Jamin Eberhart was only a few months into his job as a business analyst at A.T. Kearney when the voicemails started.
It was 2001. The twin towers had fallen, and the American economy — already slowing as a result of the dot-com bubble burst — dropped into a recession. Email use was building momentum in offices, but phones were still the way to communicate at the workplace, and the daily routine of listening to messages became a game of bad news roulette.
“People were skittish to check their voicemails, because they’d essentially get called in by the boss [and let go],” said Eberhart, now a senior director at Scimitar Inc., a roughly 30-person biopharma consulting firm.
With a record number of Americans filing for unemployment, that skittishness is back, particularly in industries like retail, restaurants, airlines and cruise lines.
But thanks to a framework largely based on remote work and virtual communication, and the fact that it helps to have a guide through a global crisis, consultants might avoid a fate similar to the one experienced in the early 2000s.
“It’s fair to say that every sector has been disrupted and been impacted by COVID-19,” said Kevin Dolan, a senior partner at McKinsey & Company. “In terms of what we’re seeing, it’s more strategic work, very fundamental kinds of questions: how to help companies, [profit and loss] balance sheets, looking out for the customer, looking out for employees. It’s all very real, very intense – and actually quite human.”
Despite being a nearly century-old consulting juggernaut, McKinsey is seeing unprecedented change, Dolan said. Whether it’s from clients in the travel and entertainment spaces where revenue has dried up; retail and food supply chains experiencing surges from panic buying; or health care providers trying to divert attention and support to the right places.
“Our clients have never needed us more,” said Dolan, who’s been with McKinsey for 17 years. “We’re having deeper, more meaningful conversations with our senior-most clients, even more so than 12 years ago [during the 2008 financial crisis]. Who knows if it will be longer, but it’s certainly more intense.”
Still, that won’t be the experience everywhere nor for the duration of the crisis. Analysis from Source Global Research, a London-based firm, predicted in late April that the U.S. consulting market would shrink 20% in 2020. The firm expects particularly steep drops in consulting for the services, energy, health care, and manufacturing markets. Human resources consulting services, in particular, would take a hit, the firm projected.
Shifting attention and services
Tom Hogan, chief operating officer at Perficient, also said he sees a difference between the 2008 downturn and what’s happening now.
“This one feels like there’s a timeframe to it, whereas in 2008, it was a very big unknown; it just kept progressing,” Hogan said. “This time feels different, even from a customer base. It’s ‘give me 30 days,’ ‘give me 60 days,’ versus stopping everything.”
Perficient — which does a lot of digital consulting — has found itself helping clients handle everything from managing e-commerce supply chains to online customer experience.
“We have a[n e-commerce] client that went from Black Friday once a year to now they’re on their third week of Black Friday in volume,” Hogan said.
Perficient is also helping the 30% of its client base that’s comprised of health care services Hogan said. On the provider side, hospitals are busier than ever but not making money because elective procedures have been put on hold, and the payer side is having its own set of challenges.
“It’s … an interesting and potentially challenging thing in a time like this,” said Amanda Feyerabend, a principal at compensation consulting firm Compensia. “Often that work changes, or there’s a different type of focus — and in some ways even more work.”
For example, in its report, Source Global Research recommended firms shift their services to support clients implementing new technology.
Even in a downturn and with so many people working from home, companies still have board meetings and the same processes that require questions and answers about things like executive pay, equity compensation, and board compensation, Feyerabend said.
Now, though, she’s thinking about how to help companies retain and motivate their employee bases, make decisions on pay for the year, and how to navigate bonuses and explain plans that are not paying out in anticipated ways.
Not a stop, but a slowdown
The consultants likely to experience their own problems first are the strategy firms with smaller project windows, said Eberhart, a graduate of MIT Sloan.
These firms tend to have three or four-month projects, and normally have additional projects lined up so there is continuity from one job to another.
But given what’s happening, Eberhart said, “clients right now are reevaluating budgets, business timelines, they’re going ‘You know what, maybe we were going to re-up, have an extension, but now we’re not.’”
“Most of the larger firms will be able to weather this without large layoffs, except parts that focus on the hardest hit areas — airlines, cruises — but they may be able to offset that with huge increases in other areas, like tech/software, and biopharma,” Eberhart said.
The fact Scimitar operates in the biopharma industry is one reason why Eberhart is confident in the firm’s ability to weather the pandemic, but also because it handles operation strategy projects, which run between six months and a year.
“What we found in the last two downturns, the pharma industry … tends to go flat,” Eberhart said. “We stop growing, but business doesn’t decline.”
For Mark Edwards, founder of Compensia, the “stickiness” of one’s client base is going to impact how a firm reacts to the downturn.
“In the 2008 downturn we still grew revenue, although admittedly, at a slower pace,” said Edwards, SM ’79, who is now retired from Compensia. “We did not lay off anyone, but slowed our hiring during this period. I would expect a similar experience this year.”
Hogan said some of Perficient’s clients have had to hit the pause button on projects, and those consultants are being redeployed to other project areas. The firm so far has had no major cancellations.
Matching capacity to demand
“We’ve slowed down hiring, and we’re hiring more niche skills; creative skill sets available that we just don’t have,” Hogan said. “That would be where we would be bringing someone into the firm.”
He added Perficient is taking the next month or so to focus on its talent and recruiting pipeline, “evaluating what our clients’ needs are and ensuring we have the people in place to meet the demand when it ramps back up again.”
Feyerabend said the roughly 40-person Compensia has made offers since the shelter-in-place in San Francisco, where one of Compensia’s two offices is located. She said the hiring process is completely virtual now, though prior to the pandemic some interviewing was already done online, given one-third of Compensia’s workforce is remote. The firm is hiring at all levels except principals — who are promoted internally.
McKinsey is honoring all of its offers, Dolan said, and its summer internship program will continue.
“For recruiting, we really haven’t changed anything,” Dolan said, though he said the company is taking advantage of digital tools to connect with students. “We’ve also been on a journey to modify our interview practices. We’ve done [video conference] interviews for at least seven years, and I expect we may do more of that in the near term.”