It’s official: we are in a low-growth world, with the latest data revealing a slowdown in the US, Europe and Japan, as well as numerous developing markets. For many corporates, this challenging operating environment places more focus on achieving the balance between the imperative to deliver attractive returns to shareholders and the need to manage risk. 

Recent history is littered with examples of businesses that have failed to get that balance right. The financial crisis exposed the poor risk management processes many businesses were using and, combined with the resultant set of new regulation and compliance liabilities, was a wakeup call that forced many to reform how they take decisions, improve the way they manage key individuals and teams to ensure they have the right “talent” in place no matter where it is in the world, and to foster the right culture.  

Many organisations have long recognised the potential for efficiencies and improvements in their HR operations – areas such as payroll administration, compliance advice and employee benefits consultancy continue to be key focuses – but strategic HR is also now taking its seat at the decision-making table.

Strategic talent management

Enter an emerging breed of business services providers offering strategic talent management: these consultants are helping large corporates to embrace cultural change from the top of their organisations downwards. Their growing influence represents an increasing recognition that while leading businesses have achieved operational excellence and process improvement, their leadership teams could improve the skills required to avoid poor decision making – and that an organisation’s culture of risk management is all pervasive, for better or worse.

You might describe such consultants as providers of strategic human resources services. Using sophisticated assessment and coaching tools, they work with a business’s most senior leaders in order to help them instil a culture that is fit for purpose. That work may extend to emerging leaders, as part of succession planning, while proprietary methodologies, models or databases where implementation and service outcomes are repeatable also enable consultants to extend their reach further into the organisation. 

The best providers of strategic HR services are therefore in high demand and this is prompting consolidation in the sector. Both specialist HR consultancies and diversified groups have been expanding their talent management offerings and acquiring capabilities. Korn Ferry acquired mid-sized specialist Hay Group, which itself had been on the acquisition trail buying assessments and capability tests specialist Talent Q a year earlier; Towers Watson paid £42 million for Saville Consulting, an international psychometric assessment business, before merging with Willis Group this year to become Willis Towers Watson; and Mercer has acquired Comptryx, a HR metrics specialist.

Private equity groups are also drawn to this niche, attracted to the high quality customer relationships, scalable operations and demand from international markets. Although there are few independent targets of any scale remaining, HgCapital (which sold SHL to The Corporate Executive Board Company for $660 million), US PE firm Argosy (Linkage) and Livingbridge (YSC) are examples of active investors.

Comment