In consulting, human capital is everything. Real experts are rare and have long been fought over, especially in a growth region like the Middle East where cultural compatibility is a key need. Now it looks as if the region’s scarcity of qualified consultants is taking the war for local talent to a whole new level. This is the second installment in a three part investigation into recent developments at Strategy& since it combined forces with global services organization PwC. Read part I and part II.
[pullquote]Consulting has now surpassed investment banking as the primary career choice among newly minted MBAs[/pullquote]
With bountiful profit potentials in the Middle East, it is basic business logic that premium consultants will compete fiercely not only for new business — Booz Allen Hamilton (BAH) for example triumphantly announced the win of a $22.3 million contract with the Royal Saudi military on the occasion of its first anniversary of its “reemergence in MENA” back in August 2012 — but even more for the scarcest and most vital resource: human capital.
In theory, this shouldn’t be a problem over the long term as international experience shows how such enhanced demand motivates more young talent to aspire to consulting careers. The Economist reported in October 2014 that consulting has now surpassed investment banking as the primary career choice among newly minted MBAs. The publication cited studies showing that almost 30 percent of MBA graduates from ‘elite business schools’ in North America and Europe take employment at consulting firms. The tendency to seek work at consulting firms increased by six to seven percentage points between 2007 and 2013 among graduates from the likes of London Business School and the University of Chicago’s Booth School of Business. At the latter school, four big consulting firms — McKinsey, Bain & Company, Boston Consulting Group and A.T. Kearney — hired 19 percent of the 2013 MBA class.
[pullquote]In the immediate term, what matters is experience and reputation. No fresh MBA graduate has that[/pullquote]
But in the immediate term, what matters is experience and reputation. No fresh MBA graduate has that — instead, it is the added value provided by partners, whose primary job often isn’t to consult, but rather to bring in clients and business. Joe Saddi, senior partner and chair of Strategy&’s Middle East business, and George Sarraf, a partner and veteran of Strategy&, concede that the loss of tier one human capital has been significant, but both emphasize that Strategy& had immediately embarked on refilling the partner ranks. “We elect partners every year or every six months. Frankly, within one year, we expect to be back at full deck,” says Saddi.
Sarraf points out that the PricewaterhouseCoopers (PwC) merger deal was similar to any such transaction in the corporate world in leading to “its own wave of departures. It is frankly very common that people either have the desire to change or are not satisfied with the transaction itself,” he says. High turnovers in personnel were moreover a common occurrence in the premium consulting industry due to high performance pressure, he argues, claiming that only a minority of departees would join a competitor as most left for reasons such as joining their family business or setting up their own companies. And in tune with Saddi’s perspective, Sarraf downplays the outmigration after October 2013 by emphasizing that Strategy& was on course to replenish its partner ranks.
[pullquote]The loss of so many partners — and with them, decades of experience — looks, by the size of the regional consulting industry’s partner ranks, like a mass defection[/pullquote]
As the Strategy& partners page has been replenished to 25 and while the outmigration provided new career opportunities to ambitious risers from within legacy Booz, the loss of so many partners — and with them, decades of experience — looks, by the size of the regional consulting industry’s partner ranks, like a mass defection whose consequences for Strategy&’s position in the Middle East consulting market are yet to become clear. BAH, which two years ago had announced that it would be “actively recruiting” regionally based specialists to increase its “traction” in MENA, in particular appears to have used every opportunity to snatch up human capital, right down to new analysts whose prior experience was an internship with the erstwhile ‘sister Booz’ in Beirut.
The picture of legacy Booz–BAH migrations suggests that the combination of the former’s sale and name change with the latter’s aggressive hiring approach — anecdotal evidence is that BAH’s new hires in their majority were fitted with fancier positions than they had held at Booz — created a specific, and for the acquirer BAH presumably very expensive migration. Another BAH-friendly factor in this particular case may have been the ring of the old name, which BAH cheerily exploited by using its bragging rights to the Booz Allen Hamilton brand legacy of 100 years in consulting, and also the joint history of the two now-competitors until 2008. Some of the most experienced career migrants in the scenario had already worked under the BAH brand before 2008 and a couple of these veterans, known as Booz & Company people in numerous conference bios and publications, curiously purged their career histories in LinkedIn profiles by posting histories of working uninterruptedly with BAH since 1999 and 2002.
[pullquote]The aim of the PwC–Strategy& merger was to reach faster growth than Booz could have achieved on its own[/pullquote]
This emergence of new competition from known people under an established name must be more than an inconvenience for Strategy&. Yet Saddi and Sarraf emphasize with joint vigor that the aim of the PwC–Strategy& merger was to reach faster growth than Booz could have achieved on its own. That long term goal may yet play out if Strategy& can stem the outflow of talent and use this experience to take their team members’ self confidence and trust in the organization to a new level. But it is clear that the future of Strategy& will require overcoming not just internal challenges such as the stratification of premium and value consulting, but also market challenges faced by the globally evolving consulting and auditing profession and, on regional terms, dealing with growing competition over clients. In the meantime, any coming battles over talent and clients in the Arab consulting space will be welcome news to the market — as long as this increased competition remains within the realms of human decency and does not deteriorate into full fledged, dirty commercial wars.