2002: Features (print version)
The End of Consulting?
the darling of job-hunting students and strategy-seeking clients, management
consulting deals with upheaval of its own.
it was: the button.
most buttons in this modern era, it existed to be punched. Ted Boles,
AB'01, had already heard from his People Matters representative that
it was in the pipeline. When it arrived on September 21, 2001-three-dimensional
and almost tactile, embedded at the end of an e-mail, subject heading
"The Flexible Leave Program"-he let it sit in his Lotus Notes
in-box for half a week before resolving to depress it. With one small-motor
motion, accompanied by the soft but audible click that denotes an e-action
taken, Boles froze his six-week-old consulting career for exactly one
was entirely voluntary. I did it to save my career," says Boles,
an analyst for Accenture who has spent the past nine months' deep freeze
working as the public relations and marketing manager of the University's
Career and Placement Services (CAPS). The case was one of simple supply
and demand: like most consulting firms when the recession hit in April
2001, Accenture's supply of consultants soon exceeded the demand for
their services. Many employees were given the option of a FlexLeave
sabbatical in return for 20 percent of their salaries, all their benefits,
and the guarantee of a position at the same salary and career level
in a year's time. If too few employees opted to take the offer, head-count
reductions would follow. (Accenture, the world's largest management-consulting
firm, spun off from parent accounting firm Arthur Andersen several years
ago and is now a separate entity not to be confused with Andersen's
internal consulting arm. So Accenture's actions are entirely recession-not
is no fool. He'd just rolled off Accenture's three-week Client Engagement
Readiness School in St. Charles, Illinois-"basically a converted
college campus with a corporate feel," he says, where Accenture
trains new hires from around the globe and where he learned, among other
things, that the easiest heads to reduce are those that haven't even
made it onto the totem pole. Nevertheless, he reflects, "Given
where I was, it was frustrating. I was eager to start."
September Boles and Danielle Kranacher, AB'01, who joined Accenture
in June 2001 and like Boles is on FlexLeave from the Resources Group
in Accenture's Chicago office, have watched long distance as their cohorts
from St. Charles spread out across the country on client engagements.
They've received frustrated e-mails about long hours and difficult clients
and exhilarated e-mails about how cool it is to actually be a consultant.
They attended the holiday party and quarterly outings held by their
Chicago Resources Group Community, dubbed Earth Wind and Fire in honor
of the natural-resources businesses it advises, and kept up on the group's
doings via the newsletter Elementals. They autosubmit charge
codes every two weeks so Accenture can keep track of its nonbillables,
and once a month their assigned mentors check in to see how they're
doing and if they still want to come back to work. Despite their short
tenures on staff, they continue to use the company's lingo, "Octelling"
each other (referring to the brand of Accenture's voice-mail system)
and "dropping Lotus Notes" to one another (particularly when
a cryptic corporate communication arrives). It's a strange limbo. Yet
it hasn't dulled their desire to get to work.
anxious to start my career," Boles says during a conversation in
the sweaty third-floor CAPS offices of Ida Noyes one unseasonably warm
April day. In the waiting room down the hall third-year students in
wool suits and ties, stockings and heels, clutch leather portfolios
and dab their foreheads with damp hankies as they wait to be called
for Metcalf Fellowship interviews: next year's class of alumni hoping
to land prestigious summer internships and an upper hand in the job
search ahead. "If there's ever a point in my life to be a consultant,"
continues Boles, "it's now. My body can take working 80 hours a
not kidding. The consulting industry has a reputation for two things
among students: what most call "the lifestyle"-long, grueling
hours and travel schedules that keep you on the road four days a week,
four weeks a month; and "the exposure"-to a broad cross section
of industries, to senior-level clients, to CEO- and enterprise-level
quandaries, to the brightest colleagues one could hope for.
the increasingly smaller number who make it through the intensive interview
process with job offers, the pros of the exposure seem to outweigh the
cons of the lifestyle. For those 10-12 percent who, before the recession,
left after two or three years to get an M.B.A. or take a position in
one of the industries to which they were exposed, the lifestyle doesn't
top the list of things missed. For those who stay in consulting and
climb the ladder to director or partner, such as Mary Tolan, MBA'92,
a partner at Accenture and a 20-year veteran of the firm, the thought
of doing anything else is pretty much inconceivable. "I'm an addict
of challenge," she says. "I think I'd fall asleep if I had
to stop consulting."
for the past 20 years there hasn't been much time for consultants to
sleep. During the 1980s and 1990s management consulting was one of the
fastest growing sectors in the world's advanced economies. The Kennedy
Information Resource Group estimates that total management-consulting
revenues worldwide are $62 billion a year, compared to about $3 billion
in 1980. Roughly 80 percent of today's management-consulting firms were
established after 1980, according to The Expansion of Management
Knowledge (Stanford, 2001). Observers explain the explosion as part
of a larger shift in advanced economies away from manufacturing toward
business services. But it's also because clients' demand for management-consulting
services has increased, mainly in response to the perplexities of a
globalized, high-tech economy.
is real, and it's fast," says Mark McGrath, MBA'69, a director
in McKinsey Consulting's Chicago office. "It comes from competitors,
consumers, and suppliers. Uncertainty is the name of the game, and ambiguity
is always present." He speaks in the practiced tones of someone
who's been around the block enough times to be a tour guide. "It's
a lot harder now than when I started. We have a much more global economy.
Transaction costs are much different. The life expectancy of a Fortune
500 has dwindled. Small competitors can be much more aggressive with
the use of technology."
also been a shift, he says, in the perception of hiring management consultants.
"Seeking help is viewed as a good course of action," says
McGrath. "Thirty years ago in company after company management
had a machismo about tackling problems. Now seeking targeted help is
much more acceptable. When you can tackle a problem with heavy-up resources,
the quality of the outcome will be proportionate to the effort you spend.
For a company to devote five or six of their most talented people to
a problem typically just isn't feasible." But hire a consulting
firm noted for employing the best and brightest M.B.A.s from elite programs
like the GSB who devote themselves full time to the problem, and, says
McGrath, they'll break its back in no time. The perception shift has
also been helped along by the many consultants-turned-corporate-managers
who hire the firms.
most striking change in recent years, says Joni Bessler, MBA'83, a partner
at Booz Allen & Hamilton in San Francisco, is that "the integration
of strategy and technology is now fundamental. They are not separate
and distinct, period. We've been fortunate because that has played into
our strengths. I can't think of a single piece of work that I've bid
on that doesn't intertwine those two."
this reality, management consultants like Bessler, McGrath, and Tolan
take pains to differentiate themselves from the large number of information-technology
consulting firms, such as the formerly robust and now emaciated Sapient
and the defunct MarchFirst, whose fast-selling, high-priced, and some
would say unwieldy and unfathomable Web-based systems contributed substantially
to the growth of the consulting industry during the 1990s. It's a telling
sign, McGrath notes, that traditional strategist McKinsey has gotten
into the business of helping clients figure out what to do with the
systems they paid other consulting firms so much to build.
was a surreal time. I don't think we'll ever see it again," says
Harsh Jawharkar, a part-time GSB student and freelance consultant who
was laid off from Sapient in February. "It was very casual. Everyone
was pampered. There were video games and Nerf toys everywhere, and our
office fridges were stocked with beer. We had lunch catered once a week."
The firm could afford the luxuries, he explains, because "big corporations
were scared to death. They didn't know what the Internet does, and they'd
pay millions for our help. The pricing pressure was unbelievable."
He tells of a client in Oklahoma City who could only pay $1 million
for a project. "That was peanuts to us. The partner on the engagement
said, 'Let's take it, and then halfway through tell them we can't finish
without more resources.'"
like this are exactly what make McGrath, Tolan, and Bessler cringe,
in part because they are quickly gobbled up by a small army of journalists
who devote themselves to questioning whether, at the heart of it all,
consulting really works. In the late 1990s books about consulting horror
stories proliferated: Con Tricks: The Shadowy World of Management
Consultancy and How to Make It Work for You (1998), Dangerous
Company: The Consulting Powerhouses and the Businesses They Save and
Ruin (1997), and The Witch Doctors: Making Sense of the Management
Gurus, the last written by Economist editors John Micklethwait
and Adrian Wooldridge.
those titles make clear, much has changed in the perception of consulting
since Hal Higdon, X'59, wrote The Business Healers in 1969. Even
then, Higdon noted what was called the Fortune syndrome. "[A]bout
once every five years Fortune publishes a debunking article on
management consultants that completely punctures their egos," he
wrote, leading to a general industrywide lip zipping and a dearth in
press interviews with consultants. Higdon seems to still have it right:
a quick search of Fortune's online archives dredges up "Why
Consultants Generally Suck," from May 2000.
professions incite such extreme views as the consulting field. Consultants
are presumed to be shallow and immoral because of their high prices
and association with "cost cutting" (read: head-count reductions).
At the same time they are respected for their problem-solving skills,
adaptability, and broad understanding of business. The effectiveness
of their work is scoffed at, and yet the industry's growth demonstrates
that they must be doing something right.
their part, students seem unswayed by the naysayers and consider a consulting
position to be the liberal-arts degree of the business world. "It's
a chance to flex every muscle in my M.B.A. portfolio," says Jeff
Koebler, a part-time M.B.A. student at the GSB's downtown Gleacher Center
campus who hopes to leave the textile industry for a strategy-consulting
position when he graduates next year. "A friend of mine at McKinsey
puts it this way: consulting is like a finishing school after your M.B.A."
best finishing schools, as one might guess, are highly competitive.
Ask M.B.A.s in the heat of a consulting job search where they'd like
to work, and you can almost chant along with the names: McKinsey, Booz
Allen & Hamilton, Boston Consulting Group, Bain & Company. These
elite strategy consulting firms have traditionally eschewed tinkering
with a client's day-to-day operations and focused instead on the big
picture and the long-term. They are also the oldest firms; McKinsey
was founded in 1910 by James O. McKinsey, a U of C business professor,
while Edwin G. Booz, a Northwestern graduate, founded Booz Allen &
Hamilton in 1914.
elites recruit heavily at Chicago, where consulting is the No. 1 career
choice for M.B.A.s, ahead of investment banking. Roughly 30 percent
of 470 new hires from the GSB Class of 2001 took consulting jobs, with
McKinsey as the GSB's top employer, at 32 new hires and 19 interns.
Boston Consulting Group was No. 5, and in the top 15 were Deloitte Consulting
and Accenture, members of the Big Five, that is, the consulting companies
that grew up as parts of the nation's biggest accounting firms.
years ago, of course, the Big Five were the Big Eight accounting firms,
but the complicated glomming of mergers and acquisitions-as evidenced
by the firms' compound names-has winnowed them down to Accenture, Deloitte,
PriceWaterhouseCoopers, KPMG Consulting, and Cap Gemini Ernst &
Young. These consulting firms built multibillion dollar businesses by
streamlining clunky processes and creating enterprisewide information-technology
systems for many of the world's biggest firms. But Accenture's Mary
Tolan notes that the "Big Insert-Number-Here" nickname is
inaccurate, given that the consulting arms have grown up and diversified
and may no longer even be associated with the big accounting firms that
Big Five, for lack of a better name, have had almost as much cachet
among Chicago M.B.A.s and certainly as much among undergraduates as
the elite strategy firms. Like most college career centers, CAPS has
only just begun to track student employment interests and job offers,
but as director Liz Michaels, AB'88, says, "By no means a majority
but certainly not an insignificant number of our undergraduates interview
in consulting, and not an insignificant percentage of our alums work
at consulting firms," demonstrating that consulting is a leading
career choice for College grads. The National Association of Colleges
and Employers (NACE) is able to be more specific: in 2001 consulting
firms ranked first among employers hiring new college graduates.
interesting is that many undergraduates who have gone into consulting
say they had no idea what consulting was when they walked into their
career centers in early fall and saw flyers announcing all the firms
coming to recruit. "The buzz on campus was that these companies
hire a lot of students for their liberal-arts backgrounds, for how you
think and learn versus your specific skills," recalls Ted Boles,
a biology concentrator. "But I knew very little about it. To an
outsider, the word is so bizarre-what does a consultant do? And
even now I know that answer is always changing and being redefined."
like many of his peers, attended each firm's informational reception
and submitted résumés even as he was signing up for interviewing
workshops and figuring out what a exactly consultant does, much less
what a McKinsey versus an Accenture consultant does. (These specifics
he learned by prowling the consulting hub at Vault. com, "the insider
career networkTM." Vault provides statistics on individual firms,
"why work for us" paid pitches, job-hunting tips, and very
active chat boards on specific companies and general trends. Recent
threads range from which girl the consultant on ABC's reality show The
Bachelor would choose to KPMG's April round of layoffs, with farewell
after bitter farewell from ex-consultants who sport usernames like consultmaniac
interviews with four companies-McKinsey, Accenture, Cap Gemini, and
Watson Wyatt, including five rounds of interviews with Accenture-Boles
had a job offer and two weeks to decide whether to sign on the bottom
line. He took one week. "It was all over very quickly," he
says, "and I spent the summer wondering what it would be like,
how long I would stay"-two or three years and then on to business
school is standard for entry-level consultants. "By August, when
I started training, I felt reassured that it was all real and happening
and I'd done the right thing."
to the dreamlike feel of landing a consulting position is the compensation:
NACE reports that the average starting salary for an entry-level consultant
was $47,893 in 2001, down slightly to $43,070 this year, reflecting
the recession. And although Chicago M.B.A.s know before they enter GSB
programs that large numbers of their predecessors have gone into consulting-and
been paid very nicely to do so, with a 2001 median salary of $110,000
and a median signing bonus of $25,000-it's not unusual to hear an M.B.A.
tell a story much like Boles's. "When I began this process, I had
no idea what consulting was," says Dean Rosenblum, MBA'02. "I
had no idea why anyone would agree to pay me 100-some-odd-thousand dollars
to consult a CEO of a Fortune 500 firm." A chef by trade, this
summer Rosenblum will become a consultant at the Chicago office of a
top-tier strategy-consulting firm that prefers to keep a low media profile.
he says, consulting was among the "low-hanging fruit." Along
with investment-banking firms, consulting companies were the most plentiful
recruiters on campus during his first year, and the more he learned
what a consultant does-being in a group of "resources dedicated
to a specific problem, where on this hand is the question the client
wants answered and on the other hand is the larger question, and it's
up to us to figure out the eight or so things we need to know, split
up, and then come back together and reassemble this incredibly rigorous
analysis we've conducted into a cohesive strategy for our client"-the
more he wanted to do it.
spent fall and winter of his first year practicing "case interviews."
(M.B.A. recruiting takes place in the first year, when students compete
for summer internships with firms that, they hope, will extend full-time
offers a year later.) A standard method used by recruiters of both M.B.A.s
and undergraduates, case interviews are essentially story problems designed
to test an applicant's ability to think systematically on his or her
feet, ask the right questions, and demonstrate problem-solving skills.
For example: "An aircraft manufacturer is thinking of building
a plant to produce a 600-seat airplane. Development costs will total
about $10 billion. Should they make this investment or not?" Compare
this to a case posed to Andy Hong, AB'01, a McKinsey business analyst:
"Estimate how many windows there are in Chicago."
did about 75 two-hour practice runs with second-year M.B.A.s who volunteer
to help their classmates prepare. In the first and second weeks of February
he interviewed with three top strategy firms, with whom he had 13 half-hour
case interviews and three "fit conversations" in which he
explained why his experience and skills might match a specific employer's
style and culture. He received an internship offer from his top choice
halfway through the second week and immediately cancelled five other
interviews. He accepted the internship two weeks later and by August
was among the five of nine interns who were offered full-time positions
were the glory days. As Ted Boles says, "everything changed on
a dime." Although the recession hit last spring, recruiters such
as Rosenblum's employer figured business would pick up soon enough.
But when the World Trade Towers fell, whatever consumer confidence was
weathering the recession was badly shaken.
the traditional fall recruiting season in early October consulting jobs
for undergraduates had all but evaporated and weren't exactly plentiful
for M.B.A.s. The industry dropped to No. 11 on NACE's list of this year's
top employers of college graduates. Hiring projections for consulting
firms plummeted 89.7 percent, according to NACE's April 2002 employer
survey. It's part of a general 36.4 percent decrease in hiring for college
graduates that reflects the drop in demand for all professional-service
industries. The drought has made headlines across the country, with
lots of "I don't know what am I going to do" reports from
jobless students about to collect their diplomas and enter the "real"
no secret to anyone that consulting firms aren't hiring and in fact
are laying off," says Michaels at CAPS. "So what are our students
doing instead? They're looking for other stuff. A lot are planning to
go to graduate school. They're looking at nonprofits, at programs like
Teach for America. Some of the small boutique consulting firms [with
niche businesses] are coming to campus, and they've been able to compete
for students they might not have in the past. And students are going
into other business sectors."
the GSB, Associate Dean of Career Services Glenn Sykes reports 175 fewer
consulting job offers than at this time last year, when there were 263.
"The growth in M.B.A.s' interest in consulting went along with
the growth in consulting," he says. "M.B.A.s pursue growth.
When growth shifts, their interests shift. Our top hiring firms this
year are companies that actually make things. Students are realizing
there's more stability in corporate positions."
inside consulting, the view is not great but not that bad. "I think
the economy is changing fundamentally," says McGrath at McKinsey,
calling the downturn "a lot less severe than others I've seen in
the past. The mid-1970s recession was quite severe, and even compared
to those in 1981-82 and 1990, this isn't the same. Recessions are different
now, at least for a firm like ours that's geographically diverse. That
means downturns don't hit at the same time. Our European, Asian, and
Latin American practices are really strong. We have the rest of the
world out there, and in addition to that, our practice is pretty widely
based. We find now we're focusing on what we can do to make our clients'
organizations more effective or make cash registers ring."
message from Mary Tolan at Accenture is similar but the story has a
slightly different twist. "Accenture is less focused on classical
strategy studies and more on shareholder value creation: how to double
the client's share price, where the break-away strategy for the firm
is. We tend to form very close relationships with senior-level executives
and, taking their ideas, accelerate their ability to implement them
and get results." The firm's shift away from information-technology
systems and toward "value creation" has been about seven years
in the making, and, she says, it's been a boon during this downturn.
in bad times clients want to improve their businesses," she explains.
"They want ideas that can get them cash flow quickly, not some
big hairy ERP [enterprise-resource planning] program that's going to
cost them a lot of money and not get immediate results." She talks
about solutions that take six or ten weeks to implement rather than
four years and her firm's expansion into outsourcing-taking on a client's
back-office functions so clients can focus on core businesses.
news from Booz Allen echoes what McGrath and Tolan say. "We're
cautiously optimistic, and our clients are too. But it's a much different
marketplace than it was before," agrees Bessler. "The work
is there, but the clients are putting themselves through the rigor of
whether we consultants add value."
does that mean for job prospects? Not much-at least not for undergraduates,
in the view of Philip D. Gordon, director of the Collegiate Employment
Research Institute at Michigan State University. "In the past couple
of years consulting companies loaded up on new hires and threw a lot
of bodies at problems because clients had the money to throw at problems,"
he says. "There's going to be a restructuring after this recession,"
he predicts, "and the demand for undergraduates isn't going to
bounce back." Many corporations, he believes, will tackle the strategy
problems that in the past they handed over to consultants. That means
the hiring demand among consulting firms, he concludes, will be for
"high-skilled people such as M.B.A.s-who will allow consulting
firms to be quicker and able to take on shorter-term projects."
a vast, globalized company be so nimble? Freelance consultant Jawharkar
has his doubts: "Smaller consulting firms are very quickly becoming
more significant now, and not only because of lower prices but also
quality of work." Adds Susan Hendrie-Marais, MBA'88, who left McKinsey
ten years ago because she felt stifled by the firm's highly structured
approach and now freelance consults for nonprofits, "Any large
organization is not going to be as fast or creative as a small organization
the recession for the slackened demand for consulting services and the
downturn in hiring-but there also seem to be larger forces at work,
and Jawharkar's words are reminiscent of the environment McGrath said
his clients face.
growth and shifts in the consulting field has caught the attention of,
among others, Matthias Kipping of Great Britain's University of Reading.
"The evolution of the consulting industry and of its preeminent
firms," he writes in "Trapped in Their Wave: The Evolution
of Management Consultants," a chapter in Critical Consulting
(Blackwell, 2002), "is closely linked to the development of management
practice and ideology.... This means that consultancies are ultimately
dependent on the evolution of management." If Michigan State's
Gordon is right, the latest evolutionary wave is in our midst. It's
plausible, notes Kipping, that the large firms now dominating the sector
could, as McGrath suggests, "avoid the trap into which most of
the earlier generation consultancies have fallen. Their efforts to diversify
their activities and offer a broad range of services might suggest they
are better able to respond to future shifts in the locus of managerial
and organizational problems."
is among a small but growing number of business and social-science scholars
who have attempted in recent years to quantify the impact of consulting
work and to understand the complexities of the client-consultant relationship.
Perhaps most telling have been studies by Eric Abrahamson of Columbia
University who notes that, increasingly, it's consultants and management
"gurus"-and not academics-who generate the ideas that catch
on in the corporate world. In a 1996 Academy of Management Review article,
Abrahamson urged scholars, "not only to study the management-fashion-setting
process... but also to intervene in this process in order to render
it a more technically useful, collective learning process...."
those on the outside looking in, consulting has a mystique that can
be almost frightening in its scope. Yet its allure is unmistakable,
if not addictive. "Do I feel like I'm a part of the consulting
world? Yes and no," says Ted Boles in his CAPS office, waiting
out another three months before he returns to Accenture. "I feel
a tie, a relationship with it. I'm hopeful this will happen." Whether
consulting will be the same industry it was when Boles punched that
FlexLeave button is anyone's guess.