What is Management Consulting? - Explaination & Analysis

Companies pay millions for the service of just a few men and women with almost no experience in the real field. Everybody says management consulting (or, “consulting” for short) is overpriced and overrated. 

Nevertheless, consulting keeps getting bigger and bigger each year, attracting the brightest and the most ambitious talents from top schools. How does that all work? Will I ever be a part of that great engine?

What is management consulting?

Management consulting provides professional advice on the big picture

Management consulting is an industry providing professional advice to organizations to improve their overall performance, through better “management”, which includes strategy, governance, operation, finance, marketing, etc (each will have its own consulting niche, which sounds much more straightforward than “management consulting”).

“Management” is a broad area, connecting almost all other functions of a company. A management consultant will typically work on top-level business problems, those that concern CEOs, Chairs, the Boards, etc., because they are in charge of “management”, or the big picture of the entire organization.

Management consulting vs. strategy consulting?

Strategy consulting is a part of management consulting, focusing on strategy (obviously). Management consulting firms also work on operation and implementation, not just strategy. It’s actually quite rare to see a purely “strategy consulting” firm, doing just “strategy” these days.

And don’t simply assume management consulting is just about strategy and implementation. This breakdown is way oversimplified. Both strategy and implementation are parts of the management big picture with many other moving pieces.

Management consulting vs. advisory?

The main difference between consulting and advisory is that consulting will only serve clients for a limited amount of time (a year at best), while advisory may engage with clients for many years.

Management consulting will focus on strictly defined, granular problems. Consultants offer strategies for specific issues, and sometimes help on implementation. Consultants won’t be involved in the overall operations of their clients.

Advisors typically work with clients on a long-term basis, providing advice for ongoing, broader business challenges to help companies achieve their overall strategic goals. Advisors are more involved in the business’s long-term success, but still, they do not decide or implement the tasks for their clients.

For a deeper comparison, you can find out more in a dedicated comparison article. 

What are the top management consulting firms?

Management consulting firms can be divided into 4 main tiers, regarding project sizes: 

• The Big Three: McKinsey, BCG and Bain 

• The Big Four: Deloitte, PwC, KPMG and EY 

• The Tier 2: Accenture, Kearney, Oliver Wyman and L.E.K 

• Boutique firms:  Putnam Associates, The Keystone Group, ghSMART, … etc.

The Big Three (MBB) top the prestige charts

The alpha of management consulting firms are known together as the MBB. The MBB have the highest recruitment standards (less than 1% pass rate), pay their consultants the most (north of $90,000/year in the US) and charge their clients the highest.

McKinsey is the top of the top dogs, viewed as the more prestigious firm than Bain and BCG. It also charges clients around 30% higher on average than our two B’s. Still, this isn’t to disregard Bain or BCG, they are still the top dogs. But usually, if one gets to choose, they’ll most likely choose McKinsey (to be fair, who wouldn’t?).

For sheer size, the Big Four are the biggest

Quite obviously, because they work in so many other services. Anh our old Big 4 accounting firms also dabble in consulting, and they’re quite good at it. These firms focus more on the mass market, with a deeper focus on accounting, tax, risk or legal (also quite obvious, that’s where they began with!).

Big Four jobs are also more accessible, with lower recruitment standards (still high though), and better regional availability. Big Four firms operate in some 150 countries, so unless your market is so bad, you’ll find at least one of them. The MBB are much more selective, with McKinsey doing business in just 65 countries, BCG in 50 and Bain in 37.

Big Four consultants are also paid less, but enjoy better work-life balance compared to MBB consultants. Learning and exit opportunities are also not as good as the MBB.

Tier 2 firms are comparable to the Big Four (and don’t overlook them)

The Tier 2 are firms directly below the MBB excluding the Big Four, so, Accenture, L.E.K., Oliver Wyman, Kearney, etc. They are very similar to the Big Four in terms of deal size, pay and work-life balance. Some of these firms do management consulting (Oliver Wyman, Kearney), some have their own niche (Accenture in tech).

Also, don’t associate Tier 2 with “no good”, some of these “Tier 2” firms are the best in their business. Just look at Accenture, it is literally the biggest consulting firm in the world by various measures, and no other firm comes even close to its reputation in tech.

And still, you’ll learn all the consulting craft in these firms, just lacking the name.

What does a consultant do?

Consultants provide analysis, insights, and recommendations for clients using their own expertise in relevant fields and in problem-solving. They are troubleshooters who work on specific, clearly defined problems. But how can someone, fresh out of college, could tell a CEO with decades of experience what to do?

Well, the technical expertise doesn’t come from you, but the massive back-end network behind you. 

Consultants are more like content ambassadors, connecting the client with the massive back-end network of knowledge and experts.

But, why don’t the clients just directly ask the experts? Why do they need consultants?

It turns out solving problems isn’t simply about knowledge and expertise. There are other skills involved, say interpersonal skills and analytical skills. Besides, the clients don’t have enough time to communicate with the experts about their problems, sometimes they don’t even know they have a problem! That’s when consultants come in handy.

Think of the experts as the introverted nerds that know everything, but just can’t express it so everyone can understand, and consultants as the cooler nerds, who may not know it all, but have all the charisma to persuade people.

This is a very simplified way of explaining what consultants do. If you want to know more, here’s an article about the topic.

Why do companies hire consultants?

Companies want the best practice

Consulting firms consult numerous other clients in the same industry across the globe. So though nobody is 100% sure the advice would work, everybody knows that firms will bring the “best practice”, the most updated, most current, and most proven solutions to the table.

Sometimes, hiring consulting firms is as about standing out as it is about not being left behind! Everybody is doing this “best practice”, we can’t afford to not even know about it!

Companies want a scapegoat

Here’s a thing, sometimes companies don’t need consultants to tell them what to do, they hire consultants just for the sake of it, so they can say things like “McKinsey told us so, what could we have done better?” when something goes wrong.

Back in my time at McKinsey, I once had a project for a manufacturing company. Their problem? Overcomplicated processing and very much a redundant factory. My team’s solution? Close the plant, lay off some workers for a leaner structure.

But my problem? They already knew that, and the decision to shut down the factory was sealed before they even hired us. And of course, shutting down the factory would lead to people losing jobs, community backlash, them getting canceled, all the horrific things you could imagine.

So, they hired a bunch of guys from McKinsey just to have the right to say “McKinsey told us so” in case the public got on their back. So, when problems suddenly emerged, well, “McKinsey told us so, what could we have done better?”

It’s something you just have to live with as a consultant. And remember, consulting firms work for the clients’ best interest, so don’t even dare call their bluff. Their best interest was to use my team as a scapegoat for any public backlash, so we complied. That’s how business works, not just sunshine and rainbows.

How much do companies pay consulting firms?

McKinsey typically charges $750,000-$1,000,000 per month per standard team, so a 6-month project would cost some $4-5 million. 

A standard team consists of an engagement manager, 1-2 associates, 2-3 analysts, 1 assistant and support staff depending on the project (translators, researchers, PowerPoint engineers, etc.).

A project will last anywhere from 3 months to a year. Usually, the firm and the client sign a short-term deal (diagnostic or strategy) for about 2 – 3 months first. If things go well, they commit to a longer deal.

You may ask, if firms charge clients by months, do consultants just drag out the time for more fees? The answer is no. That’s against the client’s best interest and would risk the consultants losing the job to other firms.

Do clients always listen to consultants’ advice?

Well, yes and no. Ever heard the phrase “no plan survives contact with the enemy”? That’s the exact same thing we can say about consulting!

Consultants’ recommendations are never simple like let’s do A or let’s do B, then you’ll get to C. It’s a complicated set of strategies with detailed actions, respective milestones and conditions. 

And implementing those recommendations is not a piece of cake. There will always be adjustments here and there to suit the specific context and the ever-changing market condition. So what the consultant advised in the first place may lose relevance when there are different variables.

And it takes us back to why companies hire consultants - for the “best practice” - the most proven solutions at times. It may not work 100%, but still something clients can consider going forward.

Does consultants’ advice really help clients?

Again, not that straightforward. The advice is a set of many detailed actions with specific conditions corresponding to each situation. Some are well-implemented while some are not. And, as you may have guessed, situations are ever-changing.

Also, we just don’t really know! We don’t even know if a company is hiring consultants or not. And even if we do, there’s no way to tell if the company follows the consultants’ advice or not. When a client discards the advice, does their own thing, fails, and blames the consultants, the consultants would never confirm nor deny their innocence.

Management consulting career path

In almost every consulting firm, there are 2 career tracks: the consulting track and the support track; basically the consultants and the rest.

While the support tracks vary a great deal from firm to firm, the consulting track is much more standardized and strictly follows the organizational chart in a bottom-up fashion.

Consulting track is open for all backgrounds

Diversity is a given. You can get into consulting from ANY background, so long as you fit the 3 criteria: leadership, achieving, and analytical problem-solving. So, just name any major, there’ll be a consultant from that. Math? Yes. Engineering? Big yes. Literature? Can’t see why not. Gender studies? Never seen one, but won’t rule that out.

Still, you’ll always have to prove your best and rise through the ranks. You can not stay in one rank forever. Most firms have an up-or-out policy that requires employees to achieve a specific rank within a certain period of time, or else they will be managed out, or dismissed from the firm.

But don’t worry, consultants rarely get fired, and getting managed out is mostly due to unsuitability to the project. Most consultants actually leave the firm based on their own intentions, for better paying jobs, or just anything they desire.

But if they do stay and rise through the ranks, they’ll go from junior consultants (analysts), to associates, then to engagement managers, and best of all go on to become partners.

Support track is extremely diverse

The scale of support centers is simply massive. There are hundreds of centers within McKinsey, ranging across industries, functions, locations, etc. Some notable support divisions include:

• Research & Intelligence (R&I): often based in Offices, taking “orders” from projects. R&I guys are usually the candidates so close to being real consultants, but just didn’t make it. Still, they are still good enough for the office to offer a spot

• Industry specialists: based in the respective Industry Support Center. These people have deep knowledge and experience in the industry and are often hired from the outside

• Function specialists: based in the respective Function Support Center, similar to the industry specialists. But many of these people transfer from the consulting track thanks to the discovered interest in the particular function

• Implementation consultants: a new and trendy career track. They are called “consultants” because their work nature is quite “consulting”: working directly with clients. But they focus on the “implementation” of recommendations made from past projects and their track is separate from the traditional consultants

Is consulting a prestigious career?

Yes! might even be the most prestigious (I’m slightly biased, but I have my points):

Consulting salary is one of the highest, starting at some $90,000/year for fresh consultants before bonus. You can say investment bankers make more, but that’s 30% more pay for 50% more hours and 100% more misery. So ask yourself, is it worth it?

The work is challenging and exciting. What other career brings you to CEOs and government officials to tell them what to do?

No environment gets you closer to that many exceptional people. Everybody in consulting is smart, driven, and special in his/her own way

A year in consulting beats 3-5 years of learning in a conventional job. Many of these lessons will remain and serve you for life

Exit opportunities! Nobody works in consulting forever. At some point, consultants leave for better things ahead (most likely better pay). And did I mention McKinsey produces the most Fortune 500 CEOs? I’m proud to call Sundar Pichai, the CEO of Google, as my fellow consultant! 

How can I become a management consultant?

So, you’re so pumped about everything: the money, the skills. But just don’t get too pumped. As good as it is to be a management consultant, getting in is brutally difficult. The pass rate is usually less than 1% in most MBB offices.

The recruiting process goes from Resume, Problem Solving Games and Case Interview. And of course, consultants always do it different:

• A consulting resume is a world of difference from a normal resume

• Problem Solving Games are no games; they are serious tests like GMAT and SAT

• The case interview is an interactive business case-study working session. The interviewer would have you solve a substance-rich case with him/her, instead of just answering some lame behavior questions like in traditional interviews. And HR won’t be interviewing, consultants will

It’s a long and challenging process that you should start as early as possible. Many of the above take time to absorb. But when you make it, I can guarantee it’s one of the best things that can ever happen to you.

You will join an elite group of people. You will suffer sometimes but will learn all the time. Your career and your life will turn to a new page.

Just a few years at McKinsey completely changed who I am, both personally and professionally (positively, of course). I also saw colleagues changing for the better. I sincerely believe you can and you should do it.

You don’t have to stay there forever, but what you’ve learned, what you’ve experienced, will forever change who you become.

It is hard to even get your foot in the doors of top management consulting firms. Most applicants don’t even get to see the interviewers, and the few that do must undergo the most strenuous, high-stake job interviews in existence.

But, with systematic and careful preparation – in the same manner, that consultants approach their projects – I believe anyone can make it to consulting!