HR Consulting Bounces Back

From Consultant-News.com

HR consulting bounces back

After almost three years in the doldrums, people-related consulting has made a comeback. A new Sourceforconsulting.com report that researches key buyers of consulting services has found that HR consulting has gone from accounting for as little as 1 per cent of consulting expenditure during the depths of recession, to 11 per cent in the first quarter of 2011. The report is based on a survey of key buyers from organisations whose collective annual expenditure on consulting services is about £2.5billion.

The report says that this is largely due to increased spend from a wide-range of mid-sized (in terms of consulting budget) clients. In fact, for those clients who spent between £1million and £10million on consulting services in the last six months, HR consulting accounted for over 50 per cent of total expenditure.

Fiona Czerniawska, Director of Sourceforconsulting.com said: “We attribute the upturn in HR consulting to the buying of recruitment services of one sort or another. How long this renaissance will last is less clear, although there’s evidence that the de-risking of pension schemes has also moved up the agenda in recent months, so for now it’s likely that HR firms will simply welcome the chance to be invited back in.”

The report also found that outsourcing has become more popular, and there is presently a strong correlation between outsourcing and HR advice. Both have experienced remarkably similar growth curves in the last six months, confirming recent Sourceforconsulting.com research which suggested that the outsourcing of HR functions (particularly payroll) may be on the increase.

The future for HR
The majority of buyers are also indicating that there will be little change over the short term – with 74 per cent, either expecting to increase expenditure in HR advice, or make no change.

The wider consulting market
Across the consulting market, the survey found that growth was around 2-3 per cent driven by a widespread recovery across the private sector. However, when asking key buyers about their future expenditure, there was a mixed picture.

The report found that expectations were especially gloomy amongst the biggest and smallest buyers: the average forecast amongst clients who spent more than £50million on consulting services in the last six months, is for a reduction of 15 per cent. But for most other segments, the picture is much brighter. For instance, clients who spent between £10million and £25million in the last six months expect to spend about 5 per cent more in the next six months.

Other key trends identified in the report include:

- The Big Four have managed to re-establish lost market share in the financial services sector but don’t look as strong elsewhere.

- Operational improvement is still the biggest area of focus for clients, but mid-sized operational firms don’t appear to be benefiting at the moment.

- Countering the widespread assumption that consulting is becoming an increasingly international business, Sourceforconsulting.com found evidence that most projects are local and that a desire, amongst clients, to deal with global consulting firms may have a lot more to do with security and simplicity than it does with any genuine need for global coverage.