When the world finally turned its gazes on the COVID-19 pandemic, it had already done irreparable damage to the economy. Unfortunately, the management consulting industry is also under this crossfire. As a consultant-to-be, one can’t help but wonder “How big will the impact be on the recruiting process of the major firms like McKinsey, Bain, BCG,…?”
The short answer is: Yes, they are going to be affected. But just how severe would the impact be under the circumstances?
1. Will There Be Fewer Consulting Projects?
With the shrinking of the entire global economy, it is undoubtedly companies would tighten their budgets leading to less demand for consulting services. Clients are delaying projects, decreasing their scope or cancelling them all together. According to one of the sources, the revenue drop could be as drastic as $30 billion USD with the Europe market bearing the strongest blow – a 28% decrease from previous year. However, we would not assert that there would be a drastic drop in consulting projects.
While the data may seem grim, we must keep in mind that not all sectors would be affected in the same way. An example would be in the financial sectors, where business contraction would lead to lucrative M&A deals through the fall in valuation of companies. And since the financial crisis, most banks have increased their liquidity, which mitigates the short-term impacts. Furthermore, they play an active role in supporting the economy back to recovery, meaning banks will be deploying initiatives, and in a continued competitive environment they would invest heavily in digitalization. All this mostly would require the handiwork of a supporting consultant.
In addition, new demand may arise within the public domain. Many consulting firms are now engaging with the public sectors, helping governors devise plans for dealing with the Coronavirus. Firms such as McKinsey who have made their reputations in dealing with government work are already engaged in this type of projects. As Stefan Schaible, Global Managing Director of Roland Berger, put it “Right now, many companies are wondering how to deal with the situation and the economic consequences. And that’s why consultants are still in demand.”
Lastly, to expert predictions, the business landscape after the crisis passed is going to be vastly different from now. One of the key driving factors is digitalization, now growing stronger than ever. To face the post-Coronavirus world, firms must now start to make key changes and transformational projects within their businesses going forward digitally. Hence, it would remain the largest business driver of consulting spend with consulting firms both in terms of strategy as well as implementation.
Our conclusion is that, while it is true that the impact on the overall consulting industry is negative, the crisis also brings opportunities for work in various sectors and different types of projects. We would keep a lookout for restructuring or cost-cutting programs – as this would likely be the direct results of recession. HR is also going to be a hot topic during the crisis time, as employees leave their jobs amidst the crisis. The consulting firms who are most flexible to adapt to this new demand are the firms that are going to thrive under the circumstances.
2. Will Consulting Firms Reduce Offers?
The consulting industry has already been noticeably impacted by the global pandemic in a number of ways. Consultants are regular travelers, making them particularly susceptible to the virus’ spread. One might argue that this would lead to reduction in hiring and redundancies between consulting firms. While we are not denying that possibility, especially for the smaller boutique firms, here are few important facts to keep in mind.
During the last major recession, big and reputable firms like the MBB proved that they could endure the hit. For these firms, their winning strategy depended heavily on their talents, one of their proud achievements. Thus, maintaining the talent pipeline is important especially during the downturn and for the recovery period afterwards. This case is no different. We have heard stories from one of the MBBs preparing for a situation where its entire operation is run remotely. This most likely would include the changes in their recruitment procedure, e.g: online-based case interviews. For firms like BCG, which parts of the recruitment – resumes and online tests, are already processed through their website portal, the changes would not be as drastic compared to a less digitally-adapted firm. They would continue to recruit and develop their talent even without sending them to the field.
Furthermore, at the time of this writing, there has not been any official announcement of cutbacks or incidents of offers being turned down reported from the MBB as well as some other consulting firms. Networking and recruitment events are still conducted digitally through online platforms, regardless of the situation. While in severely affected regions, firms might decide to postpone some of more physically intimate gatherings, this has not prevented them from using workarounds for these issues as most companies now have their own online portals. For the MBB, their sizable budget enables them to deploy these initiatives at a larger scale with greater flexibility than their counterparts.
In conclusion, we believe big consulting firms would rebound after the crisis and it is imperative for them to prioritize their current talent-focused strategy over short-term sacrifices for liquidity.
3. Will Consulting Survive?
Out of all the questions asked above, this is the only one where we could have a definite answer. No reason to doubt it, the management consulting industry will survive! This is just a recession like many others in the past, and as time has proven repeatedly, management consulting is here to stay. The question is just How long would the punch last…?
Answering questions like these require a holistic view on the whole situation itself.
There are two scenarios that could play out for the global pandemic:
- The Coronavirus will swiftly die down across the world – as it presently seems to be doing in China, the origin of the virus.
- Or, Coronavirus is here to stay and the situation would continue till the end of the year.
The first is the best-case scenario for consulting firms. As Matthias Tauber, the Germany boss of Boston Consulting Group (BCG), put it “The firm had looked at epidemic crises over the past 100 years, and in all cases, a V-shaped economic development was recognizable.” Clients will only delay their major transformation projects, instead of cancelling them all together; meaning things would be back on track in a few months. This has happened during the recovery of the Recession period and such would also likely be the case in the situation today.
The second alternative presents a darker future. According to a report by McKinsey, global GDP growth could drop close to 0% in this situation. All consulting activities would be affected, yet not on the same scale. The firms which take the biggest hit will be those whose services often mean they must spend time on a clients’ site, such as the implementation team. More so, the exposure of individual firms to falling incomes will vary based on the services they provide and industries they serve. As we have discussed above, not all industries are affected equally. Multifaceted firms which cater to various clients will undoubtedly come out of this crisis in the strongest position. However, for firms of all sizes, the key challenge will be how effectively they can rebuild their pipelines and increase their revenue stream from the new opportunities that arise.
Long story short, consulting industry will not die out. Yet, they are faced with tough challenges during the upcoming months that will determine some firms’ survivability. Diversity and the ability to adapt will be critical for the firm to come out on top.
4. What Should I Do Now?
These days, people tend to reduce their options into either needless panic or resignedly accepting the situation. But no matter what, the world will get back to its full speed right after this. Our economy has faced challenges in the past and it has proven itself capable of recovery at a rapid rate. With that global recovery, so will the management consulting industry be in high demand for talented consultants to help lead the rebuilding efforts.
You need to be ready when that comes and there is no better time than now to get yourselves to the top while others are stagnant. Isolation at home is an opportunity to ramp up your training, especially on demanding subjects such as Case Interview – which require time to master. You will not be alone on this journey, let us be your training partner on this journey. As always, check out our Youtube channel or our practicing material for additional training.
Stay safe, and stay prepared.
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