What are the main challenges keeping consultants up at night? The Predictive Index (PI) set out to answer that questions with its 2019 Annual Consultant Report. PI is a talent optimization firm that aligns business strategy with people strategy for results. Among the survey findings: Strategy and people consulting are king; consultants spend over half of their time on business development; the biggest growth blocker for consultants is measuring and proving ROI to clients; most consultants agree they can improve upon winning new business and building their networks; and, edging out the competition and increasing revenue are primary objectives. In April, PI conducted a survey of 152 consulting firm owners, senior managers, middle managers, and individual contributors. Consulting caught up with Lee Pichette, Vice President of Corporate Development for PI, to discuss the survey results.
Consulting: Can you tell me a little bit about the survey and why you launched it?
Pichette: It's the first of what will become an annual report. In my role here I recently started to focus on growing the network of certified partners that are generally management consultants or HR consultants that use PI as a way to enhance their talent offerings or offer a talent practice for the first time. I started to hear more and more about them needing to augment their business models. And when we went to look at what research was out there about the business models of consulting firms, we weren't able to find a lot of research, especially research that applied to firms with less than 50 employees. That's why we went ahead with this particular survey.
Consulting: There are a lot of interesting findings in the survey. What was your main takeaway?
Pichette: I'd say there were three takeaways that we found really interesting. Throughout the report, talent is an area of focus. This is not surprising. The most prominent practice areas are business strategy and talent strategy and that aligns well with the world today—it's not about how companies use financial capital, it's about how they use human capital. When you look at the firms that categorize themselves as management consultants, there's actually a gap in this area. So, 75 percent are marrying business strategy with operations-related consulting where only 45 percent of them are marrying business strategy with talent strategy. In some of our other research, we ask CEOs what their top priority is next year. Turns out, a CEO is twice as likely to say they need help with talent strategy over operations. So, a large portion of firms might not have caught up to that market need just yet and we're expecting to see this becomes an increasing part of the mix for those firms.
Consulting: That's interesting. We're there other key takeaways?
Pichette: Yes, so the second theme was around business development being a challenge. My favorite data point around this one was the firm's top goals, which was increasing revenue and increasing competitive advantage as the top two. We asked if there was some segment of consulting that was finding revenue growth easier than others: 60 percent of respondents say they have partnerships where they earn revenue for offering their clients a third party software or service. That was a surprising number for me. Also, the firms that said "yes" were much more likely to be working on their business—meaning focused on making their firms more attractive and increasing competitive advantage. The firms that said "no" to that question were also the ones that were saying that increasing revenue was their top goal. The takeaway for me is this: As firms are looking to augment their business model, some firms are finding ways to take the heat off when it comes to trying to sell that next product so they can focus on their offerings.
The last takeaway I thought was interesting was what is getting in the way of sales for the firms who are finding revenue growth as a challenge. When we asked why clients may not be buying consulting services, the answer was the ROI on hiring a consultant is hard to measure and quantify. If you are a consulting firm with less than 50 employees, you're top sales issue is actually that your prospects have been burned by consultants in the past. But if you have more than 50 employees, your top sales challenge is ROI. Either way, the challenge for firms comes down to making prospects more confident in your services. I have a hunch on this one but it's not backed up by this research, but I'll share it if you don't mind. We've done other research with CEOs where we ask them where they go for help to solve a problem. And most CEOs choose a software solution over custom consulting services, so here's my hunch—consulting firms that create a single offering that includes both software sold as subscription and consulting services sold on retainer will be the big winners n the future.
Consulting: Interesting, and that makes a lot of sense. So, one thing that jumped out at me is the amount of time spent on business development—more than half of their time. That's a big number that surprised me. Did you have the same reaction?
Pichette: We were also a little surprised by how much time is being spent on business development. When you look at this based on the firm size, the gap between small and large firms isn't as wide as you might have guessed. Firms with less than 50 employees reported 60 percent of their time on business development, versus larger firms spending 52 percent. With an overall average of 56 percent, and other questions pointing to this issue as well, it's clear that firms are eager to augment their business models in a way that allows them to get off the project-to-project sales treadmill.
Consulting: The other finding that surprised me a bit was that revenue and creating competitiveness account for 63 percent of a consultant's focus. I'm sure that's true but I was a little surprised that the client needs and client service wasn't a little higher on their lists of priorities. Were you?
Pichette: That was interesting for us, as well. Only 17 percent said increasing repeat business was a top priority but we're digging down into priorities and my guess is that consulting firms feel like they have that one under control so perhaps they are not as worried about it. The areas that they feel like maybe they need to spend more time because they are more out of their control would be revenue and increasing competitive advantage.
Consulting: Good point. One other thing that struck me was about how consultants are selling projects. We're seeing a lot more firms going down the road of performance based fee structures and being paid on results, but only 19 percent of respondents indicated that they charge based on the firm's performance. Were you surprised that number wasn't higher?
Pichette: I wouldn't say that I was surprised by that 19 percent result, but I do think this questions will be fascinating to watch over the next few years. I suspect, as you indicated, will start to see that number rise year over year. I do suspect we'll see more and more firms tying their fees to performance.
Consulting: When you look at the survey as a whole, what are actionable steps firms could take away from this data?
Pichette: First, talent is going to need to be part of your practice. So if you're only offering strategy consulting but not helping your clients understand how to translate that into action through people you have a gap there. So, make sure you start a talent strategy practice. Second, find ways to augment your business model to take your heat off the need to sell that next project, and that could mean moving toward retainer services or reselling third-party subscription services. And finally, think about ways to prove the changes that you'll help your clients implement are proven to be repeatable and, if possible, backed by science and data so you can ease the concerns of your perspective clients in the sales process.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.