Is the contraction of demand an excuse for the laissez-faire human resource practices at professional services companies?

Abstract

[Abstract]: Companies based on selling knowledge identify their employees as critical capital, the basis for their competitive edge. However, in periods of contraction in the demand for projects, such companies require an instrument allowing them to assess the desirability of policies to retain such professionals on their workforce or otherwise. To this end, a dynamic simulation model was employed to study possible short-term and long-term repercussions of a contraction in demand on the number of professionals required by such a firm, and to evaluate policies which could mitigate the effects of a change in sector demand. The results of the analysis allowed us to demonstrate that a relatively lower investment in training could reduce the company's capacity for future growth. We also showed that lengthening the lead times before changing the firm´s objectives, following a change in demand, improved the match between the number of professionals and the demand for them, thereby improving the organization’s competitiveness.