Strategy and consulting
2023 was a varied year across the consulting industry with many firms readjusting for over-hiring in 2022. Yet firms indexing in cost efficiencies and performance improvement have seen record growth. Marc Lesner, partner in strategy and consulting at Investigo, looks at the key trends for 2024.
Here are the key areas leaders need to prepare for in 2024:
Generative AI – becoming a key tool in consulting.
Lower price, higher returns – smaller players taking on the big consulting firms.
Salaries set to rise? – demand increasing for consulting services.
MBBs, Big 4s and many boutiques have seen utilization drop, yet have been able to retain employees as fewer firms have been hiring. Hardest hit have been those specializing in tech and life sciences, responding to the huge surge in hiring we saw in 2021 and 2022 during the pandemic. However, with the rise of generative AI and the implications of this on businesses in the coming years, consulting firms are beefing up capabilities in this space and we expect this to continue going into 2024. Industry verticals such as manufacturing and business services were resilient in 2023 with further growth expected this year.
In spite of a seemingly quieter deals market, firms coming in at a lower price point have been beating off competition from the larger players, particularly in the mid-market as PE funds look to be more cost savvy. We’ve also seen those historically focused on pre-deal diligence expand their offerings to capture larger market share from value creation.
Many firms with fewer ‘mouths to feed’ used 2023 to hire some of the best talent in the market as larger firms froze hiring and slowed promotions and pay increases. Those able to have also been preparing and executing on acquisition targets, able to buy smaller consulting firms whose valuations may be lower than normal.
Whilst we saw a significant increase in compensation in 2021 and 2022 as organizations competed for talent, salaries stayed relatively flat in 2023, largely driven by inflation and the need to save on cost.
With no elevated premium to pay for talent and fewer firms hiring, Q4 2023 and Q1 2024 are optimum periods for firms to hire top performing consultants, but as demand increases for consulting services, we expect there to be an influx of talent onto the market, potentially recreating the previous competition for talent later in the year.
While the larger firms focused on retention, the smaller consultancies were able to level the talent playing field in 2023 – but the hiring lull is likely to give way to strong competition for talent as demand increases for consulting services in an uncertain global climate. Consulting firms will need to bolster their capabilities in generative AI to provide key data and actionable strategies for their clients.
