Impact of COVID-19 on Consulting Industry
Clients are feeling the pain of the outbreak in the way of supply chain disruptions, waning consumer demand, market uncertainty, workforce security concerns, etc. This will obviously mean that budgets will be squeezed and appetite / ability to pay for Consultants significantly constrained. Additionally, since Consulting itself is obviously a travel-heavy industry, the model doesn't exactly lend well to operating in an outbreak.
What do you think the effect will be on pipeline, revenue, and chargeability for MBB and other major consulting firms? On promotions and ways of working? For those that are currently a practicing consultant, what shifts are you seeing at your firm?
The WHO has labeled the Coronavirus outbreak a pandemic as of today 3/11
Not all MCs are travel heavy, and this is a chance for many firms to flex their videoconferencing software. The main thing that will be affected are workshops as those are challenging to do properly virtually. Client-site working will be severely reduced but realistically its not necessary in 80% of cases. Its more to show "we are willing to work here physically with you". Everything else (KOs, interim and final deliveries) can be done virtually. Some firms may be more willing and other may not. But the same business problems will persist and demand for consultants may remain relatively constant depending on the industry. I'm currently in a large change management project that hasn't been effected except for lower turnout at certain workshops. Consultants should be fine.
You will not be fine. Businesses will abruptly cease to pay consultants as economic conditions worsen. It is simply a luxury that going forward companies can't afford.
I'm sorry this isn't what you want to hear, but it's a pretty basic mental exercise.
As I mentioned in another comment on this thread, perhaps my view is myopic and industry specific. I am speaking from the biotech/pharma side only. Clearly industries that struggle to survive will not spend money on consultants (have read about a few airlines firing consulting teams). I guess the industries that will fair better than others will still penny pinch but may be able to have some form of external consultation. For sure a wave of restructuring and layoff "consulting" may arrive in the coming months.
Just say you're at LEK lol
I'm at MBB and yes there will be some negative impact, but it's not as doom and gloom as some would have you believe. Fundamentally, businesses hire us when they have tough problems to solve that they themselves aren't equipped (for whatever reason) to solve alone. In a recession, business still have problems and consultants are still equipped to solve them. Sure the general focus of projects will likely shift from growth strategy to cost cutting, and yes businesses will probably tighten their belts a bit on professional services spending, but at the end of the day we're still getting the call when a F500 CEO has a business-critical problem to solve. What this means is your bonus will probably be lower than expected, some low performers may get let go that otherwise would be given an extra 6 months to figure it out, but we're not going to rescind offers or roll out mass layoffs. If you're just joining a firm or you have decent reviews, your job is OK.
Case in point, I get a pipeline email every week at my firm. In the past week we've kicked off multiple projects at my office alone, and our pipeline of projects that are sold and staffing is as strong as it's been in the past year.
Disclaimer: I'm not in a leadership position at my firm so I can't know for sure, but this is my hypothesis.
Right now we're all working from home. If work from home continues into the summer, internships will get cancelled because the logistics of having a remote intern you've never met are just too much to realistically handle. In that scenario, I would bet MBBs will just give all would-be interns full-time offers. MBBs have very high (90%+) FT offer rates for their interns and then they go out and do more FT recruiting to fill a full class, so they'll want to retain all the interns they hired. If we're in a recession, the size of hiring classes will likely decrease so overall there may be fewer spots available, but the main thing I want to stress is if you have an offer in your hand from MBB I do not believe they will rescind it at any time.
If we are able to return to work in person by mid-May, I would assume summer internships are still on. Again, 90+% of interns will likely receive return offers and then MBBs will hire even more people for full-time. A recession could cause smaller total class sizes, but again if you have any type of offer in your hand you're fine.
There's a lot optimism in this thread which isn't a bad thing but as a principal at MBB, here's some real talk. Behind closed doors, leadership is freaking out. Even if we put aside the impending recession, the uncertainty of COVID-19 is making business forecasting and resource planning next to impossible and obviously that is not good.
Many of our clients have asked us to take 20% haircuts off of our rates/burn without reducing scope in exchange to continue work. Our pipeline still looks okay but if you lived through the great recession, you know how quickly that kind of stuff can get cancelled or dry up. And this isn't just for pure and operational strategy work - it is affecting all of our businesses.
As far as internships goes, despite the reassurances to students - as a lead at one of our target MBA campuses, I know that there has been numerous conversations on alternatives. For example, what do we do if everyone is still working from home come June? Several senior partners have advocated cancelling the program all together but we are going to wait it out as long as possible before making a decision.
I'm not saying that the sky is falling but this is and will continue to be an incredibly challenging environment for management consulting. Collectively, our clients have lost over 40% of its market cap in a matter of weeks and as this drags on, many will rightfully retreat into survival mode which typically means preserving cash at all cost and cutting all discretionary spend.
What will be important is for everyone to focus on what they can control and be flexible. For those who have jobs, this is the time to step up and make sure that you are not perceived as bottom 20%. Those with offers, you have less options but maintain contact with your networks and know that worst case, you won't be abandoned but your start dates may get pushed back or your internship may be take a different form. Good luck!
From my understanding (and correct me if I'm wrong) undergrad interns tend to be of higher caliber than the general FT pool (at least based on how competitive internships are)
What an arrogant thing to think. Thanks for the laugh!
@ConsultingMonkey04 - Thanks for posting - spot-on.
All others - ConsultingMonkey04's post is one of the best WSO posts I've read (and I've read many since Fin Crisis.). His points are true for 2008-2009 and are true now. His post should be added to the WSO category of "career advice / what I wish I knew / "what every Associate should know / how did you make it through" post article to save in your library and break-glass-in-emergency scenario when these Black Swan events happen again. I confirmed below each paragraph. Hopefully my replies below are easy-to-read.
~Yukon Gold
I'm at Bain and received this in an email from our Worldwide Chief Talent Officer: "We are retaining our summer programs as a commitment to investing through turbulence and in building our future talent pipelines. We will welcome these talented individuals into our virtual team models and demonstrate our Bain spirit in new and creative ways this summer. More to come on how we will welcome our new colleagues."
I assume if Bain is doing this, most competitors will follow suit
Update on McK
Global onboarding team currently reviewing options regarding incoming full timers firmwide. Possibility of delayed starting dates. Decision made by beginning of next week. Final decision made “together with incoming employees” whatever tf that means.
Due to start soon. Scared shitless.
I saw the instagram meme account who created this sheet posted a DM from someone who claimed to work for McK Toronto and said no offers have been rescinded
This might be just a mischief since the reports were anonymously submitted