| | 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 | |
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| | all 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 | |
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| | reasons of absolute cost
alone 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 | |
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| | growth starts again.
Surviving a downturn can
often be 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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