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The case for change in people & change consulting

The people & change consulting market has long been dogged by poor performance. But there are reasons not to give up yet. 

People & change consulting represents around 5% of the global management consulting market. Pre-pandemic, growth here was typically 2-3% lower than the rest of the market. While there was a brief recovery after COVID, average market growth has been negative and is forecast essentially to flatline for the next four years, significantly below the performance of the sector as a whole. With the overall demand for consulting growing, and expected to grow, on average seven times faster than that for people & change services, the people & change market in 2028 will be worth less than it was in 2019 ($14bn globally, compared to $15bn in 2019). That’s a fairly damning report card. 

We’ve written before about challenges people & change consulting faces: People and change are assumed to be areas that organisations should be able to manage without external support; It can be hard to measure the concrete impact of consulting in this area; Clients complain of a lack of innovation on the supply side. All this has resulted in a situation where clients are around 10 times more likely to say that they’re most likely to use consultants to help them adopt emerging technologies than help them respond to people-related opportunities and challenges. 

What needs to change for this market to pick up? We’d highlight four things consulting firms need to do: 

Tap into the invisible people & change market: We carry out hundreds of interviews with senior executives each year, and almost all of them talk about the people-related issues they face. That’s backed up by our research: Twenty-two percent of clients say that the skills shortage is a key barrier that gets in the way of achieving their corporate goals—more than the need to cut costs. Eighty percent say that achieving better cross-functional collaboration is critical to success. However, most people & change-related work is embedded in other projects, so is largely invisible to both clients and consulting firms. Understanding the size of this hidden market—one client we spoke to said that 75% of what they ask consultants to do is really change management—would revolutionise how the supply side views people & change work. 

Listen to clients when they talk about people-related issues: A recent survey we carried out revealed that 41% of clients think that consulting firms don’t talk about issues that resonate with them. Our theory is that consultants skirt around the topic of people & change, perhaps because they’re in the room to sell something that probably isn’t directly related—and why waste time talking about something you can’t help with? It may also be because they don’t think of themselves as experts in this space. If they listened more, they’d probably hear the same litany of despair about people issues that we hear. 

Re-build expertise in this space: Poor market performance has led firms to downgrade any investment they might have made in the people & change space, so shrinking demand has become self-reinforcing. But the firms that are growing in this market are strategy and boutique ones, both of which are likely to bring a more serious depth of knowledge. We’re forecasting that the accounting firms (primarily but not exclusively the Big Four) will continue to have the biggest share of the people & change market in 2028 (just over a quarter), only a 4% increase on where they were in 2019. Over the same time frame, we expect the size of the traditional large-scale, people-related firms (such as Mercer, Korn Ferry, etc.) and that of technology firms to have fallen by 7% and 4% respectively. In both cases, this reflects the extent to which people & change consulting is not core to their businesses. By contrast, we expect strategy firms’ people & change practices to be around 15% bigger in 2028 than they were in 2019, and boutique specialists to be 19% bigger, though growing from a much smaller base.  

Identify ways that demonstrably improve the performance of people: Clients’ long-standing concerns about whether people & change consulting creates tangible business value needs to be countered. In the current environment, being able to gauge the likely return on investment on consulting services is uppermost in clients’ minds, but they would really like to solve their people & change issues, so there is much to be gained by firms that can allay their fears. Doing so depends on firms carrying out research into what works and gathering data to prove the impact they’ve been able to deliver in past projects. 

Fiona Czerniawska, CEO, Source

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