Recruiters and careers advisors often talk about the consulting career, but I realised that actually most of those I knew heading into consulting had any intention at all of staying more than five years, let alone trying to become Partner.
Prompted by a chat with William Johnson, MD of Openside Group, I ran a quick poll of consultants on r/consulting asking them why they joined the profession. Three hours later, I had nearly 250 responses:
As suspected, the majority want to beef up their skills, get the brand on their CV and leave (probably to do something less stressful and more rewarding).
My suspicions are that those who want to work up to Partner have become fewer over the years as salaries have stalled, training has declined and utilisation rates have gone up. This is perhaps the reason that the average graduate now stays only 7 years in consulting (though if in MBB, you’re likely to get parachuted out within this period anyway.
Regardless, it reminds me of this figure where they asked recent Harvard graduates what they are doing now vs. where they hope to be in ten years!
As ever, I’d say keep your eyes open for opportunities that excite you. There’s nothing at all wrong with those 85 responses who simply said they joined consultancy because they just wanted to see how it would go. It’s a great career for opening doors and developing great skills.
What really interests me, are those 12% of responses who wanted to become Partner. The effort-reward ratio to achieve this has changed over the last ten years, and not for the good. Someone once told me that only mediocre consultants made it to Partner – the best left, and the worst were sacked. I’m not sure if it’s true, but it did make me giggle.
As ever, if you’d like one-to-one coaching beyond the resources available at Consulting Mastered, drop me a line at firstname.lastname@example.org.
I’m getting a lot of questions about whether IT Masters (incl. software engineering / data science) are as good for a consulting career than traditional business/MBA routes.
There is no doubt that outside the top 50 Universities in the world, the MBA no longer has the cachet that it once did. It has become increasingly expensive in comparison to its effect on earnings (from 1:4 to 1:2), and, as more MBAs are granted each year (from 20k in 1970 to nearly 500k now), students are increasingly looking elsewhere.
Traditionally, it has been the MSc in Finance that has been the competitor to the MBA: cheaper, often shorter, and with nearly the same uplift in salary. But, unless you want to go into banking (or financial consulting), the MBA has been the safer bet for the consulting industry.
However, there is a new(ish) kid on the block. The MSc Information Technology (or Data Science or Computer Science) traditionally loved by geeks as a route into software engineering has increasingly been considered by business graduates as a way of adding an extra string to their bow in applying for management consulting jobs.
Should I consider an MSc IT for Management Consulting?
My answer is yes. A strong graduate with powerful data or development skills can earn more than $150k within five years of graduating. The top 1% can earn $£500k. The top 0.1% can eventually expect to earn $2m.
But, some graduates might retort, I don’t want to be a techie. I like sunlight. Dammit, I even like people. I want to be a consultant! This, of course, is fair enough. However, whatever your specialism, a strong understanding of (if not capability for) IT puts you ahead of th e competition. Traditional roles in strategy, HR, marketing, finance and operations have been transformed by IT and having a competence in this area will put you ahead of the competition.
Think of IT like accounting. Having a good understanding of finance is so helpful in most managerial roles now. This doesn’t mean that you need to be ACCA qualified, but that having experience of expertise in management accounting will put you at a huge advantage. Thus, a management consulting candidate doesn’t need to be able to code in Python, but should be able to understand the potential and constraints of IT as it relates to business: new technology, data science, SaaS and systems development.
Take a $5m revenue bricks-and-mortar chain for example. COVID hits, so you want to sell your wares virtually. Do you set up your own website? Do you integrate with Amazon Marketplace or ZShops and sell there? Can you use data analytics to improve your pricing? Can you rebrand your products to achieve a better match with commonly searched phrases? Should you use Facebook or TikTok advertising? Can you use supplier and sales data to reduce your inventory?
Two things are important in understanding the trends here. First, pretty much every traditional function in business (marketing, strategy, operations etc) can be made faster, cheaper or better by IT. Second, client CEOs that have a business, marketing or finance background (i.e. 80% of them) do not understand IT and will outsource the decision and work to consultancies.
Thus, for the applicant to management consulting, having some IT capability (e.g. data science, information management, coding, computing) is invaluable in putting you ahead of the competition as it improves your value to the firm and their clients. Certainly, if you have experience or training in the ‘hot topics’ of consultancy (e.g. AI, ETL, Cloud, machine learning, data analytics, cyber security) you can add much more value (and be SEEN to add much more value) than if you’d just done traditional management topics, but remember that for the majority of clients, basic data analytics and software development is sufficient.
On becoming a Unicorn
The great thing for a business person or graduate with IT skills is that they sit between the IT geek who can’t communicate with the business, and the fluffy marketeer who has no idea what the constraints of technology really are. The best of each skill set seeks to understand and more clearly communicate with the other. The Unicorn for top consulting firms (and indeed FAANG – or Big Tech) is the recruit that understands data and code, but has strong communication and interpersonal skills (note, this is VERY different to ‘thinks they have strong communication skills…’).
If you are a top business student/person able to get on a top 50 MBA programme then it is still undoubtedly worth it. But if you are not, then why try to compete with the 300,000 MBAs that are churned out each year, when you could be a unicorn?
PS – One last thing to say is that if I were a good IT specialist (i.e. the bottom two rows of the table) I would choose FAANG (or even start-ups) over consulting any day of the week. The pay is better (AND you can get equity without being a partner), the hours are fewer, the culture more innovative and autonomous, and the technology is generally better. Unlike Big Tech, most clients don’t NEED cutting edge IT solutions, just solid tried and tested basics. If you’re a great software engineer and enjoy it, you are rare. Why bother competing against the tens of thousands of MBAs that are churned out every year if you don’t want to sell (the crucial competence of senior consultants)?
(As ever, any amendments / comments much appreciated).
“I want to be a management consultant” is a statement most careers advisors hear a few times a day. I heard it twice today myself. It’s easy to jump to advice about which companies to apply to or the application process. But there a few things students should think about before applying.
First, there is management consultancy, and management consultancy. There’s the jet-setting, corporate credit-card waving, CXO influencing consultants, and then there’s those consultants stuck in a windowless office in Staines doing photocopying. I have been both of these, and both large companies described me as a management consultant. Interestingly, I was paid pretty similar rates for both. So, how to avoid the latter?
A great interview question to ask potential employers for aspiring consultants is ‘what’s your leverage ratio?
A great interview question to ask potential employers is ‘what’s your leverage ratio?’. This not only shows that you know how the consulting industry works, but the answer will give you a great insight into the type of work the firm does. The leverage ratio is the number of consultants for every partner. High leverage ratios (anything over 20) indicate work that is highly routinised, relatively low day rates and moving towards that basement in Staines (think IT implementation). Low leverage ratios indicate high value work, bespoke projects and more flexibility and creativity (think strategy or innovation work).
Second, how much do they like their Significant Other (or alternatively, got any pets?) because they won’t see much of them. Many moons ago, I had to sack a consultant who refused international assignments because she wouldn’t leave her cat overnight. More seriously, the average tenure of a graduate consultant is 7 years. This is because consulting is really hard work. Have a look at the graph below: the least you can expect to work is 10 hours a day, 6 days a week. Out of the fifty or so people I worked with closely in my consulting days, the vast majority had broken marriages and stress-related health problems. On one large assignment, I’d estimate
Another good question to ask in an interview is ‘what’s your utilization rate?’. The utilisation rate is the average percentage of their time that the consultants are charged out to clients. Again, this shows good understanding of the consulting industry, but equally, any answer above 85% means, in my view, there’s a good chance of burn-out in the first three years.
Another great question for interviews is ‘what’s your utilization rate?’
Finally, be clear about what service they want to apply for. It’s a terrible career move to get into an area where supply of consultants exceeds demand. This usually leads to static careers, low pay, and few opportunities for exit. At the moment, the most in-demand services include cyber-security, digital transformation, big data and artificial intelligence. Bear in mind that you DON’T need to be an expert in these areas, just have a keen interest and to have done some research (e.g. a dissertation). The same is true of sector specialisations. These vary across the world but the big growth areas for the last few years in the West have been Financial Services; Healthcare; Telecoms & Media. Decisions about sector and service can make a huge difference to students’ career trajectories: even after they’ve left consulting.
If you want to learn more, head over to www.consultingmastered.comwhere we offer 12 online courses, a monthly live Q&A webinar, and 15 useful downloads for students. University prices start at £2500 (for 100 students) and £4500 (for the whole University).
Prof. Joe O’Mahoney is a Professor of Management Consulting, an ex-management consultant, and the founder of ConsultingMastered Ltd. His textbook on consulting was the best selling in Europe, and he helped over 450 students land jobs in the consulting industry. His courses have won four national and University awards for excellence..
We’ve been told for a long time, that ‘traditional’ management consulting is being ‘disrupted’ (or even ‘dead‘). The idea being that new entrants, the democratization of knowledge, the competition for talent (especially from technology companies) and the rise of ‘asset-based’ consulting (read consulting + databases & software) will knock the incumbents off their thrones.
But, to paraphrase Mark Twain, reports of consultancy’s death are both exaggerated and premature. Indeed, given the lack of barriers to entry, the longevity of the consultancy powerhouses is the most remarkable thing about the industry: Bain, BCG & McKinsey have been around for a minimum of 50 years, whilst the oldest ingredients of the big 4 (albeit in their auditor form) are over 100 years old. The real question is ‘is this going to change over the next ten years? And if so, how?’.
“The forecast is cloudy with silver linings”
I’ve been talking to Partners at both the big brand names (MBB + Big 4) as well as some of the fastest growing newcomers, and the forecast is (TL/DR) cloudy with silver linings. The top players will continue to come under pressure, but their size, reputation and assets provide huge benefits which smaller players can’t lever.
First, we should note that whilst the names of the dominant players may not have changed, the consulting industry has changed significantly over the last ten years: strategy houses now do implementation, everyone does digital (whatever that means), the demonstration of value is more important, utilisation rates are up and profit margins (on average) are down. These ‘dinosaurs’ can dance.
Second, big players continue to dominate because they buy the competition. Acquisitions by consulting companies peaked five years ago, and have remained at that high ever since: if you buy up everyone that knows Blockchain, then clients have little choice about where to go for advice. Of course, these acquisitions raise their own challenges: a few partners have told me that the potential value of their acquisitions have been killed by the buyer’s culture or processes.
Third, ‘digital’ is much less of a threat to incumbents than is often stated. The massive economies of scale offered by the large players in both operations and deliveries lend themselves to digital: data can be accumulated more easily, the risk involved with digital R&D can be spread, and successful digital assets have a massive pre-existing market.
Fourth, whilst it is true that media companies and banks have increasingly edged out consultancies from the ‘most attractive employers‘ lists, what is not happening is top graduates heading to lesser known consulting brands. Moreover, when business students from top institutions are asked consulting is still the number one employer, and nearly 50% of graduates end up in consulting or banking. To a great extent the brand power of companies like McKinsey & Co. mean they exist in a virtuous cycle: the brand attracts top graduates, which attracts top clients, who pay top whack, which reinforces the brand (note, this doesn’t necessarily mean top work). It’s hard for new entrants to break into this cycle without the deep reputational and financial pockets that MBB offer.
Yet, there are major challenges out there and not all consultancies are adapting their strategy fast enough to stay ahead. The challenges that emerge from the four points above include:
how to be innovative without killing margins and leverage
how to assess the viability of digital asset investments;
how best to combine multi-skilled teams with emerging digital technologies;
how to do talent development when junior time is increasingly spent coding and cleaning data
how to ensure that acquisitions do not get killed by the buyer’s culture;
how to demonstrate value to clients beyond mere project delivery;
how to keep millennials working at 90% utilisation without increasing turnover;
how to share (and update) knowledge and skills in global company
There was a real mix in Partner awareness of (or being bothered about) the changes that the industry is facing. Accenture and Deloitte appear to have made significant strategic and structural changes over the last few years to respond decisively to these – many strategy firms, less so. As one Partner commented ‘Shell & BP know they need to embrace renewables, but it’s hard to move away from a tried and tested model’. All were well aware that being a Partner in the 2020s would be more challenging (‘interesting’) than perhaps at any previous time. As one pointed out, ‘when the market is expanding all these challenges seem quite academic (no offence), but the next contraction will really shake up the industry’.
I’m writing this piece because there is a predominant, though not universal, view among management consultants in my network that things will return to normal after a pause in operations. An increasing stack of evidence suggests that this is not the case. First, I will outline the reasons for the relative complacency of especially younger consultants. Second, I will present the evidence for this being a more significant challenge than most consultants realise. Third, I will suggest strategies for pivoting and surviving.
Let’s start with the complacency. Most consultants don’t remember a serious set-back in the industry. The 2008 recession was a mere blip in the steady 3-8% annual growth of one of the safest industry bets in the last fifty years. You have to go back twenty years to the DotCom bust for any serious dent to the inexorable march of the profession, and even this hardly touched the sides. Given the average tenure of a management consultant is eight years, the vast majority of these professionals will have seen nothing but growth, bonuses and success, creating a blind-spot for the consequences a massive crash.
The ‘chatter’, as they say on 24, among consultants, is that COVID-19 is a temporary pause. This is not the case: we are looking at a severe economic shock, potentially bigger than anything since the 1920s. Morgan Stanley predicts that US GDP will fall by 8% year-on-year in the second quarter and unemployment will rise to 12.8%, compared with just 3.5% in February. It may be worth reading that sentence again. The FT reports that retail sales are down by over 50%, and the Economist notes that half of small businesses, the major driver of GDP and employment, have a cash buffer to last them less than a month. I could go on, but you know the story.
In short, a long recession is looming, perhaps a depression, and for those of you too young to remember, the first thing to go will be client discretionary & procurement spend on consultants. Consultancies know this, and indeed, many have made their own projections: McKinsey, Bain, and Oliver Wyman suggest recovery being anywhere from a quarter to over a year away. Over at Source Global Research, they are estimating a hit of 20% on the consulting industry and nearly 30% for the UK market (which was already faltering due to Brexit). Certainly, out of forty or so graduates I know who have received offers, around half have been paused, replaced with secondment or a stipend, or in six cases, rescinded.
Of the 500 or so employed consultants I contacted, many are beginning to hear of significant changes. I have been told of redundancies in around 25% of large consulting firms already (though with massive variation by office) but it is very early days. Other firms have announced paycuts, forced holidays, The impact is being felt most in smaller boutique firms which are either over-exposed on their client base or don’t have the resources to carry benched consultants.
If the 2008 recession is anything to go by, the following is likely to be characteristic of their approach:
Major firms will take their time before redundancies are announced as (a) they have the cash to hold onto benched consultants (note, being privately owned as a partnership helps here!) (b) they wait to see how bad it is and (c) they plan their HR & communication strategy and plan. However, redundancies will happen.
MBB, however, will hold onto their people, even if it means Partners putting more money into the business. They have very deep pockets, are under no pressure from shareholders, and will be advising clients on how to deal with COVID-19. Other large private consultancies (e.g. Deloitte and KPMG) may also have the reserves and the reputational need to maintain headcount. See this for reassurance (though I’ve heard Deloitte making redundancies in Canada!).
If you have been on the bench for more than three weeks, you are likely to be first in line. Middle management (senior consultant, director, junior partner) are likely to be hit hardest as margin is made on juniors, but the senior partners will protect themselves.
Hard-hit sectors (airlines, tourism, retail) will cut back on discretionary spend, but increase their restructuring spend. The net effect will be a loss. If you work in these sectors, prepare for the email.
Internships will be maintained. These are cheap and flexible.
Graduate hiring will continue at a lower rate, and graduates will be reassigned to growth areas.
So, if you are in the firing line, what to do:
Get your CV out to consultancies. Visit this thread to see who is hiring, and think specifically about restructuring consultancies (e.g. lvarez & Marsal or Alix Partners), crisis management, cost reduction, digital transformation……..or healthcare.
Get your CV out (ii). Move to the client side. Visit the thread above, and think specifically about industries that are potentially growing (VOIP video, Cloud, Big Data, in-fact online ANYTHING at the moment, but especially). Contact old clients that you stayed in contact with (you did that right?!) and message LinkedIn contacts.
Learn something that will make you instantly more valuable. Python, AWS, AI, Big Data, Cloud, automation, machine learning…. whatever. Find a course, do it. Linux Academy is good if you can expense it, if not Khan Academy or even Youtube.
If you’re on the bench make yourself useful internally. Tap up Partners for crucial internal or IP work that really adds value. COVID-19 seems to be a hot topic: write something, raise your profile, appear indispensable.
If all else fails and you’re ‘coached out’ and have no alternatives, there’s a rather splendid MBA course I teach on…….
It’s one thing to get a job in consultancy (congratulations!), but it’s another thing to be successful, whatever that means. Speak to any consultant, and they will bore you with their advice, regrets and could-have-beens.
My dad always told me ‘if you need something, then go to the top’…. so I asked all the Partners in my network what their advice would be to new starters. Just over fifty responded with advice that ranged from the brilliant (‘your craft as a consultant is more important than your subject matter – practice it!’) to the obvious (‘put your client first’) to the odd (‘it is necessary to have a language’).
What was more interesting are some of the contradictions. For example, a couple of Partners stressed that new recruits should use their initiative as ‘fresh eyes notice old faults’, whereas an experienced Bain & Co. partner told me ‘trust our tested tools and don’t rely on your past experience or knowledge’. Perhaps the former only concerns internal interactions, and the latter, external?
Anyway, I analysed the fifty odd replies and found five common themes which I’ve put into this report so it can easily be shared by careers services and consultancies themselves. Click below for access.
For those of you that haven’t landed the idea consulting job yet, feel free to check out my free resources here or book some 1-to-1 coaching here. Good luck!
Why do McKinsey & others spend so much time on the campuses of Oxford, INSEAD, London Business School & Harvard? The answer isn’t what you’d think.
A student of mine, Ioanna, recently interviewed several strategy Partners, consultants, and HR-specialists as to why their recruitment effort was so skewed. In what order would YOU put these responses?
where the best future consultants are to be found
sends a signal to the market that the consultancy is the best
students tend to have the sensibilities that fit with client CEOs
students tend to be most similar to those doing the recruiting
Interestingly, University reputation, and indeed degree grade, are next to useless at predicting the job performance of graduates (a 1% predictive value). So, even though several respondents argued for (a), there is little empirical evidence that supports this assertion. No interviewees offered any internal evidence for it either. This is the reason that PWC and others now ignore markers such as A-Level grades when recruiting.
Concerning (b), the market signalling, it was argued by several ex-consultants that the outcomes of consultancy are often highly ambiguous, and so trusting in a brand is crucial in client decision-making. For most top consultancies therefore, advertising their services is not as useful as sending signals of their elite status and expertise: tie-ups with leading publishers, organising and sponsoring elite events, and yes, recruiting from top Universities. All these things indicate to the market that these consultancies must be better than others.
Several respondents pointed out the need for senior clients to be at ease with the recruited consultants. This was relevant not just to their conversational skills, but also the way they acted, ate, their sports and extra-curricular activities.
Crucially, at these firms HR played a minimal part in the recruitment process, which meant that consultants and partners, who are often untrained in bias, often ended up recruiting those with similar interests, backgrounds, and, you guessed it, alma matres. Thus (d) was also a factor.
The obvious drawback there is
that strategy consultancies are not only missing out on great talent, but also
on the diversity that is crucial for more innovative decision-making. Other
consultancies, notably the Big 4,
are aware of these dangers have changed their policies to avoid them. The
question is, when will strategy consultancies do the same?
Recommendations from the research
Involving HR more in the assessment process
Dropping University reputation as a criteria in
Training consultants and Partners more in the
dangers of bias
Communicating the benefits of a more diverse
Balancing the importance of the partner
interview with insights from HR
After a variety of HR roles
(recruitment, selection, training & development), Ioanna recently received
a distinction in her MSc in HRM from Cardiff University. She speaks in Greek,
English, German and Russian, and has excellent interpersonal and communication
skills. She is currently seeking a role in the HR profession in the UK.
Perhaps the 1980s ‘quality’ obsession was the last time that a word was as popular in business as ‘innovation’ is today. For consultancies, innovation is seen as a strategy to fight against the slow erosion of margins prompted by procurement, competition, commodification and fickle yet increasingly experienced
Since leading a 3-year project into innovation in the consulting industry I have the occasional gig with firms wanting to improve their levels of innovation, prompted usually by a high number of rejected bids on an innovation score, as a strategy to push up fees or increase client buy-in through co-production projects.
Whilst some of these projects have been truly transformational, I’d say in about 50% of cases, the firm I’m helping sees innovation as a bolt on, typically phrases as: what innovative things can we do to land more bids at a higher price point? Generally, the owner or partner is looking for a tool, technique or piece of technology that will be the ‘magic bullet’ of ideas: a low-investment add-on which will not change the company.
Attempting to become more innovative without reflecting on your firm’s strategy is likely to generate wonderful sounding projects that founder when it is discovered consultants neither have the time, knowledge or desire to innovate.
Despite the wondrous lauding of AI and Big Data, the beating heart of innovation is still people. And you, or your people, need:
Knowledge of innovative solutions
Time to research and prioritise innovations
The desire and motivation to innovate, and apply that innovation
When I have this conversation, Partners or owners agree wholeheartedly. Yet, things often become a little unstuck when we discuss the systems that will support such people:
Target leverage ratios and utilisation rates that allow space
HR structures that recruit and motivate staff to be more innovative
Knowledge systems that introduce and share new ideas that work
A culture that values new ideas to the point of welcoming failure
Things often become even less comfortable when firms realise that an idea don’t come for free. What is the firm’s innovation strategy? What is the business case? What is the market for more innovative services or bids? What investment is the firm prepared to make to reach this target? What does this mean for the firm’s branding? What are the measures, and over what time-scale?
Of course, there are hundreds of different tools, techniques, training, and technologies that can support innovation, but without motivated, knowledgeable consultants with sufficient time, the innovation in consultancies simply becomes something that is new, but fundamentally pointless, distracting and temporary. Like a kipper on your head.