In this post Chris (an Australian investment banker) explains why management consulting is a preferred option for him, versus investment banking.

As I mentioned in previous posts, I have an internship lined up in a bulge bracket Investment Bank at the end of the year. (The Australian summer is in December). I have had a lot of doubts about pursuing banking. I think management consulting is a better fit for me.

I will first explain what I want:

• Create value: I don’t want to perform a function. I want to create value.
• Nature of the work: I want to be constantly challenged by a diverse range of work so that I will get exposure to different industries and aspects of a business.
• Lifestyle: I want to work hard, but not brutal hours. I would still like some sort of life outside of work.
• Networking: I want to be in an environment where I am constantly meeting new people.
• Money

Value creation

Banking vs. Management Consulting: Even split

I believe both bankers and management consultants perform a function rather than creating value. Bankers are agents that facilitate an equity raising or advise on the approach and financing methods in a takeover bid.

Whereas a consulting house could be looked at as a “body shop”:

1. Management has an idea but has no time to explore it.

2. Hires consultants to explore the idea.

Or

1. Management wants to implement new strategies but require some sort of “objective expert opinion”.

2. Hires consultants to do a fancy report on the feasibility of the strategy so that they can bring the report as an important supporting document to the board of directors.

Consultants do not execute the recommendations either. This makes the work very wishy-washy.

I believe neither consultants nor bankers create value. But consultants have far better exit opportunities into a wide range of industries where I will have the opportunity to create value.

Note: by value creation, I mean creating something out of nothing, like establishing a new line of products.

Nature of work

Banking vs Management Consulting: Consulting wins

Consulting wins in this category in a few steps:

1. Heavy Client interaction – Constantly meeting new people is the most rewarding and satisfying part of a consultant’s work. I believe that the opportunity to have exposure to business leaders and decision makers will be one of the most rewarding aspects of consulting.

Banking on the other hand, especially in a junior role, will not give you the exposure to meet clients. In fact, you will be stuck in the office 80-90 hours a week.

1. Extensive development of presentation skills – This is the cornerstone of consulting work. Furthermore, these skills will be extremely valuable for excelling in any field.

2. Project planning and execution – In banking, especially in a junior capacity, you are given tasks, such as: update the numbers in the model, building a graph for a presentation. In management consulting, you own a piece of a project. You have set your own deliverables and timeline. In consulting, you will develop the ability to be independent.

3. Diversity of work – I left this part till the end, because this is crucial. Investment banking is known for the repetitive nature of its work. From what I understand, consulting also comes with a lot of grunt work. However, consulting gives you the exposure to different sets of projects throughout the year whereas banking has a very narrow focus. (A friend of mine is currently in the natural resources group within the M&A product team. Imagine how much variety there is!)

Lifestyle

Banking vs Management Consulting: Consulting wins

1. Hours – Consultants work hard, but you still get enough time to yourself to have a life outside of work. Banking hours on the other hand are brutal. I want to work hard, but I still want to keep a life outside of the office.

2. Travel – Consultants spend a lot of time on the road. I have no strong opinion on this yet. The pro: the travelling aspect of consulting will make some interesting stories to tell down-the-road and will be valuable life experiences. Con: Flying to a project at a coal mining site in the middle of nowhere might be exciting at first. I am sure it gets old very quickly. Yet, this is valuable and interesting life experience. Staying in the office for 18 hours a day doesn’t give you a lot of stories to tell.

3. Co-workers – Bankers have a reputation of being, put it eloquently, arrogant. Whereas consultants that I have met typically are a lot more courteous and humble. This could be due to the client facing nature of consulting. The other upside of consulting is that you get people with more diverse experiences and interesting life experiences. But this is also the downside of consulting. Banking analysts are typically young, fresh out of University. I often hear that it is like a frat house in a bank. I don’t think this is the case in consulting.

Networking and exit opportunities

Banking vs Management Consulting: Management Consulting wins

This is linked to the diversity of work and heavy client interaction.

In consulting, you meet a variety of clients and build your professional network very quickly. Furthermore, your consulting colleagues also move onto a vast range of fields.

Investment banking on the other hand does not provide the same exit opportunities. M&A bankers often move into Private Equity or some sort of venture capital work afterwards.

Salary

Investment banking wins by a huge margin

As an intern, my base compensation is higher than a management consultant from BBM. In Australia, some banks pay a base compensation of 30 percent higher than a consultant from BBM. There is no argument here.

Don’t forget that in banking, bonus could be anywhere between 30 – 50% of your base in Australia. In other places, it could be 50% – 100% of your base. (Australian Investment banks pay higher base but lower bonus).

Consulting aligns with what I want a lot more than Investment Banking does. The money really doesn’t matter.

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Monty is a principal with Deloitte’s Strategy & Operations practice in the tri-state area, primarily working out of the New York office. He holds an MBA from a top-5 school, an engineering degree and has worked around the world for Deloitte.

Could you introduce Deloitte Strategy & Operations, Deloitte Consulting and Deloitte to our readers?

Deloitte is a global professional services firm based in the UK; it is no longer a Swiss Verein. It comprises of tax, audit, consulting and financial advisory services as the core businesses. Each of these divisions is wholly owned by Deloitte, although the employees belong to separate legal entities – partnerships as you call them on the blog.

Deloitte Consulting is one of the largest divisions hiring tens of the thousands of consultants. Consulting focuses on human capital work, technology and strategy & operations (S&O). There are other areas but these are the largest of them all. So S&O is the part of Deloitte Consulting which only focuses on strategy and operations work. Leadership and organizational design consulting, for example, would be done out of Human Capital and technology consulting work would be done out of technology consulting.

S&O is large and growing rapidly. It is a multi-billion dollar business, the largest strategy and operations consulting team worldwide by revenue and has a presence in 75 countries around the world. We are structured around a number of focus areas: strategy, operations, innovation, cost reduction, supply chain and finance transformation. We have about 15,000 consultants in the practice worldwide.

Tell us about the culture of the firm?

The culture is one of being collegial, innovative and driving excellence. We see ourselves as a home to consultants who want to stay and build a long-term career, and not just race to the top. Therefore, we do not have an up or out policy. That said, poor performers will be asked to leave, like in any firm which cares about its clients. Without this pressure of constantly needing or having to impress, Deloitte consultants can focus on solving problems. We believe in executable strategy, strategy which can be implemented by our clients, and that is what counts for us. Our culture is about encouraging people to seek opportunities to develop ideas and solutions which work for clients.

That said, we do creative things and inspire excellence. We have strong relationships with the Harvard Business School, Stanford GSB and other top schools. To bring in these top people, we need to do inspiring work and make a meaningful impact at clients. So the culture is very creative and we do our work in a collegial way. We compete for the clients and not against each other for personal gain.

On a lighter note, we have so many Indians working in some of our offices that Diwali leads to the office being almost deserted. This is not just in India. I am talking about Manhattan. Deloitte S&O has a culture which embraces diversity.

Is there a memorable engagement or story which shows Deloitte’s rise in management consulting?

Yes, one more than any other shows our rise. When HP and Compaq merged, Deloitte S&O, McKinsey, BCG and another firm were in contention to help with the post-merger integration. After a tough process of getting to know the client and really understanding what they needed to make this work, we submitted a formal proposal. At the time, the odds were stacked against us and although Punit Renjen pushed us to go for the work, I think internally we were worried whether we would get it. HP did give us the work. One of the largest ever post-merger integration engagements in the US.

The McKinsey partner actually called the HP executive and asked why Deloitte was awarded the work over McKinsey!

That award, and the way we overwhelmed our competition, along with their response shows that Deloitte S&O has been playing in the highest levels of management consulting for a long time. It is just that only after we started sharing what was happening “under the engine” that people have realized there is much more going on here. For example, we set up special sessions with Kennedy Research so they would not make assumptions about the business but understand what we are actually doing.

Let’s talk about some landmark engagements which Deloitte runs, which our readers would typically expect to go to McKinsey and BCG.

I will have to be careful in answering this and will only speak to engagements which do not give away confidential client data. The first one that comes to mind is us helping execute a strategic rebalancing of Agilent’s business unit portfolio to help position several multi-billion dollar global divestitures. We concurrently performed a global cost reduction program targeting $450 MM in annual cost savings (38% reduction). The fees for that engagement were up in the low $20M.

I also do not want the readers to think that Deloitte S&O only performs major work in the US. I want to talk to some landmark projects outside the US. Turquality comes to mind – this is in the media. Our Turkish office, with strong support from the Dutch, German and UK offices are helping to literally transform the Turkish economy. We helped the Turkish government review all Turkish companies across all sectors and find those who could be helped, through improved strategies and business practices, to become more profitable and stronger. This 4 year engagement is the center of Turkey’s plan to make sure its economy can grow, and the results speak for themselves. At its peak, we had 40 consultants on the engagement generating fees well in excess of $40MM.

We helped ABM set the strategic guidance for all Mexican banks on pricing, growth and technology adoption. Deloitte S&O developed an interchange fee structure for card transactions in the Mexican banking system to maximize growth of electronic payments for the domestic network while optimizing benefits. Just a couple million dollars in fees and this engagement was of great importance to the Mexican government and economy.

In another engagement, growth for CNN International had slowed as multi-channel TV penetration peaked and profitability was being challenged by local channels. We delivered a real and robust growth strategy, adding incremental revenue exceeding $100MM. This engagement was led from the UK practice.

Finally, Bluescope Steel faced increasing maintenance costs and needed sustainable cost reductions. We beat all our peers to design and deliver an improved maintenance program, enabling a data-based approach to find and resolve bottlenecks. The fees exceeded $2MM on this engagement.

This list can go on and on. Yet, I think your readers get the point. We do great work.

Why do you think many, rightly or wrongly, consider Deloitte tier-2? For the record, I do not like that phrase much.

I just think people need to take more time to learn about Deloitte and not go on perceptions and hearsay. For example, you taking the time to ask these questions is a good example of what candidates need to do. You would not be asking these questions if you already knew about Deloitte. Granted, we should be doing more to make it easier for candidates to learn about Deloitte S&O. I have for long time advocated a separate website to address this issue and I think that will help. However, even without the separate website, as I explained earlier, we still do outstanding work and a serious candidate would dig behind the misperceptions to find out what is happening.

What is happening with the Deloitte Review?

It is still going strong. It is the flagship publication of Deloitte S&O and captures our best thinking. It can be found on the Deloitte website. There are plans to expand the review and I think in a year it will be a very different, and more exciting, initiative.

Tell us about the strategy laid down by Punit Renjen (previous S&O leader) and the results so far.

Punit’s vision was simple. He wanted us to be within the top-3 recognized consulting firms by 2009. Granted, we are still not there on the general market perception, but he made huge strides, and we are there in terms of quality and client perception. We now have one consistent and unique identity and branding worldwide. The momentum we built attracted a drove of McKinsey, Bain and BCG partners to come across to Deloitte S&O. Profits surged, we started winning major assignments and recruitment went through the roof. We are one of the largest recruiters of MBA candidates worldwide. In terms of eminence, Deloitte partners wrote more books than most of our peers last year and we repositioned the Deloitte Review.

He also had some specific themes he pushed very hard. He pushed hard on training and teaching the consulting fundamentals, as well as giving recognition through internal awards. He also worked aggressively to integrate the different offices around the world and encourage cooperation. He pushed heavily into improving our practices in cost reduction & shared services, growth & corporate strategy, supply chain and M&A. Finally, but not least important, he focused on raising salaries, fixing our business and training models, and developing more support systems for consultants.

All good news, but most importantly, Punit showed our clients that we were their best partners for their business and he changed the markets perception of Deloitte.

Why was Jeff Watts, a partner leading the smallest S&O practice (Japan) appointed to succeed Punit Renjen?

I am not sure if Jeff led the smallest practice! However, even if he did, should size correlate to ability? Jeff is a widely respected partner, who was groomed to work in one of the fastest growing regions in the world. No one questioned Dominic Barton’s appointment to lead McKinsey from South Korea and the logic is roughly the same. Jeff had the values the firm needed and had exposure to a key region.

That’s the first time I have heard Japan referred to as “one of the fastest growing regions in the world.” Let’s talk about Deloitte S&O around the world.

I meant Asia-Pacific in its entirety. As mentioned earlier, we are in most major countries and cities. We generally served about 30% of the largest companies in all economies where Deloitte is present. In major economies Deloitte S&O serves up to 80% of the largest companies.

Let’s talk about the implications of having separate P&Ls across Deloitte S&O. How do you manage the challenges associated with this?

There are definitely challenges, but we manage them well. The fact that we continue to grow aggressively would show that our clients feel we are handling things very well. S&O has 91% of work from repeat clients. That is a figure we are proud of. Logically, we want that to be lower, around 85%, and still grow, since it implies we are bringing in new clients.

What about staffing? Why would the Australians, for example, put in place an international team and “give” revenue to another partnership at their expense?

They would rather have 30% of a big pie versus 100% of a tiny pie. Seriously though, yes it does happen at times, but that is normal with human nature. When it counts, the partners will always do what is best for a client. Our clients will bear testimony to this.

So the UK partnership (separate P&L) is buying up partnerships across Europe, the US led partnership (separate P&L) is buying up practices in South America and others are doing the same. What is the end-game?

If we can manage the risk of integration, then integration is the end game. But I am skeptical we could.

I have always wondered this. If Deloitte Consulting has a separate technologies consulting practice from S&O, who is on the technology strategy projects? Is it the SAP implementers?

Yes and no. Technology strategy projects are led by our technology practice, but if needed, S&O will have people on the engagements. It depends on the nature of the engagement. Our strength is our ability to form teams which have strategy depth, technology ability, finance skills and more. Is there any firm in the world today which can help you restructure your entire technology base, run your IPO, develop and carry out your strategy, align your organization’s culture and finally make all these pieces work? We have a unique base of skills.

What is the S&O practice looking for in new hires?

Passion, intellect, a track record of accomplishments, entrepreneurial nature, inquisitiveness and a bent for interesting work. There is no need to be obsessed about your school, GPA, GMAT Score and so on. We look at the application in its entirety and rely heavily on the fit and case interviews. I think the most important thing is to be sincere. We can quickly see whose resume, background and style does not mesh.

What is the application process?

Although we have peak seasons for recruiting, we look at talented people all year round. So it is best to contact the office you would like to join and get advice from the HR team.

We also work through campuses and you should see if we visit your campus. If so, try to attend our sessions and learn more about us.

I have offers from BCG and Deloitte S&O. Why would I pick you?

If you want to learn, grow as a business thinker, add value to clients and join the world’s fastest growing, and largest, strategy and operations team, you will want to be one of us.

And the salaries?

It really depends on the country and level. Depending on who is reading this, the numbers may be irrelevant. I can say that we offer highly competitive salaries which match or exceed our peers.

Do you have any fast-facts or memorable sound bites to remember?

These numbers are just for Deloitte S&O and not for Deloitte Consulting!

• We are committed to management consulting for the long-term and did not cut or sell the business during the last 3 recessions/downturns
• ~ $3bn revenue
• ~ 15,000 consultants worldwide
• Fastest growing management consulting firm worldwide
• Largest management consulting firm worldwide
• Presence and opportunities in every major city and country
• Exposure to landmark clients on critical projects
• Rapid growth opens up tremendous promotion opportunities

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“From the first day of working in industry she realized that management consulting is her true calling “

Ali emigrated from the Former Soviet Union with nothing. Ten years later she holds undergraduate and MBA degrees, having achieved both cum laude with highest distinctions. She is a director in a Fortune 200 company. From the first day of working in industry she realized that management consulting is her true calling and is the best reflection of who she is. She aims to go back to consulting within a few years, after serving out her current role so as to depart on “good terms.”

Between Sep 2013 and Sep 2014, Firmsconsulting is running The Women Premium theme. This article is part of our Sunday Routine series focusing on the theme by exploring the lives of some remarkable female clients in our program.

***

RISE AND SHINE I wake up between 6-8am, depending on how late I went to bed the night before. The first thing I do is make myself a cup of green tea and I have it with few pieces of dark chocolate while reading the New York Times for about an hour.

CARDIO, YOGA AND PODCASTS Next I put on my gym clothes and do a cardio workout, usually aerobics, for about 45 minutes followed by yoga for about 15 minutes. I don’t enjoy doing cardio. I do it because I have to. I listen to podcasts while I am doing it. The podcasts I am now listening to are usually some combination of HBR Ideacast, the McKinsey Quarterly, McKinsey on Finance, BCG Perspectives, Econ Talk, Economist, and some podcasts targeted at financial services professionals. On the other hand, I love doing yoga. I try to do sun salutations later in the day as well. I feel my body needs it.

CHORES After a quick shower and grooming I do chores. I head to the convenience store to buy whatever we may need for the day. Sometimes I may walk to the office to pick up some work and bring it home. When I first joined the bank, I worked at the office every weekend from 8am until about 8pm, but recently we were given an option to have a laptop instead of a desktop and now I can work from home on weekends. I also no longer need to work such long hours as I cut back on my oversight of some internal projects, for the division leadership, I used to work on. The return on investment of my time and energy to assist with such projects was not sufficient to justify my further involvement.

WORK I try to finish my banking related work before 2pm, so I can get few hours to work on a strategy article that I am researching and writing, and for my general reading and professional development. I loved my previous job as a management consultant. After completing my MBA, I thought it would be an opportunity to get industry experience. I always loved financial services projects and thought banking will be a good fit. I could not have been more wrong. I felt deeply unhappy doing my job on every single day ever since I left management consulting. This switch also made me realize how lucky I was to find the work that I really love earlier in life. Now it is a trick of moving back to management consulting after serving in a demanding role that I committed to while trying to leave on exceptionally good terms. I am working on the strategy article because I miss management consulting work too much and this allows me to do consulting work of my own. I previously published two articles in prestigious journals and both were well received, so my fingers are crossed for the 3rd article which I think is my best piece so far.

This switch also made me realize how lucky I was to find the work that I really love earlier in life. 

LUNCH From 12 noon to 1pm my husband and I take a break as both of us work on weekends and we have lunch together. Usually it is some kind of baked dish as both of us don’t have time to cook. It is often crab cakes or chicken and some vegetable such as mushrooms or green beans. We try to eat healthy food so we try to stay away from red meat and pasta. We may have a half of a glass of wine with lunch.

BACK TO WORK From 1pm or shortly thereafter we are back to work. I am wrapping up my banking related work so I can start on my own work. At some point during the day, when I feel my mind is getting tired, I will do my weekly cleaning of the house which usually takes at least 1.5 hours. I clean the floors, bathrooms; do laundry, dusting and ironing. All the things that are an extreme waste of time but have to be done. I plan to hire someone to help with this in a few years. I listen to podcasts while cleaning the house. Then I am back to doing my work.

CALLING THE FAMILY In the afternoon I will call my family via video call on Skype. I wait for when they come online, and this is not always predictable. All of them are still back home, living in the same apartment as 10 years ago. I miss them very much. I have a big family, with 3 siblings and my parents. They gather around the computer and we talk about what happened during the week and what is ahead for the week to come. If my sister is at home, we always try to carve out some sister talk-time for just the two of us. My sister is almost 10 years younger than I and leaving her back home was probably the hardest thing I ever had to do. The plan was for her to come and join me, but life happened and she most likely will marry a local guy and build her life in my hometown.

DINNER At around 6pm we may have dinner. It may be just popcorn and a glass of wine. Both my husband and I don’t eat much. I suspect it is because both of us live in front of the computer due to our line of work. While eating we will watch something on TV. Usually it is a TV show such as Elementary, House of Cards, or The Good Wife. After dinner we usually will go for a walk in the city. We try to go and see different parts of the city. I am in constant search of a nice coffee shop but I could not find one for years. Maybe I need to lower my standards or open my own coffee shop. At the end of the walk we likely go to buy groceries for the week. The store is about 20 minutes walking distance away from our apartment, and if bags are not too heavy we will walk home. If we buy too much, we take a taxi.

FINAL TOUCHES AND UNWINDING At around 8.30pm or 9pm we will be back home. I do a couple of things to prepare for the week, such as ironing my clothing and packing my lunch for the next day. Then we will read in bed for a while. My husband will read news and magazines on the iPad and I will read HBR or some book. I usually read a few books at the same time. I love business books, especially memoirs of successful entrepreneurs or CEOs, such as “Tough Choices” by Carly Fiorina and “Steve Jobs” by Walter Isaacson. The amount of time I spend reading certainly does not reflect how much I love it. We usually put the lights off around 10pm to get some sleep as I am up at 5.30am during the workweek.

Emerging Leader Career Dialogue

At the campus with muted red bricks and mortar, Firmsconsulting will again provide an opportunity for outstanding young consultants to spend a day with 3 of our partners – former principals and directors of McKinsey & BCG. In an early 20th century Victorian mansion, our partners will candidly unpack the likely challenges for incoming BCG, Bain and McKinsey analysts/associates/consultants as they begin their consulting careers.

We want to share our unique personal experiences on the path to partnership, and discuss the challenges you may encounter in managing cultural differences, finding mentors, leading your first engagement analyses and building client relationships. For female consultants this may include balancing the personal wish to raise a family, with your career ambitions. The event focuses on the first 2 years of your career.

To ensure discussions of substance, we are limiting participation to 6 exceptional students from any school in the US, in any field of study, who will be commencing their consulting careers anywhere in the world after 1 May 2014.

Format

Given the intimate size of the group, participants will be expected to engage in a free-flowing dialogue as we discuss the issues above, or any others raised during the day. To encourage such candid discourse, we do not have a prescribed format for the day. There is a central room with couches where bespoke one-on-one or group discussions can take place around a wood-burning fireplace. There are no fixed times or slots apportioned and we encourage you to spend as much time as you need with an individual partner, or with as many as you would like to.

To foster an environment where you can unpack especially private circumstances which may impact your career development, a private study has been set aside as well as an outdoor path to enjoy the foliage colors and jointly reflect on your choices.

The Chatham house rule will apply throughout the day.

Essentials:

– 22 November 2013

– The invite-only event starts at 8am and ends at 8pm

– Breakfast, lunch and dinner will be served.

– A smart-casual dress code.

Application:

– Offer letter from McKinsey, BCG or Bain,

– Resume,

– Cover letter used during your consulting applications.

Please send to [email protected]

Only shortlisted candidates will be contacted approximately 7 days before the event. Please make travel arrangements for you own account.

Why go into management consulting: 11 reasons

Management consulting, along with financial services, is among the top choices for most MBAs, other graduates, and even experienced professionals. This is despite the fact that the image of management consulting is not always positive. As some people say “management consultants take your watch and tell you what time it is”.

You may be thinking about making the switch to management consulting, but may not be sure if you are clear on why go into management consulting vs. pursuing other attractive career paths.

You may also be trying to figure out how to answer a possible consulting case interview question, “Why Consulting?”

I am here to share with you my 11 reasons why go into management consulting. Hope you will find it helpful.

Why I ended up joining a consulting firm

I came across management consulting by chance. My close friend was a management consultant and he used to tell me how interesting his work was. He routinely regaled me with stories about the client issues, analyses and impact they were having.

He also shared with me interesting books and articles, and forced me to take a more structured approach to my thinking.

I remember him warning me how difficult it is to get in. The outstanding grades one needs just to get invited for interviews, as well as case interview skills on estimations, brainstorming and hypotheses, plus the stamina and alertness required to successfully handle rounds of interviews.

Moreover, even once you are in, the work can be tough, especially when deadlines are approaching. This results in many people leaving management consulting to get a better work-life balance. The churn in consulting is very high.

I remember he sometimes would not sleep 2 days in a row, working 48 hours straight. Of course, this was not necessary and was driven by the study partner who wanted to prove to everyone how exceptional he was by working all-nighters and expecting the same from his team.

Still, he seemed to like the work very much.

So, despite all the negative information I really liked management consulting and committed to joining a management consulting firm one day.

When I finally got in, it was just as great as I expected it to be, if not better.

In the very beginning I was a business analyst so you could not be more junior than me unless you were an intern or an administrative staff. However, the work was interesting.

I worked with mostly amazing colleagues and eventually, after a lot of hard work, had exposure to very senior executives of large international organizations.

I would meet and even wine and dine with billionaires, present to the top political figures and travel internationally as part of my job.

11 reasons why go into management consulting

Overall, I would recommend management consulting as I think it is a great platform to start one’s career. And for many, it is a great platform to build one’s career.

So what are the key reasons why go into management consulting?

The answer is different for each person. I can’t speak for everyone but below will share with you what were the reasons why I chose management consulting and why I still love the work.

1. A wide variety of driven and intelligent coworkers.

In management consulting you always work on different engagement teams for different clients. You are a part of a massive organization with many exceptional people at each level, whether it is at the level of a business analyst, associate, engagement manager or associate principal. Working with so many people introduces a lot of diversity into your life and makes work more interesting and exciting.

It also allows you to build a network of individuals within the firm that you truly like, respect and trust. Those are like-minded individuals who are after similar goals to yours.

Moreover, you learn a lot from people you work with. And this is important because, after all, people say you are an average of 5 people you spend the most time with.

If you are driven individual, you may feel demotivated and isolated if you end up working outside of management consulting as the quality of your colleagues in most cases will not be as consistently high as in management consulting.

2. Your reputation reflects your performance.

This benefit is the result of benefit number one. If you are good, it will be well known in the firm. Because you work with so many different people, no one person can damage your reputation or take credit for your work, the situation which is more likely in other careers.

It does happen a few times, but it eventually evens out and is usually not so damaging. The culture does not permit it.

For example, if you join a bank after your MBA you will likely have one boss who may try to put as much work on you as possible and to give you as little credit as possible so he or she (and it is usually he) can keep more credit for himself.

Moreover, there is some envy involved. Many managers and senior executives in banking really had to work through the ranks to get the role you received by securing an MBA. There is a lot less of this in management consulting so you tend to be with more like-minded people.

3. In management consulting you have more control over your development.

If you are proactive you can get yourself onto the engagement which will allow you to develop the skills you want to develop.

Moreover, in management consulting you are the product of the firm. It is in the firm’s best interest to keep your skills level up to date and help you build yourself up as a professional.

In fact, this benefit is one of the most alluring when it comes to management consulting. I cannot think of any other line of work readily available to MBAs and other graduates, or even to experienced professionals, in which organization will be as incentivized to invest in your professional development.

You are in a relationship where both partners want to see the other succeed.

4. Management consulting culture is exceptional.

Consulting firms tend to have positive environments focused on developing people, with approachable leadership. It comes back to the organization’s view of you as an asset, not just as a resource. We spoke about this in an article Consulting vs Banking: 4 Key Differences. Hence, a lot is invested in your professional development and the organizational environment is usually more supportive.

5. You get to see the world.

The extent of this depends on the things like the management consulting firm you join, your efforts to network within the firm (so you know when opportunities to work in exciting places arise and people know that you are available and have the necessary skills to be picked for those opportunities), and your luck.

However, on average, you will get better opportunities to travel and see the world in management consulting versus in other organizations.

I remember when I was just starting out my career before my MBA. My friend wanted to cheer me up and invited me to tag along on a weekend business trip.

I was sitting in an airport catching a flight to a nearby city where my friend was attending a conference. We were in an airport cafe and I distinctly remember thinking that someday I want to live a life which will allow me to travel to different cities, countries, and cultures. This was before I realized I wanted to be a management consultant.

Fast-forward about 2 years, I was working for a large consulting firm, I was at the very same airport, at the very same café, catching a plane with an engagement partner to go to another continent where our client planned to build a new business.

6. You get to test-drive different jobs.

In management consulting you will end up working on various engagements, which often will be very different in nature. You will likely end up working on projects in different industries and even in various geographies.

You may be doing a study to enhance customer satisfaction for a media client, prior to being staffed on an engagement for a banking client helping them to determine if they should target a new segment, which may be followed by a study for a large retailer that plans to enter an emerging market.

Think about the exposure this level of diversity of work brings to your life. Especially if you are a young person who just graduated and not quite sure what you are passionate about.

During one of his last presentations, Steve Jobs said “It’s the intersection of technology and liberal arts that makes our hearts sing.”

Being exposed to so many projects in various industries is such a wonderful opportunity to try out things and see if you can find something that, in words of the legendary Steve Jobs, makes your heart sing.

After all, “the two most important days in your life are the day you are born and the day you discover why”.

Many people never discover why they were born. I think management consulting can help you find what makes your heart sing.

7. Consultants get a lot of perks.

You accumulate a lot of air miles, which you can use for personal travel. Your cell phone cost is usually covered by the company. You can expense meals, travel and accommodation when you are out of the city on consulting engagements. Management consulting firms have well-oiled administration machines and onboarding teams that help consultants stay on top of everything.

8. Management consulting is known for its output-driven culture.

In management consulting the output you deliver is more important than face time. You usually have the flexibility to work remotely when needed as long as the work gets done.

When you are working from the client’s offices, the face–time culture becomes more important but still not to the extent it is abused in banking and other some industries.

9. Higher job satisfaction.

I worked in management consulting and worked outside of consulting and can say that a significantly higher proportion of my management consulting colleagues found their jobs interesting versus my colleagues in industry.

In fact, I only knew one person during my days in the industry who seemed to enjoy his job, or at least he told me he did. But he was in his role for a few months and he was in a coveted leadership position which probably any driven person will find interesting, at least for a while. Even I would find it interesting.

You also more likely to feel you are doing meaningful and impactful work. As Kevin Coyne (a former McKinsey worldwide strategy practice co-leader who leads a number of FIRMSconsulting programs such as The Consulting Offer II, How to Solve Big Problems, How to Become a McKinsey Partner etc.) mentioned in one of his interviews: “People don’t hire consultants to solve easy problems. Why would they pay our ridiculous fees?”

10. It makes negative elements that are common in any job more tolerable.

It is interesting how when you enjoy your work, negative things are more tolerable. I remember my project team landing in a different country for a series of meetings only to discover that our baggage was lost, and as a result we had no business clothes for our meetings.

Moreover, the airline had no idea when they could return it.

On another occasion, I found out around dinner-time that I had to write a business case that was due the next morning. I knew I had to pull an all-nighter. That was not what was stressing me out. I felt I needed more time and the time I had would be insufficient.

There was also a time when I was driving to a meeting on a highway in a storm at around 6.30 in the morning and was not able to see anything and yet was still driving since I had to get to an important meeting.

Those types of experiences would be highly painful in a job you hate or don’t care about. Yet those painful experiences exist in any job.

At least for me, management consulting work is so interesting most of the time that I was driven by an adrenalin rush during those difficult situations. So it was not pure logic or a sense of obligation that was driving me to suffer through those experiences, as it would be the case if you hate your job.

I actually had the energy to do difficult things. I had an internal drive, in addition to logic and a sense of obligation, which made these experiences significantly less painful.

11. Management consulting vacations are more relaxing.

As a consultant you can time your vacations so it takes place between engagements and you can completely disconnect from your work for 2-4 weeks. Comparatively, when I was working in industry, I never actually had a vacation.

When I was on vacation I was still “required” to check my emails. If there was a crisis I had to fix it. I basically worked remotely and whatever work was not done while I was away accumulated, which resulted in coming back to mountains of work in addition to already extremely heavy day to day workload.

Final thoughts on why go into management consulting

Management consulting is a good choice if you would like to learn a lot and are not sure which industry excites you the most. It’s a bonus if you are willing to be in a service job where you always have to be nice to clients who don’t have to be nice to you, can deal with uncertainty and lack of routine and willing to work harder than people do in average jobs.

I hope you found 11 points above on why go into management consulting helpful. My view is if you have a good enough profile to try out management consulting, go after it. In the worst-case scenario, you can stay for 1-2 years and learn a lot. In the best-case scenario, you will find a career that is so much better than most other alternatives available. You will find a career that will accelerate your professional development and your search for what makes your heart sing.

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Cheers, Kris

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Do you want to discover how to navigate the up or out policy in management consulting? When I started my journey in consulting, my answer to this question would have been, “Yes, a million times yes!”.

Michael asked me to write about my experiences at consulting firms, how I navigated the up or out policy and managed to get promoted so quickly, well ahead of the normal schedule in both consulting and banking.

Up or out policy in management consulting

As I was embarking on my management consulting journey, I was quite concerned hearing so many stories of my acquaintances getting managed out after less than 2 years in consulting. I was determined to go up, not out. After all, I did my second undegraduate degree just so I could get into consulting. I studied like crazy to get all As, while working multiple jobs, and there were rivers of blood and sweat leading to that very desired consulting offer.

So there was no chance in hell I was going to be one of those people to be labeled a “hiring mistake”. Not on my watch!

If you are not very familiar with consulting jargon you may be wondering, “what is exactly up or out policy?”. It is an HR policy consulting firms have which refers to predetermined time frames within which consultants either get promoted or managed out. You cannot stay at the same level for too long.

The implementation of the up or out policy is simple. If you are perceived as good enough to one day make partner, you will progress to the next level. If you are not perceived as good enough, they will ask you to leave.

I actually found the consulting environment to be similar to that of my MBA program. Although, in consulting people pretend to be a little less competitive, since everyone is required to act in a collegial way toward their coworkers.

You have to be friendly and helpful towards peer consultants on your engagement team. However, at the end of each engagement and at the end of each year you will be ranked against them to see who is more valuable to the consulting firm.

People compete with their colleagues in many other jobs outside of management consulting, of course. However, in most other jobs there is no up or out policy, so people are less competitive.

For example, in manufacturing there is generally no up or out policy in place. In fact, people rarely get managed out. You typically work with 5-6 people on a daily basis and none of them will be at your level. So there is less competition.

Comparatively, in management consulting you are often staffed on an engagement with another 2-3 people at your level. During the engagement you will need to be a good team player, helping each of them to succeed. At the end of the engagement and at the end of the year, you and your peers will be ranked to see who is more valuable to the firm.

You may even be counseled to leave. It happens very often.

Navigating up or out policy: 6 insights

My determination to figure out how to manage the up or out policy paid off. Although, to be frank, I almost killed myself in the process of figuring out what it took to stand out in the consulting environment.

I was promoted repeatedly, each time well ahead of schedule. The same happened when I did my stint in banking, so the ideas I am about to share with you are applicable beyond management consulting.

Implementing these ideas does not guarantee a promotion, of course. But it certainly will take you a step closer to it.

As promised, below are 6 insights which helped me the most in navigating the up or out policy:

1. Craft your personal brand by actively managing what you say and do
I leaned that you have to really filter what you say. Don’t say things that can hurt your profile if repeated by others. For example, don’t say that you realized consulting is not for you or that a particular partner is incompetent, even if those things are true beyond any reasonable doubt. Instead, say things that will raise your profile and worth to the firm.

You have to present to the world a very smart, organized, healthy, credible, committed and collegial person. A strong personal brand really matters in management consulting. If you are a disorganized, unprepared, uncommitted and sloppy mess people will not want to be associated with you.

Management consulting career is a unique beast. While in other jobs people are forced to work with you, in consulting you have to prove your worth every day to stay wanted for projects, and to keep your job at the next performance evaluation when up or out decisions will be made.

The trick I used to train myself to say things that helped me progress in my management consulting career was to pretend everything I say will be published on the cover of the New York Times, and everyone will read it. My friend recommended it to me when I was just a business analyst and it worked very well when I made an effort to apply it. It puts you in the right mindset as you engage with your colleagues.

Also, as much as you can, ensure your actions don’t leave room for any negative interpretation. Always observe yourself from the third person perspective. Consider what negative assumptions people may make about your behavior and adjust accordingly.

For example, lets say you are attending a weekend getaway, one of the perks of management consulting career. You are expected to play games and bond with your colleagues. Instead, you have to vigilantly work on unexpected deliverable a client requested that morning, out of the blue. Your first impulse may be to go and work in the dining hall so you can at least be close to all the fun and games. Don’t do it.

You obviously cannot announce to all leaders at the getaway event why you are not participating in team activities. Therefore, to avoid people making assumptions that you are not a team player, get permission to prioritize client work from the most senior person at the event or from your project leader, and go work in your room far away from anyone else.

By working while everyone else is bonding you are doing something against the group norm. If you have to do this, make sure as few people as possible have an opportunity to notice it.

This is important because, unfortunately, some people will make negative assumptions about why you are not participating in team activities. I am actually describing to you a real life example from my own career.

I was almost rejected to be a part of an important engagement because a principal leading the project was convinced I was not a team player. I asked why he thought I was not a team player, given we never worked together. His reply was, “Well, yes we never worked together but I observed you during our getaway weekend few months ago and you were the only person checking emails while everyone else were involved in team activities”.

This is an example of how you have to really protect your reputation at all times because by the time you can correct someone’s incorrect perception of you, if you are lucky enough to get a chance to correct it at all, they may already take away some opportunities from you.

It is important to remember that everything we say to the client and to the team members, and every action we take, enhances or damages our personal brand and can be used to evaluate us during formal or informal performance evaluations and in other situations. I know that managing your personal brand is a lot of work, but it is what it takes to get promoted.

2. Consulting is harsh for friendships
It is important to give some thought to how you will manage relationship with your colleagues. In consulting, more so than in most other careers, you are directly compared to your peers. The same peers you work with on a daily basis. So becoming friends with your colleagues may make your work life quite challenging and distracting since, during performance evaluations, you and your friends will be competing for the same promotion spot.

If you ever have been an MBA student, you will be better prepared for what you are getting yourself into with management consulting. MBA schools expect people to work in teams and build relationship with classmates and yet, while there is no up or out policy, you are ranked on a curve for each course.

For you to succeed and be above average, many of your classmates will have to “fail” by ranking below average. Given the importance of grades for recruitment and options after your first job post-MBA, it is not surprising it is hard to be too helpful to your classmates since aiding their success will mean taking away from yours.

In management consulting we have to deal with a similar situation. Helping our peers to succeed will often mean taking away from our own success. Not only in a direct sense in terms of an opportunity cost of time and effort, but also in an indirect sense. If your colleagues will be rated higher, you, quite possibly, will be rated lower. And those that are rated lower are often casualties of the up or out policy.

After much consideration and many disappointing experiences, I decided to stay away from friendships at work. Of course, there is no right or wrong way to manage this. You will have to make this decision for yourself.

In my opinion, the management consulting environment is not very different from boxing. You engage in a contest of mental strength, speed, endurance and creativity. The goal is to get one of the coveted promotion spots, which will mean knocking down the opponents (getting you promoted which means getting some of your peers managed out of the firm). If you befriend your opponents, it will make it harder for you to compete with them since you will have conflicting incentives. The friend in you will want them to succeed while the ambitious up and coming professional in you will want you to knock them down (get the promotion spot).

Also, if your colleague does something that takes credit away from you or deliberately makes you look bad, you need to stop trusting this person and never give this person a second chance. Good people tend to expect the best from people around them, and that is a wonderful quality to have. However, if someone signals to you that they are a jerk, believe them the first time. They are once and for all in a “don’t trust” category. You, of course, have to continue to play a role of a great team member but watch your back and don’t let this person hurt you again.

I usually have given people too many chances. That is my weakness. Someone will do something bad towards me, and then will become very nice towards me and I would give him or her a 2^nd, 3^rd or even 4^th chance, only to be used and disappointed again. Learn from my mistakes, not from yours.

There are a lot more people on this earth than we will ever meet. Over 7 Billion of them! Why invest in relationships with people who already showed us that they likely not worth the effort? There are so many other people out there who are considerably more worthy of our time and friendship.

I must stress that I am a great team member. I have been consistently cited for this. I always help team members, even late at night. I merely aware of what can go wrong and strive to avoid be taken advantage of.

3. Strategically select key deliverables
It is important to exercise control over which pieces of work you will take responsibility for, when you can. This gives you a greater chance to develop a reputation for doing high quality work and obtain a higher performance rating on engagements.

In the beginning of each consulting engagement I look through the project plan and decide in advance which deliverables or work streams I want to volunteer for. I pick work items which are important and which I know I can do well. I wait for the opportunity to volunteer and, more often than not, I am able to get the piece of work I want to take responsibility for.

One of the key criteria I use when I pick the deliverables or work streams I want to be responsible for is whether I am able to find exceptional examples of similar work that I could learn from. Within consulting firms we have access to prior deliverables. We cannot use the content, of course. However, we often can use design, use prior work to brainstorm for ideas and model the structure of past deliverables. This saves a considerable amount of time and helps you stay on the right path.

In other words, I use past work as a template to determine the benchmark for “excellent”. If I did not have this benchmark, I would be flying blind and not sure how well I was doing.

Another important criteria I always use is selecting deliverables or work streams which are most crucial for success of the engagement. Firstly, this ensures that my effort is worthwhile since the work really matters to the team. Secondly, this makes certain that senior leaders will be spending a lot of time reviewing my work and, therefore, will be familiar with the tremendous effort, creativity and attention to detail I tend to display in my work.

4. Ensure you are perceived as a great team player
It is important to always be on the look out for opportunities to help your engagement team to excel. However, try to ensure that what you do in this regard is noticeable to your superiors. This is not about making others look bad or showing off. It is about transparency and fairness.

Also, try to get on engagements with good leaders who are known for giving credit where it is due. This will allow you to focus 100% on your work and not on ensuring that your work will be recognized.

We also need to remember that anything we do has an opportunity cost. As you probably know, the opportunity cost is the best alternative thing we could use our time and other resources for, instead of what we are doing. Therefore, we just cannot afford to do things for which we will not get credit.

5. Perform at the next level
I think it is important to try to play a role of one level up as well as your own role. For example, if you are an engagement manager, try to play a role of a senior engagement manager but also of an associate principal.

Obviously, it is important to do so in a respectful manner. Don’t step on toes of your colleagues who are one level up. However, you need to display qualities that show that you are ready for a promotion, so when your performance is discussed and an up or out decision is made, you are concluded to be the “up” material.

6. Use information to your advantage
Some information is not required to be shared and should be kept for one’s own advantage. We all dealt different cards in life. Those cards are assets that we need to leverage to achieve what we want. Some people have good looks, others parents’ with good connections and family money, or extraordinary intelligence. Information you become aware of is part of your cards in life, so keep it close to your chest.

There are only few promotion spots available for each level and all your peers want your spot. It’s a competition for talent and not a game where everyone gets a medal for participation.

Why the up or out policy is good news

Don’t be disappointed that the environment is so competitive in management consulting. There are more pluses than minuses in this situation.

You get to work with ambitious, strong and like-minded individuals. Some say, you are an average of 5 people you spend the most time with. You spend a lot of time with your colleagues so it is great you get to work with people who will challenge you so you will develop further and faster.

Moreover, because of the up or out policy, if you play your cards right you will be promoted within, on average, 2 years after joining the firm. If you are very good, it can happen in 6 months. Whereas in many other careers it is easy to get stuck in certain level for several years, in consulting the options are up or out. So if you are good, the up or out policy is actually good news.

Final remarks

In conclusion, even though management consulting firms have an up or out policy, I think overall we should be friendly to peer consultants, be good team members and bring to the team as much value as we can. After all, we have to always try to be our best self – the most amazing person we can be. Most my advice about being careful applies if you have a weak team. If you have a great team, you can simply focus on the work and that is the best part.

However, we should remember that we need to do visible and important pieces of work, don’t say things that can take us down if repeated, always think how can we make an engagement more successful, and ensure our actions and efforts are well known to the directors.

Most importantly, we should not allow our job to define our identity.

You know you are one of a kind and have a lot to offer to the world, and if as a result of some very unfortunate chain of events you will be pushed out of the firm, don’t let it take you down.

You were born to matter, to make a huge difference and make this world a better place. I know this because you are part of the Firmsconsulting community – a community of people who are hungry and bold, and strive for more. And if the firm could not recognize it, it is their loss and your gain. It means you were knocking on the wrong door, in which case it is best to leave the firm before you invested years of your life. It will allow you to find the right path while you still have plenty of time on this earth. Find something that brings you joy and where you can make a real difference.

As Steve Jobs once said, “We don’t get a chance to do that many things and every one should be excellent. Life is brief and then you die… And we have all chosen to do this with our lives. So it better be damn good. It better be worth it”.

QUESTION(S) OF THE DAY: What is your advice on navigating up or out policy in management consulting firms? Please share in the comments.

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At the end of December 2014 we published a post recapping our year at Firmsconsulting and providing a brief overview of our plans for 2015. We want to provide an update on our plans for 2015 so you know what to expect and how we are keeping to that schedule.

More importantly, if you want us to change the schedule or our priorities, you can comment and let us know. We are going to focus this update on just one area where we need some guidance from readers.

Implementation Executive Program

Executive programs refer to the full studies we undertake and publish on our website: all the power points, videos, tool kits etc. like the merger study and LAB market entry study.

We are planning to work on 4 studies this year.

1. The market entry study is done and will be released shortly.
2. The power sector corporate strategy transformation study has started and will be released shortly.
3. In all likelihood, the power sector study will lead to a major implementation phase so that will be the next study.
4. Finally, we are debating whether or not to do the BTO strategy study, operations or another study as the 4th study of the year.

Do you want an implementation study and toolkit?

We need to know which should be the next two studies. If you look at our header and footer, under executive programs, we have listed all the studies we have negotiated with clients. The start dates for some of those studies have not been set and we can move them based on reader popularity.

Every time someone subscribes for updates on a study, we view that as a vote for the study.

We try to do the studies with the most votes first.

We need you to vote.

As it stands, this is the top 4 studies based on your votes:

1. Market entry strategy study
2. Power Sector strategy study
3. Operations study
4. CPG pricing, marketing and strategy study.

Based on this voting, the operations study is the next study we will release. That outcome was a little surprising. We suspect it is the most popular because most readers have not taken the time to vote.

So, by default operations moved to the top of the list. We also think many readers are confusing operations with implementation. This post will provide some details on implementation studies so you can understand the differences better and decide if you really do prefer the operations study over the implementation study.

We feel implementation skills are more important than operations skills. Every executive in every organization needs implementations skills. This involves setting goals, change management, embedding new cultures, overhauling systems and processes. In essence, it means helping your company/client generate the $xM benefits that was promised.

Every single executive client we have will understand their biggest obstacle is implementing recommendations. In a corporate environment, you get promoted for getting results. You do not get promoted for strategy analyses and recommendations which you fail to implement.

We are working on creating the most comprehensive implementation toolkit in the world, which we will roll out for the power sector implementation study.

We are working with Bain and McKinsey Implementation Group coaching clients to ensure the toolkit exceeds the quality of the material available in those firms. Therefore, we remain excited about this study and toolkit.

The implementation study will contain over 350 videos and power point guides. The accompanying toolkit will contain well over 100 videos and power point guides. That is >450 videos in total. That is a deeply comprehensive program. To give you a sense of some of the differences between implementation and operations, we have attached some screenshots from the videos.

Once you review these implementation slides and believe it will be useful, please vote by subscribing to this study and comment below. We use the comments to help us think of missing elements in the studies and tool kits.

In this exhibit we explain the fundamental difference between operations and implementation. They are frequently confused but are not the same in any way.

This exhibit explains the overall, high-level implementation approach. There is a lot of details that sit behind each block. In fact, the block on “Design Implementation” contains well over 100 power point slides since there are so many different implementation techniques and tools to overcome resistance from employees.

This exhibit pretty much sums up the main chart the client is interested in. At the start of an implementation, the client tracks adherence to the activities. The client does this since it is too early to track the banked benefits. However, as the study progresses the implementation will focus more on the banked benefits versus the activities initially outlined for the implementation.

This is because things always change throughout the implementation and sticking to initial activities makes little sense when the situation on the ground is fluid. Sticking to the financial targets, however, is the primary goal of the client.

The exhibit below is a simplified version of a more detailed map. We list every single type of resistance a client could display over the course of the study, along with the toolkit to overcome that resistance. This is probably the most important part of the toolkit. There is a significant amount of material walking subscribers through use of the tools.

This final exhibit highlights just one of the five possible roll out options for implementation. The “Big Bang” approach works very well during crises where there is no choice but to execute the roll-out across the entire country at one time.

As you can see, this is a very comprehensive study and toolkit.

However, if we release the studies based on the votes alone, it would seem the implementation study is not as popular and will not be released anytime this year. So please vote to help us know which studies to release.

So, to recap: 4 studies are planned for 2015 but we need you to tell us which one’s should be released first by registering for the implementation study or any other study you prefer.

If the implementation study and toolkit is not what our readers find useful, we will likely decline the opportunity to run the power sector implementation study. This would be a pity because we believe implementation is a core skill to learn and is a priority of every major consulting firm today.

Why The Consulting Billable Hours Model Does Not Work For Consulting Firms

Today I want to talk about the billable hours model and why it is unsuitable for management consulting. I have had a lot of discussions about the billable work model with aspiring management consultants, clients currently working for consulting firms, and other people in our network. I find that most consultants misunderstand the problem with this model.

One misunderstanding I would like to address is that the billable hour model is not bad. It is a fine model. The problem is that it is inappropriate for management consulting.

This is worth discussing because most consultants are quick to conclude that this model is poor without providing a convincing reason. We insult accounting firms for using the hourly rates model purely because we assume that if accounting firms are using it, it can’t be good, or if lawyers are using it, it can’t be good.

On the contrary, the billable hours model works well for these two professions.

Management Consulting Work  – How The Billable Hours Model Works

In the billable hour model, you have a consultant at, for example, Deloitte, who is going to be measured on the number of hours that he has billed to a client and the total work hours he has billed in a year as a percentage of the total hours he could have billed.

The consulting firm will track billable hours as a percentage of the total working hours the consultant could have billed out. For example, a consultant can have 77% billable hours, 88% billable hours, or even over 100% billable hours.

The percentage of billable work hours out of total working hours is called utilization. It is a key metric used in performance evaluation and productivity tracking by the consulting arms of professional services firms like Deloitte and PwC.

Why The Billable Hours Model Works For An Accounting or Legal Firms

Let’s look at the most important difference between a consulting firm and an accounting or legal firm. This difference is what makes the billable hours model work for accounting and legal organizations. An accounting or legal firm is significantly more regulated than a consulting firm. There are various professional bodies involved in tracking all the activities of these organizations. There are also a lot of guidelines in terms of being able to benchmark the performance of employees of such a firm.

As an example, you know when the legal firm wins because the judge decides if the firm wins. You also know when an accounting firm does an excellent job because the standards bodies in different countries will not penalize the firm for the work done.

In other words, great work is significantly less subjective because the work of the legal and accounting firm is publicly available, and a body with known criteria for success evaluates the work. You may very well disagree with the rules of the accounting bodies, but you know what they are.

The consulting work is a different ball game. There is no transparent way of assessing the performance of most consultancies, which is why it is such a lucrative industry that so many people want to jump into, and that is why there are so many bad consultants, meaning consultants that do not add value or add significantly less value than what they receive in terms of compensation.

I call it relative transparency since I am sure some lawyers and accountants will tell you their performance is not transparent. If you are in an organization where there is relative performance transparency, it is a lot easier to know how each employee is performing. Therefore, it is a lot easier to assign the right people to projects.

In management consulting, the transparency concerning performance is significantly lower. Consequently, it is harder to know how individuals are performing. McKinsey, BCG, and Bain will tell you it’s easy to assess their consultants and project teams, but it is not easy because there is no global standard.

Right now, a top international consulting firm’s Singapore partner will think twice about using that same top international consulting firm’s Madrid and Zimbabwe consultant. That is because even within the same major consulting firms, performance is not clear and there is no global and public scorecard against which they can compare performance.

Therefore, the billable hours model works for accounting and legal organizations because they are in a standardized profession and, most importantly, they are regulated and relatively more transparent. In those professions, it is clear what is good and bad.

In those professions, it is okay if people pursue billable hours, as if they seek billable hours at the expense of quality, it will eventually show up in most cases, ultimately leading to being reprimanded by audit committees or by the designated bodies that control the quality of audits or legal work.

This is the check built into the legal and audit professions. When things go wrong at McKinsey, Bain, BCG, Deloitte, PwC, etc. that information is usually never becomes available publicly. There is no check in the system to help clients. It is not the fault of those consulting firms. It is due to lack of governing bodies and standards in place.

Thus, in an audit and a legal profession, the billable hours system can work, and it does work. People can pursue billable hours.

Firstly, they know what good looks like.

Secondly, the billable hour model indicates the time spent to achieve the goal of a project. So, the billable hour model will work if there are metrics in place to assess if the desired result was achieved or not. 

So, suppose an accounting or legal organization starts pursuing revenue at the expense of high-quality work. In that case, the firms will know quickly if the quality is dropping because they will see it through the transparent way those two professions are run.

However, when the accounting organizations went into consulting, they adopted the billable hours model. It worked in accounting, so they thought it would work in consulting. 

Billable Hours And An Emphasis On Profitability

Many believe that the billable hours model is wrong for consulting because of its emphasis on profitability. They believe that because the consulting arms of companies like Deloitte and PwC use a billable hours model and companies like McKinsey and BCG don’t, Deloitte and PwC somehow emphasize profitability.

This is an incorrect assumption.

It is incorrect when people say that utilizing the billable hours model forces consulting firms to put profits first. McKinsey and BCG are not profit averse as they charge a lot of money for the work they do.

I can assure you when McKinsey, BCG an dBain partners are sitting there deciding if they want to serve a client, they are not going to offer their services unless doing so is expected to deliver a lot of profits now or at some point in the future as part of their master plan.

McKinsey, BCG and Bainareis not charities and many of those partners are not particularly charitable.

6 Reasons Why The Billable Hours Model is Bad for Consulting Firms

If the billable hours model is not bad for management consulting because of the emphasis on profitability, then why is it bad? Here are five reasons why the billable hours model is bad for consulting.

There Is Very Little Performance Transparency

You don’t know when a consulting project is doing well. If the consultants working on a project are pursuing billable hours at the expense of a client, you will only know the work is bad if a client complains. And even if a client complains, there is no transparent system to compare performance or track productivity. 

Management consulting firms will say they are good at comparing performance, but they aren’t actually good at doing this. That is why most professions have oversight boards, standards, and benchmarks.

It Does Not Encourage Teamwork

This is another reason why the billable hours model is bad for management consulting. The model does not encourage teamwork. It fosters a pattern of behavior where every junior consultant is looking out for themselves.

If you are pursuing billable hours, then you are not pursuing teamwork. You will only be doing things that will give you the highest billable hours at the end of the day.

The Model Leads To Higher Turnover And Lower Job Satisfaction

Another reason the billable hours model is a bad idea for management consulting is that it puts junior consultants in an unfair situation.

Assume there is 20 million US dollars worth of work in an office for this particular year. If you put everyone on projects equally, it will lead to 80% across the office in billable hours for that year. In other words, all consultants will have 80% utilization.

However, in reality, people are usually on projects at 100% utilization. Their entire working day is usually dedicated to a particular project. This means some people will likely have higher utilization than 80%, and others will probably not meet their utilization target.

Moreover, suppose someone is staffed on an engagement team for clients during the strategy phase. The partner will usually want the same person to be involved in any subsequent work with this client to take advantage of knowledge gained during the first engagement phase.

Also, if an office is involved predominantly in a particular type of work, e.g. pricing studies for clients within the banking industry, consultants with directly relevant experience will have plenty of options to increase their utilization while consultants without relevant experience will, all other things being equal, not be as in demand.

Therefore, some people will have high utilization, often over 100%, and some will not be sufficiently utilized because there is not enough work to go around.

As a result, the billable hours model puts junior consultants in an unfair situation. They are not responsible for securing work. Consequently, if the partners secure too little work, the associates and younger consultants should not be punished if they cannot get staffed onto projects.

Also, if the junior consultant puts in more effort than the senior consultant, there would be no way to measure this and adequately reward them. Their pay would still be significantly lower than that of the senior consultant. With the inequality in pay and juggling between several projects, it becomes challenging to achieve a work-life balance, which resulted in a negative perception people have about consulting lifestyle. This eventually leads to lower job satisfaction and a high turnover. 

When McKinsey, BCG and Bain hire lateral partners from Deloitte and Accenture into the firm, there are times some partners have to fight pretty hard to ensure the lateral hire does not measure younger consultants on utilization.

The Billable Hours Model Does Not Encourage Professional Development

Since when do we allow the associates and analysts to determine what projects they need to be on?

Firstly, junior consultants rarely have a clear understanding of which projects are most suitable for their professional development.

Secondly, if the billable hours model is in place, analysts and associates, or senior consultants, whatever you want to call them, are going to do things to increase their hourly rate versus being put onto projects that are important for their professional development.

This is obviously detrimental to the firm’s performance and is one of the reasons why tier-2 firms struggle to catch BCG and McKinsey. Even when they get great people into the firm, they fail to develop them.

Potential Damage To Client Relationships

When you put the responsibility of meeting utilization targets onto an analyst or associate, you are placing the responsibility of “sales” onto people who are not mature enough, experienced enough, and, I would say, sensitive enough to manage the process.

What do I mean by that? A young associate or senior consultant, straight out of business school, who is terrified of losing his job, doesn’t understand the nuances of explaining decisions to clients. He will do whatever is possible to get his billable hours up, even if it will hurt the firm in the medium to long term.

For example, a junior consultant may try to influence the duration of the engagement to pick up more billable hours, and their interactions with the client may be damaging to the firm.

It Affects Work-Life Balance And Leads To People Burning Out From Consulting Lifestyle

This model will negatively affect the consulting lifestyle. Consultants will want to increase their time spent in the office just to increase their billable hours and therefore, hopefully, increase their pay at the next performance evaluation. They will put in most of their time to pursue many activities, even if it doesn’t have any impact on project objectives. 

This will subsequently affect the work-life balance of a consultant. 

For example, take a consultant who is well aware that his pay depends on the number of hours he puts in (number of billable hours or unitilzation). Such a consultant would not mind working overtime, even if it affects other aspects of his life. His focus will be on increasing his working hours so he can get good pay at the end of the project, or at least not get managed out. He might even spend the weekend at the office. The issue becomes worse when consultant was on the beach for a large portion of time and struggled to find a project to join.

While you might be tempted to say the consultant is diligent, don’t forget that many of the activities do not have any impact on the client’s project. And also, not having a work-life balance leads to the type of consulting lifestyle that leads to burnout. 

 

 

Final Remarks

When you think of billable hours, remember this: two conditions must be met to work.

First, billable hours will work in professions that are standardized, transparent, very open to benchmarks, and reviewed by global bodies. In other words, it works in professions where good performance and bad performance are universally known.

It’s like watching a game of football and you don’t know if someone is winning. That is what consulting is like. When you go in, no one knows if the consultant has done a good job.

On the other hand, you go into battle in the audit or legal profession. The audit committee rules or the judge rules, so you know if they are doing a good or bad job. In that case, billable hours can work because if billable hours lead to poor performance, firms and employees within those firms get punished. They lose cases and clients.

Second, billable hours can only work where younger consultants are not forced to take work which raises utilization at the expense of their professional development.

Professional services firms with consulting arms that use the billable hours model are not inherently more profit-focused than McKinsey or BCG. The problem with the billable hours model is whom the model forces to make the profit trade-offs.

Billable hours pressure a junior consultant to make those trade-offs. This is someone who is not ready to handle those demands and not equipped to judge between engagements. This leads to decisions that are likely detrimental to firm performance in the medium and long term.

It’s like telling your two-year-old kid, “Here is a knife. Go and source your own food”. They may “prepare” the family dog just to put food on the table, unable to make the necessary judgment calls.

The role of any partner is to protect and guide employees so that they can focus on their professional development. When they understand the firm’s culture and how to make decisions, they can decide how they will allocate their time to get their billable hours up.

When you hand over the accountability for billable hours to a junior person, you are basically saying, “You are on your own,” and that is not right. In fact, we know it leads to problems.

The billable hours model is not bad. It is clear why accounting and legal firms use it. For an accounting or legal firm there are reasons for using the hourly rate model, and it makes sense in the legal and accounting professions.

In management consulting, it does not make sense for many reasons, especially because there is a lack of performance transparency. Things are different when you don’t have that sort of buffer pushing back and transparently assessing performance.

If you are in a firm that is forcing you to focus on billable hours, like Deloitte and PwC, you can’t really get away from it. If there is not enough work to go around, you are going to suffer. You will get punished because some partner somewhere did not sell enough work or because you are not that good at networking and showcasing your abilibites so partners would want to put you on their projects.

You should not be fighting these battles. You are too young to be making those calls, and you ultimately will be making bad calls just to get your billable hours up, even if you are learning nothing of value.

So when you are thinking about these decisions, don’t just belittle the billable hours concept. It can work and has been known to work, but it works better in some professions and definitely not in management consulting because of the behavior it forces people to exhibit.

QUESTION(S) OF THE DAY: What is your advice to readers who work for firms which force them to focus on billable hours? SPREAD THE WORD! Like this? Please share it.

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6 guidelines to help you manage travel expenses on consulting projects

In this article, and related podcast, we discuss a very important and rarely addressed topic – how to manage travel expenses during a consulting project. This is an important question to ponder over since mismanagement of travel expenses can, and usually will, be detrimental to your reputation within the firm and your consulting career.

Your project leader and other colleagues will contribute in meaningful ways to making decisions on which travel expenses are relevant and appropriate. But in the end it is you who bears full responsibility for the choices related to travel expenses.

Your choices must rest on a foundation of clarity and sensibility. No one should even think about questioning your expenses. Hence, gaining a clear-eyed perspective on how to manage travel expenses on consulting projects will help you prepare to succeed.

The post was inspired by a question from a Firmsconsulting reader, a Deloitte consultant in the United States. This Deloitte consultant wanted to know how to determine if travel expenses (e.g. bills related to a hotel stay, restaurants, taxi, etc.) during a consulting project are reasonable and appropriate. And he has given examples from his recent consulting project.

Example 1: A management consultant chooses a flight or hotel which allows him to collect reward points even though an equivalent alternative is much cheaper.

Example 2: A management consultant visits a luxury spa and charges it to the client. This charge is included in an aggregate bill so the client cannot see the itemized charge for the luxury spa.

Example 3: The engagement team stays at a five-star hotel even though the Deloitte consultant feels he does not need that lifestyle.

Example 4: The engagement team enjoys expensive dinners at a luxury hotel which are not necessary.

The Deloitte consultant expressed the following concern, “This doesn’t seem to be in the client’s best interest. It appears to be unethical. How do you ensure these practices are curbed? And how does the junior consultant decide what is ethical or not in the above scenario and act accordingly in team settings?”.

That is a great set of questions to begin with. I will give you a framework and guidelines to analyze how you should manage travel expenses during a consulting project.

Managing travel expenses in my own career

Before I get into the framework and guidelines on how to manage travel expenses, I want to talk about two situations from my own career.

Serving a client: The first example is from the days when I was a management consultant. When I just joined the firm, this is a long time ago, we had recently finished a turnaround engagement for a major oil company. That oil company was about to lose its biggest client. And they had hired us to figure out a way to replace this revenue stream.

The project was very successful. The client was incredibly impressed with the work done.

But there was an issue with that project. A presentation was put up by the senior partner which covered feedback from the client. And one of the things the client said is that, while they would not hesitate to recommend us for our analytical skills, what they didn’t like is that they felt we were not cognizant of what they were going through.

The client disliked that the project team ran up expensive tubs at restaurants in the town where the client’s head office was located, knowing full well at the time that people were being retrenched. And this came from the CEO. This is CEO giving feedback to a major firm, us. Telling us he loves the work, but he did not think we handled travel expenses well. And while they are most likely going to use us again, it just leaves him with a bad feeling knowing that the travel expenses were abused.

Being a client: And another example involves Firmsconsulting. We once hired a team to do some significant media work for us. We flew them down and booked them in a hotel covering all their expenses, including setting a nice team dinner at a very prominent restaurant. And when we were doing the travel expenses later, we came across an expense statement for the drinks and charges they occurred going to a night club.

This situation still upsets me because we did not ask them to go to a night club. They chose to do it and they decided to bill us for it. We paid it, but never worked with them again and would never recommend them to anybody.

They lost a major client over a relatively minor expense. It was the principal of the issue. They contact us often for work but can never understand that trust has been broken.

Framework for managing travel expenses

These two incidents serve as a framing point for the structure I am going to give you to analyze this. When determining whether a behavior or travel expenses are appropriate you have to think about it from your perspective, from the firm’s perspective and from the client’s perspective. And you need to consider 3 elements: cost, perception and value.

Imagine a 3 by 3 matrix here. On one side you have got yourself, the firm and the client. On the other side you have got cost, perception and value.

Travel Expenses from Your Perspective

When managing travel expenses seek to consider six essential guiding principles:

1. Don’t spend money on things you don’t need to get the job done.
2. Don’t spend money on things you would not spend on by yourself.
3. Make sure your choices are in sync with the client’s culture and situation.
4. Make sure your actions look congruent with your overall profile.
5. While it is important to save money for the client, also make sure your needs are met.
6. Extravagant travel expenses should translate into at least equal value for the client.

These six guiding principles are not a formula. They do not represent the whole universe of “good management of travel expenses”. However, they will help guide your decision making on how best to manage travel expenses.

Six guiding principles to manage travel expenses

Let’s take a closer look at each guiding principle.

1. Don’t spend money on things you don’t need to get the job done

The most important rule to remember is only do things you need to do to get the job done.

For example, you do need to stay at a hotel. You have to sleep in a comfortable and safe place while you are working on the consulting project. But in most cases you don’t need to go to a luxury spa to be able to do your job.

Also, if you are doing something because it will not show up on an itemized bill, the mere fact that you are doing it because it won’t show up on the bill indicates that you know it is wrong. So don’t do things you know or assume to be wrong. It’s unethical.

So, to come back to this Deloitte consultant who asked a very important question, when deciding if travel expenses are reasonable consider whether you need it to get the job done.

2. Don’t spend money on things you would not spend on by yourself

You also should not do things you would not do if you were paying for it. You cannot do things just because a client is paying for it. That is just wrong.

3. Make sure your choices are in sync with the client’s culture and situation

That is where we come to the concept of perception. Be very circumspect about how you spend client’s money in light of a client’s culture (how the client behaves and thinks) and the client’s particular situation (e.g. turnaround).

Choose a hotel that a reasonable person will consider to be an appropriate selection for a particular client and client’s situation. For example, if a client is going through a turnaround, don’t book a five-star hotel. Also, if you are working for a client that is very reserved, everything you do that interfaces with them should be reserved as well.

Further, while from client’s perspective they always want to cut consulting costs, from the client’s perception level don’t do things that clash with their culture.

If you are doing things that put you out of sync with the client that is a problem. If you are, for example, going to serve a major financial services client who has a certain way of doing things, which happens to be staying in five-star hotels, and you instead stay in a two-star motel you will look out of sync. So you see, this cuts both ways.

However, you can get away with staying at a two-star motel if being frugal is just the way you are. There are stories of Marvin Bower who was very frugal. In fact, he would fly coach when everyone else was flying business class. But you need to manage it and make the judgement call based on your particular situation.

You can charge a lot for your work, but do not create the impression you are abusing the expenses. In fact, that is my philosophy. Bill very high fees but charge reasonable expenses. Never ever charge low fees to a frugal client. They will not value you and it will hurt your firm in the long-term. Quality costs money.

4. Make sure your actions look congruent with your overall profile 

When it comes to costs, if you are not comfortable to charge the client for the finer things your project team selects, my view is that you are fine to say, “You know what, I don’t think I want the most expensive thing”.

It’s okay to do that. You don’t need to do what other people on the team are doing. But don’t make it look like you are better than anyone else. Just say, “I don’t need this. It’s too much for me. So I will go with a cheaper option”.

If you are someone who is frugal or just likes simpler things it is okay to go down that path versus doing what everyone else is doing. It is okay to order the cheapest item in a restaurant. Just because you go to an expensive restaurant does not mean you have to order an expensive dinner.

I have been in situations where I ordered the cheapest things because I knew the client was paying for it. And I did not wanted them to waste money.

I also had meetings with clients in Starbucks. I have met CEOs in Starbucks. That is not even a joke. I have always believed overhead is legal theft from shareholders and consulting expenses are one sliver of overhead.

If you have decided, on a personal basis, to not abuse the client’s finances, as long as it is consistent with the way you are, you will most likely not be treated badly by your project team.

However, if you generally like splurging on cupcakes and you drive a fancy German convertible, but when it comes to a client issue you say, “Oh, this is wrong. I am not going to do it”, your team may take it the wrong way.

They will notice a disconnect between who you are and what you’re doing. And some members of your project team may think you’re trying to make them look bad. You can be ethical without insulting your colleagues.

5. While it is important to save money for the client, also make sure your needs are met

If you ask a client how much you should spend, they will almost always tell you to spend as little as possible. As a result, if you make decisions based on what the client considers to be right, you will almost always undercut yourself.

So don’t ask a client how much to spend on a hotel or meals because they will likely give you the cheapest option. This is what clients do.

While you should try to save money for the client, you should also ensure you meet your needs. So I would say don’t cut costs to the bone so it is detrimental to you.

Building a great firm is expensive. You have to do things that are sustainable. If putting all consultants in B&Bs to save money forces them to leave, then it is not sustainable.

You have to treat consultants well and that means relatively higher expenses.

6. Extravagant travel expenses should translate into at least equal value for the client

If you are an awful consultant who is adding little value you should feel terrible about racking up extravagant travel expenses knowing full well you are doing a terrible job for the client. If you are a brilliant consultant who is adding enormous value to the client it is okay, in my opinion, to rack up extra travel expenses.

I will share my own experience here. Yes, I always tried to cut travel expenses for clients. But, there are certain things I never compromised on. And one of the things I never compromised on is my clothing.

I always laundered my clothing no matter at which hotel I was staying in and I often used expensive laundry options. And a client could always come back and say, “Well, why didn’t Michael go with the cheapest laundry option? Isn’t it unethical?“.

It depends on whether the tiny amount of time I was saving was used to create better value for a client. Time is money for me. I will go with the best option because they accommodate my schedule. And I would go with that option even if I was paying for it myself.

What does it mean to add value?

Adding value to a client does not mean, “I’m a McKinsey consultant. Therefore, I am adding value”. The fact that you are there does not mean you are adding value. I always say, you know you are adding value when you feel you are doing things that will earn you a bonus. You add value when you do more than what is expected of you.

If you are just doing enough to complete the tasks assigned to you, earn your base salary and get promoted in the normal amount of time, that is really poor value and you should not splurge.

If you’re someone who likes the finer things in life make sure you are adding value to a client. And if you don’t feel you are adding value then keep your travel expenses to a minimum.

Travel expense decisions are often a judgment call

Whether incurring a specific travel expense is right or wrong is often a judgment call. It comes down to this. Do you feel you are adding value to the client or not? And do you feel you require a particular expense so you can add additional value?

And if you honestly believe, “You know what, I can add this value to a client even if I don’t get these things”, then don’t go for these things. If you feel, however, that you need the finer things, only do it if you believe you are adding an additional value to a client.

And I know many of you will say, “the luxury experience during consulting travel is a major perk of management consulting“. But this perk is a reward for bringing in talented people who will do extraordinary things.

You do something extraordinary and you get a perk. A mere fact you are there does not mean you are doing anything extraordinary. Yet, this is the way many consultants think. They think, “Well, McKinsey hired me. Therefore, I deserve this perk.” That is wrong.

If you have extravagant taste and you get the job done a client may hate you for spending too much of their money but they will likely tolerate you while you are adding value. Like that example I gave you about the oil company.

Yet remember that the predominant majority of clients like frugal consultants who are good at their job. In fact, I have never seen a client saying, “Oh, you are a consultant with simpler taste and, therefore, we will not hire you”. Clients don’t care about your taste.

Some of the most brilliant consultants like George Stalk etc. look like they shopped in a trailer. Yet clients loved them.

If you get the job done and you care about client’s money like it was your own, they would most likely like you a lot more than if you were not frugal but was good at your job. And that is the thing you need to consider.

So the bottom line is if I was you I would try to not spend the client’s money unless it is necessary because ultimately that is all overhead and it increases the amount of value you have to add to a client.

Travel Expenses from the Consulting Firm’s Perspective

Now let’s look at this issue from the consulting firm’s perspective. The consulting firm needs to hire the smartest people. Its going to be very difficult to entice the smartest people to work for the consulting firm if those smart people can work somewhere else and get better perks than what the consulting firm can offer.

So in a truly competitive market where people are joining a consulting firm partially for the perks they are unlikely to join a consulting firm that doesn’t offer these perks.

And the weaker the brand of the consulting firm the more important the perks. When people are picking a consulting firm that has a weak brand and they only picking it because of salaries and perks, such consulting firm has no choice but to offer these perks.

People would say, “McKinsey also offers these perks”. Yes, that is true. But a lot of the perks McKinsey offers are not so great. For example, McKinsey salaries are not as inflated as people think. And McKinsey can get away with this because the brand is so strong.

So from a consulting firm’s perspective the position is, “Even though we are incurring high travel expenses because we are bringing in the best people the value of the work will show through”. The firm is basically looking at it from a cost / value perspective.

Travel Expenses from the Client’s Perspective

When you apply this competitive market position from recruiting to clients, the same thinking applies. If a consulting firm is offering these perks obviously the cost to the client goes up because all that overhead needs to be eaten up. If the cost to the client goes up, in the short-term the client may accept it. But in the long-term, unless you add enough value to that client, the client is going to say, “You cost us a lot of money. You don’t add enough value. Therefore, we will not work with you anymore”.

So now we come back to the value discussion. If the consulting firm is not adding enough value to justify the costs, the client is completely free to walk away. This is what it means to be in a competitive market. The client is not obligated to work with any particular consulting firm.

The client sees the fees. They understand that part of it is baked in travel expenses. If they are satisfied with the value versus cost trade-off, they say, “This is the value the consultants brought. So we are ok with it. The value of the work is showing through”.

From a client’s perspective it is also a cost / value trade-off.

—

Proper management of travel expenses on consulting projects requires good judgement. However, those six guidelines above will help you in determining whether travel expenses are appropriate.

Frugal consultants who add an enormous amount of value are respected. Extravagant consultants who add significant amount of value are usually tolerated, but are likely to be shoved aside at the first sign that value is starting to drop.

So the question is: do you want to be a consultant who is liked or tolerated assuming both add the same amount of value?

If you are spending a lot of money, at the first sign of trouble the client will likely shelve you. So ask yourself, whether the risk is worth it, after everything you have invested in building your career.

QUESTION(S) OF THE DAY: Which key guiding principle do you find most helpful? Please share in the comments. Cheers, Kris

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