| | By Mick James
The “will-he, won’t
he” speculation over
whether Gordon Brown
will call a snap
election masked a more
fundamental uncertainty.
The real issue was
whether the economy is
about to go ping or not
– which is why I think
he changed his mind.
Brown is, of course, in
the enviable situation
that any credit-crunch
inspired collapse is
clearly not his fault,
but “It’s the economy,
stupid” is such a
powerful principle in
politics that I doubt he
has ignored it. At the
moment there’s far too
much political capital
to be made from calmly
riding out one crisis
after another and
picking a more
propitious moment in a
year or two’s time.
Meanwhile, the rest
of us will have to ride
out whatever happens. I
must say I’d be
extremely annoyed if the
economy fell over now:
it has shrugged off so
many genuine blows –
energy prices, wars,
disease, terrorism –
that surely it can
survive a credit crunch.
It reminds me of those
round-the-world cyclists
who come through all | |
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| | sorts of travails only
to have their bikes
nicked when they get
back to England.
When I talk to
consultants about the
prospects for a
downturn, they are
generally bullish. But
there’s no place for
pessimists in
consultancy, so we have
to take that with a
pinch of salt. One of
the comments I hear most
is that you can run a
profitable consultancy
business in a downturn
helping clients cut
costs and downsize.
While it’s true that the
skills of consultancy
can be turned to
recovery restructuring
and redundancy, it’s a
different matter as to
whether they will be.
For a start, the best
and therefore most
rational clients will
already be in a better
position to deal with a
downturn. They may also
be farsighted enough
(and have the reserves)
not to react to the
cycle by hacking and
slashing.
For the rest of the
client base, downturns
are neither rational nor
pretty. That’s because
long periods of growth
tend to do terrible
things to firm’s | |
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| | management structures.
Bluntly, there are
usually enough mediocre
middle managers in place
to a. handle the
downsizing programme,
and b. make sure they
are the last people to
be sacked. If
consultants get a look
in it’s normally to act
as scapegoats.
For the consultancy
industry, an immediate
downturn might well pose
very serious problems.
Firms have just spent an
enormous amount of money
staffing up. We’ve also
seen an increasing
emphasis on specialism
and direct hires from
industry: it’s too early
for a lot of recent
entrants to be easily
repurposed, even if the
work is there. Big
firms would be posed an
interesting problem: how
to deal with large
numbers of people that
are no longer required
for large projects,
while still continuing
to recruit the skills
they need for a changed
reality.
Where the big
consultancy firms will
score is in their
ability to supply or
help with outsourcing.
I’ve always said that
outsourcing for reasons
of absolute cost alone | |
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| | is a bad idea, but
outsourcing to achieve
flexibility in cost is a
different matter.
Outsourcers can help new
clients manage variable
costs through difficult
times –and could do
themselves a great many
favours by being
flexible and generous
with existing
contracts.
What will sustain the
big firms most of all
through tough times is
the strength of their
brands: a few tough
years would be
incredibly interesting
in establishing how
durable the consultancy
brands that have been
created, recreated or
repositioned in the last
few years really are.
For smaller firms, a
downturn might provide a
much-needed respite from
the frantic growth of
the last few years.
Some would undoubtedly
go to the wall. Others
might settle for being
“lifestyle businesses”,
having exhausted their
growth cycle. Firms
that are not satisfied
with this would get the
breathing space to take
stock of the business
and get in shape for
when growth starts
again. Surviving a
downturn can often be | |
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| | the experience that
really causes a firm to
gel as an entity. A
downturn offers a real
opportunity for firms to
show their commitment to
clients and to
consultancy – it’s the
consultants who keep in
touch when there’s no
business who get asked
back when the projects
start to flow again.
The same, incidentally,
goes for recruiters.
Consultancy recruitment
is even more viciously
cyclic than consultancy
itself, and tends to
attract a lot of
opportunists at the top
of the cycle.
Recruiters that can show
they are in it for the
long-haul have a great
opportunity to build
market share.
I’m beginning to
sound like I’m a fan of
recessions – I’m not,
and I sincerely hope we
dodge this bullet.
Hopefully, it’s just a
warning shot – and when
the real crunch comes we
can all be better
prepared.
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