cmc-canada - industry report 2016

The Canadian Management Consulting Industry:

Trends and Outlook2016

The Canadian Management Consulting Industry:Trends and Outlook 2016

P u b l i s h e d b y C M C - C a n a d a

T o r o n t o , O n t a r i o , C a n a d a

© 2 0 1 6 C M C - C a n a d a

Disclaimer: Forecasts and research often include assumptions and data sources and are

subject to inherent risks and uncertainties. This analysis should be read as an indicative,

rather than definitive, statement of industry perspectives and overall trends. CMC-Canada and its agents do not assume and hereby disclaim any liability for any loss or damage

caused by errors or omissions, whatever the cause of such errors or omissions. This

information is not intended as specific investment, accounting, legal, tax, or business advice.

Notice: All rights reserved. No part of this document may be reproduced or transmitted

in any form by any means, electronic or mechanical, including photocopying, recording,

faxing, emailing, posting online or by any information storage and retrieval system, without express written permission from CMC-Canada.

The Canadian Management Consulting Industry: Trends and Outlook 2016 ©2016 CMC-Canada

ISBN #978-0-9693569-9-82016 Management Consulting Industry Report

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Welcome Message

The Canadian Association of Management Consultants (CMC-Canada) is pleased to release its latest study of the management consulting industry in Canada. This 2016 report is our 6th in a series, which began in 2005.

The study was conducted over the summer of 2016. The research approach comprised three elements: a detailed online survey of active CMC-Canada members, in-depth telephone interviews with senior thought leaders from management consulting firms of all sizes, and an analysis of the landscape for management consulting services, encompassing

market size, composition, trends, challenges, and opportunities.

This report provides a broad view of the management consulting industry, highlighting firm size, location, client sector, service lines and specializations, professional fee environment,

projected performance indicators, changing client perspectives, procurement processes,

strategic growth opportunities, and constraints.

Incisive Marketing undertook this 2016 study and wrote the attached report. The Incisive team joins CMC-Canada in thanking the more than 400 CMC-Canada members who shared their information and opinions in the study. Special appreciation is expressed to those 32 senior executives who shared their insights and vision for the future of our industry in the interviews. Gratitude is also expressed to the Guidance Committee, including three CMC-Canada members, who provided review and critique of the survey instruments and report.

Over the last few years we have witnessed considerable change to business environments provincially, nationally, and internationally. Along with economic and technological

changes, we are witnessing ongoing change in client base, increasing competition, and

significant shifts in industry structure and direction. We hope this report provides some insight into the management consulting profession, the industry management consultants

operate in, and a sense of where the industry and profession are headed.

Jac van Beek CMC Chief Executive [email protected]

Executives Interviewed: Sean Murphy FCMC Managing Principal and Chief Executive Officer, A Hundred Answers Sean McAlpine Principal, Abonar Business Consultants Ltd. Randy Baldwin FCMC, CAC President, Acorn Hill Partners Inc. Denis Godcharles CMC Partner, BDO Canada LLP John Harrison President, BMB Consulting Services Scott Ackerman CMC Managing Director, Criterium Group Tim Christmann Managing Partner, Consulting, Deloitte Canada Sara Arnstein Director, Consulting Strategic Initiatives, Deloitte Canada Roger Grona President, Firebird Business Consulting Ltd. Nicholas Lal CMC Managing Partner, Gartner Consulting Greg Kuzminski FCPA, FCGA Founder & and President, GMK Management Consultants Rejéan Dancause FCMC President, Groupe Dancause et Associés Inc. Peter Milley FCMC Partner, Halifax Global Inc. Garry Sears CMC Managing Director, Kelly Sears Consulting Group Ken Davies FCMC President & Owner, Lumina Consulting Howard Barrett Owner and Senior Consultant, Marketing Initiatives Kathy McLaughlin Founder and CEO, McLaughlin & Associates Christopher Lavin FCMC Partner, Advisory Services, MNP LLP Bill Reid CMC Lead Consultant, Public Sector, MNP LLP John Whincup CMC Executive Director, Optimus|SBR Valerie Sluth, FCMC Owner and Managing Principal, Praxis Consulting Genevieve M. Bonin P.Eng, FCMC Partner, Canadian Management Consulting Leader, PwC Marty Donkervoort Associate, Social Enterprise Consulting, Reconnaissance Management Consulting Group Blaize H. Reich ICD.D, CMC, CMC-Global AF Principal, BHR Consulting Ltd. Paul Twigg Vice President, Technology, Sierra Systems Tim Wildman CMC Regional Vice President, Sierra Systems Anthony Taylor Managing Partner, SME Strategy Management Consulting James McGregor Partner, Tacit Management Consulting Inc. Marie Pin Director of Business Development, Tacit Management Consulting Inc. Lisa Shepherd Founder, The Mezzanine Group Jane Rounthwaite President and Managing Partner, The Osborne Group Mauro F. Meneghetti ISP, CMC Director, WMC (Western Management Consultants) Guidance Committee: Bill Wilkinson FCMC President/Owner, Wilkinson Consulting Inc. Eugene van den Berg CMC Finance & Transformation Specialist Ludmila Jagiellicz FCMC Consultant, WMC (Western Management Consultants) Mary Blair Managing Director, CMC-Canada Sylvia Biggs Director, Business Development and Partnerships, CMC-Canada

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Note to Reader

This is the sixth in a series of industry studies commissioned by CMC-Canada to provide members and the consulting community with a perspective on the trends, practices,

challenges and outlook for the management consulting industry. In this study, many of the same themes from the recent studies, conducted in 2009, 2011, and 2013, were included for continuity and to provide trends and market direction.

This study focuses on management consulting in Canada. Definitions and understandings of the components of management consulting vary, but for the sake of continuity and

ease of use of national data, this study utilizes the North American Industry Classification System (NAICS) description: Establishments primarily engaged in providing advice and assistance to other organizations on management issues, such as strategic and

organizational planning; financial planning and budgeting; marketing objectives and policies; human resource policies, practices and planning; and production scheduling and

control planning.

In CMC-Canada’s three previous studies, management consulting has been described as: a richly diverse industry, encompassing among others, large partnerships, big

national companies, global heavy-weights, medium-sized regionals, boutiques and sole proprietorships, not to mention service line differences among pure play strategy firms, IT consultancies, operations advisors, human resource consulting enterprises, both general

and niche, and the financial advisory units of the accounting firms. This description has also been utilized in the current report. The research instruments and general study

methodology for the 2016 study were developed to maintain comparability with previous studies, to the extent feasible and practical.

When comparing some of the data in this report, it is important to know that some public information and data, such as GDP figures, are revised periodically. Also, because of the size, diversity, and prominence of the management consulting industry, some information

will vary significantly depending on the source. Since management consulting is a broad and diverse profession in Canada, and there are many practitioners who are not members of or affiliated with CMC-Canada, the results of this study do not necessarily represent the industry as a whole.

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Canada Industry Study

TABLE OFCONTENTS

NotE to REAdER

ExECutIvE SuMMARy

MANAGEMENt CoNSultING – A GlobAl INduStRyGlobal Trends

Technological ImperativesInformation, Data and Technology

WAvES oF ChANGEThe Evolving ToolkitChallenges for the IndustryHow Firms are Changing

ClIENt lANdSCApE

StRuCtuRE oF MANAGEMENt CoNSultING IN CANAdAMarket Development and OutlookChanges and TrendsSuccesses and AccomplishmentsChallenges and Changes

tAlENt ANd pEoplEInflows to the IndustrySkills and Consulting Acumen

dyNAMICS oF CoNSultING FIRMSService Mix

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Growth and Advancement StrategiesPricing and QualityBusiness ModelsProposal Setting Factors

thE FINANCIAl pICtuRERevenue PictureFee Structures and Competitive ConsiderationsFee ModelsDiscounting PracticesFinancial Projections in the Next Year

CoMMuNICAtIoN StRAtEGIES

dEvElopMENt INItIAtIvES

MEMbERS’ outlook FoR thE FutuRE

Who pARtICIpAtEd IN thE 2016 Study?

AppENdIx Methodology List of Figures

Selected Management Consulting PracticesAbout CMC-CanadaAbout Incisive Marketing Inc.Sources

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Executive Summary

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Management consulting is in every corner of the business landscape. Its marketplace is increasingly worldwide and diverse. Globally, this is a $350 billion industry, and in Canada, a $12 billion one. Management consultants make an indispensable contribution to Canadian public and private sector organizations, and to the economy of the country. Now, in 2016, the industry is facing the same turbulent and challenging times that are seen around the world. To adapt, the industry needs innovation, focus

and new strategies. Industry professionals, despite this need for transformation, are optimistic and ready to change.

Globalization opens opportunities for Canadian firms, and also presents challenges. In the past, over 50% of management consulting took place in North America, and now there is growth in both developed countries and emerging economies around the world. The

US economy is on an upswing, and Canadian consulting firms are taking advantage of this. Europe’s economic and political uncertainties are viewed as limiting the opportunities there to some extent. Many developing countries in Asia and South America are more stable now, although the opportunities there come with risk and uncertainty. Some 13% of Canadian management consultants surveyed reported that their firms do business outside of Canada, and expect this to grow.

Technology and information are key drivers of industry change. Business processes, strategies and structures emanate from technological change, and management

consulting is adapting and developing new approaches for client success. The importance

and momentum of big data and the information revolution are opening opportunities for

management consultants in information usage, governance, data security, privacy and

information systems.

Management consultants’ tools are evolving. Practitioners are developing analytical tools for information management, technology methods and innovative strategy approaches.

Adaptation of tools from one client industry to another is a creative and often beneficial tactic.

Challenges and changes for management consulting come in many forms. The consultant

has traditionally been a generalist, bringing an overall perspective and giving advice. Now,

clients need consultants to implement their strategies and to educate and train staff. Instead of being generalists, consultants are developing niche proficiencies and broader skill sets, and they are adopting a nimbler and more collaborative approach. Clients have access to a broad array of tools and information, and this is changing the deliverables

expected, and the process, for management consultants.

Management Consulting in Canada2016 Industry ReportExecutive Summary

“Our ethos is to radiate a voracious appetite for change and innovation, and to inspire our clients to do the same.”

Executive Summary

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Today’s clients come from the public (34%), private (57%) and not-for-profit (9%) sectors, an increase in the private sector importance from previous studies (47% in 2013). New sub-sectors like environment, First Nations, clean energy and not-for-profits offer potential, as does manufacturing, to some extent. Clients want consultants to provide extensive expertise in understanding end user (clients’) customers. They expect mentoring and coaching.

• Clients are asking for more value for money, not just hourly or project-based consultants but value-based solutions and clear demonstrations of cost savings.

Canadian industry structure differs by region and industry. Quebec and Alberta are the most challenging business areas, Ontario and BC are fairly robust, and Saskatchewan, Manitoba and the Atlantic region are facing challenges. The oil and gas industry is a major concern, although in Alberta, its heartland, new signs of growth are emerging.

• Nearly half (49%) of respondents expect the market for management consulting to grow in the next three years, while another 32% think it will stay the same. Many large firms say their growth is more likely to come from mergers and acquisitions than from increased sales in existing business areas. Mid-sized firms predict 3-5% annual growth. Most are more optimistic about growth in their own firms than in the industry in general. Some executives expressed the opinion that all methodologies are still based on those from 50 years ago, and most are convinced that the image and model of management consulting have to change to survive. Mergers, brand building and niche development are areas of concentration.

• Over 70% of firms are small (1-5 practitioners). 62% of management consultants are full time and 38% part time. Firms of all sizes use both, with large firms having proportionately more full-time consultants and smaller firms (other than sole practitioners) tending to have a higher percentage of part-timers.

• Mid-sized firms must develop viable, deep, sustainable niches to survive. Large firms can continue to do complex project work; small firms can specialize or sell commoditized solutions. The mid-sized firms are predicted to be squeezed most.

Measures of success differ by firm size and market situation. Internal improvements, such as leadership or ownership changes, spell success, along with revenue increases. Growth

in client base and office location expansion are also notable. In particularly challenging times, maintaining revenue levels and client base is viewed as a major achievement.

Dominating or establishing a promising market niche is a winning differentiator for some firms.

People and talent create complex challenges. This is a mature profession. Over 80% of respondents have been in the industry for over ten years, and over 70% of the CMC-Canada membership is over the age of 50. Many are retiring or cutting back, and with them goes expertise and experience. Among the many sources of recruitment for new hires, recruiting those with experience ranks highest (36%), followed by internal promotions (13%), recruitment of graduates from universities (12%), and recruiting executives from government or industry (11%). Recent retirees or people who are let go from industry or government may set up consulting businesses, and while some are

successful, some lack the skills and processes to be truly effective. Today’s consultant must come with flexibility, creativity, analytical competence, empathy and relationship-building capability.

“Niche markets and deep domain expertise of consultants have become more critical to success. The days of the generalist are over.”

Executive Summary

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• An imbalance of talent in some firms is created by bench strength of too many generalists and people with strategy and traditional skills, and not enough consultants

with niche skills and information, analysis, technological and technical competence. It is increasingly difficult to hire the talent that is needed for the evolving project needs, and at the same time maximize the utilization of existing consultants.

Types and locations of consulting firms define the industry in Canada. 42% of respondents’ firms are located in Ontario, 21% in Alberta, 17% in BC, and less than 5% in each of the other provinces. Independent consulting practices make up 61% of the firms, Canadian national and regional/provincial firms represent 14% each, and 8% of respondents work in a Canadian office of an international firm.

Services offered by the management consulting industry are continually evolving. Corporate/business strategy has long been a standard offering for consulting firms, and makes up 27% of the service mix, but now project work involves implementation of those strategies as well as development of them. People issues – human resources, organizational development, coaching, and governance – comprise 16% of the services offered. Operations (15%) and information technology (14%) are both growing in importance; clients want consultants to bring greater efficiencies and effectiveness, along with improved processes, to their assignments.

Growth and advancement outlooks show optimism, in general, with 42% of respondents predicting growth in the market for their services, and another 28% foreseeing a stable market with business volume remaining the same. The main area of concern and

uncertainty comes from economic and market conditions, viewed as a threat by 38% of respondents.

• Many initiatives are expected to take place in respondent firms. Most common is a change in business model, organization or strategy (27%), followed by hiring new consultants (21%). Some suggest no major changes will take place (15%), while others see principals leaving the firm (14%), or a merger/acquisition (13%) on the horizon.

• External market developments come in many forms. Management consultants project opportunities to be created by new technologies (58%), changing demographics (52%), globalization (52%), and information/analysis issues (51%). In addition to economic issues, they view a shortage of qualified consultants (20%) and reputation/transparency considerations (19%) to be the key developments that will pose threats.

• Increased business development tops the list of growth and expansion strategies, with 61% of respondents saying that their firm places this as a top priority. Next comes developing different or expanded services (42%), undertaking more marketing and/or promotion (35%), and pursuing new target markets (32%). Some executives reported that their firm now has a director of business development, which is a new initiative.

Pricing and proposals are front and centre with management consultants. The industry

is becoming more competitive, and some insiders are concerned that there is a race to

the bottom to lower prices to secure business. Federal government RFPs are increasingly more complex and prices are being driven down. Some firms are selling tools and processes to build revenues and client base.

• Preparing client proposals involves many considerations, and the most important is expertise of consultants (cited by 92% of respondents), followed by reputation of the

“Experience and knowledge are important, yes, but an effective consultant needs empathy (heart) and understanding for the client and their projects.”

Executive Summary

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consulting firm (85%), importance of work to the client (83%), and the relationship with the client (80%).

• Pricing factors also come in many forms. Respondents found pressure to compete on price to be most challenging (63%), pressure to lower price (55%), and uncertainty about client budget and ability to pay (55%) to be the most notable factors.

Revenue distribution across different sizes of firms has remained fairly consistent over the years this study has been conducted. Large firms, with revenues over $100 million, account for 82% of the market’s revenue, and the next tier of firms, with revenues in the $51 - $100 million range, account for 7%. The smallest firms, with under $1 million in revenue, comprise just 1% of the market, just as they have since 2008.

• Over 44% of firms reported that their revenue grew between the present fiscal year and the past one, and 30% said their revenue remained the same. While 18% of those reporting growth predicted it to be more than 20%, another 10% thought their revenue decline would exceed 20%.

• Financial projections for the coming fiscal year were down from 2013 and 2011. 49% of consultants expect their financial performance to grow, and 32% suggest they will remain the same. Another 18% expect revenues to decline. In 2013, growth was projected at 64%, and decline at just 7%.

Fees across the industry have remained relatively stable over the past year, and also over

the seven-year period of these industry studies. There are four tiers of consultants, and while their rates vary by firm size, the most senior level (principals, senior partners and CEOs) quote their hourly billing rates at $250 - $500, with $250 the most common rate. Next group, VPs and experienced consultants, come with an hourly rate of $200 - $450, and again the most common is $250. Mid-level professionals are charged out at $100 - $370 per hour, and entry level professionals at $50 - $175. Some firms charge out at a day rate, which ranges from $700 to $3500.

• Four fee models are used across the industry. Respondents said that fixed fees (60%) and hourly/daily fees (58%) are by far the most commonly used. By comparison, contingency/performance fees are rarely or never used, although some consultants have tried them. Retainer type arrangements are less commonly used all the time, with 35% of respondents indicating they are rarely used, and 33% citing never.

Discounting practices are a topic of great interest to management consultants, and

one with dissenting views. 53% of respondents indicate that discounting takes place in their firm, and 29% of respondents say they never discount, but industry leaders were confident in saying that everyone discounts in some circumstances. The major reasons for discounting are to support a not-for-profit client or worthy cause, to secure a long-term client or high value contract, or to secure a new and valuable client. Government business

is the least likely area where consulting firms will offer a discount. The discount amount or percentage is highly variable and often does not follow a specified percentage or discount practice.

Communications utilized by respondents’ firms are concentrated around relationship building with clients (77%), maintaining a strong website (48%), and demonstrating thought leadership (38%). Presentations (52%) and LinkedIn are also well utilized (38% of firms). Some other popular social media are not utilized much in the management consulting industry, such as webinars, podcasts, blogs, and Facebook. With the emphasis on

Executive Summary

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business development, the low use of these tools represents an under-utilized resource in management consultants’ toolkits.

What lies ahead for the industry? Over 45% of respondents are confident that the industry is evolving strongly and demand will be stronger over the next three years, and 32% predict that it will be the same. Only 13% predict weaker demand. Stronger demand is projected for Ontario, the USA and BC, weaker demand is foreseen for Alberta. Key drivers of growth are expected to be increased business from existing and new target markets by offering existing services (29%) and generating new or revamped services (24%).

Overall, management consulting remains vibrant, adaptable, and vital to the Canadian

and global marketplaces. Insightful leaders will view the industry disruption as a challenge they can successfully address, and will position their firms for the necessary changes and advances.

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Management ConsultingA Global Industry

Management consulting, over the past few decades, has fueled many Canadian businesses, and empowered their leadership. The management consulting industry is

interesting, complicated, and evolving. In Canada, with an increasingly global and stable economy, the landscape for the management consulting industry is promising. At the

same time, a transformation is occurring to this mature industry. Even in these dynamic times, consultants are facing the headwinds of disruptions and change. Some of the disruption comes from the same issues that are facing business in general, some are

issues related to the undercurrents of the process of consulting. The business community

as a whole continues to need management consultants, and the consultants are poised to

evolve.

In this study, some of the best minds in the Canadian consulting business shared their views, concerns, and confidences. They are convinced that the management consulting industry is rooted in sound principles and practice, and that the practitioners are well-equipped to navigate the upcoming tsunami of change. Some expressed the concern that often businesses do not understand management consulting and the value it can bring;

others are concerned about the image of management consultants as being expensive and not being hands-on. An era of more transparency and pragmatic advice is here, and along with it, more savvy clients and consultants with an increasingly diverse set of tools and

capabilities.

Global Trends

Management consulting is a global industry. While estimates of its total impact vary, a 2015 MarketLine Industry Profile valued the 2014 global market at US$340 Billion, up by close to 7% over the previous year. The Americas (North America and South America), accounted for 53.5% (US$182 Billion), dominated by the US at more than 41% (US$140 Billion) of the global market. The next largest region was Europe with 34.5%, Asia-Pacific region with 9.4%, and Middle-East/Africa with just 0.6% of the market.

Viewing the 2014 global market by service categories, operations management at 31% was the largest, followed by information technology and corporate strategy each at 21%, human resources management at 12%, and ‘other’ at 15%, based on dollar volume. Significantly, the distribution of categories is not uniform by region or country. Management consulting in the Asia-Pacific region has its highest level of activity in information technology, Europe is highest in operations management, and for the Americas, it is corporate strategy and digitization.

Management Consulting - A Global Industry

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A 2015 report by Consultancy Magazine in the UK, states that the ‘Big Four’ accounting and consultancy firms (Deloitte, PwC, EY, and KPMG) collectively hold 40% of the global market. The top 10 firms together hold more than 50% and top 200 combined hold 80% of the global market. Consolidation has played a role in the numbers and is expected to continue to impact the market moving forward.

Growth forecasts overall are positive. Projections for 2019 are that globally the industry will surpass US$400 billion – growing at a compound annual growth rate of more than 6%. The Americas are forecast to have the highest annual growth rate (more than 7%), Europe and Asia Pacific slightly slower at close to 4%.

Several sources view management consulting as an industry and a practice in flux, one that is facing disruption, challenges and changes. Clients now expect the best available in management consulting from around the world. At the same time, management

consultants working in larger firms expect to have the opportunity to develop global skills. The consulting industry has to respond by pushing itself to become more international,

and to embrace all that globalization encompasses.

North America’s dominance of the market is changing, as world markets evolve and the interrelationships between countries change. The fact that the management consulting

industry in the US is doing better than it has in the past five years is welcome news to bigger Canadian firms, who can export services to the US and charge solid rates. It is also an opportunity that even small firms are now starting to exploit, particularly firms with a distinctive niche.

McKinsey & Company’s September 2016 Economic Conditions Snapshot gives insights into growth and economic outlooks of executives around the world. The United Kingdom’s vote to leave the European Union brings uncertainty, but executives there do not find that the potential for exit of other countries from the EU poses a threat to global growth. Still, economic challenges face many European countries, and minimal if any growth is projected in Europe overall for the near term. Executives in Latin American countries are increasingly buoyant in their outlook for their economic future, a change from the

pessimism of just a few months ago. However, they are still concerned about political

risks and the uncertainties of political transition. In India, executives forecast improving economic conditions in the months to come, and in China there is similar optimism. There are developing countries where consulting can reap great rewards, but the work often

comes with substantial risk that has to be weighed against potential gains. The global

market offers opportunities for Canadian practitioners, if these are well-planned, vetted, and executed. Some 13% of those surveyed reported that their firm earns revenue from outside of Canada.

Although the global market offers some unique and lucrative opportunities, it is also fraught with uncertainty. Foreign exchange has a positive and a negative impact, depending on the perspective. While some international clients have capital, they are investing it more cautiously and slowly. The guiding light says caution, research, and

openness.

Technological Imperatives

Technological change, with its many ramifications, is affecting the management consulting industry in a myriad of ways, and may be the most pervasive issue the

industry is confronting. There is a radical change in the way goods and services are

“Technology is disrupting the consulting industry.”

Management Consulting - A Global Industry

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bought and sold, at both the business-to-business and the business-to-consumer level. Similarly, the impact and implications of the use of e-commerce and social media infiltrate every corner of the business landscape, and present opportunities as well as challenges for

management consultants. Technology practices are constantly in flux due to the speed of change, and the management consulting industry is slowly trying to adapt to the resulting

dynamics.

Information, Data and Technology

The information revolution brings with it vastly increased access to data and information

– and with it, the democratization of information. Big data is on all business agendas, and if it is not, it should be. This also comes with data analytics challenges, digital issues,

privacy, and IT concerns. IT management and security involves access to information considerations, information governance, data security, and the need for modernization of

legacy systems. The impact of security and data breaches is increasingly disturbing. With the migration of information to cloud-based storage comes additional concerns, along with opportunities. The IT sector also brings other trends and challenges. When the IT firm is the management consultant’s client, sometimes it is tough to convince the high-tech business that they need help. The technology sector has a culture of not hiring from

outside, and a reputation for asking for free advice. While the opportunities in high-tech firms are many, there are also many hurdles.

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Waves of Change

Management consulting practitioners are being forced to rethink their business and their place in the consulting market. There is a strong need to bring more value to

the table, while not increasing the cost of services. For many years conventional

wisdom said that management consultants advise, strategize, and recommend but

do not implement, and today’s client wants just that – management consultants who can come in and implement what they recommend, working with internal client staff to ready them for the tasks ahead of them after the consultant’s engagement is over. Discussions, consultations, and coaching are becoming particularly important.

The Evolving Toolkit

The skills in a management consultant’s toolbox are changing and evolving all the time. Analysis is critical, and knowing how to use data is growing in importance. While there is a lot of discussion about big data and how to store and use it, many clients have

great difficulty managing even ‘small data’, so the consultant plays a pivotal role here. The skill base required by the consultant is becoming broader, more complex and more diverse. Skills that some consultants come equipped with fit one type of client or one industry, and savvy consultants are using their skills creatively to adapt and repurpose

them to other industries and applications. At the same time, management consultants

often have to develop niche specialties, and greater depth in their areas of concentration.

Challenges for the Industry

Management consulting has been the subject of many studies and analyses. Now, the consulting model that has worked for many years is waning and needs to be reinvented.

In the past, management consultants have been considered contextualists – that is, they have been responsible for bringing an overall view of the client situation. Now,

clients want specialists, and implementers. This is one of the most pervasive and most

perplexing challenges that industry practitioners face. A disruption is emerging in the industry, and it requires different approaches and a different consulting culture.

Clients now have ready online access to basic information and tools that management consultants would have furnished in the past, like templates and processes; this

commoditization of management consulting is a challenge. There is a need to respond

by providing more niched services and implementation. Change is happening, but very slowly, and with many challenges. Management consulting, to some, is part of the supply chain, but where it sits is not clear to clients.

“What is a management consultant? This is very unclear in today’s world - and how it is different than other types of consultants, providing advisory services, technical services, advice to clients?”

“Coaching is a key need in the new world – not many smart people are good at it.”

“Web tasking, offshoring, moonlighting [is] taking away business.”

Waves of Change

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Management consulting is seen by many practitioners as a flat growth industry, clients are spending less and exerting pressure to reduce costs in what has become a relatively price-sensitive market. Some consultants expressed a concern that this could result in lower quality of work if prices are squeezed.

How Firms are Changing

Management consultants need to be nimbler and more responsive to the changing business climate. For example, when management consultants work in multi-generational teams with diverse skill sets, they can tackle large and complex assignments more effectively and with more novel approaches. Bringing consulting experts together to collaborate on multifaceted projects can be beneficial for all. Collaborating with other firms and/or specialists is becoming more commonplace.

“We would all do well to think as collaborators rather than competitors - our clients will thank us.”

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Client Landscape

Clients come from every aspect of business, government, and not-for-profit organizations. The changing client landscape is providing opportunities for

management consultants to help organizations use the information, tools, and staff they have more effectively. Many opportunities also exist in industry and company infrastructure for projects involving transition and change management.

Clients who deal directly with consumers are facing challenges in understanding the drivers of consumer behaviour and the paths of their customer experience, and they expect expertise from management consultants on the whole customer panorama. Consumer centricity reigns. Consumers are enjoying growing power and knowledge, and this is a challenge for both management consultants and their clients. Many clients do not fully understand customer worth, lifetime value of a customer, or the routes to customer

understanding. Management consultants are charged with educating business owners on customer drivers, and creating the tools to generate customer savvy and loyalty.

Clients today are impatient. They want solutions, they want management consultants to focus on empowering them to solve their company’s issues, and they want their consultants to be mentors and coaches. They also expect that consultants will go beyond strategy to implementation and training.

Proposals increasingly need to focus on fixed costs, and on delivering real value. In the public sector, the procurement process is complex, laborious, and detailed, and many consultants reported finding this work and this client segment not worth the effort. Price erosion and the drive for accountability come into play in crafting proposals, too.

Some management consultants expressed the view that some client and industry sectors are saturated markets for management consulting, and some consultants are now

focusing on slower or non-traditional sectors. The environmental sector is growing but challenging, First Nations issues offer some opportunities for management consultants, and clean energy is emerging as a sector with potential. In the area of sustainability, the challenge is to define cleaner projects and foster innovation in that space, as this is where the money is. Different provinces define and apply sustainability differently, so geographic specifics play a notable role. Here is a glimpse of the evolving demand by client sector. (See Figure 1)

Today’s clients do not expect only the traditional hourly-paid consultants; often they expect very sophisticated teams with team-generated solutions. At the same time, many clients still ask the price per hour, not what value they will get.

“Clients are looking for actual cost savings versus advice.”

Client Landscape

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As an industry, there is a need to educate clients and consultants in how to present and

accept value-based solutions, and at the same time management consultants need to work to address the big trust challenge with value-based consulting. For many, getting assignments is still based on ‘who you know’ and ‘who knows you’.

Clients value asset-driven or evidence-driven consulting, not just people who create reports, instead preferring data analytics with meaningful action items, and evidence

informed by best practices. Clients are seeking to realize actual cost savings or increased revenues as opposed to just advice about how to achieve these.

Figure 1: Expected Market Evolution for Management Consulting by Sector

ExpEctEd MarkEt Evolution for ManagEMEnt consulting by sEctor

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Structure of Management Consulting in Canada

The country’s economic performance, and the regional growth, impacts all industries. With management consulting, the economic situation presents an interesting paradox: both growth and contraction can signal demand. Canada’s GDP for the last available year shows modest growth from 2013 to 2014, and Nova Scotia, Quebec, Ontario and BC mirror that growth, with the latter two showing strongest performance. Notably Alberta and

Saskatchewan experienced decline.

Figure 2: % Growth in Real GDP

% growth rEal gdp


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Figure 3: Expectation of Industry Growth

The management consulting landscape in Canada differs greatly by region, city, scale, and industry. What works in one area may not translate to others. Most notable is the influence of industries and related clients. Quebec and Alberta appear to be the toughest markets for management consultants now, Ontario and British Columbia are much more robust. Saskatchewan, Manitoba and the Atlantic Provinces are challenging, too. For example, Halifax is reported to have lost many head offices. Winnipeg has experienced some economic downturn, particularly in the financial services industry, although overall Manitoba is relatively stable.

The challenges brought about by the oil and gas downturn have had a major impact in

Alberta, more in Calgary than in Edmonton. However, there is a perspective held by some consultants that Alberta is starting to survive quite well and new clients are emerging, ones with less focus on energy. Some analysts say that pipelines are needed to rebound the industry, and the recent liquid natural gas announcements between BC and Alberta signal a direction that will likely have positive economic ramifications across the country.

“Competitive advantage comes from being on the lookout for the next wave in business that your clients will need to respond to. To explore and be ahead of the change. Developing new approaches, and new tools.”

ExpEctation of industry growth

Market Development and Outlook

Management consultants are moving towards being more prominent and involved with their priority clients in how they serve them, the time dedicated to them, and the

impact they have on client success. How management consultants position themselves

and explain how they can provide value is pivotal to their success. Both upturns and downturns in the economy are good for the industry, if consultants are strategically

positioned and if their value proposition is strong.


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Nearly one-half of industry practitioners feel that the market will grow in the next three years, and another third sense that it is going to be flat.

“New opportunities? Go to the areas where the fees are and you will attract other consultants. Next thing you know, a new niche.”

In large consulting firms, growth is projected to come through acquisition, not just from increased sales. Others, mainly the mid-sized or very niched firms, are cautiously optimistic, and predict 3-5% annual growth in the near term. Growth may come from market penetration with existing clients, or in different industries, like manufacturing and not-for-profit. Consultants are more optimistic about the performance of their own firms than about the industry in general.

A growing consensus among consultants is that the image of management consulting,

and the old model of doing business, must change for the industry to thrive. This means

bringing better value, using fresh approaches, and unique thinking. The capacity of Industry leaders to execute this will be the key to success.

Changes and Trends

The Canadian management consulting industry mirrors many of the trends and issues of the industry around the world. Many practitioners feel that the industry is stagnant, and over half of the respondents did not express an opinion on industry direction. It should be a concern for all consultants that almost all consulting methodologies are

based on ideas and concepts from some 50 years ago, and that change and innovation are required for a healthy future.

Figure 4: Anticipated Performance Levels

anticipatEd pErforMancE lEvEls


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The ‘Big 4’ firms are building and reinforcing their brands, and some are acquiring smaller firms. Boutique consultancies are more nimble, and usually have effective plans and identified niches. Over 70% of the firms in the industry are small (1-5 consultants), and they utilize both full and part-time consultants. The largest firms have strong bench strength, and also utilize the expertise of both full and part-time practitioners.

Both government and the private sector clients are moving towards much more savvy procurement and strategic sourcing, especially in large enterprises. This puts pressure on

smaller consulting firms, and often results in lower rates for larger firms. This is only one of the many signs of change in the management consulting business model today.

In general, the management consulting business is growing more complex. Through transformation to digital, management consultants are required to bring their own tools and solutions to solve customer problems; also to bring other partners with specific skills on board. When there are more players involved, another level of complexity is added, but at the same time this can result in more dynamic solutions. However, assignments can

then take longer and be more challenging to manage.

In the near future, management consultants in the ‘middle class’ will suffer the most – smaller, lower-cost consultancies will sell commoditized or niched solutions in volume, while large firms will make money on big, complex project work. Those in between will be heavily squeezed. Big firms will hire and outsource to keep volume up, mid-range firms will be looking to merge up and/or establish a viable niche. Mid-sized firms may be able to exist quite happily if they find a viable, sustainable niche, and develop depth of expertise, knowledge and application. For example, in the current business climate there are niche opportunities in the technology sector, in specialties like privacy/security or information management.

Management consulting over the past few years has required a more mature set of skills coupled with experience, and that higher-level capability costs more and requires more investment. Demand for more specific skills is growing, as organizations are looking for immediate impact and immediate value. Agile, hyper-focused consultants are required, and implementing is key. Traditional management consulting does not apply to most

markets as it did in the past, because clients are learning from conferences and webinars,

and they need a completely different focus and depth of solutions. So management consulting is not the idea generator it used to be. Now it is being asked to drive the

program, to ‘make it happen’.

Successes and Accomplishments

Management consultants measure and express their successes in many different ways. For some, industry recognition is a goal to aspire to. For others, it is internal

improvements, growth and leadership transitions that signal advancement. Personnel changes, like hiring a managing director or a business development specialist, can make

a crucial difference to some. Acquisitions and mergers have contributed to industry consolidation in some areas.

Growth may be measured in terms of a revenue surge, increasing and diversifying

the number of clients, or geographic expansion. Companies that have scaled up their operations have had to focus on managing the workflow so that income grows along with business growth. Moving up-market to offer services to larger clients has worked as a growth strategy for some consulting firms.

“Business is changing: what worked yesterday, doesn’t work today. Consultants with both experience and education will help clients in this new landscape.”


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In difficult markets or economic environments, just simply maintaining the level of business can be viewed as success. In the past three years, many firms have shifted their focus, and others have reduced spending. Firms are generally cautiously optimistic,

although some expressed the concern that they have not experienced economic disruptions yet but fear they are coming.

Management consultants often deliver strategy to their clients, and in the past three years more have recognized the need to apply an increasingly strategic focus to their own

operations.

Some consulting projects are ongoing for years, and some projects utilize all of a firm’s capacity. Some firms that are heavily dependent on government work have found that they are able to effect changes and have impact on how the government agency in question works. All of these situations may be the hallmarks of success to their firms.

Establishing a leadership position is a winning strategy; some key areas for this include expertise in digital and cloud, product launch and incubation, aboriginal issues, and governance. These clearly require special skills and understanding. Helping organizations sort out their technological matters and develop strategies to get them to their next level of success through technology is a sought-after service and a valuable offering for consulting firms with the requisite competencies.

Challenges and Changes

Management consultants are facing many challenges, along with the disruption in the industry that is here for some and looming for others. Some firms have cut back on their margins and rates, because they are operating in tough markets and/or they do not have the bench strength to deliver. The elusive and valued multi-year clients are not as easy to find as they were just a few years ago.

Some internal challenges are common to many firms. Capacity in partners is critical, and some senior consultants who are successful in the consulting realm are not

effective managers. Many firms are smaller and very risk averse, which is problematic in a slower economy. In Canada, like in many other developed countries, everything changes by market.

Some consultants expressed concern that they sometimes encounter ‘pop-up’ competitors who do not have a methodology or framework to support their consulting advice. These

people may have a number of years of corporate experience, their employment may have come to an end, and they may offer their services to business connections. This can have a detrimental effect on the image of the management consulting profession. Others feel that consulting is becoming more commoditized and ‘dumbed down’, as practitioners do not have time, interest, or financial resources to spend on deep thinking, investing in their own knowledge base, or developing comprehensive solutions.

“Business owners get it, some are very savvy. They might not have the business acumen of the consultant, but they know talent and competence. They challenge MCs, they’re demanding; making it hard for the consultant to break into the field.”

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Talent and People

Many phenomena affect the management consulting talent pool, and the inflows and outflows are in constant flux. This is a very complex issue for consulting firms.

Figure 5: Tenure in Management Consulting

Over 80% of the respondents to this study have been in the industry for more than ten years. The industry, and the consultants, are ‘greying out’ – this is an industry predominantly (70%) populated by people over the age of 50. Many who have been in the industry for a long time are retiring or cutting back their involvement. Recruitment of new qualified staff is often difficult, and lack of qualified personnel puts additional pressure on current staff. The millennial generation (those born between 1981 to 1997) is not widely interested in management consulting, and for those who are, they require significant training and experience to get up to speed.

Baby boomers (those born between 1946 and 1964) make up a large proportion of management consultants. There will be a significant loss of expertise and experience as they retire, and at the same time, they will make way for a refresh, and for new ideas

tEnurE in ManagEMEnt consulting

“A career as a certified management consultant can be very rewarding, fulfilling and enjoyable.”

Talent and People

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from younger consultants. Boomers who retire take with them a combination of tech skills, number crunching, real life experience, and the ability to manage people and challenges, acquired through their years of experience. One challenge with boomer retirement centres around succession planning and knowledge transfer, and some leaders

are concerned that the next generation of consultants will not be as skilled as the ones currently working in the profession.

Some firms are concerned about a shortage of qualified subcontractors and consultants with niched skills. Security professionals, consultants with deep technical and technological expertise, and information analysts are in demand.

In the Prairies, emigration is a drain on the talent pool. People leaving the area is a particular concern for firms located there, as the talent shortage can limit their capacity. Skills drain, skills gaps, and low growth are major concerns. Ottawa and the Maritimes are experiencing similar talent issues, although in the case of Ottawa the drivers are different because of the strong influence of the federal government on the business community.

For larger firms, it can be challenging to get the right mix of management consultants. Some have too many people on the bench who do not have the skills needed at the time they are required. Others cannot find the skills to hire. Concerns abound over the rise in recruitment agencies that place unqualified, untested consultants in client situations, and the ease of hiring consultants online (and offshore) who will do work very cheaply. Many people who are getting into consulting do not have solid experience or the capability to work effectively with clients. Another issue is that it is hard to find the right people if a company is not willing to pay top dollar to attract the necessary skills because they have

bench strength with other employees whose talents must be utilized. Some talent on staff in larger firms is expensive, and for that reason they are being let go, which causes imbalances and problems. Larger firms may have many well-qualified consultants on staff but still be missing some key competencies. This may result in them hiring new talent with

specific capabilities at the same time as they are letting go valuable resources with more generalized skills.

Inflows to the Industry

How do talent inflows work? Not enough young people are choosing a career in management consulting, and many of those who do, prefer to work for the large firms. This has led to aggressive recruiting on campuses and establishment of special programs

to attract young talent. Still, management consulting and the value of the CMC designation need to be promoted in the university community, according to several industry leaders.

It is key to tap into young, intelligent and forward-looking individuals with related education and knowledge, and the attitude to learn and succeed.

There is a robust pipeline of leaders in some areas, although even with a strong pipeline

firms will need to be more tactical in future to attract the right people. Some firms find it hard to find the right high level of talent. Increasingly the industry has more specialized consultants. Public servants and retirees from large firms often want to get into the consulting business, sometimes without the entire skill set needed to make

them successful. Word of mouth is important in sourcing new consultants, and some consultants are also sourced from client firms.

Talent and People

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Figure 6: Sources of Recruitment for Consultants

sourcEs of rEcruitMEnt for consultants

Most firms recruit experienced consultants. The next most popular methods of recruiting are promoting from within the firm, recruiting from universities, and recruiting from client sources.

Each firm is different in its approach, and those in large markets can often afford to be choosy. Some develop aggressively from within; some recognize the need to develop talent to suit their particular consultancy. Creating a match between the type of clients, the type of markets and the cost of highly experienced talent is a fine balancing act.

Skills and Consulting Acumen

Respondents provided a perspective on some considerations about the skills and capacities of individuals in the industry. Knowledge is more accessible all the time, so

creative approaches and flexible mindsets are highly valued, as are individuals who adapt and keep up with change. Consultants with the ability and expertise to develop new markets bring a much-needed capability.

Effective management consultants are good listeners and communicators; they can frame a problem in a clear and unambiguous way. Those who are skilled at being able to take

data, analyze it and turn it into a problem statement are capable of managing the big data

issue that is so challenging for many clients. Helping clients clearly communicate and

make decisions is an important skill that consultants must have. Soft skills like genuine empathy, sincerity, and concern are critical to creating long-term client relationships.

“Need to provide value that a machine can’t do.”

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Dynamics of Consulting Firms

Consistent with the numbers of consultants in the firms that responded to this study, over 61% of the firms identify themselves as independent consulting practices. Regional/provincial firms make up another 14% of the respondents, and Canadian or national firms represent another 14%.

Figure 7: Types of Consulting Firms

typEs of consulting firMs


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location of hEad officEs of consulting firMs

Figure 8: Location of Head Offices of Consulting Firms

Ontario is home to 42% of the consulting firms in Canada, and the next largest concentration is in Alberta, with 21%, followed by British Columbia, with 17%. Each of the other provinces reports less than 5% of firms are headquartered there.


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sErvicE Mix

Figure 9: Service Mix

Service Mix

The suites of services management consulting firms are offering are changing continually. Industry professionals are providing financial strategy advice, security consulting, IT strategy, IT procurement, and implementation. Social license, community engagement, stakeholder consultation, change management, leadership, and coaching

are increasingly becoming part of today’s line-up of consulting tasks. More creative design and client experience is being integrated into what clients do (e.g., financial services watching retail), so adaptive approaches and cross-industry applications are key service offerings.

“The ability to collect data and clean it for privacy now means that there are large research data sets that can be used for many types of business intelligence.”


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Figure 10: Expected Demand for Management Consulting Services

Analytics and information management are growing in importance and involve a

steep learning curve for some consultants. There is also a shift in the techniques and approaches consultants use. Clients are asking for consultants to bring greater efficiency and effectiveness to the client processes and tools.

ExpEctEd dEMand for ManagEMEnt consulting sErvicEs

There are management consultants providing consulting services to other management

consulting firms, which is an interesting twist. Consultants who can implement all of the services they recommend, and align them with business value, are highly prized by today’s clients. Some clients want their consultants to actually work as part of their management team for a specific period of time, and this requires a distinct skill set, both from the perspective of managerial capability and from the viewpoint of objectivity.

Growth and Advancement Strategies

Participants generally view the near future with optimism, and see growth on their horizons. The most bullish firms are pursuing double-digit growth, partially because it has been happening in their firm in the recent past. Some firms that have experienced revenue drops in the past year were cautiously optimistic; others predict no growth,

and view their market as stable or shrinking. Growth predictions differ widely, from a high of 70% increase this year over last to a low of a 50% decrease from last year.

“Consulting firms with 1-5 employees need to collaborate with similar firms to assemble the talent and expertise to win business.”


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Respondents were asked what initiatives they expect to take place in their firms over the next three years, and they cited several types of plans and activities: 45% expect their firm’s business model, strategy or structure will change; 35% believe that new consultants will be hired. One-quarter of the respondents did not expect any notable change to occur. Other initiatives that are predicted include joining forces with another firm, and departure of one or more of the firm’s principals.

initiativEs ExpEctEd to takE placE in firMs

Figure 11: Initiatives Expected to Take Place in Firms


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how MarkEt dEvElopMEnts will affEct firMs

Figure 12: How Market Developments will Affect Firms

Markets and their evolution impact firms of all sizes. Consultants showed optimism and confidence in their profession when asked how they expect key market developments to affect their business. At the same time, the most concerning external force is economic forces, and is viewed as a threat by 38% of respondents.


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businEss ModEls

Figure 13: Business Models

“It is a million dollar opportunity to figure out what the innovation in consulting is, and how to get it to go viral.”

Pricing and Quality

As the industry is increasingly competitive, there is often a race to the bottom to lower

prices in order to secure contracts. This is challenging for all firms. Because of the implicit relationship between cost and quality, lowering cost may affect the quality of work being done. In addition to selling services, some firms are selling tools and toolkits to enhance their revenues, such as strategy development processes, product launch strategies,

process improvements, and market planning templates.

Some firms are not looking to grow, and are content for their revenues to remain the same. These are usually boutique firms, and they work with a specific and small set of enterprises.

For management consultants who work in the public sector, procurement is tighter,

rates are stagnant, and RFPs require more detail and time to prepare. The new federal administration has committed to undertaking and subsidizing major projects, but what

this means and how it will unfold is uncertain. There is often more competition for fewer

projects, and there is a tight focus on managing budgets and efficiencies, particularly at the provincial level. Some consultants feel that government needs to better understand and work more closely with industry – government requirements in their RFPs are sometimes so onerous that no-one bids and it is difficult to value add. Firms are seeking ways to mitigate risk and build long-term relationships.

Business Models

What do the internal workings of management consulting firms look like? The traditional consulting model has not changed much in 20 years. It is still an in-person, relationship-based sales process. Although there are many new methodologies in use, no major innovation has occurred in consulting like there has been in advertising,

supply chain management, or engineering. Consulting can be disrupted and it will be – the disruption just has not been created yet. Practitioners are working on developing different models and approaches.

How are projects undertaken? Over 50% of consultants work on their own projects, another 11% with senior staff performing some management functions and junior staff being directed to undertake parts of the work; and another 38% of projects utilize a hybrid model.


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Proposal Setting Factors

Proposals differ by the type, size, and sophistication of the potential client, as well as by the firms’ and consultants’ goals, resources, and philosophies. By far the most important factor in preparing proposals and setting fees is costing out the expertise of the consultants who will perform the work. Other major considerations are reputation of the consulting firm, importance and value of the work to the client, and the consulting firm’s relationship (or potential relationship) to the client.

“What is the ROI of a consultant?”

Figure 14: Proposal Setting Factors

proposal sEtting factors


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A core element of a client proposal is pricing, and this usually involves issues and

challenges. Competitors and concerns over the prices they may set are the most prominent among the issues, followed closely by a general pressure to compete

on price and uncertainty about client budget. Interestingly, firms do not seem to have as much difficulty pricing projects once they clarify or define these uncertainties.

factors in pricing sErvicEs

Figure 15: Factors in Pricing Services

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The Financial Picture

To ensure the integrity and accuracy of the financial picture, respondents were asked about their level of knowledge about financial performance and fees in their organization, and whether their perspective came from their business unit, their firm overall, or their geographic area. Over 85% of respondents felt competent to provide financial information, and over 65% were able to answer for their firm overall.

Most firms have established revenue growth targets, and they range widely across respondents. Some firms are content to maintain a steady revenue rhythm, while others are fairly aggressive in their outlook for the coming year.

Revenue Picture

Feedback from firms reported annual revenues that ranged from $100,000 to over $12 million annually, although some respondents, particularly from small firms, declined to share their revenue information. More than three-quarters of the respondents described their firms as having less than $1 million in revenue in their last complete fiscal year, and 13% represented the $1 to $10 million range of revenues. The revenue distribution over the six sizes of firms is consistent with the breakdown for the previous studies. Growth in revenues in 2015 for large firms is consistent with merger and acquisition activity, and these are likely related.

Figure 16: Consulting Market by Annual Revenue Range

consulting MarkEt by annual rEvEnuE rangE


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Looking at revenue change between the past complete fiscal year and the previous one, nearly 30% reported that their revenues remained basically the same. Another 45% reported an increase in revenues over the period, while 21% reported a decline.

Private sector consulting makes up 57% of the revenue, respondents reported, and public sector accounted for another 34%. Not-for-profit work was reported to comprise 9%. These data from 2016 differ somewhat from the sector revenues in the previous three

Figure 17: Revenue Performance this Fiscal Year Compared to Last

rEvEnuE pErforMancE this fiscal yEar coMparEd to last

consulting rEvEnuE by broad industry sEctor

Figure 18: Consulting Revenue by Broad Industry Sector


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studies.

Details of the shift in public sector revenue indicate that there is somewhat less activity

in the provincial government area, and more in municipal and ‘other’ public sector

public sEctor consulting rEvEnuE

Figure 19: Public Sector Consulting Revenue

privatE sEctor consulting rEvEnuE

Figure 20: Private Sector Consulting Revenue

organizations.

Private sector consulting revenue is showing a shift away from financial services and towards manufacturing and technology. Comparisons with 2008, 2010, and 2012 data show that the relative importance of the sectors remains fairly stable, but that there are no

clear patterns of increase or decrease.

Looking at the regional revenue breakdowns, Ontario accounts for 23% of revenue reported, Alberta and BC make up 15% each, and 13% comes from work done for clients outside of Canada. Among smaller firms, collaborating with other consultants or firms is mutually beneficial, and growing in popularity. Although over 50% of firms do not liaise with others, 27 to 34% reported that up to 25% of their revenues come from acting as a subcontractor to another firm, making joint proposals, collaborating with other firms, and/or working in strategic alliances.

Most respondents also gave insights into their profit situation, with 42% indicating that the majority of their profits come from management consulting, while another 30% of respondents said that 30 – 50% of their profits come from the management consulting industry, with the remainder being from other non-management consulting services they furnish.

Fee Structures and Competitive Considerations

There is more commonality in fee structures than in revenue growth. There are

generally three or four levels of consultants in the industry. The highest level

“Clients not understanding that lower hourly rates do not mean less cost overall.”

il


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consultants are charged out at $250 to $500/hour, although in some firms the rate for the most senior consultants is as high as $800 per hour. The second tier of consultants usually comes with a fee of $175 - $400, with $250 being the most common rate. Entry level consultants may start as low as $50 per hour, but normally can command $75 - $175. Rates have remained relatively stable over the past calendar year in the majority of firms, although some firms indicated that hourly fees have declined by 20%, and others have raised them significantly. Looking at the rates from three previous industry studies, it is interesting that there is not a lot of change over the seven-year period.

hourly billing ratEs for ManagEMEnt consultants

Figure 21: Hourly Billing Rates for Management Consultants

Some firms operate mainly on a day rate, typically ranging from $700 to $3500. It can be as high as $4500. Rates have risen in firms where they use global resources. In some consultancies, all billing is done on a project or fixed-fee basis.

Several respondents emphasized that transparency, openness, and consistency are guiding principles of their rate setting, and said that this goes along with working toward

establishing consultants’ worth and value for money in the minds of their clients.

When they considered their fees in comparison with those of their competitors, 52% felt their fees were comparable, and 23% suggested their fees are somewhat lower than those of their competitors. Another 17% cited their fees as being higher than their competitors’.

fEE coMparison with coMpEtitors

Figure 22: Fee Comparison with Competitors


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Fee Models

Four fee models are seen in the management consulting industry:

1. Fixed fee: an overall project fee, may or may not be calculated based on required time and resources;

2. Hourly/daily fee: project cost based on fees for different consultants involved;3. Retainer: fees based on a weekly or monthly time period; and4. Contingency/performance fee: fee based on the success of project outcomes or

results.

Also, combinations of these methods are used, although ‘sometimes’ was the most common use of combined approaches. Respondents indicated that fixed fees and hourly/daily fees are the most commonly utilized, with fixed fees at 60% and hourly/daily at 58%. Retainers were never or rarely used by 68% of respondents. Some have tried to utilize contingency or performance-based fees, but with little success, and 83% of consultants rarely or never use them.

Figure 23: Fee Models Used

fEE ModEls usEd

Fixed-fee method is set in different ways: the going rate in the market, value-based fee, cost-plus fee, and client budget method. Again, a combination of these methods is sometimes applied. All of these methods are utilized to some extent: cost-plus is the least common, and the going rate in the market is the most commonly used. Firms find it easier to price a project when the client has provided a firm budget figure, and this happens sometimes (48%) for some, and often/most of the time for others (36%).


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Discounting Practices

“Every firm does it” is a common sentiment among respondents, and “if they say they don’t they are lying”. The use of discounting has increased. The way it is described or defined varies across firms, and there are a number of different ways it is applied. In some cases, firms discount their prices dependent on the client, the market and/or the situation. Firms that serve both private and public sector clients may have established

different rates for each. Some consultants will underbid intentionally to secure an interesting project, a valuable client, or a long-term commitment. Discounting is more common for not-for-profit clients and clients with services or products that the consultant is particularly passionate about. Since the consulting market is increasingly competitive, there is growing downward pressure on prices and more pressure to discount, and this

creates a setting where it is hard not to discount. When there is pressure to discount prices, regardless of the reason, firms are looking to manage the scope of their work and cut costs where they can.

“Discounting – every firm does it, if they say they don’t, they’re lying.”

Figure 24: Reasons for Discounting

rEasons for discounting

Financial Projections in the Next Year

Stronger client demand and increased business development are by far the most common key reasons that 56% of respondents forecast stronger financial performance in 2016. For the 14% who predicted a decline in revenues, their principal reasons were weaker client demand and stronger competition as affecting their financial performance in 2016.

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Communication Strategies

Consulting businesses communicate in a myriad of ways, and the most prominent among them being client personal relationship building (77%). They also give presentations and undertake thought leadership initiatives, such as publishing articles,

white papers, and newsletters. Company websites are a major communications asset, and often showcase consultants, tools, ideas, and information assets. Next in importance is LinkedIn. Other social media tools, like webinars, blogs, twitter, Facebook and podcasts, are not as widely utilized. There is some use of sponsorship and public

relations, and large firms use advertising, print and other media to some extent. Many firms place a lot of value in a strong online presence, and in sharing information and tools to showcase their competence. Some consultants find it beneficial to join professional and business organizations, and to network, but these are more utilized as personal

initiatives rather than as company-wide communication strategies. (See Figure 25)

Larger firms concentrate efforts on brand awareness, and some have rebranded. All consultants seem to focus on good relationship building and generating repeat business.

Partnerships with influential organizations are useful, as are some professional association memberships.

“Strength is having strong client relationships to secure referral work; weakness is not being able to move outside that circle to secure work in other areas”

coMMunications tools usEd

Figure 25: Communications Tools Used

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Development Initiatives

Companies are not investing as much time and effort into the development of their own firms as might be expected. Surprisingly, many do not do formal strategic planning, and some that have undergone a planning process internally say it is more

organic than formal. For companies of all sizes, leveraging past clients and seeking

referrals are key development tools. Companies, both large and small, work to get their brand name out into the marketplace, and to affiliate with organizations and associations that will benefit them. Virtually all companies place some importance on growth and/or market presence. 61% undertake business development of some type, 42% are developing or expanding their service offerings, 35% use marketing or promotional initiatives, and 32% are focusing on new target markets.

Figure 26: Growth and Expansion Strategies

“The strength of a well-rounded MC is a holistic view, not just HR, IT or Project Management, and a comprehensive perspective.”

growth and Expansion stratEgiEs

Development Initiatives

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Internal initiatives that work have to reflect the culture and personality of the consultancy. Management consulting firms strive to offer the best services they can, and endeavor to deliver very high quality work. Many try to recruit exceptional talent, and nurture and train their staff.

External initiatives are also part of business development. Where firms have standing master orders or regularly recurring projects, these can make up a significant portion of a small to medium-sized firm’s capacity. Sharing information assets or consulting tools is becoming more popular: some consultants teach courses, some write books or articles,

some offer free tools on their websites. Many consultants give back to their communities and do pro bono work, but some feel they do not leverage these activities as fully as

they could to advance their reputation. Small firms often work to expand their network of consulting associates, and this usually results in reciprocal benefits and good project teams. There are opportunities for methodology development as a business growth

initiative. Evaluation process, expenditure management, and planning all lend themselves well to structured methodologies.

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Members’ Outlook for the Future

Although there are industry and geographical challenges, the Canadian market offers solid potential for the management consulting community. The overall industry mood

is optimistic and positive, although it is widely recognized that the industry as a whole is

facing some headwinds. Over 45% of respondents expressed the opinion that demand will be stronger over the next three years, and 32% felt it would remain the same. Only 13% predicted weaker demand in the near future. Growth outlooks, when combined with talent scarcity issues, will present challenge for the industry.

Figure 27: Evolution of Management Consulting Market

Evolution of ManagEMEnt consulting MarkEt

“Core services remain a market – there is a move to branding of services – we are seeing/doing more project work in terms of governance and quality assurance.”


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When asked about specific areas of growth, more than half of the respondents either did not have an opinion, or said they didn’t know. Notable geographic predictions included stronger demand in Ontario, the USA, and BC. Other consultants predicted that Manitoba, BC and Ontario will continue to experience the same level of demand over the next three years, while over 25% of respondents felt that Alberta would experience weaker demand over the same time period.

ExpEctation of MarkEt Evolution by rEgion

Figure 28: Expectation of Market Evolution by Region

Respondents were more optimistic about the potential for growth in their own firms than in the geographic areas they are located in. Over 55% expect business to grow in the near term, and 28% predict it will remain the same. Collaboration with other firms is anticipated by another 23% of consultants.

Well-established firms will continue to grow and do well, if they are insightful enough to invest in their people and their brain trust. Growth will occur when the right people are in

the right roles. Effective and successful management consultants are continual learners, demonstrate curiosity and creative thinking, and contribute to the benefit of their industry. Management consulting is only as good as the people who practice it, and the level of consulting resources needed is difficult to teach. Background, diversity of experience, and training combined are often the recipe for a well-rounded consultant. Some very senior consultants feel that the “runway of attractiveness” for the best people may be ending, and predict revolutionary changes in the characteristics, expertise, backgrounds, and specializations of the next generation of management consultants. Others foresee a new and refreshing wave of consultants with different yet valuable skills, and diverse perspectives.

Drivers of growth for the industry will come from several sources. As governments make

progress and undertake initiatives, the public sector will evolve. Private sector challenge


47

areas will rebound, and in the meantime, clients may need help to get their companies

efficient and back on a strong footing. The most promising growth opportunity appears to be finding new clients in existing markets, followed by developing and offering new services.

Figure 29: Expected Key Drivers of Growth in Firms

ExpEctEd kEy drivErs of growth in firMs

48

Who Participated in the 2016 Study?

Management consultants from all provinces in Canada participated in the study and provided their insights. These included selected executives from management consulting firms, CMC-Canada members, and some executives who are not CMC-Canada members. The respondents represent a wide spectrum of interests across the consulting industry.

Former CMC-Canada board members, members with provincial chapter/institute volunteer experience, new members and people who had participated in previous studies all shared their views, as well as many respondents who were new to the process. It is important to the results of the study to have included country-wide representation, and also that people from small, medium and large firms were involved. Consultants who have been working in management consulting for less than one year were represented, as were those with more

experience, and over 45% of participants have more than 20 years in the industry. The roles represented by respondents were many and varied. CEOs, VPs, managing partners, territory managers, sector managers, presidents, owners, managing principals, associates,

and founders all weighed in on the industry and the issues. This study benefits from the enthusiastic and willing participation by management consultants from every aspect of the

industry. As we look at today’s consulting panorama, we catch a glimpse of what may be right around the corner.

Appendix

49

Appendix

Methodolgy

The research for this study was conducted in four phases: market intelligence analysis,

executive interviews, online survey, and secondary research. These phases are similar to those utilized in three previous studies, done in 2009, 2011 and 2013.

1. Market intelligence analysis: Industry and economic data were acquired from Statistics Canada, Bank of Canada, Industry Canada and other publicly available sources, from previous CMC-Canada market estimates, and also from reports for other jurisdictions. Firm-level statistics were derived from survey results from the 420 firms that participated in the online survey, as well as from the 32 executive interview participants.

2. Executive interviews: In-depth interviews were conducted by telephone with thirty-two senior executives from the industry, in August 2016. These interviews were conducted in English in Western, Central and Atlantic Canada, and offered in French and English in Quebec. Interviewees gave their permission to have their names, company affiliations and professional credentials included in this report.

3. Secondary research on selected consulting practices: Information in Appendix 1 was compiled from publicly available sources. Corporate websites of each firm were consulted, along with media releases, articles and rankings.

4. Online survey: 420 respondents from professionally active management consultants from CMC-Canada’s contact database participated in the online survey, conducted in English over five weeks, in August and September 2016. Not all questions were answered by all respondents. In particular, self-assessment questions restricted financial and fee-related questions to consultants who self-identified as knowledgeable or somewhat knowledgeable about these matters at their firms (95% of total sample, in line with previous years). Rounding of percentages can cause totals to not equal 100% exactly. Tables or graphs summarizing multiple questions may not add to 100%, and the results of any question that allowed each respondent to give more than one answer (multiple mentions) will not add up to 100%. Survey responses varied by firm size, region and tenure in management consulting, often significantly.

This report presents only those results that were seen to be most relevant or illuminating.

The industry study includes management consultants from the full range of regions,

industries, company sizes, functional specialties, and tenures. However, the views and

information are largely from members of CMC-Canada, with the exception of 12 of the executive interviewees, who are not CMC-Canada members. There are many practicing management consultants in Canada who are not CMC-Canada members, so this report should be interpreted as reflecting the views of members, not necessarily of the industry as a whole.

Appendix

50

List of Figures

Figure #Name page #

Expected Market Evolution for Management Consulting by Client Sector% Growth Real GDPExpectation of Industry GrowthAnticipated Performance Levels Tenure in Management ConsultingSources of Recruitment for ConsultantsTypes of Consulting FirmsLocation of Head Offices of Consulting FirmsService MixExpected Demand for Management Consulting ServicesInitiatives Expected to take Place in FirmsHow Market Developments will Affect Firms and their ServicesBusiness ModelsProposal Setting FactorsFactors in Pricing ServicesConsulting Market by Annual Revenue RangeRevenue performance this fiscal year compared to lastConsulting Revenue by Broad Industry SectorPublic Sector Consulting RevenuePrivate Sector Consulting RevenueHourly Billing Rates for Management ConsultantsFee Comparison with Competing Consulting FirmsFee Models UsedReasons for DiscountingCommunications Tools UsedGrowth & Expansion StrategiesEvolution of Management Consulting MarketExpectation of Market Evolution by RegionExpected Key Drivers of Growth in Firms

1234567891011121314151617181920212223242526272829

1819202124262728293031323334353637373838393940414243454647

Appendix

51

sElEctEd ManagEMEnt consulting practicEs - linEs of sErvicE

Strategy humanResources

operations technology Finance Marketing/Sales

other

A.T. Kearney Co.AccentureAON HewittBain & Co. Inc. The Barrington Consulting GroupBay Consulting GroupBDOBoston Consulting GroupBuck ConsultantsBusiness Development Bank of CanadaCapgeminiCGI Group Inc.Deloitte LLPEckler Ltd.EYFujitsu Consulting Inc.Grant Thornton LLPHay Group LimitedIBMKnightsbridgeKPMG LLPLuminaMcKinsey & CompanyMercerMNPMorneau Shepell Inc.Nivigant Consulting Inc.Oliver Wyman Ltd.PwC LLPSierra Systems Group Inc.Tata Consultancy ServicesTowers Watson & Co.Western Management GroupOgers Berndtson

xx

xxxxx

xxxx

xxxxxxxxxxx

xxxxx

x

x

xx

xxx

x

xxxx

xxx

xx

xxx

xx

x

xx

xxxx

xxxxx

xxx

x

x

xxx

x

xx

x

xx

xxxx

xxx

x

xxxxx

xxxx

x

x

x

xxxxxx

x

x

xxxxx

xxxx

x

x

x

x

x

xx

xx

x

xxx

x

xxxxx

xx

x

x

x

x

x

x

Selected Management Consulting Practices

Here is a listing of some of the world’s largest and best-known consulting firms, along with a selection of Canadian firms. These are provided to give a general idea of the scope and key drivers of firms. This is not intended to be an exhaustive or complete list. All of the information on these three pages comes from external sources: company websites, government sources, industry listings, and others. In some cases, the information provided by one source is not identical to that provided by others. Some of the information, particularly about services offered, required interpretation. CMC-Canada and Incisive Marketing are not responsible for the accuracy, reliability or currency of the information supplied by external sources. If a reader wishes to rely on the information, they should consult directly with the source of the information to verify its accuracy. This

listing is intentionally general in nature and should be viewed and used accordingly.

Appendix

52

sElEctEd ManagEMEnt consulting practicEs - kEy inforMation

Hea

d O

ffice

(C

anad

a, u

SA,

othe

r)

dat

e Fo

unde

d

ow

ners

hip

&

trad

ing,

etc

Ann

ual R

even

ue

(Est

imat

ed, C

dn

Cons

ulti

ng

Rela

tive

Ann

ual

Reve

nue

Rang

e

A.T. Kearney Co.AccentureAON Hewitt

Bain & Co. Inc. The Barrington Consulting GroupBay Consulting GroupBDOBoston Consulting GroupBuck ConsultantsBusiness Development Bank of Canada

CapgeminiCGI Group Inc.Deloitte LLPEckler Ltd.EYFujitsu Consulting Inc.Grant Thornton LLPHay Group Limited

IBM

Knightsbridge

KPMG LLPLuminaMcKinsey & CompanyMercer

MNPMorneau Shepell Inc.Nivigant Consulting Inc.

Oliver Wyman Ltd.

PwC LLPSierra Systems Group Inc.Tata Consultancy ServicesTowers Watson & Co.Western Management Group

Ogers Berndtson

ChicagoDublin

London

BostonHalifax

TorontoBoston

New YorkMontreal

ParisMontrealNew YorkTorontoLondonTokyo

LondonPhiladelphia

Armonk, NY, USA

Private

AmsterdamCalgary

New YorkNew York

CalgaryTorontoChicago

New York

New YorkVancouver

MumbaiNew YorkLos Gats, CaliforniaToronto

1939

1989

1940; in Canada 1974 AON

acquired in 2010

1973/1989

2004

1984

1992

1963

1916

1944

1967; current firm 2000

1976; incorporated 1981

mid-1800s; current firm 1989

1927

1989

2009


1943, but acquired in

2015 by Korn Ferry

1911

1975, but acquired in

2015 by Adecco


1990

1926

1975

1945


1999; in Canada acquired

Kroll Lindquist Avery 2005

1984; in Canada 1998

mid-1800s; current firm 1998

1966

1968; incorporated 1995


1975

1965

PrivatePublic

Subsidiary of AON

PrivatePrivate

PartnershipPartnership

PrivatePartnership

Crown corporation

PublicPublic

PartnershipPrivate

PartnershipSubsidiary of Fujitsu Ltd.

PartnershipWas private, but has been

acquired by publicly traded Korn Ferry

Public

Public

PartnershipPublicPrivate

Subsidiary of Marsh & McLennan

PrivatePublicPublic

Subsidiary of Marsh & McLennan

PartnershipPrivatePublicPublicPrivate

Partnership

$1 billion$31 billion$3.3 billion

$2.25 billionnot availablenot available$7.3 billion$5 billionnot available$537.7 million (net income, as gross was not available)€11,915 million$10,287.1 million$36.8 billionnot available$29.6 billion$41 billion$582 millionnot available

$81.8 billion

not available

$24.44 billion$2.88 million$8.4 billionnot available

not available$567.3 million$960 million

not available

$35.9 billionnot available$19.36 billion$3.48 billionnot available

not available

$$$$$$$$$$$$

$$$$$$$$$$$$$$$$$$$

$$$$$$$$$$$$$$$$$$$$$$$$$$

$$$$

$$

$$$$$$$$$$$$

$$$$$$$$$$

$$

$$$$$$$$$$$$$$

$$

Appendix

53

sElEctEd ManagEMEnt consulting practicEs - gEographical locations

Canada Rest of the world

bri

tish

Col

umbi

a

Alb

erta

Sask

atch

ewan

Man

itob

a

ont

ario

Que

bec

New

bru

nsw

ick

Nov

a Sc

otia

prin

ce E

dwar

d Is

land

New

foun

dlan

d

terr

itor

ies

Am

eric

as

Euro

pe

Afr

ica

& M

iddl

e Ea

st

Asi

a Pa

cific

A.T. Kearney Co.AccentureAON HewittBain & Co. Inc. The Barrington Consulting GroupBay Consulting GroupBDOBoston Consulting GroupBuck ConsultantsBusiness Development Bank of CanadaCapgeminiCGI Group Inc.Deloitte LLPEckler Ltd.EYFujitsu Consulting Inc.Grant Thornton LLPHay Group LimitedIBMKnightsbridgeKPMG LLPLuminaMcKinsey & CompanyMercerMNPMorneau Shepell Inc.Nivigant Consulting Inc.Oliver Wyman Ltd.PwC LLPSierra Systems Group Inc.Tata Consultancy ServicesTowers Watson & Co.Western Management GroupOgers Berndtson

xx

x

xxxxxxxxxxxx

xxxx

xxxxxx

xxx

xx

xxxx

xxxx

xxxxxxx

xxxxxxx

xxxx

xxx

xxx

xxxxxxx

xx

xxxx

xx

x

xxxx

xxx

xxx

xxxxxx

xx

xxx

xx

x

xxx

xxx

xxx

xxxxxxx

xx

xx

x

xxxx

xxxxx

xxx

xxxxxxxxxxx

xx

xxxxxxxxx

x

x

x

x

x

x

x

x

x

xx

x

x

x

x

x

x

x

x

x

xxxxxx

xx

xx

x

x

xx

x

x

x

x

xx

x

x

xx

x

x

x

xxx

xxxxxxxxxx

xxxx

xxxx

xxxxx

x

xxx

xxxxxxxxxxxxxxxx

xxxxxxxxxxxx

x

x

x

xxx

x

xx

xxx

xx

x

x

x

xx

xx

x

xx

xx

xx

Appendix

54

About CMC-Canada

The Canadian Association of Management Consultants (CMC-Canada) is a professional, not-for-profit organization that focuses on excellence and integrity within the Management Consulting profession. Founded in 1963 to establish publicly recognized standards of competence and professional conduct, CMC-Canada supports its members with a range of services including ongoing professional development, training, networking events,

publications, research, special interest groups and advocacy for the profession in public

and government settings. Seven Provincial Certifying Institutes award the profession’s only internationally recognized certification, the Certified Management Consultant (CMC), to those who meet stringent standards.

Canadian Association of Management Consultants (CMC-Canada)

701-372 Bay Street Toronto, ON M5H 2W9 CanadaT: 416-860-1515 | Toll Free: 800-268-1148

E: [email protected]

W: cmc-canada.ca

About Incisive Marketing Inc.

Established in 2002 by Carla Gail Tibbo, MBA, CMC, CMRP, and Gerard Edwards MBA, P.Eng, CMC., this firm of management consultants specializes in marketing research, marketing intelligence, strategy and competitive intelligence, and works with clients across Canada, the USA, Asia, the Middle East and Mexico. Carla Gail, President, has consulted to a wide variety of companies for more than 20 years. She served on the Board of Directors of the Marketing Research and Intelligence Association, as well as the BC Chapter of the MRIA. Gerard is a past member of the board CMC-British Columbia, has served on several national committees for CMC-Canada, and past member of several boards of other organizations internationally and provincially. Both principals have been accredited CMCs since 2008.

T: 604-277-6292 W: incisivemarketing.com

Appendix

55

Sources

Most of the information in this report comes from the executive interviews and online survey. For the general industry trends, global perspectives and economic information,

many external sources were consulted. This is a list of the most beneficial and most utilized of those resources.

Where the Growth Is in Management Consulting, Bloomberg, http://www.bloomberg.com/news/articles/2013-06-13/where-the-growth-is-in-management-consulting

Economic Conditions Snapshot, September 2016: McKinsey Global Survey results, McKinsey & Company, http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/economic-conditions-snapshot-september-2016-mckinsey-global-survey-results

State of the Consulting Industry Analysis: The Impact of Digital Transformation, 9Lenses, http://www.prweb.com/releases/2016/08/prweb13616429.htm

Gross domestic product, expenditure-based, provincial and territorial, Statistics Canada Table 384-0038, http://www5.statcan.gc.ca/cansim/a26?lang=eng&id=3840038

Top Consulting Trends for 2016, Clearsight Insights, http://clearsightadvisors.com/top-consulting-trends-for-2016/

Performance in most recent fiscal year, Statistics Canada Table 380-0064, http://www5.statcan.gc.ca/cansim/a26?lang=eng&id=3800064

Global Management & Marketing Consultancy (and Management & Marketing Consultancy in the United States; Management & Marketing Consultancy in Asia-Pacific; Management & Marketing Consultancy in Europe), Marketline Industry Profiles, January 2015, http://www.reportlinker.com/p0168868-summary/Global-Management-Marketing-Consultancy.html

10 Largest Management Consulting Firms of the Globe, 15 June 2015, Consultancy.uk, http://www.consultancy.uk/news/2149/10-largest-management-consulting-firms-of-the-globe

cmc-canada - industry report 2016

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