What is Management Consulting?

"Management consulting" strikes many as a rather nondescript phrase. You've probably interacted with a wide variety of people who call themselves "consultants" -- whether it be a salesperson, financial representative, or business analyst. The phrase "management consulting" is more precise, referring to the industry and practice of providing guidance to management in order to improve the performance of organizations.

The client organizations are typically businesses, but management consultants also advise governmental agencies and nonprofit organizations. A basic understanding of the commonalities and different types of management consulting firms will help job seekers navigate through the milieu of management consulting career options.

Management consulting firms - also called "management consultancies" - have a few similarities that unite them. Generally, most reputable firms hire bright people who can think well on their feet, solve problems, communicate in teams, and exhibit professionalism with clients. The workaday experience of the consultant is all about gathering information, synthesizing insights, and communicating solutions.

These consultants tend to spend much of their days in team meetings, client meetings, data analysis, and slide creation. Sometimes management consultants are criticized for "stealing your watch to tell you what time it is," but consulting engagements often provide practical insights and solutions that lead to substantial improvements for client organizations.

Though the categorizations of the management consulting universe are imprecise, nearly everyone practicing management consulting could be classified into one of them. The categories are:

  1. Strategy consulting
  2. Accounting firms
  3. IT specialists
  4. Boutique consulting
  5. Internal consultants
  6. Independent consultants

 

1) Strategy consulting

Strategy management consulting firms receive the majority of this website's attention. These firms advise senior management across all industries on broad questions related to major strategic questions. The major management consulting firms focused on strategy consulting include McKinsey & Company, Bain & Company, the Boston Consulting Group, and Booz & Co.

These firms tend to recruit at elite undergraduate universities and business schools, so they rank highest in the prestige pecking order. Strategy consulting firms must tackle high-dollar questions at a CEO- or senior executive-level in order to make the hefty strategy consulting price tag (often over $500,000 a month for a team of five) a reasonable investment. Questions a strategy consulting firm might tackle include:

  • How do we respond to a new competitive threat?
  • Which manufacturing plants should we shut down?
  • How can we increase our profit margin?
  • How can we increase our market share?
  • How do we go about launching this new product?

If you were to read a typical consulting resume at a strategy consulting firm, it might say "Facilitated redesign of a Fortune 100 retailer's merchandising and planning functions by collaborating with client VPs, estimating savings under differing scenarios, and crafting new job descriptions. Client has since realized over $50 Million in annual savings."

New recruits into strategy consulting firms tend to enjoy the wide variety of business questions and industries, as this array of experiences can provide a nice survey of the business world. From there, most candidates leave consulting with 2-5 years to start or advance their chosen career path. The consulting interview for strategy consulting firms usually contains a case interview question, whereupon a candidate has a conversation working through a business problem that may resemble an interviewer's previous engagements. A consulting interview question might sound like, "Our client is a $2 Billion manufacturer of household appliances. Recently sales have been flat, but margin has declined. They need you to identify how to increase the margin."

2) Accounting firms

The major audit firms also often provide consulting work to their clients. These major players include PriceWaterhouseCoopers (PWC), KPMG, Ernst & Young, and Deloitte Touche Tohmatsu. These firms tend to recruit sharp accounting and business talent from a wider pool of universities than the elite strategy management consulting firms.

The similarities between accounting and consulting can be significant (e.g. both advise senior management, both require a familiarity with business mathematics), and the potential for conflicts of interest is sizable. In the aftermath of the Enron / Arthur Andersen scandal, new legislation such as Sarbanes-Oxley provides clear rules on how the audit and consulting functions need to have clear separations. Questions consultants within accounting firms might address include:

  • What financial tracking and reporting processes are inefficient?
  • How can we improve our compliance rates?
  • How might we improve cash flow by optimizing our billing or payment processes and policies?

While the questions above seem close to accounting-related queries, these firms can also have deep expertise in other segments. For example, Deloitte's Human Capital Advisory practice deals primarily with questions of human resources and change management. A consultant resume within an accounting firm might say, "Conducted thorough review of the invoice-to-cash cycle to identify bottlenecks slowing payments. Client has since improved their days receivable metrics by over 20%." A consulting interview within an accounting firm will likely ask a suite of behavioral questions and may quiz you on points of accounting knowledge.

3) IT specialists

The complexity of IT consulting, combined with the sheer market size of the key players, warrants giving the IT specialists their own category. Key players in this category include Accenture, IBM, Hitachi Consulting, Computer Sciences Corp, CGI Group, and iGATE Patni. (Note again, however, that these categorizations are not too rigid. Accenture also has a smaller strategy consulting arm. Meanwhile, though IBM has an estimated 100,000 IT consultants, they also make much of their money on products.)

IT firms recruit even more broadly than accounting firms, often valuing particular coding knowledge above GPA or class rank. These firms often serve the CTO of a corporation or his direct reports. IT specialists would tackle questions such as:

  • How can we automate this antiquated paper system?
  • How should we go about fine-tuning and articulating our specific requirements to receive bids from different IT vendors?
  • How should we go about implementing a company-wide ERP (Enterprise Resource Planning) software system or CRM (Customer Relationship Management) system? (Examples of such platforms include SAP, Oracle, or Salesforce.)
  • What new system should we update our old "green screens" to?
  • How can we ensure our important data is encrypted, backed up, accessible, and secure?

A typical consultant resume from someone working in the IT space might read: "Expedited online sales process via selecting, adapting, and testing a CRM solution which streamlined most manual processes, improving shipping times by 20%." A consulting interview for an IT specialist might ask a candidate to walk them through the process he'd use for implementing a given IT upgrade.

4) Boutique consulting firms

The Boutique consulting firm category is a bit of a catch-all. Generally, these firms tend to have a clear specialization on a given industry or practice area -- or both. There are hundreds of different ways boutique firms can specialize. For example, the bread-and-butter of ZS Associates is sales and marketing consulting to pharmaceutical companies. Hewitt, Mercer, Towers Watson, and the Hay Group all focus on human resources issues. Sometimes boutique firms might specialize even further from human resources to compensations benefits alone.

IDEO and Kuczmarksi & Associates are two boutique firms that operate in the creative niche of "innovation consulting." The list could go on and on. But don't let the "boutique" name fool you. Many of these firms have thousands of employees and operate worldwide. The questions they tackle and their recruiting processes vary widely. The prestige, selectivity, and name recognition of boutique firms also varies quite a bit.

5) Internal consultants

Many management consultants have one client and one client alone: their employers. It's quite common for many corporations to have an internal group that operates as a consulting team, tackling valuable potential improvement opportunities within the corporation. Often a company's "strategy group" could also be called an internal consulting team. Corporations enjoy several benefits in having an internal consulting team present. Internal consultants are already familiar with the business, cost less than external consultants, and can often advance into other key leadership roles in the company.

Many corporations recruit the very best undergraduate talent they can get into these internal consulting or rotational roles -- but stars often choose strategy management consulting firms over industry picks. Questions internal consultants might tackle include:

  • Why do we have such variation in cost in different parts of our business? What opportunities exist for us to identify best practices and disseminate them worldwide?
  • What businesses would make appealing acquisition targets for us?
  • What's the competition doing with regard to this particular issue?
  • How would we continue our business if the union organized a strike at a key plant?

The variety of questions they tackle may be very diverse like the list above, or more specialized into a particular area such as purchasing. Employees who operate in internal consulting teams are often hired from traditional consulting firms. Indeed, management consultants at strategy consulting firms frequently receive headhunter phone calls telling them about opportunities for strategy departments in different corporations. An internal consultant resume would highlight numerous projects that saved or generated large sums of money for their employer.

6) Independent consultants

Even more scattered than the boutique consulting firms and the internal consultants are the independent consultants. These consultants don't even operate under the banner of a major company. These entrepreneurial souls often work by themselves or in a very small team of 2-6 people total. Frequently independent consultants have gained a deep expertise from having spent years tackling a particular type of business challenge (e.g. waste reduction in manufacturing plants).

These people may be semi-retired veterans who keep getting pulled back into new projects, new parents who want a reduced total weekly workload, or young people who desire more freedom and flexibility in their lifestyle. Independent consultants often augment their incomes with executive coaching, speaking engagements, or other one-off projects.

These broad categorizations can provide a useful starting point in exploring management consulting career options. Which one is best? That completely depends on your background and goals.

If you're a hard-charger with stellar academic credentials and want to become a Fortune 500 CEO one day, shoot for a strategy management consulting firm. If you're working toward a CPA, the accounting firms will value it the most. If you have a fascination with computers, coding, and process improvement -- IT consulting may be the most stimulating environment. If you have a specific area of knowledge that you'd like to develop day after day, choose a boutique firm focused on that area. If you want the long-term stability of an established corporation, look to internal management consulting roles.

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10 comments… add one
  • Geanna Jones Jun 26, 2014, 3:12 pm

    I am starting a new business with a large city. I am having a problem to how much I would charge the city. It is new I have nothing to compare it with. I would be hiring, training, and motoring the new hires for 90 days. I am having trouble to how much I would charge. I would be a consultant to over 560 buildings.

  • LaRick C Oct 12, 2015, 5:13 pm

    Hi Geanna, did you ever get your question answered? How did that contract go? We do something similar now and would like to understand more how you approached it and share how we approached it.

  • Nathan Johnson Mar 23, 2016, 10:57 am

    Thanks for explaining what management consulting is all about. It makes sense that management teams would also need help to make their own business more efficient or profitable. I like that you said, “reputable firms hire bright people who can think well on their feet, solve problems, communicate in teams and exhibit professionalism with clients.” Thanks for the post!

  • Bob Lowe Apr 18, 2016, 3:37 pm

    Thank you for the post. I can see a great need to hiring a consultant. I sometimes think it is good to have an outside perspective of opinion. I think hiring a consulting firm can do just that. Their job is to help make your business more organized and successful.

  • Jerry Sep 2, 2016, 10:28 am

    Thanks so much for this management consulting article. I’ve found it very useful when structuring service-level agreements.

  • Edna Jan 1, 2017, 8:47 pm

    Thank you for your post it provided me with clear examples and great insights into what management consulting is.

  • Braden Bills Mar 1, 2017, 10:25 am

    It’s interesting that businesses consultants are so useful to companies. It makes sense that people might need a second opinion on things! What better way to get that than hire a consultant?

  • Yanni Chen Mar 9, 2017, 2:59 am

    Hi Victor,

    I benefited a lot from your articles and really enjoyed reading them.
    Just one advice: can you mark the date on which each article was published?
    Timeless as they can be, some type of information such as industry trend, firm ranking and prestige can change as time progress.
    I was really confused about some articles because I could not refer to when it was written and what specific even it refers to.

    Doing this, I believe, will also thousands of other of your avid readers!

    • Victor Cheng Mar 10, 2017, 3:06 pm

      Yanni,

      Great suggestion. Looking into it now.

      Thanks.
      -Victor

  • Nima Vahnani Aug 5, 2017, 8:05 am

    Thanks so much for the great article.
    I have a question, most of the Strategy consulting companies have started from Independent consultants versions or they have started with a different attitude?

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