Depending on how events unfold, other firms see the potential to acquire new talent—and new clients. “Over the next three years, it creates a tremendous opportunity for the rest of the industry,” says Ashim Khemani, chairman and CEO of Aon Consulting. “Getting two culturally—and to some extent, commercially diverse—large global competitors to come together and go through a successful integration, certainly over the medium term, is a daunting challenge.”
Is the Towers/Watson deal a sign of more consolidation to come? Aselstine doesn’t necessarily see it that way. This merger, he says, isn’t a commentary on how the consulting industry is evolving; rather, it’s an opportunity that two businesses found to add value. “I don’t see this as being a rationalization of the industry as much as a business opportunity.”
However, that’s not to say we won’t see more consolidation. “There’s a point of view that to be successful and globally viable, you need to grow larger,” says Malone. “I think, personally, it depends on what your definitions of success and viability are.”
“Will there be more consolidation? It wouldn’t surprise me if there was,” adds Lee. “We’ve seen it in other professional service firms and not as much in consulting. So maybe it’s consulting’s turn.”
Evolution Theory
How the consulting industry develops in the future will largely depend on clients’ needs. In the near term, the focus on costs will likely continue, so consultants will want to ensure that they’re adding value and billing work at the right fee levels. “Clients want to be well served with practical and pragmatic advice that doesn’t cost a lot,” says Malone. “And I think that’s where the consulting community needs to respond.”
The need for cost control is especially evident in group benefits plans. Walker says her company is considering ways to better position its benefits plan for the future. “We’re looking at making a couple of changes to the plan that will help save costs while not impacting the overall level of coverage—trends that we hadn’t introduced before, such as HCSAs and mail order for maintenance drugs.”
As risk management remains a priority, particularly for DB plan sponsors, Markham says that “the biggest trend of all will be on the investment front: the LDI move, gradually moving your assets to be more closely aligned to the nature of your liabilities so that the volatility gradually goes down.” This focus on risk also means employers will be looking at their plans within a broader HR and business context. “The biggest pension and benefits trend is making sure that the design of your program meets the goals of the organization and does so in a way that doesn’t create too much risk for the plan sponsor,” Lee adds.
And many of the hot topics before the downturn haven’t disappeared; they’ve just been pushed to the back burner. For instance, the demographic shift that will create a labour shortage in the not-so-distant future hasn’t gone away. Veldhuis says her company has employee groups at both ends of the age spectrum, and she expects to see increased demands and benefits utilization from the older population. “We’re going to see a demand on us to provide more retiree benefits across the country,” she explains. “We’re going to see a shift from public funding to private funding, and employers are going to be looked at to fill that gap.”
However, the most significant challenge for employers will be to maintain, on an ongoing basis, an appropriate balance between managing costs and offering strategic benefits programs to attract and reward employees. And that’s not an easy task—even in the best of economic times. “Many private sector organizations will need to balance the financial viability and strength of their organizations with the need to maintain well-designed, competitive and financially secure pension and benefits plans,” says Malone.
The good news for consultants is, employers still need support to help them make strategic decisions and position their companies well going forward. Consulting firms may feel the pressure when budgets are tight—but they won’t be squeezed out
Alyssa Hodder is Editor of Benefits Canada.
alyssa.hodder@rci.rogers.com
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© Copyright 2009 Rogers Publishing Ltd. This article first appeared in the August 2009 edition of BENEFITS CANADA magazine.
