New York City, NY – February 12, 2020 – COMATCH, one of the world’s leading online marketplaces for independent management consultants and industry experts, today released their insights into the impact a potential recession could have on the consulting industry. In recent months, many of the economic indicators that serve as the proverbial canary in the coal mine for a possible economic downturn are beginning to look a bit pekid while others have blatantly fallen off their perch. The New York Federal Reserve’s probability model, a critical recession indicator, hit 32.9 percent last summer. The measure has crossed the 30 percent threshold before every recession since 1960. Federal economists point to declining home sales as “consistent with the possibility of a late 2019 or early 2020 recession.” Additionally, the “yield curve inversion” which highlights the time that long-term interest rates pay out less than short-term rates, has again inverted. This indicator has preceded the last seven recessions in the U.S., going back more than 50 years without falter.
With a potential recession on the horizon, many organizations and employees are scenario-planning for the consequences that accompany a downturn: lower profits, layoffs, rising unemployment, reduced consumer spending, just to name a few. However, while a recession normally portends doom for most businesses, the independent consulting industry has a more nuanced relationship with downturns. The onset of a recession often leads to a cutback in the overall consulting spend by client-organizations, as an easy cost reduction, along with freezing new hiring or promotions. However, as we get deeper into a recession, companies traditionally increase demand for cost-saving initiatives, prompting consulting firms to shift their focus onto those projects. This way, consulting firms can dampen the blow of economic turmoil. In the same wake, independent consulting can serve as a sought-after employment option for highly qualified U.S. workers during a downturn.
“Today’s economic environment, whether in a strong economy or facing a recession, dictates that companies maintain a high degree of flexibility in their workforce to adapt to demand spikes and quickly changing trends, while satisfying the need to access deep subject matter experts at a moment’s notice,” said Sven Merten, Managing Director U.S. at COMATCH. “In boom times, companies look to consulting firms and individual industry experts to help them maximize their growth potential and maintain a competitive advantage. In lean times, businesses and organizations call on those very same consultants to navigate the choppy economic waters, supplement their shrinking workforces, and keep them financially afloat until the storm subsides.”
For skilled members of the U.S. workforce, the consulting industry can serve as a financial refuge during these times, especially if they find themselves suddenly without a full-time, traditional job. Consulting presents a flexible option to leverage their vast knowledge and experience while maintaining financial and employment security. However, the role of the independent contractor is not solely reserved for the grey-haired experts with a wealth of real world experience.
“Ask anyone with a few years experience that suffered from unemployment during the late 2000’s and early 2010’s, and they will relay to you the struggles of finding work despite boasting a resume overflowing with top-tier academic credentials,” continued Merten. “Fortunately, even young talent with two to three years of experience can find work as independent consultants during downturns, as the less-experienced tiers in firms often slim-down significantly, driven by hiring freezes and widespread layoffs.”
As with all potential disasters, preparation is the key to survival. Up to 162 million individuals in the U.S. workforce have already taken advantage of the Gig Economy and made the move into freelance work in some way, many to secure a second income and stave off economic hardship. Skilled consultants and industry experts should take notice and also consider independent consulting to similarly weather a potential economic rough patch. Furthermore, with the proper analysis and positioning, these consultants may be able to leverage hiring and budget dynamics during a downturn to their advantage, getting ahead of their fully-employed peers who face potential pay cut or promotion freezes.
“If the recession does come to pass, the timing might just be right for many members of the U.S. workforce to consider the successful and rewarding world of independent consulting,” Merten advises. “While it may feel like a risk to those accustomed to the road of traditional employment, it may very well be the safest path as we walk into an uncertain economic future.”
COMATCH is the online marketplace for independent management consultants and industry experts. Since March 2015, COMATCH has matched consultants with clients in need of external support. Companies of all sizes use COMATCH, including international corporations, consultancies, private equity funds, start-ups and SMEs. Consultants that want to join the network have to pass a two-step selection process that guarantees high quality consulting (only half of the consultants’ applications are accepted). Founders and Managing Directors of the Berlin-based company are former McKinsey consultants Christoph Hardt and Jan Schächtele. Former McKinsey colleague Sven Merten leads the U.S. entity as Managing Director.