Why do human capital consultancies plateau? Part one – UVP

Human capital uvp cropped

We all know the saying, “Do as I say, not as I do.” And often businesses fall victim to this too, whether it’s the IT consulting firm with out-of-date IT systems, or the management consulting firm with a vague strategy for its own growth. But what about human capital consultancies? Do they have superior leadership abilities which allow them to grow in ways others can’t? Or do they fall victim to the same habit of not using their own core competencies internally?

This week, in the first of a two part series, we’ll be looking at how human capital consultancies can develop their unique value proposition (UVP). Next week we’ll examine how to target the right clients to help your consultancy grow and the important part intellectual property (IP) plays.

Organizations are dealing with huge changes in the composition of their workforce. Baby boomers are leaving or looking for reduced, flexible working, millenials are arriving with different motivations for working and by 2020 there will be five generations working in the same workforce. This leaves businesses with big talent challenges to manage, as well as their day job of selling more products or services.

You’d think all that change would create fast growing human capital consulting firms, with strong sales, profit growth and equity value. Unfortunately you’d be wrong as only about 50% get past the first stage of growth, the rest plateauing around the $3m revenue mark.

So what’s the problem and how do you make sure your firm is one of the 50% that breaks through this first glass ceiling to grow equity value? The key is to get the right UVP, to the right clients, with the right IP.

This is Equiteq’s 8 levers of equity value, which was can use to highlight the levers in human capital firms which typically drive equity value up and those which drag it down.

EQUITEQ_WHEEL_RGB

Human capital firms usually score well on the east west axis, with consultant loyalty and client relationships driving equity value up. However market proposition, sales and marketing and IP frequently drag equity value down.

The UVP has to answer the exam question ‘Why should I buy from you?’ and this is where human capital consultancies are missing a trick. The Kirkpatrick Phillips model (pictured below) is used for evaluating human resource development and training.

Measuring training V2

(http://www.gosignmeup.com/kirkpatrick-phillips-model/)

Because an overwhelming majority of participants said they liked their day out of the office in training for example (Kirkpatrick Phillips level 1) doesn’t put you in the running for bigger, more profitable contracts. For the CEO of an organization you are targeting this is not a compelling reason to invest in human capital consultancy work. What’s needed is to move up the pyramid and demonstrate the return on investment that the work provides.

Yes, it’s tougher in human capital firms than say, IT consulting firms, to measure the outcomes, but the leadership team have to create a UVP aligned with their clients’ pain points and produce measureable results. The higher up the pyramid the better. Consultancies typically diffuse their offering too broadly. It’s better to focus on a niche offering and do it well. In fact, buyers of consultancies have told us that they prefer niche offerings when they are assessing whether to acquire a firm.

Next week we’ll look at how to target the right clients to grow, as well as the important role IP plays.

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