Our Management Consultancy guru Mick James this week talks with the consulting arm of PKF and unravels the impact of the Big Four's withdrawal and subsequent re-entry into the consulting market. Overall it's been very positive for firms like PKF, with a generation of clients having grown up with a mentality of looking beyond the “usual suspects”, and experimenting with both start-ups and established but lesser known firms like PKF.

Revealed: the true impact of the Big Four's withdrawal and subsequent re-entry into the consulting market

In all the excitement about the return of the big accounting firms to consultancy (well, I’m excited) it’s easy to overlook the fact that the link between accountancy and consultancy has never been definitively broken. We’re not just talking about Deloitte here: there are other accountancy firms with long established consultancy operations, and these have continued to grow and prosper even while the rest of the industry has been in turmoil.

PKF is the number 9 accountancy firm in the UK, and one of the few to have what partner Cath Hardaker calls an “absolute” management consultancy capability.

“Most accountancy firms have a business advisory angle, and at PKF we too have a business advisory side that’s aimed at SMEs,” she says. “But they don’t tend to have what I would call a true capability.”

Hardaker says PKF’s consultancy arm is more like a smaller version of what you would find in an old style “Big Six” firm.

“In our own right we employ over 80 professionals, so if you took us away from PKF we would be a reasonable size consultancy.”

The consultancy operates independently, and in different markets from the parent accountancy firm. Whereas PKF the accountancy firm is very strongly centred on the SME market, PKF consultants work in areas such as PPP (public private partnership) and PFI (private finance initiative), doing advisory and business modeling work for clients on both the private and public side of these projects. This links with a broader public sector practice, and the firm is also strong in EU-funded development work in the third world and the hotel and leisure markets. Supporting these practices are strong IT, HR and business process capabilities which can be deployed in opportunities that arise in other markets.

What the firm is not is parasitic on the accounting firm’s client base - Hardaker estimates that there is less than a 10 per cent overlap between clients. Instead the synergy between the two operations works in different and more subtle ways.

“Because our client base is not the same there are no conflicts of interest,” she says. “But we wouldn’t have got where we are today without being part of a £100m-plus turnover firm. That gives us credibility and weight in the market, and it’s also a safety factor for clients.”

The larger firm is also a source of talent for the consultancy arm, which otherwise tends to recruit experienced consultants.

“We will bring newly qualified people with one or two years' experience into the consultancy business,” says Hardaker. “If we bring someone in from outside with the same experience we find they don’t have the same professionalism, the same client experience or the service delivery ethos. Because the accountancy firm’s base is SMEs they could have dealt with every part of a business. We deal with the same issues, but in billion pound organisations, so that’s very useful to us--they’ve got the core.”

Hardaker views the return of the big accountancy firms with equanimity.

“On the one hand their departure didn’t affect us and on the other it changed everything,” she says , adding that as a management consultant it helps to be able to hold two mutually exclusive ideas in your head at the same time. “We are who we are and we do what we do—unless it becomes unviable to do what we do we’ve devised our strategy so we’re going to go out and do it.”

What changed was the nature of the competition.

“We would often be up against a big four firm in true, straight- down-the-line consultancy and we could beat them at their game—they would win their share and we would win our share,” she says. “Then they apparently sold out, which was good for us — we’re not in competition with systems integrators, so we were positioned in a space in the market that wasn’t filled.”

Now, she says, the firms are backfilling:

“It’s inexorable in my view, they have no choice, they’re not going to walk away from those opportunities,” she says.

While the big firms may have a focus on contracts on the £5m plus area —PKF would tend to work the sub-£1.5m region — Hardaker expects to start encountering familiar names again.

“In any one office any partner could say I really, really want this piece of business, so on any given day you could still be up against them,” she says. “In many ways they’ve got nothing to lose.”

What has changed in the meantime is that a generation of clients has grown up with a mentality of looking beyond the “usual suspects”, and experimenting with both start-ups and established but lesser known firms like PKF. This trend is unlikely to go away.

“In a sense the big firms managed to commodify what they did and then sell it off,” says Hardaker. “Now that they’re starting up again, in a way we’d say ‘please try and commodify management consultancy again—because then we’ll win, because we don’t sell a commodity.’”

Related link: View the latest consulting career opportunities at PKF

All views expressed in this article are those of Mick James and do not necessarily reflect the views of Top-Consultant.com and Consultant-News.com.

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