Consulting is a broad term which means the practice of advising companies on how they can improve the health of their business. Traditionally, consulting firms fall into one of two camps: they either tell clients how to increase revenues or decrease costs. The first type are commonly known as strategy consultants, the second as operational or management consultants. Some consultancy firms, such as Oliver Wyman, cover both these areas and more, while others have a particular focus, for example Mercer chooses to specialise in human resource consulting.
Strategy consultants will typically work on a short-term basis, perhaps for six or eight weeks at a time on distinct projects. An example for the current climate could be working with a leading global bank to work out how their retail arm could be split from the investment banking division. Or working with a supermarket to advise on readjustment of a five-year store expansion and redevelopment plan in light of a decrease in profits.
Operational consultants, on the other hand, can work consistently on the same project for years, perhaps providing an ongoing project management service to a pharmaceutical firm to ensure that their supply and distribution systems remain efficient. Alternatively, an operational consultant may work with a client for a few months before advising on whether to implement a cost-cutting regime.
Hiring top quality consultants is expensive; a short-term strategy project will cost at least a five figure sum, while the bills for the largest projects will run into the billions. Before heading into the consulting profession it is of paramount importance to understand why institutions pay such mind-boggling sums to take business advice from those in the formative years of their career (even senior staff at consultancies will rarely be beyond their mid-30s). Companies will hire consultancies for one of the following reasons:
To save time: probably the first and foremost reason - for companies that view coming to a conclusion about a business decision as more science than art, there will be reams of data to evaluate and analyse in deciding whether to build new stores, sell new products, decrease output or cut staff and so on. Hiring consultants avoids the need to employ full-time staff who may be underused once the project is finished, or part-time staff who need to be trained.
Specific insight: Experienced consultants may be able to bring valuable perspectives to the problem, perhaps through having worked at one or more of the company's competitors, or by being able to draw on experience of similar business issues from a previous project in a different sector.
Technical expertise: The company may require particular knowledge or skills, which could be the ability to master a certain technology, or a thorough understanding of an environmental issue.
Neutral point of view: Consultants have an independent perspective and so can be useful in advising on issues where the senior decision makers find themselves unable to analyse a situation objectively.
While juniors may attend important meetings with clients at the start and end of the project, a greater part of their time will be spent conducting the research and analysis required to deliver a comprehensive report on the situation the consulting firm has been asked to analyse. For example, if hired by a French supermarket chain to advise on whether they should expand into the UK market, the following questions are among the many that will need to be answered to work out whether the idea is a good one:
What is the market size for supermarkets in the UK?
How is the market split between large and small companies?
How have new entrants fared in recent years?
How much investment will be needed to get the project off the ground?
If the answers to these questions suggest that expansion would be worthwhile, the consultants would then advise on what type of store needs to be opened, perhaps looking at the following further questions:
Should they concentrate on just food or sell an array of products?
Should city centre stores or out-of-town hypermarkets be prioritised?
How would the supermarket position itself in the UK market?
Getting the information needed to answer these questions requires significant amounts of primary research to be done by the consultancy firm. Therefore, the day after the initial project meeting, entry level analysts may find themselves in a supermarket looking at the prices of toilet rolls or phoning up consumers to discuss their shopping habits. However, the initial research is unlikely to take more than a week, as consultancies are generally very strong at sharing knowledge throughout the firm, while in order to save time, research reports can be purchased from specialists.
The next step is for the consultancy to analyse the research they've done. This step is often the most time consuming, as databases full of figures need to be reconciled with qualitative research. Here the consultants will look to find answers through the rigorous understanding of evaluation of the numbers. Getting it right is crucial; for example if anecdotal evidence and statistics suggests that consumers prefer to buy "own-brand" products, the consulting firm may advise the French supermarket to save initial costs in setting up their UK supermarkets by not importing products from French suppliers. However, the data could just as easily show that the consumer has a loyalty to brand names and may not trust an own-brand from a foreign supermarket, resulting in entirely different advice from the consultants. The difference in revenues for the client between the right and wrong solution could be astronomical, and could mean the difference between the success or failure of a venture.
To be a consultant you need to have a quantitative, logical mind for interpreting data, an inquisitive nature and a passion for digging deep into the commercial issues at hand, a professional demeanour for speaking and presenting information to clients and a capacity for hard work and potentially long hours as deadlines often approach when significant chunks of work remain to be done.
Best foot forward
Many people enter the profession with a keen eye on the doors it opens to other paths, while those who start out intending to spend their entire career in consulting rarely stay more than a few years. Why? Because the lifestyle can be bruising; in the larger firms the day will rarely end before 9pm. In addition, having continuously worked as an advisor, consultants may decide to find a role with a client company where they can see projects through to completion.
Nonetheless, consultancy is a great place to begin a career as it gives you the commercial skills required to succeed in business - the ability to analyse data, to understand and react to business problems, to work with high-level people, and to manage projects and teams of staff. People leaving a consultancy will typically take one of the following paths:
Move to work in a business capacity for one of their clients: Probably the most common route out of consulting and will mean a better work-life balance and a chance to see projects through.
Start a business: Consultants with an entrepreneurial flair will use their skills and networks to create their own business (including, occasionally, their own consultancy).
Move to another consultancy: Occurs quite rarely, as most people who leave consultancies do so in order to work fewer hours and/or more closely with a company. However, consultants seeking more responsibility and exposure may move from a large to a small firm, while those seeking an established brand name on their CV and access to formal training programmes may move in the opposite direction.
Go into the world of finance: Usually into areas related to the consultant's ability to understand companies' strengths and weaknesses and advise on their improvement. A common route is into venture capital, however, transitions into corporate finance, private equity and hedge funds also take place.
Size it up
Those interested in a career in consulting will find themselves with two options - they can join either a large or small firm.
Joining a large firm such as Mercer or Oliver Wyman has a number of advantages: a reputed brand name on your CV, access to formal training schemes and knowledge that you'll be working with top quality clients and colleagues. Especially in the current climate, having a job offer now for when you leave university is also a great plus.
However, there are also many smaller firms who work on high quality projects; these companies have often been founded by senior consultants from the big strategy houses. With anywhere between five and thirty staff they will typically specialise in a particular sector and work with high profile clients often brought over by the founder of the firm from their previous company. These smaller consultancies will rarely recruit on the milkround, instead choosing whether to hire new graduates as the academic year comes to a close. While these firms may not have the global brand name of leading institutions, they do have their advantages. There is often less internal hierarchy, and new staff can find themselves getting high levels of exposure early on to the more interesting, client-orientated parts of the job. The work-life balance can also be better as the founders may prefer not to put their staff through the same pain they endured as fresh graduates. Finally, progression can be faster; within just two or three years top quality recruits can find themselves managing teams, projects and marketing - responsibilities typically bestowed at bigger firms only to those with five or six years of experience.
Consultancy is rarely the glamorous career it is made out to be in the careers presentations and expensive milkround cocktail parties you may find yourself attending. However, for those with the right temperament, passion for business and mathematical abilities, there can be few better places in which to start your commercial career.