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Up or out model has become a scam – Part 2, struggling with clients expectations

From rearranging the deck chairs on the Titanic to false promises to their clients, IS&T companies are desperately trying to keep their HR model and historical business alive. Their past management mistakes have led them to the edge.  Alternatives are possible but awareness is not there yet...

Finding the grail for clients expectations behind pyramid model

From rearranging the deck chairs on the Titanic to false promises to their clients, IS&T companies are desperately trying to keep their HR model and historical business alive. Their past management mistakes have led them to the edge.  Alternatives are possible but awareness is not there yet...

Up or out model was an answer to past clients expectations

In a pyramidal model, types of activities follow the Dreyfus model of skill acquisition. Basically, new joiners will learn by doing structured, predictable and repeatable tasks. Going from novice to mastery, an individual will switch progressively from following procedures to following his "intuition".

Even if this model has limits, it can be transposed to value delivered by an individual regarding overall clients expectations. This value is not linear over time (junior resources is supposed not to deliver the same as an expert). To be noticed, in my representation, that value brought to customer is decreasing for higher x-axis. It is a simplification to represent the fact that highly trained resources usually switch more to commercial activities or consulting company leadership than delivering value to clients.

When ERP projects where fashionable...

consultant to mgt pyrapid
Large projects and IT companies standard resource mix

IS and management consulting companies' business, for years,  have been big transformation projects. These required massive workforce on highly repeatable or industrialized tasks. As a consequence, a "pyramidal" resource mix was required. Optimizing cost structure and putting in place up or out model was mandatory.

The structure of projects and resource mix itself was intended to increase resources proficiency. Some tricks like the famous "acting-as" provided in the meantime an acceptable cost to customers. "Acting-as" was the promise made by a company to an employee that he would be paid one day for the responsibilities taken this day.

"Acting-as" in consulting : two birds in the bush are worth one in the hand, because you will learn how to hunt by working with us.

Yannick Delaviere

In this HR model, resources are considered expendable and replaceable. Fortunately, I personally managed to remain on top. But as a manager, I faced so many "unfair" situations...

So big that strategy forgets about individuals

Companies have been blind to the downward spiral they were going into. They made changes to their pool of resources, only looking at the big picture and the cost savings that could be done. They didn't take into account that changing activities would have a direct impact, not only on their ability to deliver value according to clients expectations, but also on the employment market itself.

It is important to make clear distinction between what is achieved by an individual and what an overall structure, composed of several individuals, can do. The bigger the structure, the more resilient to change it will be.

Progressive misalignment with client expectations

IS&T market has implemented a short term approach. It was potentially a matter of survival for all these companies. Just like industry companies had the choice between cost killing/polluting and dying for the benefit of competitors.

To want one thing too much, we end up doing the opposite.

Noël Audet

Step 1 : outsourcing and automation

outsourcing "low value" tasks
Step 1 : outsourcing and automation

In order to optimize cost structure (and associated revenues), consulting and IS companies have started 10 to 15 years ago to massively automate and outsource/offshore what was considered as low value tasks (tests, development…).

More recently, with Agile, trend continued on design activities. And with cloud all the infrastructure management and move to production "disappeared". However, Agile has not change anything (or close to anything) int he tasks required to deliver a project.

illustration agile/waterfall
Waterfall, Agile, same steps, different pace
(illustration from here)

They are indeed more granular, more iterative, but all are still required. You still need to plan your project. You still need to make some design (and document it!). I might write a post one day on all the misconceptions around the Agile manifesto... I've seen so many "Agile" projects failing after a few months because no design document (or clean code comments) was done making it completely non maintainable. You still need some code, some test, some deployment and to follow what happens once released to users...

Step 2 - Challenge developing skills

Mitigation plans for training
Step 2 - Challenge developing skills

Unfortunately, these tasks had two major benefits :

  • Make all resources, whatever their background, aware of the ins and outs of how solutions work, and thus what is technically possible and what is unrealistic
  • train resources "the hard way". Really know what they talk about, as they have done the job at least once.

Add to this the fact that need for trained resources is so big that more and more "fast tracks" are put in place and you have all ingredients for exponential issues.

Step 3 - Fundamental skills missing

Decrease in value of experienced resources
Step 3 - Fundamental skills missing

To deal with this gap of knowledge, consulting companies try to put in place dedicated trainings and internal certifications. Entry levels need to learn faster. But nothing replace practice. In addition, cultural gap between techies and commerce is increasing.

CC Digital certification logo
Capgemini consulting  digital certification

As a consequence, shortage of knowledgeable resources, able to provide relevant transformation roadmaps or make end-to-end design, is also increasing.

We can also notice progressive gaps in management skills. Indeed, stuck in more and more small projects, people who will in the end be managers tomorrow are not given the opportunity to get a grip on this "human" side of the job. Consulting companies should definitely insist on these soft skills : emotional quotient, management, social styles...

Emotional intelligence, key to management (notice publisher vs./ number of views...)

Step 4 - Extinction of big transformation programs

Need for complex program managers disappear with big transformation programs
Step 4 - Extinction of big transformation programs

Big ERP transformation programs are over. Some industries still need huge transformations (e.g. banking and insurance to get rid of mainframe) but most of programs are becoming patchworks of highly volatile initiatives. Large linear program managers are becoming useless while people able to coordinate numerous small initiatives and ecosystems are missing.

Step 5 - tasks which were low value in the past few years are becoming hype and critical

Low value tasks are becoming hype
Step 5 - tasks which were low value in the past few years are becoming hype and critical

With the rise of Agile and all market being disrupted by GAFAs and startups, what was considered as low value tasks is now perceived as inevitable and local. Innovation now requires all-terrains developers. And these need to work at the very same place as business guys.

In the meantime, technology lifespan gets shorter every day. Isn't there a risk to massively flood the market ? 

The challenges to meet clients expectations

For individuals, it is the end of a paternalist model. Everyone needs to plan for his career by himself. Consulting companies are directly responsible for their current HR difficulties. Its a chicken and egg story.

Whatever they say, it goes far beyond the "generation topic". Companies have demonstrated that different models were possible and even desirable to "generation Y", millenials... Consulting market (and clients) need to adopt new models.

Switching from training recruits to learning from them

Graduates shall not be considered as "cheap low value resources". Some have high skills in latest technical areas and they, of course, can bring a real knowledge of digital natives requirements and new ways of thinking. Development capabilities also need to be re-injected close to customers and inexperienced resources (maybe from uncommon schools) have great value.

However, consulting and IT companies will need to take into account three major considerations :

  • The need for this type of resources is drastically lower than the huge volumes of graduates that were required in the past. Recruitment process shall then be adapted. Resource mix and skills are also evolving
  • Technology lifecycle is changing, and thus, one cannot rely on what he has learned. It is critical to keep on getting trained with significant time spent hands-on.
  • Above all, it is no longer a matter of pushing resources outside when there is no fit anymore but to anticipate and promote external experiences right from the entry.

Up or out model is over

In this model, leaving the "firm" or "family" was seen as a failure of the employee by the others. It was also sometimes seen as a betrayal when the leave was not a result of a decision from the company.

Linear career path within a consulting company is not the royal way to success anymore. And in fact it has never been. I give more thoughts about this if you want here :

Up or out model has become a scam – Part 1, for employees

Experienced hires will now need to have various competencies :  real life innovation track records, having demonstrated new business creation, having worked to make our world better... Indeed digital transformation is not a matter of technology but to conceive society differently. Even if big consulting companies try to propose these kind of activities, they are part of the "old world". They will (for now at least) not win competition on these areas against startups, innovative end clients like neo-banks or non profit organizations.

Instead of trying to compete, why not integrate this directly into the career path? Have these as proposals of career opportunities. have partnerships with these kind of companies, and not only on business but also workforce? And in the end propose bridges to enter a win win strategy?

"Hands-on" on overall transformation for intermediate resources

Intermediate resources (usually called "senior consultants" or "managing consultants") will then come from various backgrounds. There will not anymore be the dichotomy between commercial and engineering profiles. It is critical for all of them to understand all the ins and outs of overall transformation.   

Everybody may need to be trained on their antagonistic dimension. It might as well be interesting to have some "live my life sessions".  Nowadays, just because digital transformation is at the cross roads of technology, society and new businesses, one shall understand all these dimensions. Instead of trying to standardize everybody, just like for macroscopic scale society, companies might need to switch from doing melting pot to salad bowl.

Adapt sourcing strategies and expectations

Companies are struggling to get high value experienced resources. Many of them have been pushed into adopting new models like being independent consultants. The trend may change, but for now this labor force is accessible to everybody and even to consulting companies clients. 

Freelance trend (not limited to consulting and IT) in the US in 2017 : Freelancers predicted to become the U.S. workforce majority within a decade, with nearly 50% of millennial workers already freelancing, annual “Freelancing in America” study finds

As a consequence, consulting and IT companies need to adapt not only to new HR models but also need to cope with new types of missions and new ways of working. Just like for the overall digital transformation, we can see direct similarities and a convergence between IS systems and HR. IS&T companies need to work as part of an extended resources ecosystem and stop trying to be standalone. Their value proposition need to focus on sourcing the most appropriate skills, animate a network for overall consistency and guarantee result on medium to long term.

Consulting and IT companies adaptation (or not) to change

Consulting and IS&T companies pretend to be changing their model to keep focusing on solving clients expectations while renewing the way they handle their resources. But...

Partnerships are often a good idea, only at first sight

Consulting and IS&T companies walk undercover. Officially, they want to continue delivering always more value to their clients. For that, the concept of "partnerships" is key. In reality, this is a clumsy way to cling on big volumes of low value activities. "Real" partnerships, in which the several parties are involved to deliver, for example, a new business and share benefits, are uncommon. Most of the time, it is in fact an agreement on volume discounts with some KPIs hardly defined or activated. Where everybody thinks to have a win-win deal, it is in fact disappointment on both sides :

  • IS&T company will hardly reach the target volumes. Indeed trend is to focus on RoI and decrease large expenses. Any steady or increasing volume of activity would be a failure for clients
  • Clients expectations are not met. Instead of expertise and high value projects,  conflicts of interest can jeopardize duty to provide relevant advice

Adapt value proposition given to the "HR ecosystem"

Experienced resources will not be convinced that easily anymore to join (or stay) by a promise of being promoted. Some structures already propose alternate models from which consulting companies can learn :

  • Umbrella companies : Interesting structure for individuals, it secures the day to day life by simplifying administrative tasks of freelancers.  
  • Small consulting structures (<50 people) : they have no choice but to focus on value, and try to hire experts of course. Retention is mainly achieved by by strong relationships between individuals, cutting edge topics to work on, and full involvement, not directly on business development, but on identification of potential clients gaps. These companies (and their employees) face two major risks though : 1/ being bought by a bigger group for their brand and forget their identity 2/ Switch to marketing  instead of delivery to develop revenues (e.g. : false promises on a technology)
  • Groups/networks of freelancers  :  A group of people share same interest and convictions on a topic, share business opportunities, but without hierarchical relationship. I lack feedback on how these evolve over time. We can assume that main risks to mitigate are 1/ potential difficulties in financial relationships and 2/ relationship between individuals erosion and diverging career paths.

A commonality between these is to bet on something different than money : on trust, on meaningful activities and autonomy.

A brand new report from Universum highlights part of this overall trend :

Employer branding survey 2018

Clients also need to adapt!

Evolution of consulting companies and digital transformation also have direct impact on clients. Symmetrically to what IS&T companies are facing and pushing, their clients need to adapt their ways of working :

  • They need to work together with IS&T companies to adapt their purchasing policies. Just a few examples : see clearly beyond partnerships; identify innovative revenue sharing mechanisms; have commitment on results even when putting in place Agile approaches (it is possible!)...
  • Just like their "providers", they also need to review their HR policy and be able to cope with human resources ecosystems : handling internal resources alongside freelancers, externalizing innovation and, why not, have coordination done by consulting companies
  • Of course digital transformation does not only impact IT systems departments but all business entities. There is an unprecedented change : Client-supplier relationship between business and IT is not relevant anymore. This drives evolution on expectations from IT departments and from their partners and providers.

I may discuss these topics in later posts...

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