<p>(15) Management Consulting</p>
<p>This is a catch-all for a bunch of questions I got about my post-graduation industry, strategy consulting. Anyone taking this as advice would be well-served to check in with Cerberus08, who is also a strategy consultant.</p>
<p>15A. Date: 8/30/2006</p>
<p>Someone wrote in and asked what sort of math courses they should take to prepare for a career in management consulting. I replied:</p>
<hr>
<p>Specific math courses aren’t really the point here. The point is, a management consultancy will want to see evidence of 3 things:</p>
<p>1) that you’re really, really smart
2) You have an ability to think analytically. Math (and specifically, good grades in a bunch of math classes) are a good way to indicate this, but really, that’s just to get your foot in the door. They’ll want to see your ability to reason abstractly with a variety of concepts and be able to think on your feet and problem-solve. Math is good preparation for this but it’s not the only preparation for it.
3) They want people with sufficient social skills to be presentable to clients, to look and act professional.</p>
<p>So in that regard, the point of math classes is to help develop those analytical skills. Many things will help with that too – for me it was math team in middle/high school, and always taking advanced courses. But a lot of practice at case interviews (a common style for consulting firms) can help you refine the same skills they’re looking for.</p>
<p>-Steve </p>
<hr>
<p>15B. Date: 5/18/2007</p>
<p>This user, ESSR181, wrote me with a couple of in-depth questions about the industry. Below is my second reply to him, hitting follow-ups:</p>
<hr>
<p>OK,</p>
<p>“Anyway, I have a couple more questions. Do you enjoy the work?”</p>
<p>There were parts of it that were fun. Pure strategy engagements are generally pretty flattering and interesting exercises. However, the only consulting firm that really pays the bills with pure strategy work is Bain. Everyone else, including McKinsey, keeps the lights on with Sourcing work.</p>
<p>Sourcing is tremendously work-intensive stuff, identifying the unit rates that a company is paying for commodities - like, say, raw metals, or printing services, or legal, or IT contingent labor - and then sending out RFPs (Requests for Proposal) to various vendors and getting them to bid against each other to drive the price down. You then beat up a few of them until the costs get even lower, get the client to sign a deal, and collect a portion of the savings as a contingency fee. It can be very creative work, but at the analyst level, you are breaking your ass with databases and excel sheets and international vendor phone calls. In a small firm, you may be lucky enough to be involved directly with vendor negotiations, which is fun (and GREAT experience), but the bigger the firm, the more rare that is.</p>
<p>“Do you find it intellectually stimulating?”</p>
<p>The strategy engagements, sure. Those are practically textbook problems which have real-world implications of millions of dollars - and you are being counted on to provide insights and add value. Sourcing engagements are less so - perhaps 10% of the work is the interesting job of figuring out how you might be able to solve this problem and save costs, and the rest of the time you’re implementing those recommendations, which is painful and methodical and not tremendously interesting.</p>
<p>And if you get on an Outsourcing engagement, where you are advising the client on (essentially) who to fire, like Bob and Bob from office space… well, that ends up basically being a year or more of holding the client’s hand through a bunch of meetings where people rubber-stamp the (poor) decisions that management has already made, and you’re juggling the politics of the situation constantly. That’s where my offer from (Firm) would cause me to specialize, which is why I didn’t want to take their offer, and why I’m in private equity now, at least for the summer.</p>
<p>“And finally, what would be the best case scenerio for a 30/35 year old guy who began management consultant after graduating from a respectable school (NYU) and has excelled in the field?”</p>
<p>By that age, you are likely a partner, or shortly will make partner. Best case scenario is either:</p>
<p>1) You are a partner in a major firm. You make 300-500k base salary and a bonus of up to seven figures. Your job is networking your contacts throughout the industry to find possible opportunities to sell work, and selling that work, and your bonus depends on your ability to sell work (in fact, making partner depends on your ability to sell work).</p>
<p>The cool thing about industries like management consulting (and to a slightly lesser degree, law firms) is that there is no rigid pyramid hierarchy. At most companies, there is ONE president, and a set number of vice presidents, and tremendous competition to get those jobs… but really, many factors you can’t control will factor into your career path. But in consulting firms, ANYONE can be a partner as long as you can sell work. And once you’ve sold that work, you bring in your team, and your trusted managers and senior managers, to execute the engagements and deliver the advice to the client. In the right firm, it can be a really fun job… (although you’re still flying around the country every week, don’t get much time with your family, and have a tough time getting enough sleep)</p>
<p>2) You leave your position as a partner at a top firm to start your own firm, or you are a manager or senior manager who is brought along when a partner above you (who likes you) decides to leave and start his own firm. Small firms can be even more profitable, because you’re sharing the rewards with fewer people… but there’s more risk attached.</p>
<p>3) If you work for Bain (or, to a lesser extent, McKinsey), you may get an offer directly from a client who you have advised (as a senior manager or even as a partner), to join their executive team as a junior executive. They’ll offer you a ton of money to leave your firm, and from then on you’ll have the ability to move from executive position to executive position (as long as you do decently at it), always leveraging your network of contacts.</p>
<p>Note: many consulting firms may talk about #3 as being common, but it really isn’t that common even at BCG or Booz Allen, to say nothing of smaller boutiques. They simply don’t have the network of relationships with top companies whose survival depends on the consulting firm’s continued support.</p>
<p>Hope that answers your questions!</p>
<p>-Steve</p>
<hr>
<p>15C. Date: 7/12/2007</p>
<p>User california_love8 wrote to ask for an introduction to the consulting industry, with a subject “hey, i hear you are a consultant…”. Asked for the basics, what skills you need to become one, what the lifestyle is like, how the money is, etc.</p>
<hr>
<p>OK, so, there are a couple kinds of consulting:</p>
<p>1) Management consulting, where you’re advising executives at already-large companies how to improve their bottom line. Management consultancies (mckinsey, BCG, bain, etc) tend to have a number of practice areas that describe the sort of things they do. Some are revenue-side things that grow the amount of money coming in, such as corporate strategy, marketing, etc. Most are cost-side practice areas that help drive down the money going out, such as outsourcing advisory, procurement sourcing, etc.</p>
<p>There are a couple different “levels” of management consulting. In some cases, you (or your bosses’ bosses) are not directly working with executive leadership at the client, but instead the client is bringing you in because it’s easier to expand their staff with you than it is to hire someone full time and pay them benefits, train them, etc. That is what I would call the “implementation” level rather than the “strategical” level that mckinsey tends to work at.</p>
<p>2) IT Consulting, where you are brought in to work on a specific type of technical problem, and solve it as a programmer. You may also need to work with non-IT elements in the company to show them what needs to be done, or to gather their requirements, or to be a liaison between the techies and the business guys. But mostly you’ll be brought in to work on a specific project that your firm has won the contract for, and you’ll be coding that project, and then moving on to the next one.</p>
<p>3) Industry-specific advising. Energy consultants, power consultants, political consultants, construction consultants. You get a large enough body of knowledge in a specific subject, and you can become a subject-matter expert who is a freelancer, going around using your industry contacts and expertise to get clients to pay you for your advice. This tends to be a later-career thing, whereas the first two you can do out of college.</p>
<p>So now, to answer your question. In IT consulting, to get recruited you need to have technical skills that they can use, such as a computer science degree or programming ability. It’s not THAT hard to get hired by an IBM or an Accenture or an SAIC. Do an internship with a company in that industry the summer after your junior year, that’ll help you immensely. Do I know specifically whether all schools have these kind of options? No, I don’t know that. Go to a large university near a major city, though, and you’ll probably be OK. Get a good GPA, stand out somehow.</p>
<p>As for the lifestyle, the hours are tough, sure. What I tend to tell people is that the difference between me and my banking friends is that 1) I can get a full night’s sleep most of the time if I choose to, and 2) It is very rare for me to have to work on a weekend. I probably averaged 60 hours a week, which meant 50% of the time I was working more than that. Keep in mind that’s an average day of 9am to 9pm, 5 days a week. One week leading up to a major presentation I was working 7am until 3am, then crashing back at the hotel with my team, then getting up at 6am to do it all again. 90 hours that week… that seriously sucked. And yes, you’re traveling a lot, although the bigger your firm gets (i.e. IBM, at the end of the spectrum), the more regional offices they have and so the more clients they can service with local staff, meaning no plane travel. the smaller or more prestigious the firm, the farther you may travel to find clients.</p>
<p>The money varies considerably. Starting salaries in the 50-60k range out of college are fairly typical at this point. it’s whether you get an MBA that’s a major determinant. You wouldn’t get an MBA in IT consulting, because it’s not really a management field - you’re just external staff being brought on to do something the client can’t do themselves. But in management consulting, once you get an MBA and get hired as an Associate, 6-figure salaries (and big bonuses) are pretty much the norm. But you have to bust your ass to get to a place like that, and will have definitely earned it. Earning money like that while you’re in your 20s is tough to do and requires sacrifices that not everyone is willing to make.</p>
<p>Hope that helps,
Steve </p>
<hr>
<p>Wow, that’s a lot.</p>