Chicago GSB EXP11 - Introduction to Consulting | Mc Kinsey & Company | Strategic Management


Chicago GSB
EXP 11 Barcelona, 20 October 2004

Marc Kitten

This material was used during an oral presentation; it is not a complete record of the discussion. It is based solely on publicly available information

Whatever you do, wherever you go, they will be there…


1. You may become a consultant

• 20% to 30% of MBA graduates join Management consulting firms • Most Fortune 500 corporations hire external consultants

2. You are likely to hire or work with an external consultant

3. You will have ex consultants as colleagues (consultants skills are transferable)

• Most consultants get management positions in the industry after a few years

You cannot escape consultants!


• Management consulting firms offer a few thousands jobs every year. Those jobs are among the most competitive, especially with top strategy firms

• Whatever the role and the type of project, working as a consultant requires following a set of principles aligned with an organisation aimed at optimising efficiency and effectiveness

• If you want to become a management consultant, preparation will be key


HISTORICAL BACKGROUND • During the later part of the 19th century, engineering, accounting and law firms started offering independent corporate counsel to fast-growing and increasingly complex industrial organisations in the US. Arthur D. Little was the first external consultant to bring operational effectiveness to its manufacturing clients • It was not until the 1930s and the Great Depression that management consulting firms grew beyond a few founding partners, with the notable examples of McKinsey and A.T. Kearney • A few years later, Marvin Bower was to transform McKinsey and the industry when he started developing the firm after the model of the law firms into the first strategy consultancy, dedicated to solve the problems of the CEOs • The 70’s saw the real explosion of the industry with the rapid growth of new competitors: BCG as a Booz Allen spin-off, Bain as a BCG spin-off, etc • Big audit firms like Andersen started to capture part of the strategy market through their consulting arms, to retreat a few years ago • The latest development is the rapid emergence and growth of networks of independent consultants like Candesic, more closely aligned to the model of law partnerships

Even at strategy firms, pure strategy projects represent only one component of the activity


Corporate vs. B.U. • Market analysis /Due diligence • New product • M&A • Alliances


• Organisational design & governance • Performance management • Leadership • Sales force and channel management



• Marketing, CRM, branding, pricing • Financial engineering • Risk management • Technology • Communication



Revenue growth or cost reduction • Purchasing & supply management • Change management and Process improvement –Logistics, supply chain –Manufacturing –Business process redesign –Business process outsourcing

Consulting city 5 . $b (Estimates 2002-2004) Accenture CSC IBM Business Consulting Cap Gemini Ernst & Young McKinsey & Company Deloitte Consulting BearingPoint (ex KPMG) Booz Allen & Hamilton Hewitt A.“Management” consulting is a broad concept: the bulk of it is in IT-related activities TOP 15 MANAGEMENT CONSULTING FIRMS WORLDWIDE BY SIZE Strategy consultants Turnover. Vault .T. Kearney (EDS) Altran Boston Consulting Group Bain Mercer + Oliver Whyman Roland Berger Monitor Employees (Estimates 2002-2004) 0 2 4 6 8 10 12 14 0 10000 20000 30000 40000 50000 60000 70000 Source: Business Week.

Big-5.THE MARKET FOR STRATEGIC CONSULTANCY IS CHANGING Clients becoming much smarter consumers Increased competition from I-Banks. niche consultancies. research houses Strategy Consultancy Value of “Top Level” strategyonly projects hard to justify Dynamic market and economy 6 .

000 175.951 190.063 4.084 1960 1970 1980 1990 1995 2000 2001 2002 2003E 2004E Source: UK Management Consultancies Association 7 .009 19.CURRENT TRENDS IN MANAGEMENT CONSULTING – UK EXAMPLE Average income per consultant. £ 180.608 180.987 156.000 111.493 36.045 168.

Polling ~ 1.RECENT TRENDS IN MANAGEMENT CONSULTING Balance of opinions Sectors expected to grow / decline in 2003 1000 Business lines expected to grow / decline in 2003 1000 900 800 800 700 600 600 500 400 400 300 200 200 100 0 0 tor ies ec tilit S -200 c U li y& ub P erg En il eta R ial nc a Fin s ce rvi Se ing tur fac nu Ma T TM th ce gy ow man trate r e S e G rfor tso red prov e nu st Ou m P ve Co sI an Re es m oc Hu Pr in urc g ti o uc n n me t IT M CR Source: The Annual Consultancy Forum.500 management consultants 8 .SURVEY RESULTS . London 2003.

CURRENT DIFFICULTIES • Relatively high-priced. inflexible model • Drop in revenues • Generalisaton of discounts or free services • Reduction of average engagement length • Reductions of headcounts • More difficult to justify high price • Less differentiation as clients develop internal knowledge and expertise • Lack of tech expertise • Competition from research houses 9 .

Candesic analysis 10 . $ 000’s 550 Boutiques Strategy McKinsey OC&C Marakon Parthenon LEK Mars Diamond Cluster Independents Candesic Monitor BCG Bain 300 Roland Berger Mercer Booz Allen Operations Accenture CGEY IBM Consulting Bearing Point EDS CSC Hewitt 100.000 Gartner Deloitte 150 100 1.I Yearly revenue per consultant.000 Consultants Headcount (log scale) Source: Top Consultant. Vault. Press search.Work of strategic or highly specialised nature tends to involve smaller teams with high billing rates per consultant DIFFERENT BUSINESS MODELS .

II PRELIMINARY Subscription Corporate Executive Board Revenue model Per diem/document Gartner* Forrester* Accenture McKinsey Generic Customised Research and advice * Focus on technology Source: Interviews. management research and consulting firms offer a broad range of positions DIFFERENT BUSINESS MODELS .From market intelligence to implementation of recommendations. Press search 11 .

increase our clients´ value in the marketplace” Source: companies websites. analysts. interviews 12 .III The Next Practice “Develop unique solutions with the client teams. and research capabilities” Corporate Executive Board Generic “Increase the effectiveness of executives and their enterprises by discovering and teaching to this membership the best new thinking and strategies from across industry and around the world” McKinsey Flexibility & cost “Offer the best valuedriven advice to the world economic leaders” Specialisation BBDO Consulting “Significantly increase our clients´ brand and customer equity. acting as strategic and operational coaches rather than as classic consultants” Involve client Candesic “Deliver top practical and actionable advice using proven talent from top-tier firms and a broad network of industry experts. and hence. the “McKinsey model” has inspired numerous other applications of its core values to other business models DIFFERENT BUSINESS MODELS .In the field of strategy consulting.

807 MBA students at 40 US business schools 13 . 5 preferred industries Management Consulting Consumer Goods Investment Banking Healthcare/Pharma Venture Capital Entertainment/Media Commercial Banking/Financial Services Investment Managing Engineering/Manufacturing Internet/e-Commerce Computer Software Biotechnologies Telecommunications Energy IT Consulting 4 8 12 16 38% of the students in Harvard Business School’s class of 2002 went into consulting 20 24 28 32 Source: Universum 2002 survey of 2.Management consulting appears as the most attractive industry for business students RANKING OF PREFERRED INDUSTRIES AMONG US MBA STUDENTS % of respondents.

2004 McKinsey & Company Boston Consulting Group Bain & Company Coca Cola Goldman Sachs Apple Citigroup BMW Microsoft Booz Allen & Hamilton 4 8 12 16 20 Management consultants US MBAs.300 MBA students at 18 European business schools.Management consulting appears as the most attractive industry for business students RANKING OF TOP 5 EMPLOYERS AMONG MBA STUDENTS % of respondents European MBAs.000 MBA students at 46 US business schools 14 . 2004 survey of over 4. 2004 McKinsey & Company Citigroup Goldman Sachs IBM* Johnson & Johnson BMW Boston Consulting Group Coca Cola General Electric Booz Allen Hamilton 4 8 12 16 20 * Includes PWC consulting now part of IBM Consulting Services Source: Universum 2004 survey of 1.

T.K. The IBM BCS L.Management consulting firms with a strong focus on strategy are perceived as more prestigious by consultants TOP 20 MANAGEMENT CONSULTING FIRMS WORLDWIDE BY PRESTIGE Rating on a scale of 1 to 10 based on prestige Strategy consultants McKinsey & Company Boston Consulting Group Bain & Company Booz Allen Hamilton Monitor Group Mercer Management Consulting Gartner A. Methodology: 1.100 consultants asked to rate the consulting firms on a scale of 1 to 10 based on prestige (excluding their own firm) 15 . Kearney Mercer Oliver Wyman Roland Berger .E. Consulting Cap Gemini Ernst & Young Towers Perrin BearingPoint 3 4 5 6 7 Many top consulting boutiques missing for lack of scale or international presence 8 9 Source: Vault Top 50 survey 2004.Strategy Consultants Deloitte Consulting Accenture Mercer Human Resource Consulting Marakon Associates Parthenon Group.

If you have any interest for general management. a management consulting experience makes sense CONSULTANTS SKILLS ARE TRANSFERABLE Analytical and problem-solving skills Leadership General Management Project management skills Communication skills * Note that management consultants do not necessarily make great managers! 16 .

clients. firm reputation) • Working methodology and learning opportunities • Intellectual challenge / fast pragmatic problem solving • People • Money • Lifestyle • Delay career decisions 17 .The value-proposal is very attractive… REASONS FOR BECOMING A MANAGEMENT CONSULTANT • Career opportunities (network.

… but you need to balance your expectations REASONS FOR NOT BECOMING A MANAGEMENT CONSULTANT • Career choice that doesn’t require consulting experience • Limited scope for fundamental research / pace of problem solving • Lifestyle • Money • People 18 .

less brand Less Blue-chip clients or more B. no room for private life Tough in downturns Strategy firms Boutique firms • • • Risk from exposition to specific sector Small alumni network Limited transition opportunities Independents • • • • Immediate personal accountability Key-man risk.WHICH TYPE OF FIRM? Advantages Operational firms • • • • • • • • • • • • • • • Strong and coordinated training Gentle integration into large project teams Blue-chip client base Potential for internal transfers Strong alumni networks Potential for fast and international careers Exposure to top management issues Generalist early career Often enjoyable work atmosphere Easy access to partners Early responsibilities Opportunity for early specialisations Autonomy Direct exposure to client management No/less profit sharing • • • • • • • Disadvantages Frustrating rules and procedures Lack of business overview Rigid promotion tracks Limited or no top management exposure Up or out policy High workload. level Limited institutional training Source: 19 .

CONSULTANTS BELONG TO TWO DIFFERENT WORLDS Traditional consulting firms Cons • Workload • Partners • Up or out • Rigidity Pros • People • Brand • Scale • Training Independent consultants Pros • Autonomy Cons • Training • Profit sharing • Accountability • Exposure • Alumni 20 .

There will always be traditional firms and there will always be consultants who want their freedom EMERGENCE OF A NEW MODEL OF CONSULTING Traditional consulting firms Cons • • • • Pros People Brand Scale Training Independent consultants Pros • Autonomy • Profit sharing • Exposure Cons “Taking the best of both worlds” 21 .

MOST IMPORTANT CRITERIA FOR NEXT CONSULTING JOB Weighted scores. survey of ~1500 management consultants 22 . 2002 Quality of work and clients Salary Career progression Work-life balance Training and personal development Brand name and reputation Benefits Job security Partnership potential Source:

working as a consultant requires following a set of principles aligned with an organisation aimed at optimising efficiency and effectiveness • If you want to become a management consultant.SUMMARY • Management consulting firms offer a few thousands jobs every year. Those jobs are among the most competitive. preparation will be key 23 . especially with top strategy firms • Whatever the role and the type of project.

which offer different perspectives WHO ADVISES THE EXECUTIVE MANAGEMENT? • Board of Directors • Internal consulting department • External consultants 24 .The CEO relies on various sources of strategic advice.

Strategy consultants are the most efficient resource in unique situations THE “WHY DO COMPANIES NEED STRATEGY CONSULTANTS” MATRIX Value Added Portfolio of Corporate Activities Strategy Consultants M&A Restructuring Legal (Patent Filing. One-off. Litigation) IT Support Core Activity (in-House Capabilities) Treasury Risk Management HR Management Outsourced Activity Administrative Processing (T&E. Unpredictable Activities Source: High Strategy ltd Variable but Predictable and Relatively Regular Activities Routine. Payroll) Basic Accounting (Accounts Payable) Frequency Unique. Stable Activities 25 .

benchmarks. facilitates internal communication Facilitator Researcher Gathers market data Counselor Helps solve problems 26 .SIX MAIN ROLES OF A CONSULTANT Educates. recognises need for change Provides authoritative external advice. supports management Coach Provides best-of-class technical expertise Advocate Expert Acts as catalyst for change.

not cure ! (Henry Mintzberg) Excellence Non-hierarchical communication environment –Feedback and obligation to dissent –Pyramid principle –Constantly forward-moving Values – – – – Integrity Objectivity Commitment Curiosity 27 .Management consulting is based on a set of principles aimed at optimising efficiency and effectiveness THREE PRINCIPLES OF (GOOD) CONSULTING Impact driven pragmatic problem solving – – – – – Hypothesis driven Facts driven Structuring and Pyramid principle (“MECE”) Prioritisation and 80/20 (Pareto principle) Leverage knowledge Care.

Consultants need to show integrity ETHICAL ISSUES IN MANAGEMENT CONSULTING • Unpleasant results With the client • Forced recommendation • Chinese walls • Cost cutting • Data accuracy Do the “Wall Street Journal test” • Inefficient team members Within the team • Lifestyle • Feedback and development • Intellectual property • Mistakes • Hierarchy 28 .

not client’s deliverables • Project scope ignores client readiness • Grandiose solutions • Strict separation of work between consultants and client team members • Labor-intensive use instead of leveraged use of consultants • Client imposes a solution based on an opinion Source: Candesic analysis 29 .Following virtuous principles should ensure avoiding some typical mistakes SIX TYPICAL FLAWS IN A BAD CONSULTING ENGAGEMENT • Project defined in terms of consultant’s.

There are typically four different team roles which require a different set of consulting skills ROLES AND RESPONSIBILITIES WITHIN THE TEAM Entry level Years in role Role Description • Acquires and manages senior client • Contracts and bills • Supervises teams • Manages project and delivery of solution • Liaises with partners • Often conducts presentation • Manages work streams and client team members • Coaches analysts • Liaises with research and production • Initial focus on interviewing and modelling • Takes part in problem solving • Often takes responsibility for logistics Partner* or VP 3-5 Manager 2-4 MBA PhD Master Bachelor 2-3 Consultant Analyst * Often two-tiered partnerships with senio partners (directors) and junior partners (principals) 30 .

The Manager is the key person to run the project A TYPICAL TEAM STRUCTURE IN STRATEGY/ORGANISATION Client Team Member Senior Partner Consultant Manager Analyst Junior Partner Consultant Client Team Member Part time Full time 31 .

Consultants go through various activities that can be averaged across the year TYPICAL BREAKDOWN OF A WORKING DAY Hours 3 24 7 Project specific 2 1 1 2 2 1 1 1 1 2 Travelling Data Interviewing Modelling gathering Client meeting Individual problem solving/ drawing charts Team problem solving Presenting Training Socialising Sleeping Other Total 32 .

THE CONSULTING PROJECT MANAGING – Team – Client – Self Problem Intuition Solution Implementation Data ANALYSING – Framing – Designing – Gathering – Interpreting PRESENTING – Structure – Buy-in Source: The McKinsey Mind. Rasiel 33 . E.

Vault 34 . Rasiel.WHAT THEY ARE LOOKING FOR IN THE CASE INTERVIEW MANAGING How good is your logic ? – Team – Client – Self Would it be pleasant to work with you in the team ? How would clients perceive you ? Solution Implementation Problem Intuition Data ANALYSING – Framing – Designing – Gathering – Interpreting PRESENTING – Structure – Buy-in How good are you at communicating your logic ? Source: The McKinsey Mind. E.

USUAL STEPS IN A STRATEGY ENGAGEMENT Direction setting • • • Mission Vision Aspirations • • • Situation analysis Industry profitability External forces Competitive position and sources of competitive advantage Uncertainties • Strategic options to address uncertainties Assets for and • drivers of value creation Portfolio management Portfolio of strategic opportunities • • • Planning and execution Execution requirements Alignment of organisation Execution plan • 35 .

ANOTHER PROJECT EXAMPLE: SALES FORCE EFFECTIVENESS Problem identification Data gathering and Analysis (market and internal) 2-4 weeks Problem solving Communication 5-10 weeks Phase 2 Segment clients. monitor and benchmark sales performance 2-4 weeks Phase 3 Evaluate performance and take corrective actions Implementation 4-6 months Interviews with top management Phase 1 Size of the opportunity Beware of incorrect problem definition or scope… End product: implementation plan for the new organisation 36 .

SUMMARY • Management consulting firms offer a few thousands jobs every year. preparation will be key 37 . especially with top strategy firms • Whatever the role and the type of project. working as a consultant requires following a set of principles aligned with an organisation aimed at optimising efficiency and effectiveness • If you want to become a management consultant. Those jobs are among the most competitive.

and discuss a business case and specific questions TYPICAL RECRUITMENT PROCESS AT STRATEGY CONSULTING FIRMS First round • Possibly a short numeracy or logic test • 2 or 3 interviews with consultants (typically senior consultants and Managers) –Most interviews will include a business case discussion for 20-30 minutes • Possibly Group Exercise: discussion of a business problem by several candidates to test empathy. often accompanied by offer to meet informally with consultants • Rejection should not be taken personnally.The recruitment process is typically based on two rounds of interviews to screen the CV. leadership and teamwork Second and possibly third round • 2 interviews with Partners. Reapplication generally possible after 1 or 2 years provided candidate can show improvement Final decision 38 . Always ask for feedback and record it. most interviews will include a business case discussion for 20-30 minutes –Partners sometimes prefer to test candidates with questions embedded in casual discussion: apply same rules as in formal case discussion • Generally communicated within a week or two • When positive. sometimes with Managers –Again.

The type of case is often determined by the focus of the consulting firm and the individual experience of the interviewer TYPES OF CASES Examples Business strategy cases Main skills required •“Should company X enter/exit a new/old market?” •“How should company X react to a new entrant?” •“Should company X launch product Y in region Z?” •“Should company X choose an alliance in country Y?” •“Should company X add capacity?” •“Why did profits of company X decrease?” •“Should company X change suppliers?” •“Should company X allocate real costs?” •“How many windows are there in Chicago?” •“How many screws in a French hypermarket?” •“What is the size of the surfboard market in Austria?” •“Should Germany consider reopening the “Neuer Markt”? •“Why are manhole covers round?” •“Describe 10 things you can do with a rabbit” •Big picture perspective •Ability to structure and prioritise •Broad functional skills •Creativity •Understanding of processes •Ability to structure •Broad functional skills •Comfort with details. analysis •Comfort with ambiguity •Ability to structure •Facility with numbers •Poise •Ability to think “out of the box” •Creativity •Ability to prioritise •Logic Business operations cases “Guesstimates” Brainteasers 39 .

maybe Main strategic frameworks Basic Concepts (Economics) Basic Concepts (Finance) Basic Concepts (Accounting) Basic Concepts (Marketing) A robust problem-solving methodology 40 .TOOLS CONSULTANTS USE TO SOLVE PROBLEM Operational frameworks.

We would go into the detail of this process in the next course on business case studies FIVE EASY STEPS TO EFFECTIVE PROBLEM SOLVING Step 5 Step 4 Step 3 Step 2 Step 1 ? Disaggregate the issues State the problem Eliminate all non-key issues Conduct critical analyses. go back and forth between data and hypotheses Synthesize findings and build argument Problem identification Analysis Problem solving Communication 41 .Problem solving can be made easier.

complication.WRITING A STORYLINE* Use situation. the thought process and the storyline are not the same thing: the pyramid is not sufficient for a good presentation 42 . resolution format Situation State the conditions at point of problem Complication Flesh out barriers to improving situation Resolution Lay out possible solution path * While a well-structured pyramid thought process is necessary for telling a compelling story.

Audience is much more interested in what the answer is than in how you got it 2.The use of the pyramid to structure the storyline ensures that the audience gets the answer and has context in which to understand details Overall Structure: The Pyramid Principle THE PYRAMID STRUCTURE Basic premises Main Message = The Answer 1. Audience can absorb ideas and draw desired conclusions more easily within context of “big picture” Rest of pyramid supports main message .

it is mine alone. the Air and the Navy did all that Bravery and devotion to duty could do.” Note by Eisenhower.BEING PREPARED “Our landings … have failed … The troops. 6 June 1944 44 . If any blame or fault attaches to the attempt.

Good luck 45 .

Appendix 46 .

by Ethan M. Pollan (2000).Getting into top management consulting firms requires thorough preparation. Maister. Green. ISBN 0-273-61710-9 47 . ISBN 0-07-053448-9 –The Harvard Business School Guide to Careers in Management Consulting (2001) –Dangerous Company: Management Consultants and the Businesses They Save and Ruin. by David H. Rasiel (1999). Robert M. Thinking. ISBN 0-471-49619-7 –Managing The Professional Service Firm. Charles H. by James O'Shea (1998) –Consulting Demons. Marc Cosentino –Minto Pyramid Principle: Logic in Writing. Galford • To prepare for the case studies: –Wetfeet Ace Your Case!™: Consulting Interviews (2003. Maister (1997) –The Trusted Advisor. and Problem Solving. 3 volumes) –Vault Guide to the Case Interview (2003. Minto. by David H. 2 volumes) –Case in Point. by B. by Lewis Pinault & Stephen M. individually and with others BIBLIOGRAPHY • To better understand the work of a consultant –The McKinsey Way.

. If October sees a renewed gusto in their attempts to woo the brightest of the bright then we will feel confident that better times are here to stay. when the strategy consultancies begin their drives to entice and recruit the top talent amongst university finalists. Source: Kennedy Information – 30 Sept 2003 48 .Spending. In the UK a similar story is emerging.. preferences and perceptions of management consulting clients in the U. The renewed interest in recruiting experienced strategy consultants is the most obvious indicator that Partners expect stronger strategy consulting growth to materialise in 2004. Several of the leading strategy firms are actively recruiting once again. though mostly through discreet channels. a new report* shows there is an increased appetite amongst corporate executives for strategic advice. These last 2 years. according to the latest research. Surveying consulting clients.S.and a continued upturn expected over the next 12 months. Strategic consulting looks set to make a comeback on both sides of the Atlantic. In the US. the presence of many firms at Milkround recruiting events has been a purely token gesture to maintain brand awareness on campus.suggesting the hay days may soon be back for the likes of McKinsey. This ties in with data suggesting a US economic recovery is underway and that a refocusing on growth strategies is likely to occur amongst big corporate clients. Perhaps the most telling indicator for the sector will become clear during the next 6 weeks. Watch this space for a campus update in the next weeks. Kennedy Information found that 87% envisage engaging strategic advisors during the next 2 years . with the latest economic data suggesting the UK economy is growing more resiliently than previously thought . BCG and BAH.

18 months on and the situation has thankfully been transformed. The sustained upturn in consulting order books and market confidence has caused consultancies to re-evaluate their MBA recruitment needs and in many cases kick-start quite sizeable recruitment drives. an MBA does not appear to have lost its currency or any of its allure with the top consulting firms. awaiting their opportunity to return to a permanent career and fast-track career path when the market recovered." Source: www. Come graduation day. First up were experienced consultants whose sector-knowledge and skillsets were suddenly no longer in demand. "We are seeing firms increasingly interested .consultant-news.MBA recruiting is back Two groups suffered more than any other during the consultancy downturn of 2001-2003. Even harder hit than experienced consultants.Consultant News – 12 Oct 2004 . For all the negative talk a couple of years ago. most found they had hit a brick wall as consulting firms put an almost total freeze on MBA recruiting for the duration of the downturn. Many went to work as freelance consultants. Even those high-flyers whose MBAs had been sponsored by a consulting firm often found themselves made redundant . were the thousands of professionals that embarked on an MBA course with high aspirations of entering or re-entering consulting upon 49 . as public sector experience became far more valuable than private sector expertise. Talking to many of the top consultancies it is clear there are a raft of new opportunities opening up in the consulting sector.For MBAs the long wait is over .in hiring both MBA students and recent MBA graduates to fill a skills gap that has developed from 2-3 years of below-average MBA recruitment. though.despite the sizeable investment that had been made by the firm in their professional development.and active .

we can replace the name with Ted Snyder’s 50 . How would you handle them? • Case 2: A big Spanish wine producer is thinking about producing a blue wine. What would you do to help them make the decision? • Case 3: A developing country is considering setting up an organisation against slums. How would you advise them? * If we have more time.LET’S PRACTICE A CASE INTERVIEW • Case 1: Describe the biggest challenges Glenn Sykes* faces.

Sign up to vote on this title
UsefulNot useful