Human resource (HR) consulting, also referred to as human capital advisory or HRM consulting, spans advisory and implementation activities related to the management of an organisation’s human capital and the HR function. The scope of services range from overarching work on human capital strategy to the design and deployment of a compensation & benefits framework down to the transformation of the HR function.
HR consulting market
The market for human resource consulting services is estimated to be worth $31 billion, representing approximately 10% of the total global consulting market, making it the smallest of the six main industry segments. During the crisis years HR consulting was one of the chief casualties within the consulting of the recession industry – according to analysts, spending on human resource consulting contracted by 10% or more in mature geographies.
Since 2011, growth levels in the market have been restored and the revenue of HR consulting services has seen a rise of around $1 billion per year. Annual growth percentages vary between 3.6% and 4.5%, with most recent years showing better performance.
In the coming years, spending on HR consultants is forecasted to continue to grow, on the back of large megatrends in the human capital domain such as an aging workforce, continued mismatch on the labour market, the rising impact of diversity /inclusion and the need to bring employee capacities in line with 21st century skillsets.
HR consulting services
The market for human resource consulting services consists of eight main disciplines: Human Capital Strategy, Compensation & Benefits, Organisational Change, HR Function, Talent Management, HR Analytics, Learning & Development and HR Technology.
Human capital strategy includes a variety of strategic work in the HR domain, such as defining a corporate culture, organisation design, setting up a people strategy that supports key pillars in the business, as well as the design of HR-related strategies in the area of among others diversity, recruitment and talent management. Compensation & benefits, a segment also known as total rewards, looks at all aspects of employee compensation and benefits, from base and variable pay to bonus schemes and other secondary benefits, across the entire organisation – from board level to employees on the workfloor. The discipline also includes pensions / retirement consulting, and advisory services tied to health and welfare.
Organisational change encompasses the people side of change, aimed at successfully guiding and embedding changes in organisational structure, ways of working or cultural changes within an enterprise. Change management stands at the heart of the service area, spanning advisory expertise to tools and interventions, with leadership alignment, stakeholder management, change interventions and cultural management the main offerings. Organisational change services can be sold as standalone offerings by consultancies, however, typically they are bundled into larger functional transformations to safeguard the people side of change. The HR function area focuses on all activities related to improving the functioning of the human resource department. Offerings vary from developing and implementing a HR target operating- or HR delivery model, to the implementation of HR systems and technologies, or other HR transformations that boost processes and organisational efficiency.
Talent management encompasses all activities required to recruit, retain and develop talent, as well as having the right structure and processes in place to ensure professionals can perform optimally. Key propositions include strategic workforce planning – the science to anticipate on present and future human capital needs by matching business goals with HR data – recruitment & retention, workforce effectiveness and performance management. Through the rise of data and new technologies, HR analytics has grown into a full-fledged service area within HR consulting. HR analytics focuses on applying analytic processes to the human capital spectrum, with the key objective of adding insights and value to HR activities.
The learning & development service line, also referred to as training & development, is concerned with activities aimed at improving the performance of individuals and groups. The scope ranges from organisational- and competency development across leadership, departments and functions to support the training and education needs of individuals. Learning & development also includes the soft side of development, such as coaching and mentoring, as well as the technological side of training, such as the development and implementation of learning management systems. Lastly, HR technology is the field that specialises in all systems and tools used in the HR department, including large ERP modules by SAP, Oracle or Microsoft, and more niche solutions per functional domain.
What does an HR consultant do?
Human resource consultants are generally hired by three types of clients. Firstly, HR advisors support HR directors and managers of client organisations with improving the performance of the HR function - examples include implementing a HR business partner delivery model, redesigning HR processes or implementing a HRIS system. Secondly, HR consultants are hired by clients – business, HR or works councils – to support broader human capital issues. This can range from providing HR support on M&A programmes to managing a cultural transformation or developing a new talent management strategy for critical business functions. Lastly, HR consultants are typically staffed on large transformations to ensure that the necessary people and human capital expertise is on board, complementing the traditional 'hard' functional skills that already are part of the project. In this case, the client is often an internal consulting department that leads the delivery of the engagement. For example: a Finance Transformation programme at a client will be led by the Finance service line, which subsequently will call upon human capital consultants to lead areas such as leadership alignment, change management, learning and communication.
HR consulting firms
Analysts typically distinguish between three types of HR firms: the large global players that specialise in human resources (e.g. Aon Hewitt, Hay Group, Mercer, Willis Towers Watson), generalist consulting firms that have a separate HR consulting unit and niche players that focus on a specific discipline or market.