Management Consulting and Consulting to Major Corporations

The consulting industry is a multifaceted, global business sector that is facing many challenges and evolving quickly. At the highest level of the business is “management consulting,” the segment that advises top executives and boards of directors at Fortune 1000 firms on strategy and organization. McKinsey & Company, Inc., Bain & Company, Inc., Boston Consulting Group, Inc. and a handful of other companies are the most elite. Such firms may charge their clients anywhere from $300,000 to $1 million in monthly fees, with top consultants billing at more than $5,000 daily plus expenses, and associates at $2,000 or more. These consultants’ engagements for a multinational corporation may include analysis of multiple divisions and involve travel to several continents. Their suggestions often result in sweeping organizational changes, with the hoped-for result of creating significant efficiencies and adding tens of millions of dollars to the client’s yearly operating profit. Management consultants may take assignments involving many aspects of a client’s business, including marketing, acquisitions, finance, taxation, information technology, manufacturing, distribution, human resources, divestitures, government relations, facilities, telecommunications, environmental matters and more.

The growing globalization of business and industry in general led inevitably to the globalization of the leading consulting companies. Major consultancies operate offices in the most important business centers in Europe and Asia-Pacific as well as in North and South America. Africa is the next consulting frontier, as rapid economic growth has been enjoyed by a handful of African nations in spite of problems ranging from lack of infrastructure to social turmoil and terrorism. Many consultancies operate worldwide and have multiethnic, multilingual employee bases. In particular, major consulting firms have opened large numbers of offices in Brazil, India and China in recent years.

Annual revenues at top, global consulting firms run in the billions of dollars, and top consultants who reach “partner” status may each earn $850,000 or more yearly in return for grueling hours, high stress and many, many days spent traveling far from home. Despite these drawbacks, considering the high pay and the prestige, the best students at the best business schools frequently pine for posts in consulting. (An interesting exception to the grinding work and travel required of employees at many consultancies is found at Atlanta-based North Highland, (www.northhighland.com). At this innovative mid-sized firm, consultants find that, per company policy, their assignments are largely in the cities where they live, negating the need for extensive travel, and work/life balance is encouraged by the firm’s business practices.)

In contrast to the size and infrastructure of the leading management consulting companies, a large portion of the industry is comprised of very small companies—in many cases these are one-person shops, perhaps operating from a spare bedroom at home. This part of the business has grown rapidly, as legions of well educated, highly qualified and thoroughly experienced executives and professionals have been laid-off during corporate downsizing or took early retirement in exchange for an opportunity to work for themselves. These professionals have turned to self-employment as consultants, focusing on their specialties and combing their contacts for leads.

Also in recent years, consultancies, large and small, have become more virtual, cutting back on the need for personal time spent in the office and/or on the road. The Coronavirus pandemic has accelerated this trend. High speed internet connections combined with online collaboration tools and video conferencing are making it easier for consultants to work effectively no matter where they may be. This trend was fostered by globalization, as the need to collaborate with team members in the global offices of a consultancy, as well as communicate with the global offices of clients, has created high demand for the latest in online tools, such as Microsoft Teams, Slack, Zoom and Google Docs.

The days of unrestrained corporate spending are long gone. Corporate clients are now much more demanding when negotiating consulting contracts. Their demands are likely to include specific caps on overall cost, tight controls on travel and other expenses related to a consulting project, a demand for lower hourly rates and sometimes a penalty if desired goals are not met.

In an effort to control costs, some corporations that were formerly desirable clients have built their own internal consulting staffs. One interesting offshoot of this trend is that the internal consulting units at a few companies have begun offering consulting services to outside clients. This is increasingly found in industries such as hospitality that are focused on high levels of customer service. At the Walt Disney Company, long famous for customer satisfaction and innovative employment practices, a consulting unit called The Disney Institute is now teaching other firms how to better engage their customers. Likewise, The Ritz-Carlton Leadership Center, a unit of Ritz-Carlton Hotels (itself a luxury property subsidiary of hotel giant Marriott), is teaching client firms how to provide high levels of service to picky customers.

Going forward, consulting firms will be forced to compete fiercely for their engagements, and the engagements they receive may be relatively short-term or less profitable than assignments of the past. Corporate clients will be focused on a provable return on investment for consulting dollars spent. Specific goals will be set early in the process, and consultants will be under intense pressure to meet those goals. Large, multifaceted consulting companies will face fierce competition from smaller, niche companies. In particular, consultancies that can quickly improve their clients’ profits may have the best competitive advantage over the mid-term. Corporate clients may lean toward hiring consultancies with a proven ability not only to point out a corporation’s problems and strategic deficiencies, but also to implement solutions that cut debt, restore health to balance sheets and stabilize profits.

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