The Consulting Year In Review (Part 1): Top 3 Challenges of 2022

2022 has been a challenging year for consulting firms. The industry has faced a number of headwinds, including economic uncertainty, a shortage of talent, and the difficulty of maintaining a company culture in a remote environment.

Originally posted on Link here: The Consulting Year In Review (Part 1): Top 3 Challenges of 2022

2022 has been a challenging year for consulting firms. The industry has faced a number of headwinds, including economic uncertainty, a shortage of talent, and the difficulty of maintaining a company culture in a remote environment. Recently, we asked consulting leaders and industry experts to discuss their biggest challenges in 2022 and what they were doing to set themselves up for 2023 success. Three key topics emerged:

Top 3 Consulting Challenges of 2022

  1. Uncertainty & Forecasting Concerns
  2. Hiring & Retaining Talent
  3. Managing Growth

Kelly Waffle, Managing Director at Hinge Research Institute, summarized the overall sentiment, “We ask a similar question as part of our annual research study. For some consulting firms, the biggest challenge was getting prospects to commit to new deals due to rising prices, an unpredictable economy, political trends, and dramatic global events.” He continued, “For other firms, the biggest challenge was having too much business – and not enough talent and staff to deliver the work.”

Challenge 1: Uncertainty & Forecasting Concerns

For Andy Jordan, President of Roffensian Consulting S.A., the most significant challenges this year revolved around client uncertainty. “The highly volatile economic conditions meant that many clients made significant adjustments to their priorities and plans, making it very hard for us to accurately forecast resourcing needs, revenue streams, and cash flow.”

Firms that lack reporting and visibility into resources and projects can find it difficult to pivot quickly and often suffer from poor project results and decreased profitability. However, as evidenced in the How Consulting Firms Win Playbook, the most successful consultancies are ones that can quickly access reliable information regarding capacity and status, develop sustainable utilization targets, and reassign resources agilely.

Dave Hofferberth, Managing Director at Service Performance Insight understands the importance of visibility. He recommends firms, “Make sure to take advantage of your company and project information and have someone who monitors it daily. Change occurs quickly. Timely and accurate data to help you respond faster.”

For Roffensian Consulting S.A., open and honest communication with clients was also crucial in this year of uncertainty. “Clear and transparent communication was key for us. The ability to leverage strong relationships with clients meant that we could adapt and adjust to their changing situations while protecting our own business imperatives.”

Challenge 2: Hiring & Retaining Talent

As you know by now, finding new talent and keeping high performers has been difficult for consulting and professional services organizations. The Great Resignation, along with growth opportunities across the industry, stretched many consulting firms thin. According to McKinsey, the voluntary quit rate in 2022 was 25 percent higher than pre-pandemic levels and the projected pace of hiring, quitting, and job creation, openings likely won’t return to normal levels for some time.

For Worldgate LLC, a technology consulting firm specializing in K-12 technology solutions, the uncertainty around the economy made staffing difficult. An already long sales cycle became harder to forecast. Scott Montgomery, Founder & Chief Customer Officer at Worldgate, LLC explained, “The sales cycle is long in the K-12 space – we had more business, but had challenges around revamping our sales efforts and expanding the team.”

Tim Bailey oversees hundreds of consultants as VP of North America Consulting at Deltek. He found similar struggles. “Our biggest challenge involved finding quality candidates. We were forced to work more closely with recruiting and finance than ever before to ensure our comps were aligned with the market.”

For smaller firms like marketing consulting firm Rattleback, retaining key talent was much more difficult in 2022 than in years past. Jason Mlicki, Principal of Rattleback, explained, “Companies of all shapes and sizes are looking for digital marketing talent. Many are willing to pay more than smaller firms can afford. To retain our best performers, we upgraded our pay bands, increased our benefit contributions, reinforced our commitment to family-first employment, and revitalized our organizational purpose.” Kelly Waffle, Managing Director at The Hinge Research Institute, works with small and midsize consulting firms on a daily basis. “Other solutions we have seen included: Using in-person happy hours, mental health days, employee recognition, and management transparency programs to attract and secure new talent.”

Challenge 3: Effectively Managing Growth

Even with the many headwinds facing the consulting industry in 2022, many firms found success and continued their growth trajectory. But even good problems like growth come with their own challenges, such as:

Downsides of growing your consultancy too quickly

  1. Reduced Cash Flow
  2. Higher Employee Burnout Rate
  3. Lower Project Quality & Customer Satisfaction.

Andreas Georgoulias, Director of Sustainability and ESG, Environmental Financial Consulting Group, LLC, saw managing growth as his practice’s biggest obstacle in 2022. “Our biggest challenge revolved around coping with growth and delivering multiple projects that had overlapping deadlines,” Being selective in how you position your practice and services to clients can lead to sourcing the right opportunities. For Andreas, “A key best practice here is to always build more spare capacity into your schedule than you might first assess.” Careful planning and design of your work streams will help in creating that necessary buffer zone. 

And Speaking of Challenges & Solutions …

Make sure to join me on December 15th as I host an executive panel of consulting leaders (including many of those cited above) for an interactive discussion on the challenges they faced in 2022. We will review what worked, what didn’t, and what’s next for the consulting industry in 2023.

Thank you to our consulting partners who helped with this effort:

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