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Boom and bust in professional services

Boom and bust in professional services

Throughout 2023, several clients approached me with the same basic concern. They had doubled in size during the pandemic-related boom and wanted my advice on how to develop their organizational culture, governance structures, and management systems to keep pace with this rapid growth.

But since then the situation has become more complicated.

Helen Thomas interviewed me for her article in the Financial Times. She examines how the sudden slowdown in revenue growth in recent months has tipped several leading firms into hiring freezes and redundancy rounds.

As I say in the article, the shortage of junior bodies in the post-lockdown boom kept some professionals doing junior work for longer than they should, rather than shifting up to doing more business development and client management work. This means they are now struggling to generate business in the current tough market.

In professional service firms, profitability is based on having the right number of people at each level, who are charging the right level of fees, for doing the right level of work. So, going forward, professional service firms need to focus on getting the balance right.

They need to avoid overreacting to the current slowdown as the market will remember clumsy restructurings. Rather than engage in yo-yo dieting, they should focus on losing a bit of fat and building a bit of muscle. That way they will be in good shape when the market does pick up, and they won’t be forced into another round of overhiring and overpromoting.

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