In simple terms, consulting is a service in which specialists recommend solutions to a company that has commissioned them. There are many fields and services within consulting, but the areas mainly covered by consulting are strategy, management, organizational and human resources, finance, and technology, while the services provided range from recommendations, advising, and other expert knowledge concerning business plans, reorganization, corporate acquisitions, to technology implementations.
It is thought that there are over 700,000 consulting firms worldwide. According to the major statistics service company Statista, the size (in sales) of this industry is estimated to have been approximately $272 billion in 2018 and is expected to grow to $285 billion in 2019 and $296 billion by 2020. The aggregate sales of the top ten companies in the industry had an annual growth of 4% between 2010 to 2015.
Perspectives among specialists and industry insiders may differ, but it is safe to say that a consulting firm exists expressly to bring value to its clients. This value will vary case by case, but can be classified into the following three categories:
Finding solutions based on different perspectives, ways of thinking, and knowledge not under the influence of the preconceptions and biases of the client (commissioning company).
Implementing solutions that the client is unable to due to its own interests or obligations.
Proposing the most effective solutions and methods for the execution thereof based on the client’s requests, targets, and objectives.
The branches of consulting are varied and extend beyond the main areas of strategy, management, organizational and human resources, financial advice, and technology. The client companies served are also varied and can include manufacturers, telecommunications carriers, medical services, public utilities (government services), construction, and real estate companies.
When companies wish to formulate and implement strategies to increase revenue and profit, expand their business, or develop new business. Key examples include sales strategies, marketing strategies, PR strategies, and strategies for business diversification.
Overlaps significantly with strategy consulting. In general, focus is given to the proposal of solutions surrounding the management of the company, such as for the improvement of business results, problem solving, and operational policy planning. Consultants may also ascertain policies for efficiency in daily operations concerning specific businesses and will suggest methods to optimize business management to enable those policies to take effect.
Organizational & Human resources
Assisting the discovery and retention of talent. Development and implementation of training programs to enhance skills and expertise for employees. Improvement and establishment of employee benefits aimed at reinforcing employee morale and retaining skilled personnel. Consultants also propose dismissal policies and act on behalf of companies when carrying out large-scale workforce reductions.
Includes advice on cost reduction measures and spending optimization, including identifying and proposing financial improvement plans. Through the analysis of financial statements, consultants offer the service of identifying how a client company can reduce its costs and in what ways it can optimize its spending.
Aiding in the planning and implementation of technology use and systems for task efficiency, improvement of results, cost reduction, and sales promotion. This field has arisen due to the dissemination of computers and digital technology as well as the ubiquity of the internet.
M&A, Private corporate investments
Researching and analyzing every facet of a business that a company wishes to acquire or invest in and providing materials and advice based on the results to support decision-making. This includes the process of investigatory and analytical services known in the investment industry as “due diligence.”
Risk management & legal compliance
Providing expertise and advice for the implementation of risk management and legal compliance in accordance with industry standards, conditions, product types, and operational methodology. Because of the countless laws and regulations that impact corporate and project management and revisions constantly made, many corporate legal offices must rely on external organizations of specialists to keep up to date.
There is also consulting that are field or industry-specialized (such as medical, hotel management, real estate, government). Additionally, there are such types as comprehensive consulting, think tank-style consulting, economic consulting, and security consulting. Comprehensive consulting seeks to solve problems for entire companies or entire business divisions by making proposals from the planning stage through to business improvement, organizational planning, system introduction, and outsourcing policies. In think tank-style consulting, there are many firms that specialize in the four fields of economic study, general investigation, information technology, and management, and some focus just on government institutions as clients and engage in international business.
Consulting firms typically take the form of a Limited Liability Partnership (LLP) and are operated under joint ownership by many partners. Accordingly, the role of “partner” is the highest position one can aspire to. Below is a general path one might take along the following sequence of positions:
It is more typical in the consulting industry for consultants to promote their services than for client companies to commission them. It is the role of partners to attract client companies and form business relationships. To become a partner after a little over 10 years is regarded as a typical career pattern in this industry. As proprietors, partners take on client management and leadership of the organization to which they are affiliated. Alternatively, they may act as industry leaders in a valuable area of expertise.
While directing (supervising) projects as instructed by directors or partners, senior managers execute the duties of and take responsibility for results stemming from specific elements of the client’s commission, including negotiation with the client and supervision of budgets and time usage. One leads not only large-scale projects, but the organizations itself. Partners give opportunities and impetus to managers and senior managers and they turn around and build a market for ideas and secure contracts.
Responsible in recruiting skilled members to the team as project leader. Also participate in the development of new solutions, expanding of clientele, and training of personnel.
Senior Associate Consultant
With the supervision of the managers and senior managers, completes the work necessary to the project. Seeks to deepen knowledge of business; leads on business improvements within a specified area. Gives guidance to members as team leader.
An assistant to a senior associate consultant. Receives guidance from a coach (a project manager who evaluates associates) and can accumulate promotions annually on a 5-grade evaluation scale. One might spend two to three years in this position.
Associates develop the fundamental skills and contribute to projects by improving and expediting the tasks hand.
There are researchers who provide the materials necessary for the provision of consulting services. At the same time, there are analysts who integrate the results of studies and all other kinds of necessary data to perform analyses. Some individuals serve as researcher and analyst simultaneously and some researcher-analysts become consultants.
Qualifications and Qualities
There is no specific “Consulting” major when it comes to pursuing a career in consulting. However, most hires within consulting firms tend to have bachelor’s degrees in business administration, economics, commerce, mathematics, statistics, or applied science.
The consulting business is thought to have been pioneered in the 1890s by university professors, when US technical experts thought to reorganize factories through the application of scientific principles to their management. Not long after, this business world recognized the role of several university professors, including MIT professor Arthur D. Little, in commercializing management consulting. Later, Edwin Booz, with an MBA (Master’s in Business Administration), founded the management consulting firm Booz Allen Hamilton (later known as Booz & Company), thus accelerating the expansion of the industry.
Early management consulting, which coincided with the Industrial Revolution, focused on the improvement of task efficiency and business methods through the application of the technology of the time. In 1926, however, with the establishment of McKinsey in Chicago, the era of purely management-centered consulting, which specialized in the management of the company and business, began. Then, it was typical for people with work experience and specialized knowledge to play active roles as consultants. McKinsey, however, was the first to employ new MBA graduates, and the hiring of MBAs has become common at consulting firms
In the 1960s and 1970s, the elements of analysis and strategy were added to the repertoire of management consulting, and this period saw the founding of a succession of companies, including Boston Consulting and Bain, that would later become industry leaders. Still, the true flourishing of the industry is said to have come during the 1990s. Driven by causes such as the rapid increase of multinational firms, the spread of computer technology, the rise of developing nations as markets, the privatization of public utilities, and the internationalization of business, typical firms, compelled to compete better in markets, expand their business, or improve their operations, came to need the specialized knowledge and advice offered by organizations of experts. As a result, specific expertise became the object of ever-increasing demand, and the industry began to differentiate clearly into fields such as strategy, management, human resources, finance, and technology.
Did you know?
The business of consulting is not work that creates and sells products, like in manufacturing: it is a labor-based service in which one’s mind and body are the sole capital involved. Thus, profitability is limited only by the presence of individuals who can perform services that are billable to clients. That is why companies desire to hire people who have the ability or the potential to gain contracts and carry out projects efficiently without as much emphasis on whether they are new graduates or in mid-career.