One of the most challenging and sought after careers for an MBA student is consulting. The term consultant though has been one that has been overused and abused over the last two decades that it has somewhat lost its glory and shine. But this shouldn’t diminish the value that the profession brings to the individual, the firm and the client.
Here, the individual, of course, is the MBA student and the prospective consulting professional. The firm is the company that hires the consultant to provide services to the customer, almost always called the “client”.
So what exactly is consulting and how did it come about?
Over a 150 years ago, the US and UK were emerging from the industrial revolution and were experiencing extraordinary periods of innovation and growth. Companies were looking for employees with expertise in specific areas, such as accounting, taxes, and financial management, but didn’t need them to serve full-time because there wasn’t enough work to last throughout the year.
Smart businessmen, such as London’s Samuel Lowell Price, in 1849; William Welch Deloitte, in 1845 and William Barclay Peat, in 1870 saw an opportunity to start firms that would professionally serve such companies. By hiring smart employees and continuing to invest in their training, these firms farmed out their employees to provide advice to clients on a short-term basis. Billing was generally based on the number of hours of service provided, a novel way of charging clients not only during the 19the century but as a practice it survives to this day.
Today, the likes of PwC, Deloitte and KPMG are three of the largest consulting firms in the world. The fourth, Ernst&Young, also traces its history to the 1850s. Together they are known as the ‘big four’. A 2008 US government report found that more than 95 per cent of all companies listed in the NY Stock Exchange had their books audited by one of the Big Four.
In 2014, the combined revenues of the Big Four exceeded $100 billion. They are run like franchises with partnerships establishing offices in each country, all loosely combined to form a massive network under one brand.
Deloitte has over 200,000 employees in 150 countries.
Like a law firm, a consulting firm acts as a trusted advisor to its clients, but rather than dispense advice about the law, it provides specific advice on matters of various business interests.
Questions such as: in which country should a company next invest to grow? Should a company diversify its product line, say from being a motorcycle producer to include cars? What are the risks involved in entering into a merger with a competitor? Questions like these call for strategic thinking and boards of companies are generally unwilling to take such decisions on their own without seeking advice from an elite strategy consulting firm such as McKinsey, BCG or Bain.
Once a company has decided on a business option, such as acquiring a competitor to expand into a foreign market, it often retains the services of a consulting firm to conduct due diligence on its acquisition. Does the acquired company really have all of the assets listed in its books (as was offered during the merger discussion)? Does its balance sheet look sound?
Many mergers and acquisitions are often contingent upon independent validation by the acquirer’s audit firm.
Then is the tough task of integrating the two companies’ business practices and technology infrastructure. Sometimes the target company’s business processes may be better than the parent’s. The acquirer may be working on the SAP platform but the acquired may be an Oracle shop. Management and technology consulting firms, such as Accenture and IBM Global Services, are often hired to plan and execute such massive integration tasks. And these are complex because the two companies have to continue to serve their customers and stakeholders during the integration.
Fixing a plane while in flight is never easy but these firms often help achieve success by working tirelessly behind the scenes. And after the companies are integrated, there is always the important task of maintaining optimal performance of their systems — an area of business dominated by the big Indian IT majors.
It is not always that these consultants know exactly what they are doing because they learn on the job often at their clients’ expense. But what make them especially valuable is that they record their experiences and lessons in knowledge libraries back in their offices so that they could take the experiences of one client to the next client.
Over time, their knowledge databases becomes such vast storehouse of best practices that even large companies, such as a GE or a GM, find it beneficial to turn to the consultants for advice.
Work with the best
For the employee, consulting compensation packages are better and opportunities to travel are plenty. But perhaps the best reason to be a consultant is the intellectual growth that takes place. Consultants get to work with some of the brightest people in each industry and acquire better communication skills, a key factor for business success. And no other profession offers an individual the opportunity to work in such a diverse range of industries.
The major disadvantage of a career in consulting is the burnout from long work hours and sustained periods of travel but these should be a minor consideration for any young MBA. A career in consulting has great prospects especially for an MBA holder. So, go for it.