Strategy consulting firm asks staff to take unpaid leave

09 May 2020 Consultancy.com.au 5 min. read

A growing number of consulting firms are being forced to take measures to curb the effects of the Covid-19 induced downturn, and the strategy consulting sector is not immune.

According to an estimate from analyst firm Source Global Research, between 20% and 30% of revenues could be wiped off the face of Australia’s US$5.8 billion consulting market. The impact is felt hardest in areas regarded non “mission critical” by clients, such non-strategic work in the areas of operational improvement, innovation and technology. In its slipstream, demand for change management is tumbling.

Amid an economic fallout, organisations across the country have been reducing or even completely halting their consulting spending, a cost typically regarded as a discretionary service when things get tough. In hard-hit sectors such as travel, recreation and tourism, consultancy demand has come to a near standstill as authorities clamp down on movement to stop the spread of the virus.

L.E.K. Consulting asks staff to take unpaid leave

Traditionally big spenders on consulting services, such as National Australia Bank, Rio Tinto, Virgin and Qantas, are among the private sector companies that have implemented drastic cost-cutting measures. While the public sector is more resistant to the Covid-19 crisis, some major (semi-)public sector organisations have also cut back on the use of consultants, including Australia Post and a number of universities, as the higher education sector is heading towards a $9 billion shortfall in 2020 alone.

Strategy consultants

Australia’s strategy consulting segment has so far been less impacted, as strategy consultants typically work on high-impact engagements aimed at safeguarding a sustainable future for companies, or on change programs with a high burning platform.

At the same time, the need for immediate Covid-19 response panning has seen demand for some strategic services spike, including business planning, supply chain strategy, commercial due diligence (for reassessing deals already in the pipeline) and boardroom crisis management. 

Despite stopping some hundred non-essential projects for now, National Australia Bank continues to work with Bain & Company on a strategic planning review, while in similar fashion, Australia Post continues to work with Boston Consulting Group on an independent strategic review of its strategy and business model. Meanwhile, market leader McKinsey & Company last week landed a new $1 million three-month myGov deal

Boutique Port Jackson Partners is “as busy as it ever has been” said Managing Partner Byron Pirola on Friday shortly after the firm decided to join EY-Parthenon, in a bid to pre-empt rumours that the national strategic consultancy firm was forced to give away its independence amid mounting market and financial pressures.

Not immune

But the $US1.4 billion strategy consulting market is by no mean immune to the coronacrisis, demonstrated by AFR’s recent unveiling that L.E.K. Consulting, a UK-headquartered strategy consultancy with offices in Sydney and Melbourne, has asked staff to take unpaid leave and extended time off as the firm anticipates “very significant short-to-medium-term effects” on its business.

Setting an example for consultants and staff, L.E.K. Consulting’s partners have agreed to take a 25% cut to their income between April and June. They also are excluded from taking unpaid leave, as they will now have to work harder to maintain/build the sales pipeline and generates fees. 

According to Nick Holder, who leads L.E.K. Consulting in the Asia Pacific, the measures are focused on supporting and retaining its people, which he describes as the firm’s greatest asset. “We know that our greatest asset is the strength and capabilities of our people and in deciding what actions to take we have put a high priority on keeping the team together so that we have the capability to continue providing best-in-class services to our clients both through the crisis and on the other side of it,” he said to AFR.

L.E.K. Consulting is not alone in its dealings. Although strategy consulting giants McKinsey, Boston Consulting Group and Bain shroud their internal operations in secrecy, and as a result not much information is made public, speaking on the basis of anonymity a number of MBB partners have confirmed to Consultancy.org (Consultancy.com.au’s parent) that measures have been inacted.

These include slowing down recruitment activities, stimulating staff to take leave, realigning resourcing across offices to meet shifting demand and the recalibration of service portfolios.