what is management consulting and how do they make so much money?
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The general point of using management consultants is to buy expertise that your company might not have.
Often – maybe mostly – the expertise consultants offer is ‘how to identify problems and recommend solutions and even help manage changes’.
This can be worth it as often company culture, habit and even complacency can make it difficult to really take an objective look what’s happening. Sort of a ‘cant see the forest for the trees’ deal.
The consultants might be for a specific purpose and hired only for the time needed to achieve that purpose. Purposes such as:
– selling off a division
– buying someone elses division
– changing process to get the best from a specific need e.g. design process or company structure to minimise taxes (probably your company doesnt employee full time tax managers which are expensive and only needed now and again)
Consultants can be viewed as a ‘risk mitigation strategy’. That is to say that, if left to your own managers, they might not be expert enough to achieve the best result, and so theres a risk that the changes go wrong.
Also there may be company politics/in-fighting that makes it harder for existing managers to co-operate (it happens, even in larger companies).
Consultants are not part of that so they can get stuff done.
I have hired consultants in this scenario:
I manage teams that are heavily regulated by rules, standards, risk measures and so every time we need to do something for a customer things can get pretty complex, and customers can get pretty pissed off.
In short, we were too concerned with meeting rules and not giving enough importance to ‘good service’.
I hired Customer Service Consultants to suggest how we could be better, while still meeting the rules. It took their expertise to make my team – and even my bosses – realise that *rules vs service* didnt have to be mutually exclusive.
The consultants made their recommendations and left after 4months.
I should point out: at no time did they ‘dictate’ anything. Every step in their partnership was notable by how they listened to my team and ensured they were valued, agreed problems and changes that were entirely consensual. They even interviewed customers to get their suggestions. The whole project was a text book collaboration.
we benefitted overall. Even made some new friends.
10/10 would do again.
EDIT – theres another comment that Consultants may be hired so that if things go wrong the consultants are blamed and not the managers. I suppose this is possible somewhere but I’ve never seen it, and in the companies ive worked in it wouldnt be possible.
In the above scenario of mine, I would have been 100% accountable for the end result. It was me that identified the ‘management problem’, me that decided outside expertise was the best way to find a solution, and me that met and assessed which consultants could best do the job. Also me that would accept or not the results.
Hiring the consultants required a lot of explanation of what i was looking for, and how the consultants would achieve it.
The general point of using management consultants is to buy expertise that your company might not have.
Often – maybe mostly – the expertise consultants offer is ‘how to identify problems and recommend solutions and even help manage changes’.
This can be worth it as often company culture, habit and even complacency can make it difficult to really take an objective look what’s happening. Sort of a ‘cant see the forest for the trees’ deal.
The consultants might be for a specific purpose and hired only for the time needed to achieve that purpose. Purposes such as:
– selling off a division
– buying someone elses division
– changing process to get the best from a specific need e.g. design process or company structure to minimise taxes (probably your company doesnt employee full time tax managers which are expensive and only needed now and again)
Consultants can be viewed as a ‘risk mitigation strategy’. That is to say that, if left to your own managers, they might not be expert enough to achieve the best result, and so theres a risk that the changes go wrong.
Also there may be company politics/in-fighting that makes it harder for existing managers to co-operate (it happens, even in larger companies).
Consultants are not part of that so they can get stuff done.
I have hired consultants in this scenario:
I manage teams that are heavily regulated by rules, standards, risk measures and so every time we need to do something for a customer things can get pretty complex, and customers can get pretty pissed off.
In short, we were too concerned with meeting rules and not giving enough importance to ‘good service’.
I hired Customer Service Consultants to suggest how we could be better, while still meeting the rules. It took their expertise to make my team – and even my bosses – realise that *rules vs service* didnt have to be mutually exclusive.
The consultants made their recommendations and left after 4months.
I should point out: at no time did they ‘dictate’ anything. Every step in their partnership was notable by how they listened to my team and ensured they were valued, agreed problems and changes that were entirely consensual. They even interviewed customers to get their suggestions. The whole project was a text book collaboration.
we benefitted overall. Even made some new friends.
10/10 would do again.
EDIT – theres another comment that Consultants may be hired so that if things go wrong the consultants are blamed and not the managers. I suppose this is possible somewhere but I’ve never seen it, and in the companies ive worked in it wouldnt be possible.
In the above scenario of mine, I would have been 100% accountable for the end result. It was me that identified the ‘management problem’, me that decided outside expertise was the best way to find a solution, and me that met and assessed which consultants could best do the job. Also me that would accept or not the results.
Hiring the consultants required a lot of explanation of what i was looking for, and how the consultants would achieve it.
Management consultant here. Clients pay extra for a few things.
1. Specific domain expertise. Since most of us solve only one or two types of problems and do it for many clients, we frequently have knowledge and experience the client may lack.
2. Temporary employment. I often tell people that I get fired for a living. I am self-employed and have ZERO job security. I have been told on Friday not to come back for Monday without any severance or unemployment. In exchange, I make about double what I would make as a practitioner.
3. We are often used as a temporary labor force during periods of higher activity, for example: mergers or turnarounds. The stakes are often pretty high if we’re involved.
Management consultant here. Clients pay extra for a few things.
1. Specific domain expertise. Since most of us solve only one or two types of problems and do it for many clients, we frequently have knowledge and experience the client may lack.
2. Temporary employment. I often tell people that I get fired for a living. I am self-employed and have ZERO job security. I have been told on Friday not to come back for Monday without any severance or unemployment. In exchange, I make about double what I would make as a practitioner.
3. We are often used as a temporary labor force during periods of higher activity, for example: mergers or turnarounds. The stakes are often pretty high if we’re involved.
Management consultant here. Clients pay extra for a few things.
1. Specific domain expertise. Since most of us solve only one or two types of problems and do it for many clients, we frequently have knowledge and experience the client may lack.
2. Temporary employment. I often tell people that I get fired for a living. I am self-employed and have ZERO job security. I have been told on Friday not to come back for Monday without any severance or unemployment. In exchange, I make about double what I would make as a practitioner.
3. We are often used as a temporary labor force during periods of higher activity, for example: mergers or turnarounds. The stakes are often pretty high if we’re involved.
I’ll try to give an actual ELI5 version: They get so much money because (1) the consultants are branded as smart and (2) the company is branded as experts across any field, industry, problem area so you’re paying a premium so them
* **Profile of management consultants: Really smart people** who graduated from the top colleges/MBAs and/or are at the top of their class
* They are touted to have a wealth of knowledge and skills that are “transferable”, meaning they don’t necessarily need to have experience in a particular field or industry because their smarts and ability to think outside the box and across boxes can get good results
* **Prima****ry use o****f management consultants: (1) Expertise and (2) outside opinion**
* **Presumed expertise, they know what to do** because the consultants are smart and because the firm (whether someone from the team or their records) has the experience which can be utilized by these “smart” people
* **Outside opinion, often hired by company’s management to do the (dirty) work they or the company can’t do**. Whether to give credence to a particular strategy (“back them up”) or as a scapegoat to do something or anything
I’ll try to give an actual ELI5 version: They get so much money because (1) the consultants are branded as smart and (2) the company is branded as experts across any field, industry, problem area so you’re paying a premium so them
* **Profile of management consultants: Really smart people** who graduated from the top colleges/MBAs and/or are at the top of their class
* They are touted to have a wealth of knowledge and skills that are “transferable”, meaning they don’t necessarily need to have experience in a particular field or industry because their smarts and ability to think outside the box and across boxes can get good results
* **Prima****ry use o****f management consultants: (1) Expertise and (2) outside opinion**
* **Presumed expertise, they know what to do** because the consultants are smart and because the firm (whether someone from the team or their records) has the experience which can be utilized by these “smart” people
* **Outside opinion, often hired by company’s management to do the (dirty) work they or the company can’t do**. Whether to give credence to a particular strategy (“back them up”) or as a scapegoat to do something or anything
I’ll try to give an actual ELI5 version: They get so much money because (1) the consultants are branded as smart and (2) the company is branded as experts across any field, industry, problem area so you’re paying a premium so them
* **Profile of management consultants: Really smart people** who graduated from the top colleges/MBAs and/or are at the top of their class
* They are touted to have a wealth of knowledge and skills that are “transferable”, meaning they don’t necessarily need to have experience in a particular field or industry because their smarts and ability to think outside the box and across boxes can get good results
* **Prima****ry use o****f management consultants: (1) Expertise and (2) outside opinion**
* **Presumed expertise, they know what to do** because the consultants are smart and because the firm (whether someone from the team or their records) has the experience which can be utilized by these “smart” people
* **Outside opinion, often hired by company’s management to do the (dirty) work they or the company can’t do**. Whether to give credence to a particular strategy (“back them up”) or as a scapegoat to do something or anything
Management consulting firms not only have a library of experts in the field of the problem you’re trying to solve, but they also have a library of customers who have worked on the exact same problem.
They can look through their database of customers, find the best 3 or 4 solutions that closely align with what you’re trying to do, and then match you with the best experts to implement those solutions.
They’ll also spend a lot of time with you beforehand making sure you actually [understand the problem](https://youtu.be/pWgyy_rlmag) you’re trying to solve.
Management consulting firms not only have a library of experts in the field of the problem you’re trying to solve, but they also have a library of customers who have worked on the exact same problem.
They can look through their database of customers, find the best 3 or 4 solutions that closely align with what you’re trying to do, and then match you with the best experts to implement those solutions.
They’ll also spend a lot of time with you beforehand making sure you actually [understand the problem](https://youtu.be/pWgyy_rlmag) you’re trying to solve.
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