Close this

The Management Consulting Model Shifted, Here’s How It Affects the Deep End of the Talent Pool

The management consulting market has been worth an estimated $300 billion annually for the last several years and is forecasted to grow 10% each year over the next decade.
Cody Samuels

Meanwhile, the number of management consultants in the United States has also grown significantly since 2012 from 540,000 employees to almost 810,000 full-time employees. Take a moment to consider the scale of these figures. Currently in the United States, according to Statista, there are around 708,000 law enforcement officers employed across the United States. This figure includes officers working for local, state, and federal agencies. The number rises to over 800,000 only if you were to count all sworn law enforcement officers such as part-time officers and volunteers, according to the National Law Enforcement Officers’ Memorial Fund.

These numbers further emphasize the economic reach and growing influence of the key consulting firms.

Evaluation of the management consulting space and shifting practices over the Last decade.

A 2021 survey from Clutch, a leading B2B ratings and reviews platform, found 24% of small businesses in the United States plan to hire a financial consultant or advisor. Currently, studies suggest that between 17% and 33% of small businesses hire consultants annually. This variation depends on the type of consultant (e.g., marketing, financial, strategy) and the specific year of the study. The survey also suggests a significantly larger percentage – around 70% to 80% – of non-Fortune 500 companies also have situations where management consultants could be beneficial. This broader figure considers potential future needs and situations where companies might not actively hire but could still benefit from specific expertise.

If we look at an approximated breakdown by industry, we are able to discern each company’s main areas of specialization:

  • McKinsey & Company: Healthcare (20-25%), Financial Services (15-20%), Technology (10-15%), Consumer Goods (10-15%). With 38,000 employees across more than 120 offices around the world, they are a formidable player in the market.
  • Boston Consulting Group: Consumer Goods & Retail (25-30%), Financial Services (20-25%), Technology (15-20%), Healthcare (10-15%). Roughly 25,000 employees across 90 offices around the world.
  • Bain & Company: Private Equity (30-35%), Consumer Goods & Retail (20-25%), Financial Services (15-20%). Over 13,000 people across 50 offices worldwide.

This proliferation of hiring over the last fifteen years has coincided with an industrywide transformation in private consulting, pricing out most non-Fortune 500 companies and creating record profits in the process by charging astronomical retainers. As a result, access to premier consulting firms has become financially prohibitive for most companies looking to hire these transformational business services.

A Deeper Dive: McKinsey & Company

If we analyze the trajectory of the McKinsey model, currently generating $12.5 Billion per year, we can see how these major consulting firms have been able to embed themselves in all facets of the economy and drive growth at a rate previously unseen. Since its inception, Mckinsey had been selling three to four month engagements, effectively acting as elite hired guns who ride into town and solve whatever problems arise. McKinsey and its industry-specific teams can evaluate your business needs, assess the required solutions using their 7S framework (structure, strategy, systems, skills, staff, style, and shared values), and solve the specific problems plaguing your firm. After the consulting group’s work was completed, McKinsey’s professionals would sever their employment until a new issue had arisen. This long held mode of consulting represented 80-90% of their business revenue. Today, it represents only 20-30% of revenue.

So what happened? 

In 2007 and 2008, the worldwide management consulting firm founded in 1926, Mckinsey & Company devised a new mode of operating by launching Mckinsey Solutions. The aim was to shift from its traditional mode of finite consultancy, relying on human advice, judgment, and soft deliverables in order to transition into an asset based consulting model. At the outset of McKinsey Solutions’ implementation, the company’s new model paired the aforementioned consulting services (human advice + judgment = selling time/billable hours) with hard assets (i.e. irreplaceable, customized software).

A seismic shift in strategy, the McKinsey Solutions model overtook their former mode of business operating, currently representing over 70% of their annual business.

This begs the question. Why did they do it?

Simply put, McKinsey & Company came to the realization that relying solely on their employees’ expertise would not serve as a long term solution for the nearly one hundred year old business. At a time when digital technology was exploding, McKinsey identified a shifting need among its predominantly Fortune 500 customer base. By analyzing macro shifts and trends across the economy, Mckinsey began helping their clients better implement through cheaper solutions, most specifically digital technology.

The consulting group needed to synthesize software at a premium price that they could adjust and upsell, productizing their ability to modernize Fortune 500 companies for the 21st Century.

McKinsey decided to leverage this trend and realized that no one was going to outsource and pay the consulting firm millions of dollars to fix an internal system that they could do for a fraction of the cost. So, instead of hiding from complicated new technologies, the firm embraced its modernization headlong and have acquired 30+ assets since that they now leverage when helping businesses.

The new model looks like this:

Acquire a client  → Share new methodologies & infrastructure (talent/training, software or both) → Retain leveraged services (consulting, media & software). 

Let’s use McKinsey’s work with Coca-Cola as an example. The pioneers of the new new economy have learned that human capabilities are critical when organizations wish to adopt advanced digital technologies successfully. As expressed by Iain McLaughlin, VP of Commercial Product Supply at Coca-Cola:

“One of the things that has been most helpful to us is that early in 2021, we built a digital twin of our manufacturing network to support business continuity planning, as well as network optimization. Previously, we had relied on experience, we had relied on know-how within the organization in order to do business continuity planning. But by digitizing it, we actually brought all of the data together into a single model [spearheaded by McKinsey], which has helped us enormously in reacting to situations during the pandemic. We’ve had to react to ingredient shortages, border closures, and various other disruptions. And the good thing about the model is that it takes the human bias out of the analytics and the decision making, and it has really opened our mind to possibilities for continuity of supply that we had never considered before. So, I think really relying on data and analytics [to support business continuity planning] has been a tremendous benefit to us and the organization.”

By adopting McKinsey’s strategies, Coca-Cola was able to build the resiliency they needed by synchronizing and modernizing a digital twin of their manufacturing network to support business continuity planning, as well as network optimization. This included establishing an internal academy across Coca-Cola in 2021 which would help alleviate supply chain disruptions across Coca-Cola’s 18 plants all over the world shipping to about 1,000 locations among their bottling partners in 170 coun­tries.

In its first year, the newly formed academy trained more than 500 people in digital skills using a combination of go-and-see visits, immersive boot camps, and e-learning modules. Graduates of the academy implemented about 20 digital, automation, and analytics approaches at a dozen sites in the com­pany’s manufacturing network, boosting productivity and throughput by more than 20 percent. Digital-skills training is now being rolled out to about 4,000 employees across the organization. A lot of companies talk about upskilling but Coca-Cola and McKinsey have actually created a program that will transform their business for years to come. We can only imagine what this has been worth to both firms and how many more clients have lined up for a similar service.

LinkedIn (and Microsoft) as an Example

While there are many examples of mid-market and legacy tech firms in operation today, many of us in the business of career management and job placement see LinkedIn as a prime example for transformation. While digitally native, the technical product debt has been stacked high at LinkedIn for some time, long before their acquisition by Microsoft. The professional offerings and ad products are confusing, even for internal business development teams. Stressing again how common these challenges are, they are exactly the type of challenges that persist in post-merger environments.

Meanwhile, LinkedIn’s revenue has increased sharply since the acquisition (worth $13.81 billion as of 2022), even though their product offerings have remained relatively flat, especially since Microsoft folded LinkedIn into its Business Division with Office 365 and other business tools.

At Worky, we use LinkedIn every day in our business, mostly because it is among the most accurate professional data sets in the business world with an active social function. There is no shortage of business databases of course, but the competitors are mostly that – databases only.

Microsoft has their own business consulting firm, officially called Microsoft Consulting Services, a rapidly growing unit within the tech giant. It was established in July 2021 through a reorganization of the company’s field sales organization.

Their remit focuses on helping businesses adopt and implement Microsoft’s cloud, AI, and productivity solutions. They offer a wide range of services, including:

  • Strategy and transformation: Helping businesses develop their digital transformation strategies and roadmaps.
  • Cloud adoption and migration: Assisting businesses with migrating their workloads to the Azure cloud platform.
  • Application development and modernization: Building and modernizing applications using Microsoft technologies.
  • Data and analytics: Helping businesses unlock the insights from their data using Azure data services and AI.
  • Security and compliance: Ensuring businesses are secure and compliant with industry regulations.
  • Modern workplace: Enabling businesses to create a modern workplace experience with Microsoft 365.

It can only be a matter of time until a company as thorough and innovative as Microsoft turns this team’s focus on internal products and offerings, like LinkedIn. Without a doubt, there is plenty of crossover on the cloud, data, and cybersecurity functions across Microsoft’s primary lines of business as well as Microsoft Consulting Services. With revenue exceeding $15 billion (projected), LinkedIn is certainly a diamond worth polishing and well worth the time of Microsoft’s top strategic minds.

While Microsoft has been successful at monetizing LinkedIn, adding velocity to their revenue growth in spite of their expected user growth rate, even a company the size of LinkedIn would be hard pressed to afford the services of a topflight management consulting firm. The McKinsey & Company’s model features complex multi-year engagement retainers that are estimated in the millions annually per client. This begs the question: had LinkedIn stayed independent, would the then publicly traded company be able to leverage their customer database and afford the retainer of a premier management consulting firm circa 2011? Perhaps the answer is in its sale. The overriding sentiment remains McKinsey and its consulting firms have become an increasingly necessary, and a fully luxury if unattainable, expense for companies outside of the Fortune 500.

How consulting firms’ close relationship to Fortune 500 companies has affected the talent pool and recruiting.

Entry level positions at these top consulting firms remain coveted landing placements for elite recruits. The proliferation of hiring among top consulting firms has matriculated down to the collegiate level among top universities, siphoning off an increasing proportion of the talent pool from other traditionally elite disciplines like law and medicine. At top firms, salaries start at $110,000 with the prospect – and all but assurance – of a sizable year end bonus.

In 2019, the Harvard Crimson’s annual “By the Numbers” feature reported 18% of graduating seniors were entering consulting. The following year, those numbers rose to 22%. Nevertheless, only 0.55 percent surveyed some years earlier wanted to be in that field 10 years from now. No other industry is skewed to that degree. Despite the pay, the rate of attrition has proven exceedingly high. Around 43% of Boston Consulting Group employees have been with the company fewer than two years (only 11% of employees have been under employ for ten years), opening up a talent pool with invaluable skill sets and knowledge who often matriculate into each’s own field.

Utilizing their relationships, employees seeking jobs elsewhere will either jump ship to a partner company with whom they are already familiar from their time working at a top firm or may even go out on their own.

Here at Worky, we see this trend weekly, a topflight brand needs to transform a significant aspect of its operation, complete with a reorg and full-scale reporting apparatus. They can no longer work with the Bains, BCGs, or McKinseys of the world so they wind up searching for a talent or a team with experience from one of these firms. This is exactly why Worky keeps a pool of talent in this field at the ready, people with a range of management consulting experience who are no longer tied to a firm that all but requires they sell a retainer package alongside the initial fee to assess and execute on the known issues.

Worky will help scope the initial project requirements including the translation of skills and seniority for all hires, and we can even go as far as leading onboarding, the creation of detailed project road maps, and managing both projects and talent on a rolling basis. Very few executives have the bandwidth for this type of hands-on management. And since these teams tend to work independently at the top of the org chart, it’s proven to be a strong approach for our clients in a number of industries.

There is a hole in the management consulting market that cannot simply be filled by off the shelf SaaS platforms, because customization, interoperability, and a detailed understanding of the day to day operations of the business are required. We’ve created a hands-on solution to fill this need with a variety of consultative talent ranging from former tech employees to the upper echelons of the big consulting firms. If you’re looking to hire talent, we can walk you through our processes and help assess your needs from the beginning.

Business Transformation
Hiring & Staffing Trends
Innovation
Talent