Difficult decisions have been brought to the door of the HR director. The need for bouts of redundancies, rethinking of remuneration strategy, the desperation of employers to secure the highest possible calibre of employee talent, coupled with the need to effectively manage change within business, have brought HRDs to the board table to prove their commercial nous, resourcefulness and capacity for innovation.
But although many believe this to have been the finest hour for dynamic people strategy, a growing number of HR professionals have looked to consultants to advise and guide them through the aforementioned challenges.
US-based Kennedy Consulting's examination of HR consulting markets worldwide in 2012 shows cost management and regulatory reform are driving a rise in spending related to HR consulting. In fact, in the US alone, market research company IBISWorld found in 2012 there were 81,784 HR consultancies in existence, employing 201,188 members of staff - and they have collectively pulled in a mind-boggling $25 billion over the past five years.
But it is not just the global giants making the money. IBISWorld found three-quarters of the revenues are coming through small consultancies (employing five people or less).
The Kennedy study of global consultancies - including Accenture, Aon Hewitt, Buck Consultants, Deloitte, Hay Group, IBM, KPMG, Mercer, NorthgateArinso, PwC and Towers Watson - attributes 'dramatic growth' in the human capital management space to employers striving to realise appropriate staffing levels, while planning for future demand and addressing the challenges associated with a multi-generational workforce.
Employers are also seeking more efficient structures to quench the thirst for effective global HR departments, as well as a greater use of technology and analytics within their HR processes.
And although, according to the Institute of Consultants, members surveyed were divided about the opportunities to grow their businesses in 2012 (see pie chart), they predicted the most opportunities would be in professional services, followed by IT, sales and marketing and general management. Responding to this, the HR consulting sector has experienced consolidation and unprecedented M&A activity - Towers Watson, Aon Hewitt, Mercer, Penna and Oracle have all completed high-profile mergers in the past three years. This serves to underline the potential for big money to exchange hands and big deals to be made on the back of the investments from HR directors.
But are these consultants making money from employers who could quite easily do the work themselves?
In the UK, 90% of consultants surveyed by the Institute of Consulting (IC) said their clients had been previously let down by consultants who had over-promised, failed to add value, lacked the right skills and charged too much - giving the industry a bad image.
Huw Hilditch-Roberts, director in charge of the IC, explains: "Many employers have had a bad experience finding consultants they can trust - and who deliver results."
According to Annie Hazelrigg, client director at HR and performance consultancy DPA, this could be down to terminology.
She explains: "Consultancy is a broad church and classic consultancy is not as clear as it often could be. Ultimately, as a client, you are paying the consultant for their time. But HRDs need to be sure about what they are looking for: do they want consultancy - or do they want the consultant to actually deliver a project? So there are two flavours of consultancy - those that are open and interested in sharing ideas and those who just want to get things done."
James Miller has worked as an HR consultant in the past, but returned to in-house HR roles. Until April, he was interim HR director at MTV.
"The role of HR consultants is important," he explains. "But failures happen when they present a strategy to the HR director, who then polishes it and takes it to the board as their own. If this programme rolls out and fails, the HR director will have to look into a new strategy in 18 months and both the consultant and the HRD lose credibility.
"The HRD is a generalist and can't take an objective view of their business, in many cases. Here, consultants can bring an outside view and in-depth knowledge and research - this is especially true of small businesses that don't have an HR department and need this expertise.
"But unless the client challenges the consultant with their own knowledge of the business and works with the consultant, they will be unable to truly believe in and champion the consultant's suggestions - the strategy could turn out to be nothing more than a re-brand of someone else's HR plan."
On the other side of the divide, Angela O'Connor is a self-confessed poacher turned gamekeeper.
Having held the role of HRD at the Crown Prosecution Service and until 2011 chief people officer at the National Police Improvement Agency, O'Connor became the founder and CEO of her own consultancy, the HR Lounge, late last year. This year, she was elected president of the HR Society.
"As an HR director, I made mistakes in working with some consultants," she admits. "I have had negative experiences, because they have wanted to implement an off-the-shelf product; or, having been pitched by a senior team, I found a more inexperienced consultant arrived to deliver the work.
"But HRDs working with consultants have to know what they want. It has to be a collaborative relationship. Sometimes, clients tell me they know they have an issue in their business, but they don't know what it is. The relationship needs to be based on knowledge transfer, because there are bits of strategy the HRD can do alone and they won't need consultants for.
"Clients will be nervous about bringing in a consultant. They might feel they are failing in their job, but they will have to carefully consider if they want every product the consultant is suggesting. The consultant should remember the relationship is based on the client's needs and not their own. They are not the HRD; they are there to guide, not to make decisions about the final direction. That role lies with the HR director."
Brett Walsh, global leader for human capital at consultancy Deloitte, admits his organisation has experienced growth in the UK and abroad during the recession. But he is careful to emphasise the difference between consulting and putting 'blanket' processes or 'off-the shelf' solutions in place within organisations.
"I don't recognise that Deloitte puts 'blanket' initiatives in place. We are not a provider selling products and services to HR directors and as such we wouldn't be involved in providing salary data, coaching and skills or leadership training. We can introduce HRDs to new delivery methods and we can help organisations transform HR.
"But, while I wish we could use the same toolbox for every organisation, the stakeholder management in each company will be completely different, so we have to change the shape of our tools every time we work with an organisation, because no two are the same."
And responding to the challenge that the fees consultancies are charging are too high, Miller responds: "I'm less interested in the question of fees. They can range from £500 to £2,500 per day, but this is objective and if an HRD buys into a consultancy, it is dependent on the size of the project and the amount of work being done."
Walsh puts the growth of the consultancy market down, not to the amounts of money consultants are charging HR directors, but the nature of the global economy.
"A feature of our strong growth has been the nature of slower-growth markets around the world," he explains. "Employers are realising now that their most effective assets are their people and shareholders are putting more focus on HR departments as such.
"The size of the working population is shrinking, there are changing demographics globally and HR is now much more global."
So if the rise in consultancy involvement is a symptom of the importance HR is being seen to be playing globally, then the onus is on the HR director to make sure their relationship with the consultant is managed proactively or - as O'Connor and Miller suggest - the results can be catastrophic.
Phil Hepburn, European HR director at surface product manufacturer and designer, Formica Group, wanted to bring a culture change into place in his organisation to break down silos across the countries in Europe.
He used a tendering process before bringing in consultancy, BlueSky.
"I made this final decision because this consultancy wanted to build trust and tailor a solution to the organisation," says Hepburn. "Some of the other consultants [in the tendering process] were offering off-the-shelf products and this is not what I wanted. BlueSky was clear about what it could deliver within my budget."
A year later and the organisation's change-management programme is nearing completion. Hepburn adds: "The relationship between myself and the consultant has gone from strength to strength. We speak at least twice a week and have a great degree of flexibility. They were able to bring in greater experience, credibility and helped me benchmark against other employers, not just in this sector. This helped me feel strengthened in my own role."
But he adds: "I was very clear about my goals and my ROI expectations from the start and the consultant was constantly keen to show me it was delivering what I wanted.
"The consultants have also shown us a plan for sustainability after the project with them is finished and have always been keen to help us network with their other clients."
DPA's Hazelrigg agrees the role of the HRD is vital in setting out the boundaries for a consultancy relationship, concluding: "Consultancy is a practice - it is an art - but no amount of knowledge transfer between consultant and client can substitute for the work of the HRD.
"Consultancy is about empowering people and we work with some brilliant HRDs that have their finger on the pulse of the organisation. We bring in the 'stuff' and they 'stir' it into the business.
"This last mile must always lie with the HR director."
What do consultants think?
34% of consultants are optimistic the market for them will be stronger in 2012 than last year
43% of consultants are unsure about the state of the consultancy market in 2012
23% of consultants think the market for them in 2012 will be worse than in 2011
Source: Institute of Consultants
Institute of Consultants launches consultancy register
The Institute of Consultants (IC) last month launched a National Consultants' Register - the first of its kind in the industry - to be the first port of call for any company looking to procure first- class consultants.
The majority of the organisation's members have between 10 and 20 years' experience and many have received the institute's accreditation. It also provides them with a range of tools and training to ensure they are at top of their game.
Huw Hilditch-Roberts, director of the IC, explains: "From what we have seen so far this year, there will be plenty of opportunities for consultants in 2012, even in this 'zigzag' economy. There seems to be a greater reluctance to hire senior level permanent employees and instead companies are bringing in specialist consultants for projects and on a needs-must basis.
"However, more than ever, consultancy will need to be about quality and value for money this year. Companies will be only looking for consultants who can demonstrate genuine value-add."
Case study: National Farmers Union
When the National Farmers Union (NFU) launched a new pay strategy for its 500 employees, it brought in consultancy Towers Watson.
The union's HR director, Bal Jacobs, explains: "The strategy we developed with Towers Watson was holistic and covered all aspects of what it would take to deliver pay for performance in light of the change challenge - this in an organisation that was sceptical about whether this change could be delivered."
The organisation wanted to ascertain what 'high performance' looked like - how it could be defined, how it varied by role and the extent to which it could be measured, when considering pay and reward. This was where the knowledge transfer from the consultancy came in.
Jacobs said: "Towers Watson worked with managers and individuals in all areas of the organisation, using its bespoke competency atlas tool to identify specific competencies for each role within the organisation. Competency atlas helped to quickly identify which skills were required across the company and which ones would be required for each specific role. This core-and-periphery approach meant the right balance was struck between role-specific descriptors and common behaviours across the organisation. The outcome was a very specific competency framework that could describe performance for the diverse roles in our business and provide a process whereby people were involved in creating it themselves."
And Jacobs' tips for working with a consultancy to deliver a change programme such as this are simple. "Listen to staff, managers and senior execs to align what people want with what the business needs," he explains. "Ensure all parts of the programme are working together, from setting the structure, developing performance criteria, linking talent to learning and increasing manager capabilities. It is important each component is working towards the same end goal."
He adds: "Recognise what you can manage internally and where you need external expertise and perspective and follow through on consultation and planning. Be confident in the strategy and the organisation will believe in it too."
