Increased free and subsidised pitching is burdening consultancies with the costs of employing more non-chargeable staff such as account handlers, according to the Design Business Association’s latest quarterly survey.
The result is an increase in the amount of staff-time spent earning each pound of income.
“Presentations, research, pre-concept stage strategic input, project management, account handling, business development and client servicing are all being done by non-chargeable staff. All these affect the economic health of a consultancy working under precarious circumstances,” says management consultant David Jebb, who compiled the survey.
The performances of 40 consultancies – both DBA members and non-members – were monitored from July to September.
DBA president and Elmwood managing director Jonathan Sands agrees that free and subsidised pitching is becoming alarmingly prevalent. “There’s an obvious downturn in UK business activity and clients are finding it tough again, so they’re buying even harder than before,” he says.
And according to the survey, the feel-good factor within the design sector has plummeted, with consultancy managing directors reporting a massive drop in optimism about the general situation in the industry.
The gloom continues with an end to the upward trend in consultancy profitability which started in the second quarter of 1992 (January to March) and ran through to the second quarter of 1995 (April to June).
There has been a 6 per cent decrease in the annual rate of turnover per employee, which in turn has caused a drop in average profitability to 6.5 per cent compared with 14 per cent in the previous quarter.