Before reading this, remember that it is a successful Firmsconsulting strategy to sometimes “park” MBA clients in internal strategy units at banks before we feel they are ready to apply to MBB (McKinsey, Bain and BCG) and other consulting firms. This works because the client is in an internal strategy unit that has some cache with consulting firms, but crucially, this is a temporary stop before they go on to join McKinsey, BCG, etc.
The article below is about readers who simply want to stay in internal strategy units to learn management consulting skills. There is a major difference between both strategies. We recommend the former and not the latter if you want to become a capable management consultant.
Management consultants are all over the place. The big-3 alone have an estimated 50,000 alumni working across the world. Moreover, the rise in the use of management consultants throughout the 1990s accompanied by their rising fees led to some clients actively trying to replicate consulting skills in-house by creating internal strategy units. This professionalized the development of internal strategy consulting teams and created a second-act for many exiting consultants who did not want to immediately jump into operating roles.
The banks have been particularly guilty of propagating this trend. They also never seem to learn from the difficulties associated with such past attempts. Every three years or so another banking executive, usually in the same bank, thinks he can set up an internal strategy unit which will work. Despite years of failure, he thinks it can be done correctly this time. It’s a predictable pattern, like death and taxes.
Every bank we have met is doing this, trying to do this or exploring the idea. If I tried to name them all it would take too much time.
The thinking behind internal strategy unit is almost always the same:
(2) Hire associates and analysts to do the work.
(3) Save money by not hiring management consultants.
The idea that a few smart people can find ideas for improvement and opportunities for growth is a supposed no-brainer.
Each week we get several queries asking about the value of joining these internal strategy teams at banks.
The reader surmises that since the team is led by ex-BCG or ex-McKinsey partners and managers, then it would be the same as joining a management consulting firm. The reader is sometimes, though not always, trying desperately to justify their wish to take the opportunity.
And why would they not? Given how hard it is to get into McKinsey surely the idea of working for an internal strategy consulting unit staffed with consulting alumni must be the second best option.
There are some major and critical differences between working for an internal strategy unit at a bank versus joining an élite management consulting firm. If you really want to join an internal strategy consulting unit, then that is fine. There is value and merits to doing that. In fact, in many countries it can help you eventually land a consulting position, but does not teach you the same skills as what you would learn at an elite management consulting firm.
That sounds counter-intuitive but it is true.
Just do not justify it on the basis that it is the same as joining a top management consulting firm. It is not. Here are the critical reasons why:
1) First, in a management consulting firm you will be carefully taught a rigorous problem solving approach which you can apply to any situation. This flexibility is one of the values of management consultants. They can work in any situation, at anytime, anywhere in the world and at a moment’s notice.
In a bank, you will be working on very similar issues. Therefore, it is unlikely you will learn the ability to apply the problem solving approach across issues and industries. In a perverse case, you will acquire industry knowledge and rely on this knowledge versus applying basic and rigorous problem solving to understand the fundamental issues. If you see how much effort goes into testing the case interview capabilities at the top firms, you will realize just how important basic problem solving really is.
2) Second, when you work in a bank, you will be encouraged to bond with your peers, colleagues in other divisions and basically make friends. Given that close bonding and the fact that recommendations need to be publicly debated for them to have any impact, how likely is it that you will produce analyses calling for a colleague’s department to be right-sized? What about an analyses pointing out that the leader of the largest and most important business division is actually underperforming? Do you have the backbone to do this? Are you willing to put your career on the line given the fact that power lies in the operating divisions?
Unfortunately, when you work in internal strategy units at banks, the existing power structure forces you to put out politically correct recommendations. You have no choice. If you put out the correct material which challenges an important person, it is sidelined. You can choose to continue being sidelined or play the game and progress. Offering lukewarm recommendations to get ahead is not management consulting.
3) Third, speaking about power structures, in any bank anywhere in the world, the power and influence lies with the operating units and the operating leaders. It is a badge of honor, a sign of recognition to be awarded the chance to run an operating unit.
In fact, you can Google this, read about the careers of Jamie Dimon and Mike Carpenter. Dimon was a brilliant HBS graduate who led Sam Weill’s strategy and planning. Dimon did everything in his power, according to his biography, to get into the operating units and lead a profit centre. In his words, “planning was half of the game”. Carpenter was a star BCG partner who was recruited by Jack Welch. He ran Kidder Peabody and eventually went to Citigroup. There he was “exiled” into strategy planning when his performance dipped.
Sir Deryck Maughan the former head of Salomon Brothers experienced the same issues. When his performance dropped he was asked to move into strategy planning.
The bottom line (no pun intended) is that internal strategy units at banks are seen as killing fields for under-performing executives. It’s hard to admit this but it is true. The exception to this rule is Goldman Sachs. Of course, they do not staff the internal strategy unit with ex-consultants and the unit works on organizational issues. Assuming you are not going to Goldman Sachs’ internal strategy unit, why would you want to work in a part of the business with such a bad reputation and absolutely no influence?
4) Fourth, consultants from even the top consulting firms are given a really tough time when they work at banks. What makes you think you will fare any better? It will be much worse by a factor of 10 to 50! Your advice will be ignored, analyses openly ridiculed and questioned. It can become debilitating. This would not happen to you if you were a BCG case-team assigned to JP Morgan. You would get respect even if the employees resented you.
The internal consulting units inevitably respond to these internal organizational issues in two ways:
Despite their moniker of being an internal strategy unit they end up picking up fairly mundane work. They focus on conducting surveys, and, especially, undertaking business-process-reengineering work. There is nothing wrong with business-process-reengineering work, but even here, they struggle to get any traction for the reasons listed above.
They also become quant jockeys. They put out fancy analyses which makes them feel all warm inside but which is never ever used. A management consultant’s job is to give the correct recommendations AND make an impact at a client. Consultants are sometimes unfairly mocked for producing reports which sit on a client’s desk, I would argue that dishonor belongs to internal strategy teams at banks who want to act like management consultants and do not realize they face a very different set of expectations. No one really wants their reports. They are seen as implementation managers.
5) Fifth, whether you like it or not, you must realize that in a bank, to rise you must run a business. Please make sure you understand this distinction. Consulting firms are designed to promote and reward thinkers. That is how you make partner and eventually senior partner. In the internal strategy unit at a bank, your reward for doing great work is to have your entry into the operating units fast-tracked.
Understand that for a minute. No matter how well you do in the internal strategy unit, you will still need to very much prove yourself in the operating side. Even if you came to Bank of America from BCG as a manager, while you will have that incredible brand on your résumé and respect it confers, you will still need to eventually move into the operating units.
6) Sixth, banks do not reward smart ideas. A bank’s currency is its share price, net profits and risk profile. If a bank produces this then it is a success. Those who help the bank produce these things are rewarded and recognized. Smart internal strategy unit’s guys and ladies are not rewarded unless they meaningfully and directly contribute to the bottom-line.
Management consulting firms on the other hand build value via ideas, publications and influence. Can you see the mismatch? Your internal strategy unit will march to a different beat.
About 70% of McKinsey, Bain and BCG employees are managed out of the firm. That means they are asked to leave since the firm did not think they would make partner. In laymen terms, they are not good enough. So when you meet an alumnus of these firms you have to ask yourself the following:
Do not be afraid to ask these questions. Just do not ask them directly. It is your career on the line. Can you learn anything from someone who was managed out? What can anyone teach you who spent just 12 or 18 months at a management consulting firm? If they left as a partner that is a different story. The bottom line is to be wary of working with internal strategy units stocked with alumni of the top firms. Quality is an issue.
7) This point comes at the end but it is probably the most important. People who served at the junior levels of consulting firms think true management consulting is all about analyses. They are wrong. Unless they made case manager or associate principal they have likely never learned how to take the pieces of information from analyses and construct recommendations.
This is a critical point. Knowing how to break down an issue with analyses is only part of the way in an engagement. The other part is to bring it all together to create the recommendations. Only partner level consultants can do this. Junior employees are always analyses junkies.
My point is that you can only be exposed to the full collection of required skills at a management consulting firm. Moreover, you need to learn the consulting value system. It is vague but without it learning how to size a market means little. Learning the culture and value system of management consulting takes time to understand.
So if you get an offer to join the internal strategy unit at a bank or another company, even if it is led by “ex-McKinsey managers”, think very carefully about what you are getting into. I can assure you it will not teach you to be a management consultant or expose you to even 10% of the true experience. If anything, you may learn the wrong skills and never gain the correct training, or worse end up thinking this watered-down version of consulting is management consulting.
If you do not get into McKinsey, Bain or BCG then do not subject yourself to an internal strategy unit unless it is just a stepping stone to move into consulting. In that case, you need to be very careful about doing things which make you attractive to consulting firms. Merely being in the internal strategy unit is usually insufficient.
If you want to join an internal strategy unit at a bank, you should do the following:
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