Industry Overview: Consulting

Posted by The Editors on December 3, 2012

Imagine spending your day giving advice to other people, telling them how to run their businesses better or how to save money on hiring new employees. You've spent your years at school or in the workforce acquiring knowledge and now you're able to sell it for hundreds of dollars an hour. Consulting firms are traditionally among the largest employers of top MBA and college graduates. With various specialties like IT, human resources and business strategy consulting on the growth fast track, if you've got the qualifications it's likely that these firms will hungrily read your resume.

More than half the people in top MBA programs and a significant number of college seniors flirt with the idea of becoming a management consultant after graduation. It's a high-paying, high-profile field that offers students the opportunity to take on a lot of responsibility right out of school and quickly learn a great deal about the business world. But many mid-career professionals, too, decide to take their expertise to consulting firms or hang out their own shingle and begin selling what they know. Most consultants specialize in a particular field, and if you have a big career coup that you can tout-such as having success at a big company, or launching a high-profile product or initiative-that's exactly the kind of calling card you can take advantage of to get clients.

In essence, consultants are hired advisors to corporations. They tackle a wide variety of business problems and provide solutions for their clients. Depending on the size and chosen strategy of the firm, these problems can be as straightforward as researching a new market or as complex as totally rethinking the client's organization. No matter what the engagement, the power that management consultants wield is hard to scoff at. They can advise a client to acquire a related company worth hundreds of millions of dollars, or reduce the size of its workforce by thousands of employees.

Consulting is a big, one-size-fits-all term that includes virtually any form of advice-giving. Many people think first of management consulting, also called strategy consulting, which specializes in providing advice about strategic and core operational issues-but there are many other types of consulting, including marketing consulting, technology consulting, human resources consulting, just to name a few.

IT is H-O-T
At an estimated $14 billion in size, and with a compound annual growth rate projected at 8.8% through 2009, the IT Strategy and Planning (ITSP) consulting market is healthier than it's been since the crazy days of the dotcom boom. Consulting research firm Kennedy Information, publishers of Consultants News, says that there are three key reasons for the growth: The technology marketplace is maturing, with identifiable key players; competition is forcing companies to make better use of technology to be more efficient; and complex IT systems require companies to seek outside help.

The Challenge to Outsourcing
Outsourcing has been one of the greatest revenue builders for many of the IT firms like Accenture, but a number of India-based firms, such as Infosys, are getting in on the game. These players can charge $30 an hour versus the $150 IBM Global Services, Accenture, and EDS must charge. To counter their overseas rivals, some consulting firms are throwing in hardware and other consulting services to sweeten their bids. It doesn't seem to be enough to bridge the gap: Indian firms have advantages on both cost and quality. Look for North American firms to begin acquiring Indian firms (which is what IBM did with Daksh eServices, one of the world's largest call center operations) as well as Indian outsourcing to boom.

Firms are Cashing In
As more companies realize that it's easier to hire someone who knows what he or she is doing to fix a problem rather than fumble along in the dark, consulting firms are getting more profitable. Kennedy Information reports that consulting fee levels are expected to increase by 5 percent in 2007. This is a welcome contrast to rampant fee discounting and lackluster profitability growth over the last several years. This increased profitability not only means higher fees to clients, but also more competition between firms for the best clients.

These days, it seems like just about everybody and her brother professes to be a consultant. "Hold on," you say. "How can Aunt Suzie, who has her own consulting business, and those people in the blue suits at the famous New York addresses all be doing the same thing?" All of them may really be consultants, but you can bet they're not all doing the same thing. Just as there are many different sorts of doctors, there are consultants with all manners of expertise and specialty.

This industry profile deals primarily with management consultants, the elite consulting firms that make the most money advising the biggest and most powerful companies in the world. However, there are a number of specialized groupings within the management consulting field and many more types of consulting firms that provide specialized advice and services in other areas.

To help you get a better handle on the options, we've grouped the consulting world into several different segments. Keep in mind, however, that such groupings are arbitrary. Firms in one group can and do compete directly with players in other segments.

Industry Elite
This group is populated by a few top strategy firms and a host of smaller challengers. The bulk of these firms' work consists of providing strategic or operational advice to top executive officers in Fortune 500 companies. For this, they charge the highest fees and enjoy the most prestige. They also have the fattest attitudes, work the most intense hours, and take home the most pay. Representative firms include Accenture, A.T. Kearney, Bain, Booz Allen Hamilton, The Boston Consulting Group, Marakon Associates, Mercer Management Consulting, McKinsey, and Monitor Group.

Boutique Strategy Firms Firms that specialize along industry or functional lines. Although often smaller, these firms may have top reputations and do the same operations and strategy work the elite firms do, but with more of an industry focus. Representative firms include Cornerstone Research (litigation support), Gartner (high tech research), and PRTM (high tech operations).

Technology and Systems Consulting Firms
Firms here typically take on large projects to design, implement, and manage their clients' information and computer systems. Technology consulting often takes place in the bowels of the client organization. In general, this kind of consulting job requires large teams of people who actually do the computer work. As a result, there are usually more opportunities for people from undergraduate or technical backgrounds than from MBA backgrounds, but it's not the same high-prestige work strategy consultants are known for. Representative firms include Accenture, BearingPoint, Capgemini, Computer Sciences Corporation, EDS, HP Technology Solutions Group, IBM Global Services, Novell, Oracle, SAP, and Synopsis.

Human Resources Consulting
This can include everything from designing an employee evaluation and compensation system to conducting organizational effectiveness training to helping an organization through a significant change event, such as a merger. HR consultants often work as long and travel as much as their counterparts in general management consulting. Representative firms include Accenture's Change Management Group, Buck Consultants, Hay Group, Hewitt Associates, Mercer Human Resource Consulting, Towers Perrin, and Watson Wyatt.

While outsourcing consulting was the bread and butter of many firms over the past few years, that's all changing. The BLS expects consultants in business, technology and health care to enjoy a whopping 60 percent growth rate between now and 2014-more than four times the cross-industry average of 14 percent, and making it the fifth-fastest growing employment segment. Increased profitability reported by top firms bodes well for fueling that growth. With a tight labor market, it's actually cheaper and easier to hire specialized expertise in the short term than it is to try to find an appropriate staffer to bring onboard.

The BLS says that the growing number of businesses means increased demand for advice in all areas of business planning as consultants draft business plans and budgets, develop strategy, and determine appropriate salaries and benefits for employees. Some of the key areas of growth include:

  • Location and marketing planning for franchised restaurants and retail stores.
  • Logistical consulting, mapping the most efficient links between suppliers and customers.
  • Human resources and workplace safety experts who can help companies navigate increasing federal, state and local employment law, as well as how companies can better attract and retain talented employees.
  • IT consultants who can help companies take advantage of technology.
  • Environmental compliance and "green" consultants who can help businesses navigate stiffer environmental laws and regulations, while helping companies find ways to be more sustainable, which is of increasing importance to customers.

Love My Job
Most people who work for consulting firms talk about how intellectually stimulating their work is. They enjoy the challenge of going into new settings and facing some of the most difficult issues business leaders have to deal with. Although most don't admit it openly, there's also a palpable excitement associated with being able to sit down with a CEO of a large firm and tell him or her what to do. Consultants also take pride in seeing the impact their advice has on clients' businesses.

People Power
The key resource of consulting firms, and some would say the only resource, is their people. All of the top-tier firms fill their offices by skimming the cream of the undergraduate and business school elite. Insiders tell us that working at a consulting firm is very much like being on a team with the best people from school: "People are universally bright, interesting, hardworking, and motivated." Many insiders also say they enjoy socializing with their colleagues.

Learning Environment
One of the thrills for many consultants is the constant learning that comes with the consulting workload. Whether you're learning about a new company or industry, talking to people in various parts of a client organization, or brainstorming ways to deal with challenging technical problems, consulting offers a steady diet of new cases and settings. Many consultants believe they wouldn't face such a wide variety of challenges in another profession.

A Dog's Life
The travel, the hours, and the difficulty of maintaining a personal life top everyone's list of consulting complaints. "There is limited life outside of work," says one insider. It's not that people in other professions don't work long, hard hours, but the consulting lifestyle, which often requires the consultant to be out of town four days a week for months at a time, is hard to maintain over the long run, especially for people with families. Some individuals actually thrive on the pace and excitement of the energetic schedule. For many others, a few years are about all they want to put up with.

"I'd Rather Be."
Consultants often express their desire to get into the thick of managing a company and start making management decisions. This may be partly a case of the grass being greener, but after giving advice to so many companies and executives, many consultants are eager to try their hand from the client side. They also complain about not getting the in-depth experience they'd get if they worked at a company. A large number of consultants leave after a few years to start businesses or work in operating companies.

What Difference Does It Make?
Most people who go into consulting as a career say they do valuable, highly meaningful work. However, a common complaint among ex-consultants is that the work didn't seem as meaningful to them as they would have liked. As one explains, "I felt like we did a lot of ephemeral strategy stuff for big companies that didn't really amount to much. I really didn't want to be working with conservative, old Fortune 500 companies. I wanted to be making a difference in a smaller setting, with real people."

Job Descriptions and Tips

As each firm has its favorite buzzwords, it also has unique terminology for its rank and file. While the titles may vary from firm to firm, the roles can basically be divided up as follows: analyst (also called research associate or staff consultant at some firms), consultant (or senior consultant), manager, and partner or VP. In addition, consulting firms hire a cadre of highly capable nonprofessional staff into administrative and support positions-this is not a bad place to be if you've got skills in PowerPoint and you like to create slides.

Administrative Assistant
Most consulting firms have a fairly large pool of college-educated administrative assistants and support staff on board so that the consultants can keep focused on tasks that justify their $200-plus per hour billing rates. In addition to performing standard support functions, many have specific roles (recruiting, office administration, or website maintenance, for example). Most firms also have a group of graphic designers on staff to prepare materials for presentations. Salary range: $26,000 to $42,000 or more.

Analyst/Research Associate/Staff Consultant
This is the position at the bottom of the professional pyramid. The vast bulk of analysts are young, talented, and hungry college graduates. Many firms structure this position to last for two to three years, after which the analyst is expected to move on-perhaps to graduate school or another employer. Some firms do allow people to progress up the management ladder without leaving the firm. The work itself-as well as the hours-can be quite demanding. It often includes field research, data analysis, customer and competitor interviews, and client meetings. In IT, analysts may do heavy-duty programming. Salary range: $56,000 to $84,000, often plus a signing bonus and year-end bonus.

Associate/Consultant/Senior Consultant
This is the typical port of entry for newly minted MBAs (and increasingly for non-MBA graduate students as well). Senior consultants often perform research and analysis, formulate recommendations, and present findings to the client. Oh, and at many firms, they have to implement those great ideas, too. Although this is usually a tenure-track position, a fair number of consultants will leave the business after two or three years to pursue entrepreneurial or industry positions. Salary range: $43,000 to $93,000 or more with bonus.

After a few years, a senior consultant will move up to manager. As the title implies, this usually means leading a team of consultants and analysts toward project completion. Some firms may hire MBAs with significant work experience directly into the manager position, particularly in their IT practices. In addition to having more-rigorous responsibilities for managing the project team, the manager will typically be a primary point person for client interactions. Salary range: $89,000 to $150,000.

Partner or VP
Congratulations! You've forded the River Jordan of consulting and arrived at the Promised Land. Note that some firms further subdivide partners into junior and senior grade. And, if you aspire to it, there's always that chairman or CEO position. As a partner, one of your big responsibilities will be to sell new work. Fortunately, as with other big-ticket sales jobs, the pay can be quite rewarding. Salary range: $250,000 to several million dollars at leading firms.

There are two main routes into consulting. One goes directly from campus (undergrad and MBA, primarily) into entry-level positions (analyst or consultant). The other leads from industry into midlevel positions in specific practice groups (e.g., aerospace, energy, and financial services), functions (e.g., marketing or supply chain management), or technologies. If you're set on landing a consulting job, keep these things in mind:

  • Competition for consulting spots is intense-major firms review hundreds of resumes for each hire they make. To stand out from the crowd, impressive schools, impressive grades, and a demonstration of significant work or leadership experience are almost essential.
  • In addition to your bulletproof resume, you'll need to show evidence of strong analytical skills-usually by acing a series of the notorious case interviews, in which recruiters ask you to analyze a hypothetical business problem-your raw intelligence, and your ability to work well with people.
  • If you're applying for an IT consulting position, you may well be asked to write some code.
  • In almost all cases, you will be screened for your fit with the firm. So, for the duration of your interviews at least, try very hard to scale back your most irritating habits.
  • Remember, this is a very conservative industry. A pale blue resume, white loafers, and off-color comments will certainly earn you a rejection letter.