Are consultants useless
Hot take I feel consultants are just expensive scapegoats for companies with awful management like how is a 22 year old going to more about ur company than the ceo would like Jamie dimon said don’t trust a consultant with ur business like why do people pay so much for them to crunch numbers and build a PowerPoint outta it
No 22 year old consultant is expected to "know more about ur company than the ceo would". Consulting is a team sport. The 22 year old fresh associate has a role, and the partner with decades of experience has a different role. Only one of those folks is expected to be a deep subject matter expert.
Exactly. Just like in IB — the MD is the one who actually makes the deals while the analyst does behind the scenes work. Don’t get why people have such a hard time understanding this lol
Ye but how can they a 22 year old fresh grad than a decade long ceo
… are you having a stroke?
The Associate isn't the one advising the CEO. The partner and EM with years of consulting experience in that industry and/or years of experience working in a corporate in that industry solving similar problems will drive the case forward. They will need analysis done e.g. conducting expert interviews, building a market sizing model to support the project - that is what would be done by the associate.
But why can’t corp dev teams do that
It’s often more cost effective to hire specialists than try and train a corp dev team for certain projects. If there’s an ESG project in a niche industry it makes more sense to hire a specialist consulting team who’s done ESG projects in that industry compared to trying to train up a corp dev team to tackle all sorts of problems that specialists would be cheaper to hire for
The BA/ Associates job is to make sure that the question is answered for their workstream. That is all. The EMs job is to make sure that all work streams tie in and own the overall process. The Partners job is to manage stakeholders and ensure quality control.
Sometimes expertise can be held by the engagement team. On topics where this isn’t the case, the BA/ Asc must find experts (within the Firm, through ENS, however else) to make sure the question is answered.
There are 3 reasons why this often isn’t done in-house: 1) the company lacks expertise because it isn’t something they do often enough, 2) it is something that needs to be done fast and with a high quality bar and 3) it is high profile and execs do not trust their team enough to deliver it. Same reason why most companies hire IBs and law firms
hot take?
They wouldn't. I don't think you understand how consulting projects work
Consultants aren't all subject matter experts. Rather, teams are organized with 2-5 partners and directors who are actual subject matter experts, and 2-4x as many junior-midlevel consultants. At a high level, the senior team members design approach and guide work, while the junior resources do the nitty gritty stuff to test hypotheses / get to an answer
Consulting firms can provide value vs doing in-house work for a number of reasons. Non-exhaustively, some of these include getting immediate access to specialized skillsets immediately without having to build them (can take long OR you might not need that skillset enough to justify "buying" vs "renting"), providing an outside-in lens that can help to cut through or resolve internal disputes, or frankly just getting access to a smart & super hard-working labor force that a company couldn't realistically have themselves (e.g. the client might be in a really lame industry / location / bad comp)
Ye but why can’t a companies in house management do the asvising
Did you just deliberately ignore the last paragraph or something?
Generally, it's because they're busy running the rest of the company
Are you fucking dumb? Or do you purposely type and act like this? Because I'm having trouble understanding how you got into banking...
.
Apparently there are enough clients who couldn't get the work done themselves.
And that's why the consulting firms can keep selling multi-million bucks projects.
Why clients can't get it done without help really doesn't matter. And no, usually it's not expertise related, but about human nature and misaligned incentives. The top management levels of a blue chip can sometimes feel like a kindergarten.
Where there are humans, there is inefficiency.
Ye because consultant specialize in it and that is the only thing they do so they can do it the best
Doesn't nail it. I'd say because there's a focus on soft skills in recruiting and evaluation/promotion, and because they train you to become really good at storytelling and "influencing". Consulting senior partners are magicians.
The whole consulting industry is a laughable joke. Except the RX guys. Probably bias but these interim CEOs managing liquidity needs trying to make payroll actually add some value to the stakeholders. But you go to an MBB, or worse, some no name boutique consulting firm advising some niche vertical in some industry...man you just fucked your career. Exit opps? None worth pursuing. Compensation? Below market. Lifestyle? Ass. Couldn't imagine it. At least MBB can do some interesting stuff long term.
What exactly...do RX consultants do that makes them differently viewed from other consulting? How are their exit opps different from regular consulting? Knew a former mgmt. consultant who always said that RX consulting (at firms like Province, Alix, etc) was much less technical and challenging than strategy / management at MBB / T2 firms, so it's interesting to hear this.
Haven't worked with either of those shops you mentioned. I work a lot with A&M and FTI. I worked creditor side for a deal where the company was certainly going to file. There was a counterparty that, without getting into too much detail, fucked the debtor. The CEO of the debtor was an interim CEO. The junior guys were responsible for the 13 week cash flow analysis. Firm didn't have liquidity for 13 weeks. We had a weekly stand up and the occasional non-weekly update meeting in addition if things looked rly bad. CEO was able to squeeze extra liquidity by pushing vendor payments and stretching payments as much as possible. We all thought they were going to ask us to fund additional short term liquidity. They never did for the first couple months. They managed NWC really well and cut all the fat and were able to make payroll. We tried to do a bunch of out of court stuff with the new liquidity these guys had found for us. Unfortunately a shitco sometimes is just a shitco. That was the case here. We filed. Still in chapter 11. Interesting stuff. Those guys actually added value and allowed us to do our jobs better. Some asshat at McKinsey telling NYC to use trash bins and then charge the taxpayer $4M is wild. Same with the government contracts they do. Same with all the corporate "strategy". 99% of the time these idiot consultants are hired because if a transaction blows up but MBB said this is good then management can blame them and the shareholders can't be mad. It's the same with hiring goldman because of the name. No shareholder can blame a CEO for hiring GS bc it is GS, even if some cheaper bank could fetch a similar or better price for a sell side M&A process. You get the point. I despise consultants with a passion. Never met an "aspiring consultant" in my college days that I thought had above average intelligence, or even average intelligence. Maybe that was just my school. Maybe they would say the same about me. Most of those idiots ended up at no name boutiques in Chicago so maybe that's why I associate all of consulting with that persona. Not my cup of tea, but I digress.
My “no name boutique consulting firm advising some niche vertical in some industry” IS my exit from MBB… and was the same for my staff, who make double market rate for below market hours. I made 8 figures running this place last year.
I think my career is doing just fine.
That’s what I’m saying the consulting industry is just a joke they don’t provide anything of value
Other than stupid suggestions, they never own
The purpose of consulting is CYA for company executive management team and provide culpability in case the consultant recommendation does not work out. This way mgmt team can avoid blame and keep their job. Most importantly - at least for mgmt consultants - is to provide market information. Since large consultancies almost always work with other industry participant in their client's given field, the consultant will simply go "well this is what we're seeing others competitors do XYZ". It's a way to provide "insider" information without saying insider info. It's a roundabout obfuscated method to deliver competitive data through a redacted filter.
But can’t corporate development do this
Same reason why companies with corp dev teams still hire IB firms to advise on transactions.
deleted. seems the guy i was responding to is either an illiterate troll or mental indigent.
Consultants are good in some aspects, especially in the realms of PR, restructuring, post-merger integration, economic advisory, and litigation. I would say they aren’t as effective when it comes to general corporate finance. Not to say that management consultants duck at advising M&A, capital structure, or cash management, but most corporate bankers can immediately identify that same analysis, structure a product, and execute that transaction all without being billed by the hour.
Yes I’m in IB so I’m biased, but while acknowledging that consultants tend to be creative, a lot of the entry level associates and business analysts tend to be horrendous when it comes to understanding corporate finance (And the ones that do tend to have banking backgrounds… i.e A&M’s CF).
That’s just my two cent. The only corporate finance plus that consultants provide in my eyes is the fact that consulting fees are an easy way to burn a company’s high liquidity ratio when activist investors are eying higher dividend returns.
This is half accurate, but a lot of the IB folks on here don’t seem to really understand what consulting is about because you/ they don’t understand how businesses are actually run.
1. MBB don’t bill by the hour at all. I don’t think any reputable consulting firm does. It would create horrible incentives.
2. As a rule of thumb, if work is done by bankers, it probably won’t be done by consultants and vice versa. Whether or not consultants are better than bankers at XYZ is misguided. It’s like saying bankers are better than lawyers at some things and not others - it’s a trivial point and not as insightful as you think it is
3. I interned in IB and have a lot of close friends who work there. I don’t think bankers appreciate how late in the M&A process they actually come in. There’s a world of strategy/ CF work required in demonstrating to management teams that a BU should be sold/ an add-on is required with certain attributes. The best IB MDs aren’t pitching random sponsors l to buy random assets - they have a deep understanding of what sponsors’ strategy is in the first place and how an asset might be interesting to achieve this.
idk bro. I'm at an MBBEY and we bill by the hour
I think this is the sort of simplistic take that a lot of general public think but lacks nuance. Plenty of instances of consulting engagements that shouldn’t have happened because a) they added limited value, b) they resulted in measurably worse results or c) they were poorly defined or scoped.
This is an issue across the industry, and particularly bad when you get into the ‘warm-body shop’ consulting firms.
I can speak for McK - there are increasingly strict criteria for when a Partner can conduct an engagement. Part of this is the new risk controls following Purdue, part of it is to ensure that the engagement adds substantial value (e.g. iirc one of the criteria is that the study should result in 10X value realisation for the client).
Part of the issue is also that MBB (McK in particular) has no interest in defending its work - the view is that if the client is satisfied and we are satisfied that value has been added, then what anyone else thinks is irrelevant. I don’t know much about the NYC engagement; it might have been one of the ones that shouldn’t have happened, but I think it’s more realistic that we had to persuade some legislators that every option had been evaluated because the straightforward option was being blocked by someone important. Here, value creation is really driven by ensuring that this block is removed.
On the CF front, we have a dedicated practice called Strategy & Corporate Finance which tends to be where ex- bankers, PE/ HF professionals end up. Most of my work has been in this practice, and my experience has been that they are some of the sharpest people I’ve met. A lot of them (myself included) tend to overlap with the PEPI practice and so more than a few tend to end up in PE roles after a couple years.
I sense a lot of these questions are driven by some ambiguity about how consulting firms operate and what they actually do. Happy to answer any other questions
Thoughts:
I am a father of 2 and already have them working for consulting roles even though they are 7 and 12. Consulting is monkey work and only suitable to train children. This will set them up for high school VC internships, then LMM PE for freshman of uni, then they will place at BB ex GS TMT. Grown adults punching numbers into templates is the personification of the no value-add suffer high economy leading to eventual economic collapse
Nice job getting your kids working! But don’t you think they are a little young and need to focus on other things like having fun and school.
Yes
Eaque reprehenderit aut facilis. Sed deleniti ducimus quibusdam eaque sed.
A laborum consequatur debitis sunt qui labore libero neque. Incidunt debitis porro nisi eum ut alias alias cupiditate. Quos provident fugit explicabo omnis vel hic veniam. Doloribus mollitia molestiae et ullam quo maiores suscipit.
Culpa eum recusandae velit necessitatibus aut et. Ducimus delectus sed quis aut. Ad architecto omnis neque optio rem iste facilis.
Nesciunt error saepe perspiciatis. Ut necessitatibus et sit enim distinctio expedita in. Dolor tempora sed iste laborum.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Quisquam in cumque omnis. Doloribus aliquid vero et odio laboriosam ea. Qui laboriosam aut accusamus delectus maiores adipisci aut quis.
Quam enim quas ut deserunt ullam. Qui ut nam ad molestiae. Fugit consequuntur rerum tempora laboriosam.
Et vel pariatur ipsa dolor eaque provident. Iusto minima expedita at consequatur eum. Quis expedita enim ratione ut perferendis praesentium voluptatum. Inventore architecto nostrum incidunt tempora. Autem ab numquam exercitationem placeat. Illum et deleniti debitis voluptas voluptas quia earum.