February 1, 2002
Framework for Discussion: Maintaining Morale in a Soft Market
Introduction
The aftermath of 2001 left many hoping that 2002 would be a year
of new hope and better fortune. To date the much awaited upswing in
the market is yet to materialize and management consulting HR professionals
have many difficult issues to contend with to ensure that their firm’s
most important asset – their people – are mentally prepared
for the year ahead.
Morale issues are inextricably linked with the economy, the terrorist attacks of September 11 and the change in the corporate structures of many consulting firms, due to merger/acquisition/IPO.
Key issues discussed by participants in this meeting included:
How to facilitate leadership
How to foster enthusiasm and stamina for work
How to increase job productivity
How to retain staff
How to build the right firm culture
How to ensure that when the market runs up firms will have the people power they need
Current
State of Play
The general consensus is that employee morale is lower than desirable
in most consulting firms at the present time. Low
morale is attributable to:
downsizing (uncertainty about job security and the breaking up of organizational structures);
turnover (preference for more secure vocations on client side and greater emphasis on lifestyle than career development);
less resources (yet greater pressure to perform);
higher expectations to sell (particularly from staff not equipped with these skills);
less risky/creative job assignments (focus on cost reduction rather capital spending initiatives, less strategy and more process improvement);
greater focus on true industry specialists for highly specialized assignments to gain client credibility and increase consultative selling potential (making general business skills and consultants without industry backgrounds less valued);
concerns about personal safety (impacting extent of travel and security of ex-pats here in the USA and abroad);
repatriation difficulties (desire of expats abroad to return to the US and the difficulties in transitioning them back into the organization when there might not be an available position for them);
frequent change in overall corporate strategy (reactive rather than proactive strategic planning);
cultural changes (merging of firms at the organizational level and less independence and more micromanagement on the personal level);
public company vs. private firm mentality (providing quarterly projections to the Street in relation to long sales cycle projects).Proposed Solutions
Facilitating
Leadership
The ease with which this can be done depends on the culture and
size of the firm. Generally speaking leaders within consulting firms
(i.e. partners) are not cognizant of the need to develop their own skills
as they are not usually included in the firms HR assessment program.
Although some firms adopt "hybrid 360 degree" employee assessments
they do not usually result in an extensive or accurate assessment of
the firm leaders.
In some firms negative morale issues have been difficult to address, as it has been at partner level that some of the greatest negativity has been experienced. With increased work pressure (to increase sales and utilization) some leadership and mentoring responsibilities have fallen by the wayside as partners focus on their own career development and security. Some firms recommend that senior consultants adopt executive coaching as a pre-requisite for consideration for partnership as a way of incentivizing them to take external advice (this is usually more accepted than executive coaching offered internally). Succession planning and mentor programs are often required by public companies for disaster management and to protect shareholder's interests.
Recommended leadership courses include: Harvard Business School’s Leading Professional Services Firms (one week leadership course); Simmons Graduate School of Management's Strategic Leadership for Women (one week course) and various programs provided by the Center for Creative Leadership. Recommended advisory consultants include David Maister, a leading authority on the management of professional service firms; Ford Harding of Harding & Company (Author of Creating Rainmakers - The Manager's Guide to Training Professionals to Attract Clients); and Gary Bradt, a motivational speaker who speaks about leadership, change and life balance issues (also leads discussions based on the best selling book "Who Moved my Cheese"). Fostering Enthusiasm and Stamina for Work, One firm reported an unusual increase in the number of employee claims for sickness and compassionate leave in the last 4 months (attributable to the September 11 attacks and the downturn in the economy). Although many firms invested in counseling for employees post September 11, emotional support for employees suffering from stress as a result of the depressed consulting market is less important than fiscal concerns at this point in time.
Understanding the impact of low morale on a professional services firm’s greatest asset – it’s people – most HR professionals agreed that a co-ordinated and positive internal communications program/s is imperative in a consulting firm (e.g. dissemination of sensitive employee information may be inappropriately handled by firm wide voicemail when it might be better discussed within individual practice groups or one on one, or a combination of these approaches).
The greatest stress for employees is not knowing whether they have job security and not knowing what their job is. Therefore a clearly defined corporate strategy (which dictates the firm’s direction, rather than reacts continuously to the market place) is more assuring for employees. In relation to actual roles, HR professionals should ensure that jobs and assessment processes are well defined and clearly understood so that employees understand their context within the organization, regardless of the marketplace. Established assessment criteria are also useful in deciding which staff to retain in layoffs and provide a rationale to those staff that are laid off.
Most of the large firms continued to invest in people programs, despite reduced budgets. The success of any program was always dependent on the extent to which it was supported and implemented by firm management. Sometimes investment in these programs at more junior levels is balanced against expected turnover, which in one large firm was 2yrs tenure for over 50% of their staff.
Some firms had developed creative ways to encourage and reward employees (e.g. senior staff not using their holiday time donated it to more junior staff as reward at no additional cost to the firm).
How
to increase Job Productivity
Job productivity is currently dictated by demand for services by clients. Most
consultants are underutilized at the moment due to market conditions. Those
firms, which have cut as many staff as possible, have consultants trying to
handle more work than they can reasonably handle. Sales and business development
are imperative to ensuring maximum utilization and most firms have increased
demands for staff with these abilities.
How
to retain staff
Employee retention is not currently a key concern for many firms; due to the
number of consultants who have been laid off there is a shortage of available
positions. Therefore many employed consultants are believed to be staying in
roles for job security. HR professionals are concerned about turnover when the
market turns up because of the inherent dissatisfaction they believe a lot of
consultants are experiencing within their firms. Firms that have IPO'd are also
aware that once options have vested for senior staff they will have attrition
issues at the senior level.
Firms wanting to retain staff when the market turns will have to ensure that they are offering incentives to staff that they value i.e. firm camaraderie, a community of peers, thought leadership, cutting edge work and a good client base. Therefore an enjoyable workplace, good management/mentorship and a context where consultants can grow and develop and increase their marketability are still important to employees. Unfortunately many firms focus on the bottom line has compromised many of these values, often inadvertently rather than consciously.
Despite
the market, there are consultants who have decided to leave the profession
for the usual reasons: (1) travel and lifestyle issues (particularly
in light of September 11); and (2) because they would prefer to work
on the client side (to gain specialized skills and feel more connected
to an organization).
Due to the project nature of most consulting work, it is important
for firms to encourage a sense of community amongst their employees.
With the drop in
the number of large consulting projects, there are smaller numbers of consultants
on jobs spending less time together. There is not so much bonding between project
groups as previously. Some firms have tried to encourage a sense of community
for consultants isolated whilst "on the beach" by designating a senior
consultant or field human resource professional "Lifeguard". The Lifeguard
supervises consultants on projects at a specified geographical location and
they are managed to develop resources for future projects/help with business
development and/or perform public service.
The decentralization and localization geographically of some consulting practices, lessening travel, has helped retain and attract more female consultants.
If staff have to be laid off, it is important that firms ensure the transition is positive. Ex-employees usually become competitors or clients. Well established and managed career transition and alumni services within firms can ensure that the human resource your firm has invested in continues to project a positive image of your firm wherever they land.How to build the right firm culture
Firm culture is dependent on many things (e.g. history, size, core values, communication, self-perception) and once established can be difficult to change. It usually starts from the top and filters down an organization, so executive management need to be aware of the internal and external perceptions of the firm from all levels and be involved in any changes that need to be made.
Mergers/acquisitions often bring different cultures together. HR issues, as well as financial concerns, should be considered and managed as part of the overall change management strategy.
How
to ensure that when the market runs up firms will have the people
power they need:
Strategies for ramping up human resources for an upturn are not
currently a priority. Most corporate strategy is based on short-term
objectives because firms are reacting to the market place rather charting
a course into the future. Without the requisite confidence or vision
human resource strategy has become a luxury. Most firms are concerned
with their financial situation, pricing of services and turnover of
staff.
When the market picks up there will initially be an increase in work for employees rather than an increase in headcount, especially if the turnaround is not rapid. The current approach to recruitment is that of selective purchases for quality talent (in a buyer's market) rather than headcount per se.
Some firms are offering lower bases with higher incentives to maintain headcount (this is currently justifiable due to economic conditions and amortization of the investment in less senior staff). However this will have to change when client demand increases to account for the lifestyle sacrifices consultants make for their jobs.
Most firms are staying on campus with MBA recruitment however offers have been deferred (in some cases for the last 2 years). When the market improves competition will be great amongst graduates, there being a greater pool of candidates with higher education (i.e. those who were not employable in the last 2 years and have gone on to further degrees).
Replacement recruiting is the greatest impetus to hire. Targeted firm growth remains modest. Due to the scaling down of internal recruitment functions in firms there will be an increased reliance on outsourced solutions (i.e. search firms and staffing contractors) when the turnaround hits and if it proves to be rapid.
Outlook
Areas of continued growth in the profession are HR Consulting (Succession of
Human Capital); Supply Chain Management; Biotech and Life Sciences and Government
(procurement, regulatory, preferred provider systems, etc). The overall growth
in consulting last year was 6%.
The US consulting market appears to be stabilizing, although there are indications that the European market, previously better than the US, is now losing ground.
Consulting firms that are best positioned to survive are those with concurrent business units that are less market sensitive, e.g. actuarial, IT, systems integration and auditing (although Enron will probably force the remaining accounting firms with consulting businesses to become distinguishable).
Summary
RIFs are no longer the exception to the rule, or a cost reduction
method alone. They will be used as a continuous management tool to maintain
and increase performance standards. Whilst difficult these are times
to "sort the wheat from the chaff" not only on performance
but also in loyalty to the firm and trustworthiness.
Employees' priorities have not changed, but have been compromised by the need for job security. Firms need to consciously manage and develop key staff to ensure retention in an upturn. Be aware that no other asset walks out the door each evening and decides whether it will be a part of your organization.
Recruitment is still taking place, mainly to replace staff, otherwise on a "selective and opportunistic" basis.
Coming
AMCF sessions of relevance for HR Professionals
Small/Medium Firm CEO Seminar
April 4-6, 2002
Baltimore
- a forum where HR professionals can discuss HR issues in small and medium firms
with Executive Management
Annual
Meeting
October 23 - 25, 2002
Royal Sonesta Hotel
Boston
- a useful forum for HR professionals to bring HR issues to the attention of
executive leadership of their consulting firms as a unified voice.
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