Consultancy Industry
13.2 Employability Demand in the German Consultancy Industry
ployees in the context of employability and (C) based on these results propose several starting points for consultancies that want to strengthen their efforts with regard to employability development.
We have put the focus of our contribution on the large IT and management consultancies in Germany for three particular reasons. Firstly, Germany is the second largest consulting market in Europe (BDU 2005). Secondly, large German consultancies are currently experiencing the consequences of the above-mentioned slowdown to a greater extent than small and medium-sized firms (BDU 2005).
Thirdly, IT and management consulting represent 88.5% of the consulting market in Germany (BDU 2005).
13.2 Employability Demand in the German Consultancy Industry
In this section we focus our attention on the industry-specific demand for employ- ability caused by the relevant business context of the German consultancy indus- try. Certain driving forces in the business environment may influence the demand for employability. Such drivers can be developments in the industry and character- istics of the market where firms operate. In this context, Riddell and Sweetman (1997) distinguish between four major developments: technological, organiza- tional,economical and demographical (see Figure 13.1.).
These phenomena and market characteristics influence the demand for employ- ability in the German consultancy industry to differing degrees. In order to specify the influence of the above-mentioned driving forces on the demand for employ- ability within the German consultancy industry we have used data mainly from the annual reports of the Federal Association of German Management Consultants Bundesverband Deutscher Unternehmensberater (BDU 2005; BDU 2004) and an- nual market studies (Streicher and Lünendonk 2004a; 2004b) which are focused on the 25 largest players in the management and IT consultancy market.
Dem ogr
aph ical Deve
lopm ents
Product Market
Employability Demand
Economic Developments Labor
Market
Technological Developments
Org aniz
atio nal Dev
elopm ents
Fig. 13.1. Driving Forces Shaping the Demand for Employability
13.2.1 Technological (Know-how) Development and Product Market In an economic environment characterized by globalization technological devel- opment is becoming more and more important with respect to organizational suc- cess. Due to such development job-specific skills can become obsolete fairly rap- idly (Blechinger and Pfeifer 2000; Neuman and Weiss 1995). Thus employability is crucial for bridging skills gaps and continuing labor market participation (de Grip et al. 2001). More specifically, technological development in the consultancy industry leads to the continuous emergence of new managerial vogues. Conse- quently, existing knowledge and skills regarding management concepts and tech- niques have a short half-life (Kubr 2002). Furthermore, consultancy firms are con- tinuously confronted with market pressure to keep a balance between the capacity to offer new services and the ability to stay specialized in one area in order to guarantee in-depth know-how (BDU 2005; BDU 2004). To sum it up, the inten- sive know-how development and market pressures can be expected to have a steady impact on the employability demand within the consultancy industry.
13.2.2 Organizational Developments
Organizational developments demand a high degree of flexibility, which can be accomplished by being employable (Dielmann 1999; Riddell and Sweetman 2000). Organizational developments can be reorganizations and/or changes in the
position of the organization that take place in a larger configuration like parent company or franchise (De Grip et al. 2001). The more employees are involved in such developments the stronger is the need for organizational and individual flexi- bility. For 2004, the BDU reports a high number of reorganization activities within the big consultancies concerning internal structures and reorientation towards new services and clients (BDU 2005). Internal reorganization and new market orienta- tion are typical strategies in turbulent times. Thus employability is particularly important during times of crisis: on the one hand external employability can be used as an alternative to job security and on the other hand internal employability contributes to better organizational flexibility. Due to current organizational de- velopments in big German consultancies the need for flexibility and respectively for employability is relatively high.
13.2.3 Economic Developments (in Competition)
Recent competition in Western economies is focused on knowledge and innova- tion capacity. In an international context firms are forced to adapt to changes more rapidly (de Grip et. al 2001) and this leads to an increased demand for a flexible and innovative workforce (e.g. Brown 2003; Bollérot 2001; Dielmann 1999). The degree to which an industry is influenced by its international context depends on how open it is. Openness of an industrial sector can be estimated by looking at ex- port shares of the industry’s production (de Grip et al 2001).
According to market studies carried out annually by Lünendonk, in 2003 the top 25 IT consultancies made 14% (1.1 billion EUR) of their total turnover with foreign clients (Streicher and Lünendonk 2004). The same study reports less than 10% (304 Mio EUR) export shares for the top 25 management consultancies. Al- though export shares do not differ to a great extent, Kipping (1996) as well as Streicher and Lünendonk (2004) consider management consulting a “local busi- ness”. On the other hand, the consultancy industry in Germany considers increas- ing internationalization as an important driver for turnover in 2005 (BDU 2005).
This development could lead to a higher export-orientation also for management consulting. In summary, openness of the IT consultancy sector can be considered moderate, whereas openness of management consultancies is lower and therefore less relevant to the demand for employability. However, increasing internationali- zation is seen as a driver for turnover. This may positively influence export- orientation of German management consultancies in the near future.
13.2.4 Demographic Developments and Labor Market
In Europe the aging workforce and a decreasing labor market inflow of younger employees lead to two challenges where employability could contribute to a solu- tion. Firstly, European employers, especially those in Germany, need to retain their personnel longer (Commission of the European Communities 2005). A look
at the German consulting market reveals the following picture: While the number of consultants and junior consultants has decreased, the number of senior consult- ants, project managers and partners has increased (BDU 2005). This development in the German consultancy sector underlines a general tendency in the European labor market. Secondly, knowledge-driven industries more than others experience a skills shortage due to the above-mentioned demographic development and are forced to participate in a “war for talent” (Chambers et al. 1998; Leitl et al. 2001).
In 2005, the battle for outstanding talent within the large consultancies in Ger- many is likely to continue. Furthermore, people development and alternatives to job security will be of central relevance for recruitment strategies (BDU 2005).
Employability also plays a central role with regard to career transfers. Due to a
“grow-or-go” policy (Kubr 2002) and a high number of separations in the recent past (Graubner and Richter 2003) career transfers outside the organization are common in consultancies. In summary, current demographic developments in the German labor market have a strong impact on the need for employability in the consulting sector.
As we have seen various kinds of developments influence the demand for em- ployability in the German consulting business. In the short run this demand re- flects the need for finding an alternative to job security. In the long run, it reflects the need to build a flexible and innovative workforce possessing state-of-the-art know-how regardless of age. Thus, we see the concept of employability as highly relevant to the German consultancy industry.