Human resources consulting: friend or foe?
Summary
We look at human resources consultancy, identify the main players and examine the services they offer. In addition, we sketch out some of the advantages - and disadvantages - of using HR consultants. We conclude that:
At the heart of this feature is a directory of contact and service details for 14 leading HR consultants operating in the UK.
Are you "maximising the return on your investment in human capital"? Is your "HR strategy aligned with your organisation's overall business objectives"? Are your "people management and financial management strategies clearly connected"? Are you prepared for the "new business day"?
Are these valid questions that will enable organisations to focus on the most important issues they face? Or is this "consultancy-speak" - a series of platitudes dressed up as corporate wisdom? Here, we look into the world of human resources consultancy and assess the range of services offered by some of the leading firms in the field.
Rapid growth
Human resources consulting is big business. With the dictum "people are an organisation's most important asset" now part of everyday business language, a proliferation of firms, large and small, has jumped on the lucrative bandwagon of advising organisations how to maximise the performance of their employees.
According to the Financial Times, the combined fee income of the world's 20 largest management consultancies - a sizeable proportion of which comes from HR advice - was $43.5 billion in 1998, and is forecast to rise dramatically. The sector has grown at 20% a year over the past decade, and at 25% a year over the past two years. Around 90% of the UK's top 300 companies now use consultants1.
One reason for this spectacular growth has been the dramatic changes confronting organisations - technological transformation, globalisation and intensified competition - which have necessitated external counsel. Solutions currently in vogue, such as harnessing "intellectual capital", "knowledge management" and "emotional intelligence" (all of which have a clear HR dimension) require specialist input if they are to have a practical utility to an organisation.
The advocacy of ideas such as these has led to accusations that consultants can effectively "manufacture demand", although their standard defence is that they are merely responding more quickly to the changing business environment than everyone else. Quoted in the Financial Times, John Lindquist, a senior vice-president at Boston Consulting Group in London, says: "If we can stay two years ahead of our clients, and sometimes only six months ahead, there will continue to be growth opportunities."2 There is some way to go, it seems, before the consulting bubble bursts.
Targeting HR
The expansion of HR consulting has generally mirrored that of management consultancy as a whole. With the shift from a welfarist and operational "personnel" approach to a more strategic, business-oriented human resources management programme common in many organisations, the role of HR has been transformed, and consultants have not been slow to offer their services in facilitating this transition. In addition, fundamental shifts in working patterns and practices, such as outsourcing, multiskilling, total quality management and technology-driven change, have also increased organisations' demand for external expertise.
In a 1995 feature looking at the role of HR consultants, we suggested that "the need to deal with constant change in a competitive environment is a frequent theme for HR professionals", and, given that many HR functions had been slimmed down, "it is perhaps unsurprising that an increasing number of employers are calling on HR consultants for help in introducing specific changes" (IRS Employment Trends 589). With this in mind, we identified three main reasons why employers were likely to use HR consultants, namely:
Confirmation of these points was provided in a 1996 IRS survey of employers' use of management consultants, which found that the most popular reason for using consultants - mentioned by nine out of 10 respondents - was to obtain more specialist expertise on a particular issue than was available in-house (IRS Employment Trends 620).
Four years on, it seems that such reasons are more valid than ever. The demands facing the HR profession - from new legislation to the electronic revolution and increased competition for high-quality staff - mean that more, not less, expertise needs to be called on, and independent solutions sought.
Another explanation for the rise of HR consulting is the general change in the kinds of issue tackled by management consultants themselves. The historic thrust of management consultancy was concentrated on improving performance in relation to profits, costs and revenue; in recent years, it has developed more in terms of ideas, creativity and maximising the contribution of an organisation's people. And here HR obviously has a central role to play.
Human resources consultants can be grouped into three categories:
Services offered
The directory provides a detailed breakdown of the HR-related services offered by 14 major consultancies operating in the UK. This is not an exhaustive list of the service providers available - a plethora of other firms and many hundreds of individual consultants offer similar wares.
What the directory does indicate, however, is the wide range of consulting services that is on offer. It lists eight areas - general HR, employee relations, change management, remuneration and benefits, executive reward, pensions, employment law and international HR - that fall under the umbrella of employment-related consultancy. In addition, it details supplementary services offered by consulting firms that do not fit easily into one of the eight categories.
Analysis of the entries reveals that:
Added extras
HR consultancies' promotional literature reveals that they offer a wide range of supplementary services to clients and use some innovative consulting techniques. These include focus groups with employees, attitude surveys and process or systems audits of HR functions. Many offer regular seminars and conferences addressing topical issues, briefings and newsletters about key developments, and general surveys that aim to quantify aspects of the business environment.
Most consultants also undertake bespoke research tailored to individual client requirements. For instance, Hay operates a "research for management" service, while rival William M Mercer uses specialist research teams to support its consultants' work in the field.
A number of firms have also developed databases derived from the findings of their client work. For instance, Watson Wyatt's data services unit has built up an extensive global compensation database, similar to the compensation and benefits database pioneered by Hay. MCG has created an "HR benchmarker" database.
The use of methodologies is another favoured selling point of consultants. Although these are particularly prevalent in the area of pay and benefits benchmarking, some firms have developed models applicable to other fields. Arthur Andersen, for instance, has created what it calls "human capital appraisal", a system for reviewing HR policies and quantifying cost and value to the business.
One of the growth areas in consulting in recent years has been information technology. Some firms have developed applications designed with HR functions in mind, to enable clients to streamline administration, outsource types of work, measure performance more effectively and provide better reporting. Examples include Hay's HRXpert programme, PricewaterhouseCoopers' HR information systems practice, Watson Wyatt's HR technologies practice and Arthur Andersen's bespoke software products, which it claims "can remove a substantial part of the administrative burden from your HR department".
Benefits ...
The sustained increase in demand for HR consultants' services suggests, to some degree, that organisations believe they are gaining something and creating value by using them. Indeed, the pages of the major consultants' brochures are liberally sprinkled with case studies showing how leading companies and public sector bodies have benefited by deploying their counsel.
Closer analysis of this material suggests that there are four general advantages that might be gained through using consultants:
Most consultants work with organisations from both private and public sectors, covering all parts of the economy and ranging from smaller businesses and partnerships to major multinationals. Employees of consultancies are, in the main, well-qualified both academically and professionally, and some have experience either of working in industry or of running their own businesses. The majority of the 14 firms featured in the table make some play of their multidisciplinary capacities: lawyers, accountants, actuaries, tax specialists and HR experts all work together in project teams.
With HR departments in many organisations having an increasingly strategic remit, this is advantageous. Many of the 14 firms featured in the table have expertise beyond the HR realm; the strategy consultants, for example, have operational knowledge spanning the whole organisational spectrum, while the "big five" accountancy firms offer an ever-increasing range of professional services, including auditing, corporate finance, taxation, technology and business development. In a similar vein, specialist HR firms such as Towers Perrin, Watson Wyatt and William M Mercer have expanded their knowledge bases into related business disciplines.
This is increasingly important at a time when the HR profession's work is acquiring an international dimension (see Western HR in eastern Europe). Most consultants are not slow to stress the opportunities - and pitfalls - of the accelerating process of globalisation. They are equally quick to point to their own credentials demonstrating they are global organisations of some size and complexity. This, however, is more than just rhetoric: 12 of the firms featured here are genuinely transnational, with offices across the world, staffed by people of many nationalities, who are often actively encouraged to undertake secondments and assignments overseas. Their knowledge and experience of dealing with diverse national business environments and cultures builds into a comprehensive resource.
In terms of HR, this might mean: increasing employees' motivation and performance through better communications or reward strategies; reducing the time and resources devoted to unproductive tasks or routine administration; improving systems and processes, or creating a new culture; facilitating restructuring or change elsewhere in the organisation; and making efficiency gains or reducing costs.
... and drawbacks
The rise and rise of management consultants - a recent television series about them was titled "Masters of the Universe" - has attracted some negative publicity from those who view the profession with a degree of cynicism. Consultants are expensive, they say, and basically offer the same advice. Furthermore, some argue that the solutions they offer are merely common sense dressed up in confusing jargon and terminology.
Is there any evidence to support this view? While it is highly unlikely that the services of the major consultancies would be in such demand if they did not add value to client organisations, there is, it seems, an element of truth in the "sameness" charge.
Many of the messages peddled by HR consultants are undoubtedly very similar (see box, left). Two themes underpin much of their work, namely:
Few would disagree with the validity of such statements: what some people object to, however, is expensive consultants passing off such axioms as expert insights.
The danger of consultants singing from the same hymn sheet is that if everyone uses them - and around 90% of the top 300 UK companies do - competitive advantage is lost. There is nothing to be gained by using a consultant if your closest rival is receiving similar advice; on the other hand, there is everything to lose by not keeping up with the game. This leads critics to argue that consultancies have a captive market.
Our 1996 survey of employers using management consultants offers some evidence to support the views of critics (IRS Employment Trends 620). Although most respondents were generally satisfied with the quality of the consultancy received, a significant minority voiced serious reservations about the performance of their advisers. These included:
Finally, good consultancy is not cheap. Consulting is a lucrative business - clients pay premium rates for services from the top firms. They are usually billed on the basis of hours worked by the individual consultants employed on a project. With partners in the most prestigious firms "charging-out" at around £500 (and more) an hour, and the most junior associates costing £60, fees mount up quickly.
1Financial Times, 10.12.99.
2ibid.
What is a management consultant?
A management consultant is an independent and qualified person who provides a professional service to business, public and other undertakings by:
Qualities of a management consultant
The personal qualities required of a person to enable them to carry out these duties effectively and efficiently are:
Source: Institute of Management Consultancy.
Institute of Management Consultancy, 5th floor, 32-33 Hatton Garden, London EC1N 8DL, tel: 020 7242 2140, fax: 020 7831 4597, e-mail: consult@imc.co.uk, www.imc.co.uk
How to choose and use management consultants
According to the Institute of Management Consultancy (IMC), there are 10 "golden rules" for choosing and using management consultants effectively1. Although the IMC is primarily the professional association for individual consultants and smaller firms, its recommendations might also be applied to the selection criteria for larger firms. Its advice is:
1Contact details for the IMC are listed in the document extract.
Directory of HR-related services offered by 14 leading management consultants | ||||||||||||
Name and Address |
Contact details |
Size |
HR consulting |
Employee relations |
Change management |
Remuneration and benefits |
Executive reward |
Pensions |
Employment law |
International HR |
Other HR-related services/areas of expertise |
IRS comment |
ANDERSEN CONSULTING | ||||||||||||
2 Arundel
Street |
Tel: 020
7844 4000 |
Worldwide firm with 65,000 staff. |
O |
O |
O |
x |
x |
x |
x |
O |
Business process management; collaboration and knowledge management; IT and technology consulting; stategic development. |
Eight distinct lines of business underpin the firm. Multinational project teams use Knowledge Xchange and Solution Centres to share ideas. Formerly part of Andersen Worldwide with Arthur Andersen, currently involved in acrimonious split. |
ARTHUR ADERSEN (HUMAN CAPITAL SERVICES) | ||||||||||||
1 Surrey
Street |
Tel: 020
7438 3000 |
Some 70,000 employees in 83 countries, with 6,500 professionals in 14 UK offices. |
O |
x |
O |
O |
O |
O |
O |
O |
Expatriate management and relocation services; HR systems and technology consulting. |
Rebranded in January this year, US accountancy giant claims to have coined the phrase "human capital". One of the first consultancies to offer one-stop accounting, tax, actuarial and HR service. Legal services through Dundas & Wilson and Garretts. |
BOSTON CONSULTING GROUP | ||||||||||||
Devonshire
House |
Tel: 020
7753 5353 |
One UK office with 170 employees; total of 47 offices in 33 countries. |
O |
O |
O |
x |
x |
x |
x |
O |
IT consulting; healthcare consulting; corporate development; knowledge management. |
One of the major "strategy" consultancies, together with Andersen Consulting and McKinsey & Company, Has developed "Workonomics", a systematic approach for measuring and improving a company's human resourses. |
DELOITTE TOUCHE TOHMATSU (DELOITTE CONSULTING) | ||||||||||||
Stonecutter Court |
Tel: 020
7303 3000 |
Consulting arm as four UK offices, although parent firm has 23 UK sites and annual fee income of $10.6 billion from 700 offices in 130 countries |
O |
O |
O |
x |
x |
x |
x |
O |
Change leadership; "PeopleSoft" Solutions - integrated tools and services |
People Transformation is one of Deloitte Consulting's four key service lines. Project teams are multiskilled and multinational. "Increasingly our clients are thinking and acting globally. To keep pace with them, we must become even more flexible, fast moving, responsible - and global." |
ERNST & YOUNG (EMPLOYER SOLUTIONS) | ||||||||||||
Becket
House |
Tel: 020
7951 2000 |
In UK, 8,568 staff in 24 cities. |
O |
O |
O |
O |
O |
O |
O |
O |
Executive search and selection; HR planning; interim management. |
"From thought to finish", EY says it proves an integrated tax, reward and employment service. Focusing on particular markets and industries, the firm develops a "service charter" with clients to clarify goals prior to start of an engagement. |
HAY MANAGEMENT CONSULTANTS | ||||||||||||
52
Grosvenor Gardens |
Tel: 020
7881 7000 |
Around 2,000 staff in 75 offices in 36 countries worldwide; six UK sites. |
O |
O |
O |
O |
O |
x |
x |
O |
Selection and development advice; competencies and performance management; Hay Information is world's most expensive pay database. |
Working with 73% of the FTSE 100 companies, Hay is one of the longest-established consulting firms. Its "Hay points" job evaluation system is used as a benchmark the world over. |
KPMG (HUMAN RESOURCES SOLUTIONS) | ||||||||||||
1-2 Dorset
Rise |
Tel: 020
7311 1000 |
Over 9,000 UK employees; more than 90,000 staff worldwide in 844 offices in 155 countries. |
O |
x |
O |
O |
O |
O |
O |
O |
Management consulting division offering business transformation and IT services. |
One of the "big five" professional services firms, KPMG's HR Solutions practice comprises - among others - tax, share scheme and pensions experts. It works with companies of all sizes, and public sector organisations. |
MCG CONSULTING GROUP | ||||||||||||
11 John
Street |
Tel: 020
7242 3665 |
Two UK offices (London and Liverpool). |
O |
x |
x |
O |
x |
x |
x |
x |
Performance management; training, development and competencies; benchmarking HR; employee selection consulting. |
Formed in 1976, MCG is a smaller, specialist consultancy but still services large plcs and public sector organisations. "We work with a wide range of organisations to help them maximise the return of their human capital through imaginative and enlightened management." |
MCKINSEY AND COMPANY | ||||||||||||
1 Jermyn
Street |
Tel: 020
7839 8040 |
One UK office (London) and 81 worldwide sites. |
O |
O |
O |
x |
x |
x |
x |
O |
IT and technology consulting; strategic development; change leadership; organisation design. |
"By far the most influential consulting firm in the world," according to US magazine Business Week. Works with large, high-profile organisations and charges accordingly. |
NEW BRIDGE STREET CONSULTANTS | ||||||||||||
20 Little
Britain |
Tel: 020
7282 3030 www.nbsc.co.uk |
One office in London; links with Clifford Chance Consultants. |
x |
x |
x |
O |
O |
O |
x |
O |
Communications campaign advice; shareholder relations. |
Small but well-established firm - advises three in 10 FTSE 100 companies - with reward specialism. Lawyers, accountants, actuaries, tax specialists and remuneration experts form multidisciplinary terms. |
PRICEWATERHOUSECOOPERS (GLOBAL HR SOLUTIONS) | ||||||||||||
1
Embankment Place |
Tel: 020
7583 5000 |
World's largest professional services firm has 63 UK offices. |
O |
O |
O |
O |
O |
O |
O |
O |
HR/benefits outsourcing; organisational effectiveness and development consulting; HR IT systems advice. |
Consisting of five complementary groups, Global HR Solutions is one of six lines of service (others of interest to HR practitioners are Management Consulting Services and Global Tax Services). Its aim is to "build and run cost-effective, targeted strategies to address your HR challenges". |
TOWERS PERRIN | ||||||||||||
Swan
Gardens London W1V 0AE |
Tel: 020
7379 4000 |
Around 7,600 employees in 27 countries worldwide; 700 UK staff. |
O |
O |
O |
O |
O |
O |
x |
O |
Actuarial consultancy through sister firm Tillinghast-Towers Perrin; strategy and change consulting through Kinsley Lord, another sister company. |
One of the longest-established HR consultants. American firm that aims to "build internal capability rather than consultant-dependency". Guiding philosophy: change people one person at a time. |
WATSON WYATT WORLDWIDE | ||||||||||||
Watson
House |
Tel: 01737
241144 |
5,000 consultants operating in 89 offices worldwide in 33 countries; nine UK offices. |
O |
O |
x |
O |
O |
O |
x |
O |
Retirement consulting; healthcare consulting; HR technologies; practice dealing with people management during mergers. |
Another specialist HR advisory firm, operates "ClientFirst" service programme based on partnership and collaboration. Guiding principle is to integrate people and financial management: "One without the other is only half the solution." |
WILLIAM M MERCER | ||||||||||||
14 Tothill
Street |
Tel: 020
7222 9121 |
12,000 staff in 34 countries worldwide operating out of 125 offices; 3,000 UK staff in 20 office locations. |
O |
O |
x |
O |
O |
O |
O |
O |
Health insurance consultancy; occupational health and absence management; organisational communications; personal financial advice. |
Investors in people (Iip) firm. Services are "geared to helping companies use the power of their people to enhance business success". Teams are supported by international knowledge management network. Specialist EU practice in Brussels. |
Key: O = services offered; x = service not offered.
Service descriptions:
HR consultants: singing from the same hymn sheet?
Do consultancies all peddle the same approaches, as their critics would have us believe? It cannot be denied that some of their publicity material conveys remarkably similar messages.
HR consultants on the importance of people within organisations ...
"Successful organisations understand they cannot achieve their potential without achieving the potential of their people." - Andersen Consulting.
"It is no coincidence that the most successful businesses are those that are best able to realise the full value of their people." - Arthur Andersen.
"Good people, not scarce capital, are the critical resource for competitive success." - Boston Consulting Group.
"You can't rely on strategy, products or technology to deliver superior organisational performance. Only your people can make that happen." - Hay Management Consultants.
"We believe that in any organisation, be it a major plc or a small local authority, the most important asset is the people employed." - MCG Consulting Group.
"We also know that sustained change - true transformation - only comes when people in the organisation change." - Towers Perrin.
"An organisation's people make the difference. That's the accepted wisdom these days." - William M Mercer.
HR consultants on the importance of aligning HR and people strategies with overall business objectives ...
"The firm works with clients from a wide range of industries to bring about far-reaching change by aligning their people, process and technology with their strategy." - Andersen Consulting.
"Aligning the people strategy with the business strategy is critical to realise a business's full potential." - Arthur Andersen.
"We specialise in working with multinational and large national entities to assist in the integration of their strategy, process, technology and people." - Deloitte Consulting.
"In order to change the whole system, all the elements need to be aligned; culture with structure, people, processes, technology and leadership." - Towers Perrin.