PA Consulting Group today announces record financial results with revenues up 20.5% to £277m from 1997's £230m and profits after tax up 47.4% from £16.3m to £24.1m.
PA’s Executive Chairman, Jon Moynihan, points to the company’s determination to increase its clients’ economic value as the secret of its success. He said:
"We work with one aim – to increase our clients’ economic value, measured in increased shareholder and stakeholder return. Our focus on this objective has in turn helped to build our own success and profitability. Increasing the economic value of our clients and increasing PA’s value are two sides of the same coin. Unless we create value for our clients, we cannot develop and grow our own company."
PA’s abilities were recognised last month when an independent panel of judges – sitting as part of the Management Consultancies Association (MCA) annual awards – awarded PA an unprecedented two out of three of their ‘Best Management Practice’ awards – best Human Resource assignment for our work at Lloyds TSB and best use of IT for our project at the National Health Service in Scotland.
When announcing their verdict, the MCA’s judges stated: "The way in which PA Consulting developed strategic models with Lloyds/TSB HR staff and arrived at the optimum commercial solution is an example of management consultancy at its best" and "GPASS was a world-class computer system that underpins the new primary care-led NHS in Scotland. In the view of the judges, PA Consulting's approach exemplifies best practice in the public sector."
PA believes this ability to design and deliver effective business solutions is a result of its unique organisation and approach, which is designed to drive a virtuous circle – increasing the economic value of clients and therefore increasing PA’s value.
Increasing clients’ economic value
PA increases its clients’ value by managing change ‘from insight to implementation’ – providing strategic insights and innovative ideas but also designing and implementing complete solutions. This requires an ambitious breadth of capability – PA’s expertise includes Strategy, Performance Improvement, IT, Technology, Human Resources, Recruitment, and Programme and Project Management, and includes specialist expertise such as systems dynamics, product development (with laboratories in the US and UK producing everything from mobile phone handsets to asthma inhalers), and management development (including a major conference centre in the UK). This allows the firm to design and deliver integrated solutions to clients’ most complex business issues.
Many of these solutions have an IT dimension, and PA is also a recognised leader in applying leading-edge IT to business issues. The firm continues to develop this key strength, and has just set up a new group, which provides an innovative, benefits-led approach to Enterprise Resource Planning, Customer Relationship Management, and e-business implementations. The single most important objective for PA is to help clients fulfil their expectations from these often massive investments.
Building PA’s value
To enforce the link between client and PA value, the firm has developed a unique compensation and ownership philosophy. The first dimension of the philosophy is that everyone should be a shareholder in the company – not just those at senior levels. PA is a staff-owned company where all staff think and act as owners – not just as employees. With the second dimension, the emphasis is placed on performance-related compensation. A high proportion of our consultants’ remuneration is made up of a bonus element which is closely linked to their performance in delivering outstanding work for clients.
"Our philosophy is about building a team that is focused on adding value to our clients. Full employee ownership ensures our staff receive the direct benefit of what they do – allowing us to attract, retain, and motivate the best consultants. Bonus pay-outs – although high – are linked to a consultant's performance in delivering outstanding quality of work for clients."
The approach has proved very successful in the marketplace. PA recruited over 760 new people in 1998 – attracting staff from its competitors and senior industry figures, including 17 senior consultants who joined the firm’s management group.
PA has also embraced corporate venturing to invest its own money to meet clients’ changing needs, particularly for technology solutions.PA has set up a new ventures programme, launching two new subsidiary companies: ‘Strategic Simulation Systems’, which is developing project management applications based on systems dynamics; and ‘UbiNetics’, which is developing new products for the fast-growing wireless communications market. At February’s GSM World Congress in Cannes, UbiNetics launched two wireless products, including a slimline GSM PC card, which provides laptop and palmtop users with a wireless data and voice communication facility without the need for any cables.
"The new ventures programme will ensure we keep abreast of new technologies – providing our clients with the leading-edge solutions they need. It is also evidence of our determination to channel our marketplace success directly back into building an even better offering for our clients."
Mr Moynihan concludes:
"Our ambition is to build PA into the world’s premier consulting firm. These financial results are a massive success in their own right, but we see them as a means to an end – part of an ongoing cycle of growing our business to meet our clients’ needs."
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