Will Consulting Firms Survive the Recession

I would like to hear your views on the imapct of the economic downturn on consulting industry ie

1. order books shrinking??? I hear firms whose focus was banking are struggling whereas those who focused on FMCG are thriving

2. redundancies - rumours or reality

3. state of the job market - I hear most firms are not recruiting

4. which firms are resilient? niche or strategy or the big 4?

5. do we have any casualities yet

How about you pay a consulting to answer your questions

It's okay, I'll reply for free.

1. most order books are shrinking. If they weren't, it wouldn't be a recession - consultancy as a whole certainly isn't a counter-cyclical industry.

2. reality. See point 1 as to the reasons why. However, relatively small numbers for the time being.

3. true. However, some firms will be growing and doing well - this is always the case in any market - I bet even some retailers are doing well (Ugg boots, anyone?) - so therefore some will be recruiting, and getting their pick because of it.

4. niche are resilient if they are in the right sector / doing very well for themselves in their niche. They're screwed otherwise. Strategy are niche. The big 4 have the advantage of being pretty diversified, so should represent the market as a whole (or even out-perform if people flood to them as 'safe havens'). I wouldn't consider anyone to be resilient right now.

These are all pretty irrelevant questions if I'm honest. Although I have attempted to answer them (and others may disagree with my views), it is worth realising that consulting is a 'nice to have' for most companies - a luxury good, so to speak. At a macro level, it will represent general market movements. Look out for the first signs of recovery - normally the press having a more positive outlook on things like housing, or evidence of m&a activity, or a levelling out of the stock market that goes unnoticed (all decent indicators of underlying market confidence) - and any firms still treading water at that stage in the economic cycle are likely to be okay.

I don't agree. Some companies need consultants because their management are so screwed up. unfortunately, because the mangers pay the check we don't recommend firing them!

I would like to hear your views on the impact of the economic downturn on consulting industry ie

1. order books shrinking??? I hear firms whose focus was banking are struggling whereas those who focused on FMCG are thriving

Possibly true as a general trend over the short term past. However having won some project work in the banking sector recently, lets not make the mistake of confusing a trend with an absolute fact. Also if trends are the be all and end all, then its now apparently in the retail and fmcg sector where the recession is predicted to inflict comparatively excessive doom and gloom esp. now (Woolworths) and quite possibly after Christmas.

2. redundancies - rumours or reality

There are always some redundancies even in bullish years. I haven't seen the figures but would guess its tough for graduates getting into consulting, and having graduated into the previous recession myself they have my utmost empathy.

There will always be some rumour mongers who secretly get a kick out of other people getting fired (why do people watch 'The Apprentice?')

3. state of the job market - I hear most firms are not recruiting

The consulting firms that hire talent most at the bottom of the cycle tend to do better when the economy picks up. That was the evidence from the previous recession. If some firms cannot afford to hire then we should feel sorry for them, but question the long term sense of their business model.

4. which firms are resilient? niche or strategy or the big 4?

Niche are probably comparatively resilient. Big firms have lost alot of relevant knowledge in recent years in the consulting domain and some struggle to leverage their exerience across industry and function. Strategy firms are quite/very resilient but there might be some exceptions.

do we have any casualities yet

Poor question. Do you mean firms or people? The consulting sector is actually bearing up well in comparison to the economy as a whole. The industry is not entirely counter cyclical but in some ways its easier to sell advice to a client when they reckon they need it, than in a bull market when they reckon they dont. Genuinely Top Consulting advice can certainly be a necessity for a business to survive rather than just a luxury.