Consulting means advising companies on how they can improve the health of their business. Traditionally, consulting firms fall into one of two camps: they tell clients either how to increase revenues, or how to decrease costs. The first type are commonly known as strategy consultants, the second as operational or management consultants.
Strategy consultants will typically work on a short-term basis, perhaps six or eight weeks, on distinct projects. In the current climate, strategy consultants could find themselves working with a global banking group on how their retail arm could be split from their investment banking division. Or they might be advising a supermarket on how to adjust a five-year store expansion plan in light of a decrease in profits.
Operational consultants, on the other hand, can work consistently on the same project for years at a time. For example, they might provide an ongoing service to a pharmaceutical firm to ensure that supply and distribution systems remain efficient. Sometimes, however, operational consultants might work with a client for just a few months, for example, when advising clients on whether they should put a cost-cutting regime in place.
Hiring top quality consultants is expensive; a short-term strategy project will cost at least a five figure sum, while bills for the largest projects will run into the billions. So why do corporate 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)?
To save money: Hiring consultants avoids the need to employ full-time staff to work on a project who may be under used once it's finished.
Specific insights: Experienced consultants bring valuable perspectives to a problem, perhaps through working with the company's competitors, or through having dealt with similar business issues for a client in a different sector.
Technical expertise: A company may require specialist abilities which consultants can bring to them, such as certain technology skills or expert understanding of an environmental issue.
Neutrality: Consultants have an independent perspective, so can give useful advice on issues where senior decision makers find themselves unable to analyse a situation objectively.
If a consultancy firm is hired by a French supermarket chain to advise on whether it should expand into the UK market, they might look into the following questions:
- What is the value of the UK's supermarket sector?
- How is the sector split between large and small companies?
- How have new entrants fared in recent years?
- How much will the client need to invest to enter the UK market?
To answer these questions, analysts might find themselves in a supermarket looking at toilet rolls prices, or phoning up consumers to discuss their shopping habits. Alternatively, they might access pre-existing market knowledge within the firm, or purchase market research reports from specialist sources.
The next step is the analysis of this research, where consultants will look to find answers from the research they've done, and possibly research further questions. For example, if initial research and analysis for the French supermarket suggests that expansion would be successful, they might ask:
- Should the client sell a range of products or concentrate on food?
- Would it be better to start with city centre stores, or out-of-town hypermarkets?
- How should the client market their products?
The final step is presenting the results to the client. Getting it right is crucial, because 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.
So to be a consultant you need to have a quantitative and logical mind for interpreting data, an inquisitive nature to dig 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.
Best foot forward
Consultancy is a great place to start your career as it gives you the commercial skills required to succeed in business - the ability to analyse data, understand and react to business problems, work with high-level people, and manage projects and teams of staff.
Many people enter consultancy with a keen eye on the doors it opens in other fields, and even many of those who start out intending to spend their entire career in consulting may well end up moving jobs after a few years. Why? The lifestyle can be bruising - in the larger firms the day will rarely end before 9pm. In addition, consultants may choose to move on to find a role which will allow them to work in a more long-term way on projects, and to capitalise to a greater extent on their successes. Typical destinations for those leaving consultancy include working for a client, starting a business (which could be a consultancy business), or going into finance (typically into venture capital, though transitions into corporate finance, private equity and hedge funds also take place).
Size it up
Those interested in a consultancy career will find they have two options - join either a large or a small firm.
Joining a large firm through the milkround 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 is also a plethora of smaller firms who work on high quality projects, which have often been founded by senior consultants from the big firms. With anywhere between five and thirty staff members, they typically specialise in a particular sector and work with high profile clients often brought over by the founder of the firm from his or her previous company. These smaller consultancies rarely recruit on the milkround, instead choosing whether to hire a new graduate or two as the academic year finishes. While these firms may not have the global brand name of larger institutions, they often have less internal hierarchy and can offer junior staff high levels of exposure to clients. 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 within the firm can be dramatic; within two or three years top quality recruits might 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 at the career presentations and cocktail parties you may find yourself attending over the coming weeks. However for those with the right temperament, a passion for business, and mathematical abilities, there are few better places to start a commercial career.