Tag: Consulting

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Update On Management Consulting Blogs

Close to two years ago (in February 2005) I wrote an original post that noted a dearth of blogs by traditional management consulting firms. Six months after that post, I wrote an update where I happened to run across a few more blogs by individual consultants.

Since that time, I’ve run into many more blogs that are associated with management consulting, such as Guerrilla Consulting, David Maister‘s blog, and the Management Consultants’ Blog.

I also ran into a few more blogs that I closely associate with big name, traditional consulting firms (either because the blog carries the company banner or is written by an executive at the firm). Note that even though the blogs likely reflect the perspectives of the individuals and not the perspectives of the company, I still have some loose mental association between the individual and the firm. In any case, the other traditional consulting firm blogs I’ve run into over the past two years are:

In the past, some folks had indicated that a dearth of management consulting blogs may have been due to concerns about unwanted disclosure of confidential information. I’ve not heard of any cases to date, not to mention any disclosures that would indicate that blog media increases chances of disclosure over other media. (That said, there are clearly cases where the blogosphere amplifies the transmission of information which could be argued increases general risks associated with corporate blogs or those loosely associated with companies).

As an additional note, I find it interesting that the four traditional consulting firms that I mention above all have a strong technology competency associated with their brand. For example, Accenture not only has a strategic management consulting practice but also has a strong systems integration practice.

Update (1/4/07): Per comments below (Thanks, Amaresh!), Diamond has a blog by its information and analytics practice. From the looks of it, it is a unique blog that sheds some light on more rigorous consulting practices that top consultants strive to implement for their clients.

Update (1/9/07): Booz Allen Hamiton podcasts here.

Update (3/8/07): Accenture has started a corporate blog here.

Update (3/12/07): Although apparently not officially attached to the "Firm", McKinsey alum Paola Bonomo commented here (thanks, Paola) and points us to a wiki of McKinseyite and McKinsey alum blogs.

Update (10/13/07): Consultant Ninja has a blog over here. Thanks for the links! Sorry I was not able to comment on your blog as it does not accept users without Google logins.

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Venture Capital Test Suggests Some Weaknesses About MBAs and Consultants

Paul Brown tipped me on Guy Kawasaki’s post on the Venture Capital Aptitude Test. (Disclosure: Paul’s kind words come from years of he and I working together in a startup where he and the other developers did all the hard work) . Thanks, Paul.

In Guy’s post, Guy gives two positive nods two areas I’ve had lead roles with (engineering & sales) and disses two other areas I’ve been also been involved with (MBA and management consulting) in terms of how it affects one’s ability to be a venture capitalist.

Guy writes about management consultants:

The three worst backgrounds for a venture capitalist are management consulting, investment banking, and accounting. Management consulting is bad because it leads you to believe that implementation is easy and insights are hard when the opposite is true in startups.

Guy writes about MBAs:

Finally, there is the issue of the pertinence of an MBA to venture capital. The upside is that such a degree can provide additional tools and knowledge (such as calculating that 25% of $1.6 billion is $400 million) to help you make investment decisions and to assist entrepreneurs. The downside is that earning this degree (and I have one) causes most people to develop the hollow arrogance of someone who’s never been tested. All told, the downside of an MBA outweighs the upside.

While I won’t address Guy’s claim about the whether these areas are good or bad for venture capitalists (as I can’t claim to be an expert about picking good venture capitalists), what I will address is Guy’s claim that "Management consulting is bad because it leads you to believe that implementation is easy and insights are hard when the opposite is true in startups" and "The downside is that earning this degree (and I have one) causes most people to develop the hollow arrogance of someone who’s never been tested. All told, the downside of an MBA outweighs the upside."

On the point about management consulting I simply disagree (with no disrespect) with Guy. Guy’s statement is an overgeneralization. There are different types of consulting firms out there, and Guy’s perspective may be more influenced by pre-2000 practices. Consulting firms pre-2000 that were focused on strategy might have more of a tendency to be focused solely on stategy, but these firms got burned by making recommendations without focusing on ease of execution. On the other hand, there were firms that grew of of an implementation background (and potentially interim management background) and moved upstream into more strategy consulting. Although markets started to overlap a bit, structurally I think consulting firms and client were better off by having this type of cross breeding.

All said, if one has not spent any time managing or working in a business role prior to management consulting, I think this can be a weak point that one needs to work on careerwise. But there are strong benefits to management consulting that should not be underestimated either – by working in management consulting, one can get exposed to the internal operations of a lot more firms than one could by working for one firm straight for five to ten years. In five to ten years as a consultant, one may have seen the detailed operations of twenty to forty firms versus two to five as an operating person.

On Guy’s point, "The downside is that earning this degree (and I have one) causes most people to develop the hollow arrogance of someone who’s never been tested."

To this, all I can say is that my hypothesis would be that MBAs may tend to attract arrogant people [who overstep their bounds in terms of what they think they’ve accomplised over non-MBA entrepreneurs]. I don’t think the MBA naturally breeds this type of person.

Overall, I think Guy is onto something when he says people should value the difficulty of implementation and value and proximity of market insight. I also think he’s onto something when he talks about arrogancy affecting the ability of VCs to do the job effectively. But Guy’s characterization overly discriminates against consultants and MBAs. What about the negatives to engineers who only think about technical beauty and miss the market need? What about the salespeople who only sold what the customer already bought and never hunted for a deal?

Updates (12/4/06): Guy here. Charlie here.

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Q&A With Deloitte Consulting On The Industry And Career Guidance for MBAs

This post has been reproduced from my BusinessWeek MBA blog. Comments and trackback only taken over at the original post.

I had an excellent opportunity to phone interview management consultant, Mike McLaughlin, about the overall management consulting industry today and about employment opportunities for MBAs in the field. Mike is not only a blogger at award-winning Guerrilla Consulting but also a principal at Deloitte Consulting LLP and the former Managing Partner for Deloitte Consulting Chicago, where he had market responsibility for a practice of 800 consultants.

Steve: Mike, it’s been awhile since I worked as part of a larger, management consulting firm. Please talk a little bit about how strategy consulting has shifted over the past five years and where things are at.

Mike: Strategy consulting has been the bedrock of the industry. There are some firms, like McKinsey, BCG, Bain, etc. that are branded as strategy firms. The market has been cyclical for other firms that are not branded that way. But there has been a market uptick, e.g., for the former Big Four consulting firms. The difference in the overall industry, however, is that there has been a slight shift. It has to do with what strategy consultants do.

Strategy consultants do more on executable strategies these days – less credenza-ware.

Steve: I like that term. I know exactly what you are talking about, but I’ve never heard a term that evokes such imagery.

Mike: Lots of management consulting firms have negligible implementation capabilities. Clients are looking for the implementation tail and a roadmap of how to execute. As a result, what we are finding is that some of the best strategy teams are those that have a mix of strategy and implementation backgrounds, whether those be in operating roles in companies, IT groups, etc. The successful consultants these days are those that have a good mix of strategy and operations background.

Steve: Consulting seems to be beginning to boom again. What’s your take?

Mike: A handful of reasons come to mind. In the decline phase of prior years, companies were battening down the hatches. Management consulting fell into the discretionary fund pool. Lots of companies got swamped. Many consulting firms were not bringing good ideas to the table. Operating companies got tired of the strategy prescriptions where one or two firms dominate. Now there are a lot of new developments around managing a company, whether this be offshoring, managing a workforce, or fostering an environment of innovation. Management consulting engagements are not coming back as mega projects. Shorter projects. Smaller teams. Plus there was an awful lot of consultants back in the operating company workforce. After 2001, consultants went out into the streets. Many of these people are buying services from consulting firms, in part because they can get high-caliber people. Current growth in consulting now is probably 7%-9% these days as opposed to the 25%-30% growth rates of the wave.

Steve: How would you recommend business school students look at opportunities in consulting versus an operating company? Would the internal consulting arms of operating companies be another good place to look if people like consulting? I saw some of these crop up post some of my engagements in the profession.

Mike: One fundamental question to answer is whether people like industry or professional services. If you like services, then people should look at things like consulting and investment banking. If one is looking at industry, then one should be looking at a functional role like brand management or finance, say. I haven’t seen internal consulting arms work. Maybe one or two companies come to mind that could pull this off. There is a lot of backwater in most of the internal consulting groups in that they either have no budget or are understaffed. Not a high probability bet to go down the internal consulting path.

Steve: What dark sides do you see to consulting?

Mike: None of this is going to be new to you, I’m sure. The upside is that one can make a lot of money in consulting. You can get about tens years of normal industry experience in about two years. You can run the risk of an extensive lifestyle focus.

Steve: You mean travel?

Mike: Travel is a good catch word for something much broader. It’s about where you are living your life. You could have consulting projects in the armpit of the world. Or there could be family issues.

Another dark side is that the longer one stays with a consulting firm, the more important the number game becomes. A drive to sell, execute, make sure that partners get paid emerges. There can be ethical challenges. Not a problem with firms like Deloitte or firms like your past firm (PRTM), but there becomes a point when the interests of the client and the management consulting firm diverge. If you cross the path of not acting in the interests of the client, you’ve compromised yourself, and you are done. No one will work with you again.
 
Steve: Since this post is geared for the BusinessWeek MBA Blog community, can you give some tips for current b-school students on interviewing.

Mike: Consulting firms like Deloitte are looking for talent. We don’t care what course you took. Be yourself. Let the talents come through but not in an arrogant way. We want to see how you think on your feet. How this is done at Deloitte is through the case interview. A decision is pretty much made on the spot. There are diminishing returns for multiple interviews. The importance of using business school frameworks and practicing for the case interview are more for the purposes of freeing yourself so that your talents can show through. Not so much for the process itself.

The other aspect of interview is what I call, "passing the airplane test". This is the cultural stuff. As an interviewer, can I bear to be with this person ans sit next to him/her on an airplane? Can I put this candidate in front of a client?

Steve: How does Deloitte manage to make sure that interviewing does not fall into the trap of the Pepsi sip test, where the short interview and trial does not reflect how the person will actually work out in the long run?

Mike: The trends are way up at Deloitte in terms of only making offers to people that have done internships with the firm. If you didn’t intern with Deloitte, then we will make these candidates jump a higher bar.

Steve: Was great talking with you live for the first time as opposed to exchanging emails. I’ll let people know that if they have any questions, they should feel free to post comments to my blog, and I’ll pass on to you so that you have an opportunity to respond.

Mike: That will work great.

P.S. by Steve: If you don’t use a newsreader, consider using something like NewsGator and add Mike’s RSS feed to your reading list or subscribe using Bloglines. High value and free cost!

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Services Offered

Freelance consultant. Provide both interim management and business strategy, marketing, and operations consulting services to clients. Specialty sectors include high-tech, software, services, and communications/telecom. Sample services include:

  • Outsourced management for growth-phase companies (business development & general management)
  • New business initiatives and product introduction
  • Operational diagnostics and change management
  • US market entry for international ventures
  • Business and marketing plan development

Post updated (March 2009).

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Empathy Versus Sympathy In Management Consulting

I’ve had some interesting discussions on how corporate politics play a role when consulting to clients. Perhaps I have a parochial view here.

My take is that consultants should take no part in corporate politics.

It was a lesson that I learned early on while at the management consulting firm PRTM (a great firm to work for BTW – see Consulting Magazine PDF here).
Here’s the rationale for "no politics": consultants are often brought in to make things
better. Clients pay a premium for consultants for any number of
reasons. One common reason is that consultants are supposed to be
unbiased third-parties. If one gets consumed in politics, there’s not
enough focus on motivating everyone to get to the end goal.

Here’s another distinction (my own wrinkle) as it relates to consulting:

  • In consulting, empathy is the ability to understand what a person is going through.
  • Sympathy goes one step further. One not only understands a person but also agrees with the person on an emotional level.

Sympathy can be the "dark side of the Force". Suppose one is working
within a business unit (sponsored by one of the EVPs) and there are two
VPs below the EVP that don’t get along with one another. You are alone
in the office with one of the VPs that you may like better from a
personal chemistry point of view, and this VP starts to bad mouth the
other VP. If you join into this sort of thing, while you may be
ingratiating yourself with the one VP, you are hurting the client by
participating in politics. Bad mouthing is just not constructive. In
this sort of scenario, you should probably consider something like
letting the VP know that you can understand why he/she might feel this
way but that as a consultant, you can’t have any part in this. Other
good options would be to try to get the VPs to work it out
face-to-face. One may also want to probe a bit with the VP to see if it
is a worthwhile thing to bring things up with the EVP if the
disfunctionality is hurting the productivity of the business in a
significant way. Junior consultants should probably also consult with
their firm’s primary manager for the engagement, especially before
escalating things to the client sponsor level.

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Management Consulting and Solution Building (Part 1)

In a prior post, I set a backdrop on some posts I would do on management consulting. The first topic will try to capture some styles of building the solution (I call these underlying flavors of management consulting).

In Ethan Rasiel’s book, "The McKinsey Way," he outlines the problem solving process as having three attributes:

  • Fact-based
  • Rigidly structured
  • Hypothesis-driven

Fact-based consulting is something that the majority of top, traditional management consulting firms practice. It is something I practice now and had practiced while at Pittiglio Rabin Todd & McGrath (PRTM). Fact-based consulting requires a lot of legwork to gather data, interview information, reports, benchmarks, etc., but it is about the only thing one can rely on to build an iron-clad case for a company. It provides value to clients because clients sometimes learn things they did not know collectively as a group. It also provides value to the consultant because in many cases, while the consultant may know less about the specific operations of the client, the consultant can draw on new facts gathered and experiences of working with other companies (or benchmark data).

On the second point of being rigidly structured, Rasiel’s book talks about the pervasive McKinsey thought structure of MECE (pronounced "me-see"), which stands for "mutually exclusive, collectively exhaustive". I like this structure. It reminds me of core computer programming techniques of case statements and engineering analysis related to breaking down larger chunks into orthogonal and comprehensive components.

Now McKinsey tends to be more of a generalist strategy firm than PRTM or the type of consulting I practice. In general strategy consulting firms, consultants may work in a wide varieties of industries before specializing. Thus, at firms like McKinsey, one could be working on a dog food manufacturer on one project, a valve manufacturer on another, a financial services market entry project, etc. McKinsey clearly has more detailed consulting frameworks for attacking problems, but MECE seems to be a good core framework.

Management consulting firms like PRTM, on the other hand, have historically had a different structure. In part, it is because PRTM is less than 1/10 of the size of McKinsey (say 350ish consultants versus 4500ish [don’t quote me on exact numbers]). In the Eastern region of PRTM, consultants join a practice in a particular industry space, and they are usually expected to have experience in that space prior to business school. While I was at PRTM, I was in a sector that covered telecommunications companies, and to a lesser extent, companies in the software space. PRTM tends to have management consultants that have both science or engineering degrees, plus an MBA from a top-tier business school. If you didn’t have some of this background, you’d better be an exceptional leader and client driver (times two at least). On top of having less of a generalist structure, PRTM has historically fortified around three functional areas: product development, operations and supply chain management, and customer service operations. Over the years, PRTM has expanded and fortified around strategy, marketing and sales, and strategic IT management (see home splash page), but it has grown out of the core competencies in the three first areas I mentioned (more or less). These are the core aspects of high-tech firms anyway, right? How all of this affects the problem solving structure for PRTMers, is that the consulting method tends to de-emphasize intellectually-driven approaches and focuses more on a core motto of "results not reports". What this means is that PRTM consultants are more focused on being facilitators and leaders of client projects and less intellectually-driven. This is not to say that that PRTMers are not intellectual and smart – most certainly they are – it’s just that when the rubber hits the road, if push comes to shove, consultants would probably throw a report out the door in favor of helping a client move forward with results that stick. Pragmatism over intellectualism.

I should note that in Rasiel’s book, he does indicate that it is best practices for McKinsey consultants to only make recommendations that can be implemented based on client capabilities, bandwidth, etc. – "all roads lead to Rome" so to speak in my book when it comes to providing quality consulting services. I just wanted to point out the difference in flavor between the two firms. FWIW – I tend towards being a pragmatic person, but I have a wife who is both an academic and former consultant with ZS Associates. I’ll let you decide what style of consulting I practice.

On the final point of being hypothesis-driven (i.e., developing formulations of what the options are for improving the business), what struck me about Rasiel’s depiction of McKinsey was how front-loaded the process was in terms of brainstorming and coming up with hypotheses. Some of the team sizes were characterized as quite large, but more importantly, the intensity of the up-front process was striking. In essence, developing the hypotheses in an exhaustive roadmap and then being able to test each branch is very methodical. It also reminds me of a core team under pressure type model that breeds excellence.

People probably have differing experiences at PRTM. From my experience, I would say that we typically either had a core framework in advance of the project (e.g., improving product development cycle-time) as a baseline or used more of a facilitative approach to working with the client to determine the best way to proceed. Hypothesis testing was more typically pursued slightly later during project execution. I would say that this probably has more to do with the fact that the majority of the PRTM projects I worked on were implementation-oriented or strategy + implementation-oriented. At McKinsey, the firm historically grew out of strategy into more strategy + implementation projects.

In any case, some of the differences seem to stem from both market & product focus and where the companies came from. Worthwhile to be aware of when considering these firms (e.g., as an employer). May also shed some light for companies that are looking to use management consultants (i.e., is there a particular style that will serve your specific situation better?).

Steve Shu

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Management Consulting and MBAs (Part 0)

Over the past few weeks I’ve been getting an increased amount of traffic from three groups of readers (as far as I can tell):

  1. those pursuing MBAs or contemplating MBAs
  2. those seeking information on McKinsey
  3. those seeking information on PRTM (see below).

Let me give a short preface by saying this:

  • I am not a McKinsey alum, but there is a post I wrote about a lack of management consultant blogs – this appears to have attracted some attention (here)
  • I have a number of McKinsey alumni friends whom I compare notes with (to the extent allowed by ongoing confidentiality obligations to either PRTM, McKinsey, or clients of these firms)
  • I am a present freelance management consultant, and I am an alum of the firm Pittiglio Rabin Todd & McGrath (PRTM), a relatively well-known firm at the top 20 business schools or so
  • I have an MBA from the University of Chicago

Given the above, I thought I would write some posts that compare both PRTM and my freelance management consulting practices to the McKinsey practices outlined in the well-known book by Ethan Rasiel, "The McKinsey Way". Although I am slightly late in terms of typical business school recruiting seasons, perhaps these posts will be of interest to those looking to gain more insight to the profession. Anyway, Ethan’s book is an excellent introductory book on general management consulting, and many of the practices can be used as a general manger within a company as opposed to just a consulting firm. Whether Ethan’s account is an accurate representation of all vintages of McKinsey consulting, I cannot say because there has been some shifting around in the past five years. That said, his book is likely not too far off in terms of breath. It is definitely a great foundation to base a discussion on because it is publicly accessible by all.

In the interest of full disclosure, I should also mention that, in general, I am a fan of both PRTM and McKinsey. I do not plan to make any disparaging remarks about either firm, and I will tend to highlight my perspectives on greatest strengths as opposed to weaknesses. If I highlight weaknesses, they will likely be directed at the general industry.

Posts will be forthcoming. Stay tuned.

Steve Shu

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Musings on a Management Consulting Premium Puzzle

This post was motivated by a recent social meeting where my friend and I talked about the management consulting industry. Both of us are University of Chicago MBAs, and as such, I think it is fair to characterize that we believe in the notion of mostly efficient markets, i.e., where buyers and sellers reach fair prices for doing business in aggregate.

Now there are a number of examples in behaviorial finance, economics, and finance areas where puzzles exist and where free market theories do not seem to hold. For example, there is the equity premium puzzle, which tries to address why required rates of return for equity securities is so high relative to risk-free rates of government bonds. There is also the closed end fund puzzle. In this case, it is perplexing why funds comprised of individual stocks trade (when the fund is closed) at a deep discount of the total sum value of the stocks. It seems as there would be close to a riskless opportunity (called an arbitrage opportunity) for someone clever to buy up the entire fund and then sell each of the shares of stock for a profit (even net of transaction costs).

So here’s why I called this post the "Management Consulting Premium Puzzle". My friend basically questioned why management consultants should be able to charge so much money for their services over the cost of using existing employees (to put this in some perspective, average annual billings for the larger consulting firms can go anywhere from $400,000 to over $1 million per year per consultant). Even though I am a management consultant (now freelance), I didn’t take this as a shot at me. I have worked in both camps numerous times, and I can see valid arguments by both operating managers and consultants as to why or why not consultants should have high premiums.

Part of it comes through calibrating the value of management consultants (as I’ve posted before), but there is another way to look at this. Consider some typical questions operating company managers raise:

  1. is there value to having a third-party facilitator (the management consultant) that is apolitical?
  2. is there value to outsourcing this vs. insourcing?
  3. is there value to having a consultant that has seen other businesses?
  4. is there value to having a specialist consultant?
  5. is there value to having extra bandwidth to get over a hump?
  6. is there value to having a high-caliber resource for a temporary period?
  7. is there value to having a well-known brand consulting firm involved (e.g., no one got fired for hiring McKinsey or IBM)?

My gut feel is that the answer to at least five of these questions must be yes for a company to feel very comfortable in using an outside consultant. Therein lies the reason for the premium.

What would be an interesting study, however, would be to run a statistical analysis that regresses the $ cost of using either internal employees or outside consultants against the factors above (although the factors above are not entirely orthogonal). By doing this, one could get a more scientific idea about which factors clients weigh most and how much those factors contribute to the value proposition (in terms of $, how much value is attributed to the brand, etc.).

Steve Shu
Managing Director, S4 Management Group

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