Management Consulting is aimed at yielding productive solutions to an organization. It can range from general to specialized consulting services to improve the functioning and achieve organizational goals.
Broadly brushed, management consultants are the expert gurus who are hired to either proactively find best practices to improve the performance of an organization, or, reactively resolve problems or crisis that threaten to hamper the performance of an organization.
These consulting services can range from general management like strategy and risk management, to the specific services related to finance, legal, digital, technological, operations, and more.
And these external management services are usually provided in tandem with the internal management practices of respective companies to find unique solutions.
A career in consulting is quite popular. It is possible to put your foot in the door with just an undergraduate degree, getting placed into an entry level analyst position.
However, with stiff competition for recruitment and the race to make it to top firms in the industry, an MBA, especially from known consulting feeder schools, has become a key ingredient.
With its popularity and lucrative prospects, consulting, along with finance and technology, has become the top career choice as is evident from placement reports released by MBA programs.
Here is the distribution of employment offers by industry for a few MBA programs, based on 2021 statistics.
Highest Percentage Placement by Industry
|Harvard Business School||23%||16%||19%|
Management consulting compensation is among the highest for graduating MBAs. This statement though needs a deeper analysis when it comes to a breakdown of salaries for recruits from feeder schools into other industries.
For instance, Stanford GSB, known for Finance recruits, has the highest salaries in that sector. Though Consulting is not far behind. Here is a glimpse of some of the consulting salary statistics provided by the b-schools.
|HBS (Median Base Salary)||Chicago Booth (Median Base Salary)||INSEAD (Median Base Salary)|
|Consulting – $165,000||Consulting – $165,000||Consulting – $165,000|
|Technology – $150,000||Financial – $160,000||Technology – $147,500|
|Investment Banking – $150,000||Technology – $133,000||Financial Services – $131,000 (in UK)|
For more entry level salary insights across various locations, we refer you to this article on average Management Consultant salaries around the globe.
Taking a clue from the placement and the compensation, for consultants even in their novice years, it is safe to say that management consulting is in demand.
What are the trends and why is the industry partial towards paying huge compensation to the crème-de-la-crème of MBA grads. Correspondingly, why are the bright and brilliant heading towards consulting? Let us explore.
Market for Management Consulting
Let us begin with some trends. The Bureau of Labor Statistics in the US charts the growth of Management Consulting employment at 11% rise (faster than average) in the next ten years.
For instance, in 2012, the number of consultants employed in the US was about 540,440. This number as of 2021 is north of a quarter of a million at 768,450. That’s half the population of Manhattan!
For perspectives outside the US, the number of management consultants, in Australia, has grown by over 63% in 10 years, four times higher than the growth of the total Australian workforce.
In the UK, small consultancies have increased at an 18% rate, surpassing large and mid-sized consultancies. Niche consultancies are thus gaining in the market as well.
As far as the largest market share is concerned, the giant consulting firms, especially the MBB Big 3 – McKinsey & Company, Boston Consulting Group, and Bain & Company – are the major players.
The combined workforce of these three management consulting firms has about 30,000 consultants and a large percentage of them are alumni of some of the prestigious business schools such as Harvard, Chicago Booth, INSEAD, and the likes.
The growing number of consultants are generating a humongous amount of revenue worldwide. The global consulting market is a whopping $160 billion. Though during the recent pandemic, it dipped to $132 billion with a promising upward trend after.
The size of the consulting industry market in the US is $64.4 billion and that in Europe is $45 billion. It has been increasing at the rate of approximately 5%. In the UK, the consulting industry has risen from £8 billion to more than £10 billion in just five years (as of 2019). And the trend is still upwards.
Clearly the future of consultancy is secure. Now let’s get into the “whys”. What do they do that make them so indispensable to the economy? Why are they in demand and why are consulting firms willing to pay so much to keep bringing in the smart ones in their fold?
Why are Management Consultants in demand?
Need to adapt
Business owners are now in the midst of a changing landscape. The goal is not just to do business “as usual”, but rather grow in relevance.
Cost-cutting and efficiency are now part of a larger need to modernise and adapt to the dynamic nature of the marketplace. With disruptive innovations and practices forcing this change, specialist consulting services are now more in demand than ever.
Take for instance the global pandemic that grappled the world and the need that business owners faced for digitization. Ensuring continuity and profit now needs expert intervention that consultancies can now leverage.
Cost effective expertise
For new business owners, as well, general or niche consulting services can not only provide valuable inputs for start-ups but also be a low-cost alternative to full-time staffing options.
In fact, small and mid-sized companies are now large contributors to consultancy revenues. According to the Australian National Skills Commission (ANSC), there has been a steep increase in the number of management consultants in Australia, growing at twice the rate of other industry employees.
This is supported by the trend of hiring focused experts who provide support in finance management, productivity management, digital transformation, and other niche fields, rather than experts in overall business. The shift is to hire experts in business areas.
So, why are consulting salaries so high?
The task for consultants is not an easy one. The service that they provide their clients with, requires expertise. And the clients are now savvier than ever.
They pay good money for said expertise and expect transparency, cost efficiency, trust, better quality and value for their money, accountability, and expediency, in their services. And if consultants fail to deliver, they can always switch to another firm that can provide results.
With a growing number of consultants, there is also an increase in competition in the services they provide. Especially since experienced consultants tend to branch out and set up their own businesses, tapping in on the expertise they gained while working for other bigger firms.
More competition among consultancies only ups the ante for the kind of people they recruit to represent them to clients. Consultancy firms have to stay on their toes and ensure productivity.
They need to not only get ahead and compete with other firms providing expert services but also keep getting ahead. So, they need a constant input of the brightest as well as the most motivated to learn and grow.
Firms like MBB may get 10,000 applications for a hundred positions reflecting the race of MBA grads to a promising future. But there is also another race that all sizes of consulting firms, including the MBB, undertake to nab the best and the brightest at top MBA programs.
For instance, 2020 placements saw a whopping 156 INSEAD grads, 109 Chicago Booth grads, and close to a hundred each from Northwestern Kellogg, HBS and Wharton, being handpicked by MBB.
A consultant’s pedigree can bring prestige and reliability to a firm’s brand and one of the ways to ensure that an applicant accepts a job offer is the promise of career growth and big compensation. They are willing to pay well over the average to hire them and their returns are seen in client retention.
Is a consulting career worth it?
It comes with its challenges. While the top firms in the industry are in a non-stop growth mode, expanding into different niches, capturing a bigger share with each, there are also low-cost independent consultants who work at much lesser cost, grabbing the market with their own flavour of low cost, yet effective solutions.
This scenario can be hard for firms in the middle. Loss of clientele can be a major concern just as the need to constantly catch up to new technologies and know-how.
A consulting career is lucrative as long as you are able to either secure your future with a large firm or find a niche field where your expertise is relevant to the growing complexities. It is also a very demanding career that can eat into your work-life balance (Read Dark side of Consulting and Is consulting a good career choice for me?). Ultimately, if the shoe fits, give it an earnest shot ‘coz rewards are a plenty to buy more to fill a whole closet.
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