Editors Note: This is the fourth in a series of four articles presenting highlights from the 2009 M Squared Consulting independent consultant survey. You can read the first article here. The second here. And the third here. A PDF copy of the full report is also available for download.

Conclusions

Based on the M Squared 2009 Independent Survey responses and comparison with previous surveys, we made the following conclusions:

• The 2009 M Squared Independent Consultant Survey confirmed the far-reaching effects of a tough economic climate. The general level of business uncertainty that exists in the marketplace and its impact on management consultants and their clients remains undeniable.
• Out of competitive necessity many consultants have been forced to reduce their rates and be more flexible with their billing practices. Investing more time and effort up front to add value to the client before an engagement actually starts is the trend.
• Going forward, consultants expect their revenues to be soft, and most do not expect the economy to start improving until 2010.
• Today, client priorities are cost reduction, operational efficiency improvement and growth opportunities.
• Consultants continue to see an increase in engagement opportunities within the technology, healthcare, biotechnology/life sciences, and financial services industry verticals. Though these industries have been cited by consultants in previous surveys as having an upward trend in opportunity, recent legislation strongly supports this view.
• The 2009 survey speaks strongly to the adoption of social media and networking groups by our Independent Consultants. LinkedIn and Facebook have become permanent features of marketing, business networking, and connecting with people.

Survey Respondents

As we expected to see there was an incredible diversity within our consultant survey respondents. The M Squared Consultant Network has over 14,000 seasoned professionals, representing a wide spectrum of functional and industry expertise. A few highlights:

Independent Consultant Tenure

59% of the respondents have been Independent Consultants for 1-10 years. 33% of the consultants who responded to the 2009 survey have been an Independent Consultant for 1 - 5 years, followed by 26% for 5 - 10 years. These numbers very closely match previous year’s statistics. Of note, though a consultant may be new to Independent Consulting, the average number of years of industry experience for an M Squared consultant is 15 years.

Geography

In this year’s survey, 46% of the respondents primarily consult in Northern California, 13% of our Independent Consultants list having clients nationwide, 12% of the respondents consult out of Southern California, and 7% consult internationally.

Primary Functional Practice

Consistent with previous survey results, nearly 21% of our network’s primary consulting practice is in Marketing. Top Management & Strategy (15%), Information Technology (14%), Human Resources (11%), Finance (10%), and Operations (8%) reflect the next largest practice areas of talent within our network. 21% of consultants selected additional niche practice areas in which they specialize.

Industry Vertical Practice

Of the1,079 consultants in our survey who identified an industry vertical, 20% focus on technology, 13% on financial services, 9% on professional services, and 8% on healthcare. 44% of consultants selected additional industry verticals in which they specialize.

Editors Note: This is the third in a series of four articles presenting highlights from the 2009 M Squared Consulting independent consultant survey. You can read the first article here. The second here. A PDF copy of the full report is also available for download.

• It will get worse; the recovery has not arrived: 48%
• Cautious, but generally positive about the present year: 24%
• There will be some growth, but not a true recovery: 13%
• It will remain flat: 9%
• Optimistic about the present year: 6%

One M Squared consultant wrote: “Certainly I’m anticipating a significant decline vs. 2008 but my aim is to ‘hang in’ this year & work on developing more contacts…”

Economic Recovery

“I am generally positive about the prospects for consulting opportunities. That said, I also do believe that the overall world economy will get worse and the recovery will not arrive until 2010.” - M Squared Consultant

We also asked for a prediction of when the economy will recover. Here are the results:

• In more than 12 months: 64%
• Between 6 and 12 months: 31%
• Within 6 months: 5%

Another M Squared consultant wrote: “I think that Q1 will be dismal and that we will see a turnaround in the second half of the year. People want some good news and as soon as we see any glimmer, people will jump on it. It will most likely be a slow upward trend as we recover.”

Social Media

The rise of social media and its use in business were the trends most frequently cited in the survey. Of the 1,110 consultants surveyed, 684 identified themselves as belonging to a social media or networking group. Of the 684, over 80% of them are members of LinkedIn and over 40% have profiles on Facebook.

The survey revealed these as the most popular social media and networking groups for our consultants to participate in:

• LinkedIn: 80%
• Facebook: 41%
• Plaxo: 13%
• Twitter: 9%

“I consult in this arena and have been active in social media for over a decade. Blogs, Facebook, MySpace, Ning, Twitter, Plurk, Friend Feed, Flickr, LinkedIn, Plaxo, the list goes on and on…” - M Squared Consultant

“Use Ning.com to connect and communicate with members of a couple of groups. This gets my name out there and helps with marketing through name recognition and being aware of potential client needs as discussed in forums or calls for assistance.”

“I use Facebook to schedule events and send these events to interested people. I participate in some networking groups to give my opinion on how certain industries are developing. I use these relationships to reach out to people who may be able to help mean win consulting jobs or who are connected to companies or industries I have targeted.”

“Have not yet exploited it for revenue generation. Mainly use it to understand the competition and gain market insight through profile changes and discussion groups.”

Editors Note: This is the second in a series of four articles presenting highlights from the 2009 M Squared Consulting independent consultant survey. You can read the first article here. A PDF copy of the full report is available for download.

Consulting Revenues

In this year’s survey, when comparing 2008 with 2007, as many consultants reported a decrease in revenue (36%) as those reporting an increase in revenue (37%). In a sure sign of the recession’s impact, these results are in marked contrast to prior surveys where the answers skewed heavily towards substantially increased revenues.

Survey highlights - Percentage of consultants whose revenue increased year over year:

• Prior surveys: 55%
• Current survey: 37%

Note: prior surveys are defined as the average of the 2005 and 2006 surveys.

“Revenue is down about 20% beginning in December, particularly for the Organization Development work I do. Although I am not approaching it differently, the new projects seem to be smaller in scope and more time limited.” - M Squared Consultant

Revenue Forecast

Consultants are forecasting a decline in their business revenue in 2009; 24% indicated a slight decline and 22% a major decline. These results are in stark contrast to the previous surveys where nearly 75% of consultants predicted an increase in revenue in the coming year.

Survey highlights - Percentage of consultants forecasting a decrease in business in 2009:

• Prior surveys: 6%
• Current survey: 46%

“I think that there will be a general decline in business with a few spikes from current clients, but overall, a down year…” - M Squared Consultant

Industry Opportunity

The industry verticals where consultants see the most opportunity for their services remains consistent with previous years, including technology (46%), healthcare (42%), biotechnology/life sciences (31%), and financial services (27%). Of note are an increase in internet services and a decrease in manufacturing.

Note: Technology was defined as computers, peripherals & software, internet services, and networking/wireless

A couple of interesting write-in comments from M Squared consultants:

“Green and Clean Technology.”

“Internet infrastructure. Financial analysis systems. Forecasting and modeling systems.”

Client Trends

“I am only working with clients that are about seizing the opportunity for growing in a down economy. The companies that invest in growth now will be the dominant players in the long term…Survival will belong to the companies that promote and invest in growth.” - M Squared Consultant

The top trends Independent Consultants are seeing is that clients are taking much longer to make decisions, but most are moving ahead cautiously with new initiatives. 30% have frozen consulting budgets, while 19% have frozen fulltime hiring but are still actively using consultants. In comparison to prior years, far fewer clients are starting new projects and the overall business sentiment of clients is negative.

Survey highlights - Top client trends in 2009:

• Are taking longer to decide about new projects: 54%
• Appear to be moving forward cautiously on some new initiatives: 53%
• Are not making investments in new initiatives: 31%

“[Clients] are very nervous about spending… Clear communication, differentiation, credibility, customer benefits, and especially bottom line benefits are more important than ever.” - M Squared Consultant

Client Challenges

It is no surprise that cost control was the most common answer (55%) for top business challenges clients will be facing in 2009, followed by gaining operational efficiency (34%), and revenue growth opportunities (32%). In previous surveys, these ranked behind more strategic issues.

Survey highlights - Top business challenges clients will be facing in 2009:

• Cost control: 55%
• Operational efficiency: 34%
• Revenue growth: 32%

“[Clients are] Looking for cost reductions, process streamlining, and incremental revenue.”

“All my clients are very cautious about spending of any kind.”

“In my consulting business- in the area of consulting on revenue generation- work is expanding.”

M Squared Consulting has a legacy of collaboration and open management, which includes a tradition of frequently communicating to our staff about the performance of the business.

Every Friday an email “update” goes out to all hands. Sometimes it is a straightforward summary of our business metrics, other times it details exciting new business developments or updates on projects. Once in a while these communications are more philosophical.

This past Friday, Alex Dodd, the CEO of M Squared sent the following message to our team. It is one of those messages that gives you “a pause for reflection” when you read it.

Here it is:

Hi everyone

Having just returned from business in South Africa, via London, I thought today I would offer a viewpoint not strictly along the lines of a “business update”.

We all know that we are in a nasty recession, and that times are tough; you just have to walk the streets to see shops closing and judge the pace of how quiet things are, out and about. This is over and above our daily business lives at M Squared of helping clients with their critical business issues, trying to get appointments with clients and prospects, moving opportunities through our sales pipeline, working through challenging issues with our consultants, doing more and more support work with fewer resources, and so on and so forth.

How does this link to South Africa and London, I hear you ask? When I was in South Africa last week I was once again reminded that there are millions of people in the world who do not have enough to eat and live in very difficult conditions, and who have a far tougher time of it than we in California do, recession or no recession, and this is a good time for all of us to remember that.

When I stopped off in London on the way back I got a cab at one point. My driver’s name was Tim, and he and I got chatting. He is from Kosovo, and spoke about the ethnic cleansing his family and people suffered at the hands of the Serbs not too long ago. To this day he remembers his father being badly beaten up when he went to collect his mother from the railway station. Incidentally, America and Americans are revered in Kosovo for the then Administration’s efforts in ending the war, and they even have streets named after America and celebrate the 4th July!

The point of all this of course is that no matter how tough we all feel our own lot is, we still have an awful lot more than many other people all over the world, and should be reminded of that perspective every now and then.

Regards for a great weekend,

-Alex

We do indeed have much to be thankful for. The United States remains a nation deeply committed to democracy and is truly the land of opportunity. In the daily challenges of our personal and professional lives, and the relentless news cycle that our technological prowess has enabled, it is very easy for us to get so wrapped up that we fail to recognize just how good we have it relative to much of the world.

So I say thank you, Alex, for the reminder!

Editors Note: This is the first in a series of four articles presenting highlights from the 2009 M Squared Consulting independent consultant survey. A PDF copy of the full report is available for download.

Introduction to the 2009 M Squared Independent Consultant Survey

In 2003 M Squared Consulting initiated its annual Independent Consultant survey. The purpose of the survey is to take the pulse of the consulting marketplace and gather firsthand insights from our Consultant Network of over 14,000 Independent Consultants. This seasoned bench of talent represents deep functional expertise across all major business verticals. This years survey was conducted in February 2009 and received a record 1,110 responses.

The survey allows us to tap into the collective wisdom and experience of our consultants, while getting a snapshot on the vitality of the overall market for consulting. In particular the survey uncovers the business trends of Independent Consultants and the clients they serve.

The overall sentiment of the 2009 survey reflects the tough economic climate and the general level of business uncertainty that exists today. There are a number of interesting insights on how Independent Consultants and client companies are surviving the downturn, and what they expect for the future. As we analyzed the data it sorted itself naturally into a three-part story; the opening of the story is how Independent Consultants are conducting business in this climate. Then, we present a client-centric view of the consulting market seen through the eyes of Independent Consultants. And finally, we close with some market predictions and a commentary on interesting trends.

Billing rates

“…To remain competitive in this market, creative changes have to be undertaken by consultants.” - M Squared Consultant

In 2008, 42% of consultants reported no change in their billing rates, while 20% reported an increase and 11% reported a decrease. Looking forward, 43% report they will be more creative with pricing structures. These results are in stark contrast to prior surveys where many reported plans to increase rates and few were considering more creative pricing options.

Survey highlights: Percentage of consultants who became more creative with pricing:

• 2008: 15%
• 2009: 43%

Survey highlights: Percentage of consultants who decreased their billing rates

• 2008: 11%
• 2009: 18%

“In 2008, my rates stayed the same. But as the economy further declines I realize I have to be open to adjusting my consulting strategies in order to ensure I continue to get projects.” - M Squared Consultant

Flexibility

Overall, Independent Consultants are planning to be much more flexible in terms of how they do business in 2009. In contrast to previous surveys, 48% plan to take on smaller projects and 55% plan to work with different types of clients than they normally have in the past.

Survey highlights: Percentage of consultants contemplating smaller projects

• 2008: 26%
• 2009: 48%

“I am working on expanding the number of types of clients that I work with that still fit the parameters of my expertise. I am also being more flexible with my billing and going more towards per project, flat fee billing rather then an hourly rate.” - M Squared Consultant

Growth Tactics

When asked about effective methods in growing their business, two primary themes emerged: (1) an increase in networking, and (2) investing in adding value before a client engagement actually starts.

Here are a few representative answers from M Squared consultants:

“Good old fashioned word-of-mouth: Repeat business from clients at existing companies, clients who move on to new companies, and referrals from clients.”

“Not being afraid to share ideas pre-contract stage.”

“Developing value-based sales proposals, heavily researched prior to presentation so as to resonate with stakeholders/audience.”

“Word of mouth (hands down). It really is about who you know, so I talk about our consulting practice all the time with friends, people I meet and business associates.”

Last week M Squared Consulting was again honored as one of the Best Places to work in the Bay Area. This award program was sponsored by the San Francisco Business Times and the Silicon Valley Business Journal, and garnered nearly 400 company applications.

What makes this award significant is that the “voters” are the employees of each company. In order to be considered we had to have an 70% participation rate in the survey which was sent to every M Squared employee. Each qualifying company was scored on a 100 point scale and the top 25 in each of several company size categories were ranked and awarded. (NOTE: We were ranked #16 in the 51 to 100 employee category with a score of 92.13.)

In our business (management consulting) we rely on two important groups of talent: the staff employees who sell and manage projects, and the consulting talent we deploy on client engagements. People, and the results they deliver for clients, are our product. We have no greater asset than our human capital.

By striving to be a “best place” to work, we send a signal to our employees that we value them and their contribution, we respect them as individuals, and we want to keep them happy. We also send a signal to our clients that we care deeply about our talent. It is no great secret that happy employees create happy clients.

When you consider the incredible costs and challenges with recruiting and retention (particularly with highly educated knowledge workers who are increasingly in short-supply and thus have many employment options) every employer must have a human capital strategy that insures they have the talent to execute.

I can think of no better human capital strategy than to strive to be a “best place” to work in your local market. It is certainly something the M Squared Consulting management team is invested in: our goal is to continually improve our employee value proposition just as we continually improve our client value proposition.

My last blog article referenced the advantages of the flexible workforce (for talking purposes, this is all of the non-full-time workers including part-time, temporary, interim, project/consultant, outsourced, etc). A few questions prompted me to write this follow-up article.

What are some of the benefits from embracing the flexible workforce?

• Expertise: Brings in targeted expertise, helps to build and maintain the “core competencies” of the organization
• Execution: Enables the management team to focus on execution of strategic initiatives, accelerates time to market, extends their “reach”
• Cost Control: Buy the expertise you need, as you need it, where you need it. In non-FTE increments
• Flexibility: Manage the peaks and valleys of your business while also satisfying the workforce need
• Agility: Proactively or reactively take quick action to capitalize on threats/opportunities
• Knowledge: Build in retention and training so that knowledge remains. (Knowledge retention*)
• Perspective: Cross-company/industry pollination - You benefit from an objective perspective, outside experience, best practices, and learnings
• Recruiting: Broadens your reach, try before you buy, focus on talent, enabling management team to get more done
• Retention: Demonstrates your commitment to talent and fosters a high quality, stable, and satisfied workforce
• Passion: Add energy and leadership to stalled projects, leveraging the “reach” of existing management

What are some of the common business situations where you could use the flexible workforce?

• Your company is going through a merger, IPO, or some other transition and special skills are required immediately
• A reorganization is in process and you still need to get the work done; hiring full-time is not an option
• You need expertise you don’t have in house
• Senior talent could provide wisdom and stability in an uncertain or new arena
• A top employee needs a mentor to grow to the next level
• You want to build a new competency
• A key manager abruptly departs, or takes a leave of absence, and you must insure continuity of their job function
• An extra set of hands is needed for a special project
• You want to hire a full-time candidate but critical projects need to move forward in the interim
• A key initiative requires specialized resources to accelerate progress
• Fresh outside perspective is needed