The Professional Services Recession Playbook

As corporate titans and the uber-rich navigated the icy walkways of Davos, the talk of the town this year was of a coming recession.

The IMF’s Managing Director, Kristalina Georgieva, just announced she believes a third of the world will be in recession by year-end, citing “Ukraine, rising prices, higher interest rates and the rise of COVID in China.”

Similarly, David Malpass, President of the World Bank, recently said the global economy is “perilously close to falling into a world recession.”

Everyone, it seems, is worried about economic slip and fall risk in 2023.

How will this affect those of us in consulting and professional services?

Will it be feast or famine, and if there is a slowdown, what is the playbook for how to navigate a coming downturn?

Wander past any one of the twenty-nine project rooms at Harvard Business School’s Spangler Center or listen in on the cafeteria conversation at Arbuckle, the dining all at Stanford’s Graduate School of Business, and you will hear variations on a theme as students consider whether consultancies will be hiring this year.

“Consulting’s not cyclical. It feeds on change and uncertainty. A recession is both of those things on steroids. Companies will be desperate for help from the consultants, and there’ll be plenty of job offers.”

But another who will say, “Gartner reports that in 2008 and 2009, the last really big recession, consulting and advisory services declined. The hiring of a professional services firm by a big company is discretionary spending and the first thing that’s cut.”

Both views are right, of course.

Firms that focus on projects that save money — outsourcing, digital transformations that reduce headcount, and supply chain efficiencies — not to mention workout firms, do well in recessions.

Practice groups that focus on increasing capabilities — the hardening cyber defenses, innovation, ESG capabilities, new facilities, or M&A — tend to suffer as companies look to delay investments.

Happily, if you find yourself in either category, the professional services recession playbook is the same.

No sooner than you hear, “We think we’re going to push pause of this project while we see how the economy goes,” you should do the following.

Firms that focus on projects that save money — outsourcing, digital transformations that reduce headcount, and supply chain efficiencies — not to mention workout firms, do well in recessions.

1. Lean into current relationships

According to research conducted as part of the writing of Never Say Sell: How the World’s Best Consulting and Professional Firms Expand Client Relationships, professional services firms earn 80% of their new work year-over-year from current clients.

Notwithstanding the lure of landing new clients, in a recession, the lion’s share of your business development efforts should be focused on your current clients.

They know your good work and they trust you to have their best interests at heart. The hardest part of selling is done.

Develop and ask for new projects that help your clients achieve their goals — even if those goals are to turn their accounting staff into a variable cost or renegotiate their leases.

2. Crush delivery

Now is the time to over-deliver: on budget, and ahead of schedule.

You will be less busy, and that should translate not into a “Friday-afternoons off “culture, but let’s “burn the midnight oil and blow our clients away” culture.

If you shed staff, it will mean that your best people have time to serve even small clients.

This is an opportunity to shine and cement a reputation for quality that will both win work in the short run and reinforce your brand when times improve.

3. Underwrite the conversation

Clients are worried and “misery loves company.”

Convene Client Advisory Boards (CABs) where the goal is to facilitate a sharing among like-titled executives in your clients to help them unpack problems, share solutions, and commiserate.

By sponsoring that conversation, you learn about your clients’ idiosyncratic problems (and how you might help), become known for sharing just-in-time best practices, and stay close to those you most want to serve.

No one needs help until they do; when the CEO marches into your client’s office and says, “We need to raise prices,” your relationship will know who call, having just seen you lead a conversation about the ways in which companies raise prices and knowing you to be the font of pricing best practices.

Now is the time to give your best people raises; loyalty is not bought with foosball tables, it is a function of being there for your employees when the going gets tough.

4. Love your best talent

Speaking of prices, you need to raise yours.

When you read that the price of milk is up, you know inflation is on the march. This means a couple of things.

First, your clients are raising prices (that is what inflation is) and they will not be surprised when you do too. It is a free pass to charge more.

Second, your talent is suffering having less real income to spend. If you fail to raise prices and pass that on in the form of raises, your employees will look elsewhere for less timid employers. You are fighting a war against a slowing economy, and one of the biggest fronts will be talent.

Now is the time to give your best people raises; loyalty is not bought with foosball tables, it is a function of being there for your employees when the going gets tough.

5. Focus on strategy

During boom times, we think about the projects we’d like to do in the future. We innovate, we invest, we try new things, and we work to expand our original niche, dreaming of world domination — all of which makes sense and is appropriate for boom times.

During slower times, however, resist the panicky instinct to say you will do anything to keep busy, accepting all new work, and, instead, shrink your brand back to what made you famous in the first place.

Double down on the kind of activities that remind clients why they fell in love with you in the first place: publish whitepapers, accept speaking engagements, and host industry best practices groups.

Do what you know best and let go of the rest (actually, just mothball it; your aspirational capabilities will soon enough have their day in the sun).

Conclusion

Recessions are hard. People’s rent goes up, they ask their kids to take a semester off from college, and people lose their jobs.

Now is the time to slow down and ask those you serve how they are doing.

I mean really doing.

If a relationship loses their job, circulate their resumes and help them find their next gig. Take the time to ask the kids and the non-work stuff that gives them joy and their life meaning.

We all remember when this happened in COVID.

Humbled by the disease, we became twenty percent more human with each other — twenty percent more real with each other as we fumbled on Zoom and played around with backgrounds.

Those are the ties that bind us together as people and the base on which we can make it through a recession, living to fight on another day.

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Tom McMakin is the Chief Executive Officer of Profitable Ideas Exchange (PIE), a leading consultancy focused on professional services business development. He is the author of Never Say Sell (Wiley, 2020), a guide for professional services firms on how they can expand their commercial relationships with clients, How Clients Buy (Wiley, 2018), a guide to business development for professional services firms, as well as Bread and Butter, (St. Martin’s Press, 2001). He has appeared on the pages of Fast Company, Inc Magazine, Newsweek, Business Week, The Wall Street Journal, among others.