This is the full report on which our Management Consulting career profile is based.
What is this career path?
Management consultants provide advice to organisations to help improve performance. Consultants divide into two broad types: strategy and operations. Strategy consultants advise management teams on top-level decisions like prioritizing new markets to enter, developing price strategy, mergers and acquisitions, how much to invest in research and development, how to structure the organisation and how to deal with competitive threats. Operations consulting is more about how to implement strategy, for instance; how to improve the efficiency of the recruitment process, or implement a new sales strategy. Consultants may also specialise in highly technical areas. The industry is divided into the ‘Big 3’ strategy consulting firms (McKinsey, Bain, BCG), the ‘Big 4′ professional services firms (PwC, Ernst & Young, Deloitte, KPMG) who primarily do operations consulting (as well as auditing and accounting), and a large number of small ’boutique’ companies, who often specialise in a particular type of situation or subject matter.
The entry level title for undergraduates varies from firm to firm, but “analyst” is a common title. People in these positions often work for 2-3 years1 and then move on or go get MBAs (sometimes funded by the company they work for).
“Associate” is a common title for new MBAs, or others entering with comparable qualifications. This can be a long-term position, but many people entering at this level move on after 2-3 years.2
What is the work like day-to-day?
We recommend viewing an answer to this question on Quora. The WetFeet 2011 guide we relied on for this survey also had a helpful answer to this question, but we can’t publish it here.
Potential for immediate impact
Direct impact potential
Consultants affect the organizations they work with by:
- Sharing best practices within and across industries
- Bringing in smart outside perspectives to offer strategic improvements
- Helping to settle strategic disagreements within organizations
On the positive side, each of these changes can increase organizational efficiency. Sometimes, consultants increase efficiency through downsizing. This is controversial due to negative effects on employees, though some would argue that it usually has good long-run consequences.
It is sometimes argued that consultants are brought in to “rubber stamp” or otherwise lend prestige to a strategic decision supported by one part of the company but opposed by another. This kind of activity would likely have more limited impact since it would probably be less connected with strategic improvements and involve complex power dynamics.
We have considerable uncertainty about both (i) how much consultants increase the efficiency of the organizations they work with, and (ii) how valuable such increases in efficiency are. Our uncertainty about the importance of increases in efficiency improvements are related to uncertainty about how much these efficiency improvements help the global poor and how substantial their long-term consequences are. For further discussion of (ii), see GiveWell’s discussion of “flow-through effects”. The remainder of this section will focus on how much consulting increases organizational efficiency.
In his book on the history of McKinsey, Duff McDonald concluded that it is hard to identify specific pieces of advice McKinsey gave that had transformative impacts on organizations though he also concluded that “through its objectivist, skeptical, fact-based, integrative, and analytical approach to solving its clients’ problems, McKinsey has certainly made the world a more efficient, rational, and objective place than it might otherwise have been.”3 A potential limitation of this argument is that McKinsey is highly secretive about its engagements, so we might not expect to hear about substantial achievements. However, McKinsey has pointed to some engagements—such as an engagement with General Electric—as examples of major successes.4 Our intuition is that McDuff’s analysis would be about as applicable (or inapplicable) to McKinsey as it is to other top strategy consulting firms.
One consultant we interviewed argued that there can be potential for major impact because strategy consulting firms are often changing the behavior of very large companies or other institutions. Someone in his firm helped change healthcare programs in a way that he believes decreased healthcare costs while improving health care. Strategy consulting firms sometimes advise poor country governments on things like natural resource strategy, which could have important impacts. Lots of the work could have positive impacts on GDP. Moreover, despite high competition, a lot of this work may be less replaceable than it seems at first. Employees have a lot of say in project selection, and the work that gets done is fairly responsive to what employees think is important.
Our intuition is that 80,000 Hours’ other top career recommendations have more substantial effects on efficiency and productivity. This intuition is partly based on conventional wisdom, and partly based on comparing the number of people working in notable consulting companies, the number of people working in other industries/notable organizations, the higher plausibility of market failures in other areas, and our rough impressions of their outputs. For example, as of December 2013, McKinsey had roughly 17,000 employees,5 and, based on their “up or out policy”, we’d guess that they hire about 2,000 new employees per year. In contrast, there are about 10,000 software engineers at Google, Y Combinator had funded 716 companies as of July 2014 (suggesting about 1400-2000 founders),6 and about 34,000 science PhDs are granted per year in OECD countries (as of 2008).7 Our intuition is that the value created per Google software engineer, Y Combinator-backed founder, or science PhD is significantly greater than the value created per McKinsey employee per year. However, this judgment is speculative and open to revision.
Consulting is among the highest-paid paths (either if you pursue partner positions, or exit into executive track positions in industry). Because you can enter without additional training, earnings tend to be higher than law at comparable stages. On the other hand, several sources indicated that consultants generally make less than investment bankers in comparable positions.8
The clearest presentation of earnings in consulting that we have seen is available here:
| Research Associate|
| First Year Analyst|
(plus bonus of $5,000-$10,000)
| Second Year Analyst:|
(plus bonus of $10,000-20,000)
| Management Consultant|
|$80,000 – 170,000|
| Senior Consultant|
(MBA + 2-5 years)
| Junior Partner|
(MBA/Ph.D + 5 years or more)
| Senior Partner|
(MBA/Ph.D + 5-20 years)
(bonus: up to $3,000,000)
These figures are broadly consistent with what we have heard from other sources and private interviews, though we have been told that advanced degrees are not required for senior positions at some firms. Some salary estimates broadly consistent with this are as follows:
|Bureau of Labor Statistics, U.S. Department of Labor, *Occupational Outlook Handbook, 2014-15 Edition,* Management Analysts.||“The median annual wage for management analysts was $78,600 in May 2012. The median wage is the wage at which half the workers in an occupation earned more than that amount and half earned less. The lowest 10 percent earned less than $44,370, and the top 10 percent earned more than $142,580.”|
|University of Oxford Careers Service, “Management Consultancy.”||“New entrants can earn £25,000-£40,000 rising to over £50,000 within a couple of years. The sector is attractive because the most senior partners in firms can achieve seven figure salaries.”|
|Harvard Business School, “Employment Statistics.”||25th percentile, median, and 75th percentile base salaries for students in the HBS 2013 graduating class taking jobs in consulting were $125,750, $135,000, and $135,000, respectively, with a median signing bonus of $25,000.|
As discussed below, consulting is good for networking, and therefore seems like it will provide relatively strong opportunities to influence people with powerful or otherwise influential people.
Potential for long-run impact
Consulting is often pursued in order to build career capital while keeping options open, and overall, we think it’s a strong option if that’s your aim.
The information below is generally applicable to analysts and associates working at top strategy consulting firms such as McKinsey, Bain, or BCG. It is probably less applicable to specialist consultancies or the professional services firms, such as Accenture.
Opportunities following work as a consultant
Consulting experience is often attractive to large, successful companies.9 You can generally advance more quickly in industry by starting in consulting then entering industry several years later. Consulting is sometimes recommended for people who want to transfer from one industry to another.10
By one plausible estimate, McKinsey alumni have a roughly 1 in 690 chance of eventually becoming a CEO of one of the 1,187 publicly-traded companies with at least $2 billion in market capitalization,11 higher than any other company in the survey.
We’ve also found it recommended as a good first step for entering many other sectors, such as policy and social enterprise.
A substantial fraction of people leave the industry for after 2-3 years.12 Both of these tendencies are partly driven by “up or out” policies that are common—but not universal—at top firms, where the bottom fifth or so of employees are jettisoned or “counseled out” of the firm every couple of years. Consultants we interviewed was unaware of publicly available breakdown for where people go next, but it’s clear that they successfully pursue a wide range of paths.
One consultant within a top tier firm reported that some common paths following a 2-3 year stint as an analyst at a top strategy firm are as follows (in no particular order):
- Attend an MBA program, paid for by the company on the condition that the employee work at the company for at least 18 months following graduation. People would rarely do MBAs without the company paying for it. Anecdotally, roughly 25-50% do this.
Become an associate at the same company without doing an MBA. This would happen after 18 months to 3 years, depending on how well the person was doing. Roughly 10-20% do this.)
Occupy a “chief of staff” position for a senior/influential public official or a CEO of a large company. This work is often somewhat administrative, but higher status and gives you a helpful mentor.
Work on a “strategy team” for some other company. For example, a colleague recently got a job of this kind at Google.
Work on the front lines in some organization that you served as a consultant. It’s valuable to take the skills/knowledge back into consulting later.
Entrepreneurship. Most of the people he knows who did this got funding from angel investors or VCs.
Venture capital/private equity.
The most common destinations vary by firm.
Associates—consultants on the MBA track—also often work for 2-3 years before moving on. The same consultant identified some common next steps at that stage as follows (in no particular order):
- Being promoted to a project manager within the company.
Working at a large company. It’s fairly common for people promoted to a project manager position to move on to a VP level at a large company (e.g. Fortune 500 or top 1000).
Policy/civil service (though this is more common for analysts).
Venture capital/private equity.
Of particular interest to people interested in social impact, some people work at the Gates Foundation or the Global Fund to fight AIDS, Tuberculosis, or Malaria. There’s an interview about one such case here. The Global Fund was started by people at McKinsey. A consultant reviewing this document suggested that, in her experience, consultants leaving at the associate level have similar options to consultants leaving after a 2-3 years of work as analysts, though the rate of the options varies and the associates are likely to be qualified for more senior positions.
Opportunities for advancement within consulting
A consultant we interviewed gave the following rough and tentative picture for people who want to climb the ladder within consulting. About 50% of people make each promotion grade. There are three promotion grades leading to partner from associate: project manager, junior partner, and partner. So maybe one eighth of associates who want to make it to partner eventually make it. The climb would usually take several years, but this seems to be more driven by skill development than “put in your time” considerations. Making it this far tends to require extreme commitment to one’s career. Of associates hired in general (who aren’t necessarily aiming to advance as high as possible), much fewer than 1/8 would ever make it to partner. In the very long run, people who stay in the corporate world make it reasonably high up. Unlike working at start-ups, most people who put in time at top consulting firms and then go the corporate world make it to senior director positions or higher.
This roughly fits with McDonald’s book on McKinsey, which said that, at least during the 1990s, only 1 in 6 associates stayed on for more than 5 years,13 only 1 in 5 associates made principal, and only half of them became directors.14
According to WetFeet, “More often than not, consultants work in teams that report directly to the client’s CEO or other top management.”15 This may be an effective way to learn about how top management thinks.16 However, a consultant we interviewed said it was unusual to report to the CEO and get to see how he/she thinks.. Usually the relationship with the consulting company is handled by the director of client services (DCS). Typically, the CEO or the DCS focus primarily on the general direction of the project, leaving details to more junior people. More senior consultants tend to deal with more senior staff at client organizations.
Colleagues are generally high-achieving and drawn from top business schools and undergraduate programs, and as we’ve just seen, pursue a diverse range of paths afterwards.17 An interviewee mentioned that the quality of the colleagues is generally seen as a major benefit of the job. Other alumni of the firm and contacts from individual projects give consultants a large number of valuable business contacts.18
Consulting firms take the training of the staff seriously – most consultants receive regular feedback, opportunities for mentorship and opportunities to seek advice from senior consultants.
Although a significant portion of your time will be spent on preparing powerpoint presentations, email, and “grunt” tasks, such as creating databases, junior consultants gain responsibility relatively quickly, and work on solving challenging business problems. You’ll also have to get good at “general professionalism” and “getting stuff done” – dealing with clients, running meetings, and producing lots of work to tight deadlines.
All the junior consultants we’ve spoken to say they learned a lot from the experience.
Consultants usually work on a series of one to two month projects across a variety of sectors, companies, and divisions within companies (including government and non-profit organizations),19 making it one of the most attractive options if you want to quickly learn about many different types of work.
As with many other careers, the best way to test for personal fit is to spend some time in the job. College students with a strong interest in consulting should apply for a summer internship the year before they complete their studies. Internships and prior experience, however, not requirements for applying.
The standard route to entry for an analyst position is an undergraduate degree from an elite university, and an MBA from an elite university for an associate position. However, many consulting firms also hire MDs, PhDs, and JDs at the associate level.20
Consulting jobs at top firms are highly competitive, with acceptance rates around 1-3%.21
We can get a rough sense of how hard it is to get these jobs by looking at what fraction of students from various graduating classes actually get them. According to a survey of Harvard’s undergraduate class of 2014, about 15% of students took jobs in consulting.22 22% of the graduating class of Harvard Business School (their MBA program) took up jobs in consulting.23 I compared this with employment statistics at a less elite college, the University of Minnesota, whose business school is ranked #33 in the US by the US News and World Report, and whose undergraduate program is ranked #69 (among “national universities”). According to the Carlson School of Management (the University of Minnesota Business School), 21% of graduates of their MBA program took jobs in consulting24 and 11% of the graduates from the business program for undergraduates took jobs in consulting.25 From this information, it’s hard to infer what fraction of people who want these jobs can get them because we don’t know what fraction of students wanted jobs like these. But the information does suggest that a significant fraction of graduates from programs like these can get consulting jobs if they want them. One shortcoming of the data, however, is that we don’t know what types of consulting jobs these people are getting (top strategy firms, operations consulting, IT consulting, etc.).
A consultant we spoke with said there are more highly qualified people than there are jobs at top strategy consulting firms, and it would be hard to be more than 50% confident that you could get one of these jobs regardless of how qualified you were. The standard profile of a person getting one of these jobs at a top firm is:
- Ivy League (or equivalent) education for the US, Oxford, Cambridge, or LSE for the UK.
Top 25% of the class in terms of grades.
Did something extracurricular that shows initiative. Running your college’s Engineers without Borders chapters or starting a Giving What We Can chapter are examples of the kinds of things they like. This is often more important than your grades, though many firms have minimal requirements for academic achievement.
And these traits reflect those that recruiters most commonly look for.
“Case studies” play an important role in hiring. These are basically conversations about market sizing, an intellectual topic, or an imaginary project with limited time/info. They test for whether you can think/communicate quickly and clearly under pressure.
What does it take to progress?
We didn’t get a great sense of the answer to this question. We think it suits someone with a well-rounded profile of good analytical skills, social skills, teamwork, and the ability to work hard. Compared to the other careers in the list, the verbal and social skills seem particularly important since you need to interact with and persuade clients from the start.
A consultant we interviewed suggested that it is very hard to tell who is going to be great at the job and highly committed to it, and recommended not putting much weight on this consideration when deciding whether to enter consulting.
The work is probably more interesting than many other corporate jobs, including the early years of finance, because it involves more problem solving and variety. Consultants often like the challenge and variety of their work, as well as the people they work with.26
Competitive people would probably have an easier time with “up or out” policies at top consulting firms, where as much as a quarter of people are laid off or “counselled out” of top firms.
Common complaints from consultants include:
- Long hours: 60-hour work weeks are standard
- Extensive travel: consultants generally work where their client is based, and this often requires being out of town a substantial fraction of the time (though this does not apply to all consulting jobs)
- Lack of opportunities to implement strategies developed27
- Spending too much time making PowerPoint presentations and writing emails28
A consultant we interviewed echoed many of these points. Overall, of people we’ve coached, around one in four of the people who entered consulting found it stressful and unenjoyable, one in four enjoyed it, and the remainder thought it was a positive experience with significant challenges.
Questions for further investigation
- Are statistics available on what consultants typically do when they move on?
How much value has the consulting industry as a whole created?
How is consulting work outside of McKinsey, BCG, and Bain similar to or different from the picture painted here?
Is it possible to specialize in an area of consulting that might have unusually high impact, such as advising major foundations, policymakers, or especially promising industries?
Are there some simple ways to tell if getting a job at a top consulting firm is not a realistic possibility for someone? If so, what are they?
The main inputs to our analysis were an interview with an analyst at a top strategy consulting firm, the WetFeet Guide to Management Consulting, and The Firm by Duff McDonald. We also considered the following sources.
- Find out about consulting jobs and firms by using this list of firms.
- The WetFeet guide to Management Consulting was the best source of general information about consulting that we found. It is about 100 pages long, costs $20, and has a lot of detail that isn’t included in this review.
- The Vault Guide to Consulting is a good guide on how to get in. The case interview is a particularly significant part of the selection process, and you can find out more about that here and on the consultancy company websites.
- CareerHoot.com has interviews with several people who spent some time working in consulting.
- The Wall Street Oasis forum on consulting has useful information.
- The Firm by Duff McDonald is an in-depth history of McKinsey. We found it valuable as a source for getting a rough sense of the culture of the industry.
If interested in consulting as an undergraduate, then apply for internships. If you’ve got an MBA or comparable experience, then apply for associate positions.