Work still to be done on consultancy productivity

There’s an element of ‘must try harder’ in the latest end-of-term report from accountant Willott Kingston Smith. While independent design groups fared well over the past four quarters, only six of the WKS top 30 consultancies achieved the gross income of £80 000-£100 000 per head of staff, cited by WKS partner Mandy Merron as a sign of a well-run business.

Of course, the WKS charts do not compare like with like. Given the constraints of the Sarbanes-Oxley Act in the US, that prohibit consultancies quoted on the New York Stock Exchange from promoting figures that aren’t part of an annual audit, the big ‘owned’ groups are included in the charts largely on the strength of their financial performance for 2003. Meanwhile, the independents’ submissions are based predominantly on data from 2004. But it is nonetheless interesting to see how both types of consultancy have fared year-on-year.

A more important message, for all design consultancies, comes through the business of earnings per head of staff. Merron has consistently cautioned that it is one thing making a good profit, but quite another if the large proportion of it is being ploughed back into staff costs, rather than hitting the bottom line. And she is right – especially with so many design bosses keen to sell their businesses.

The problem has tended to be high salaries, rather than over-staffing. Many groups kept on expensive senior staff when times were tough, dispensing with more junior roles. While this gives short-term stability, it doesn’t help the balance sheet in the long run, or bode well for the future health of the consultancy. Then there are the higher salaries commanded by some disciplines for largely historic reasons – digital design is a case in point, despite the dotcom bust at the turn of the new century.

Until these issues are addressed, the industry won’t be operating at full strength. The WKS report is a timely reminder that there is still work to be done.

Lynda Relph-knight, Editor