MANAGEMENT CONSULTANTS: We all know
that one consultant who travels the world, works with the biggest companies,
and gets a massive salary. They usually work at McKinsey and Co, Boston Consulting Group, or some
other big name firm. But, what exactly do these people actually accomplish? Well, theoretically,
they’re supposed to bring in an expert perspective in a specific field or industry. But, most of the
time, they’re completely useless. Now, before I get clobbered in the comments, let me specify that
I’m not talking about technical consultants. Engineering consultants, legal consultants,
security consultants, and IT consultants can be extraordinarily valuable given that they
truly possess expertise in a certain area. This expertise is often something that many companies
lack internally, so they have to outsource certain work to these external firms. But, there’s another
breed of consultants, management consultants, who are virtually useless. For starters,
the average consultant at these big name firms are between 20 and 30 years old. And over ⅓ of
them have only been at the company for a mere 1 to 2 years. So, how could a 25 year old with 2 years
of experience possibly have any idea regarding how Apple or Microsoft or even small company should
manage their business. These individuals have no management experience whatsoever, and everything
they know is theoretical and from a textbook. And I think we can all agree that management isn’t a
skill that you learn from a book or case studies. Great management is something you learn from years
of leadership, management, and actually doing the job that your managing. The average management
consultant lacks all of these traits, yet they often achieve 6 figures out of college and over
$200,000 by the time they’re 30. Now, you might be saying that these junior consultants are
usually led by senior consultants who do know what they’re doing. But, to that I would argue
that most companies have internal staff that are more knowledgeable than senior consultants. For
example, an internal program manager who has 20 years of experience across 4 or 5 big companies
in a specific domain will likely outperform a senior management consultant with broad
experience everyday of the week. Hearing all this, you’re probably wondering why in the world do top
consulting firms pull tens of billions if they’re so useless. Well, one things for sure, it’s not
for their management expertise. So, here’s why companies actually hire management consultants.
BREAKING BARRIERS: One of the most common reasons that companies hire
consultants are to break through various barriers, both internally and externally. If you’re a high
ranking executive at a $10 plus billion company, you’re probably going to have handle a bunch of
politics. This includes things like backstabbing and blackmailing colleagues, trash talking
competent employees, and intentionally withholding crucial information. Why do people resort to such
measures you ask? Well, it usually has to do with jealousy, ego, and getting revenge. For example,
Betty who works across from you and is obviously less productive may get that promotion before you
do. And suddenly, you have to report to Betty. From your perspective, Betty doesn’t deserve that
title, and you’re honestly pretty salty that you didn’t get the promotion yourself. So, the next
time that Betty tells you do something, you may be inclined to be unresponsive, push back, or put up
unnecessary roadblocks. Usually, you can’t just fire such employees because you’d end up laying
off you’re entire workforce. Not to mention, in most cases, such employees aren’t necessarily
incompetent or not hard working. They just need someone to get through their hardhead and get them
do what’s right for the business. Enter management consultants. One of the biggest roles of
management consultants is to identify painpoints and offer solutions, but they wont actually make
decisions for you. This is actually a big meme within the industry. People often criticize that
consultants just tell you what you already know, and this is very much true. But, the thing to note
is that they do it in a much more credible manner. For example, instead of just saying that fixing a
supply chain bottleneck will save the company money, they’ll actually get the numbers, put
together graphs, and create a solid presentation. Virtually 100% of the time, they’re gonna come to
the same conclusion as Betty, but as an employee, it’s much harder to say no to a 100 page slide
deck filled with charts and graphs than it is to say no to Betty’s seemingly subjective analysis.
Ideally, instead of paying consulting firms an arm and a leg to facilitate healthy objective
communcation between employees, companies should work on creating a better workplace culture. But,
that’s much easier said than done. Also, if your company grows large enough,
it’s just a matter of time until there starts to be a disconnect between the end product and the
average employee. And at this point, it’s just a matter of time until you start to see rampant
corporate politics. Employees will no longer be loyal to the product or customer. Instead,
they become loyal to the salary, the prestige, the job title, and maybe the performance review, but
that’s pretty much. Meanwhile, the employees who do want to make change and produce impact will no
longer be interested in working at your company. This is truly an unfortunate situation, but you
as the leader can’t just give in and let employees do whatever they want. So, you’re often forced to
bring in management consultants to breakthrough the corporate barriers across the organization.
UNPOPULAR DECISIONS:
Consultants aren’t just useful at breaking through corporate politics. They’re also especially useful
when it comes to making hard unpopular decisions. This is particularly true in the current economic
climate because lots of unpopular choices need to be made during downturns. For example, this might
include shutting down a sector or laying off a substantial number of employees. And contrary to
popular belief, the vast majority of CEOs don’t want to lay off employees for two reasons. One,
they’re actually good people and they feel bad cutting off so many people’s incomes. Or two,
they’re cynical and they don’t want the bad press and reputation associated with
laying off so many people. A perfect example of the latter is Jeff Bezos. Back in November,
on the same day that rumors started to float around that Amazon was gonna do layoffs, Jeff
Bezos announced that he would donate all of his wealth to charity. Seems like an odd coincidence
to me, but you can be the judge of that. Anyway, regardless of whether a CEO wants to avoid layoffs
for respectable reasons or cynical reasons, in the end, they want to avoid layoffs. But,
at the same time, they know that deep down, it’s the right choice for the business. But, how are
they gonna convince thousands of managers, tens of thousands of employees, and millions of investors
to at least somewhat agree with them? Well, enter management consultants. It will essentially be the
consultants jobs to justify the layoffs through objective means. For example, they might make
charts regarding just how much money a particular sector is losing and why the ROI may not be worth
it. They may also quantify how much money layoffs could save the company and how this could put the
company in a much better position in case of a deeper recession. Once McKinsey or BCG puts
together all of this data, the CEO can send out the findings to the various managers and
directors across the organization followed by a heartfelt message. They can say something like
“I really didn’t want it to come down to this, but after seeing this 1000 page report from McKinsey,
I feel that there is no choice but to move forward with these layoffs.” This report doesn’t just help
the executives either. It also helps the various directors and managers who will directly be laying
off team members that they’ve been working with for years. I mean these guys aren’t stupid. They
also know that making these cuts is the right choice. But, given that they personally know the
people being laid off, it’s much harder for them to pull the trigger. They may even fight for a
certain employee or manager, but the McKinsey report does wonders when it comes to making
this process as smooth as possible. With all that being said though, you can bet that if the layoffs
work and the company starts doing well again, the CEO is gonna say something like “You know,
it wasn’t easy but I was willing to make the hard decisions when it mattered, and
that’s why the company is where it’s at today.” Conversely, if the recession passes by quickly and
the layoffs turn out to be unnecessary and they put the company a step behind the competition,
the CEO can shift all the blame to the consultants. They can something like “You know,
I never felt good about the layoffs. That’s why I brought in McKinsey and paid them $30 million to
do a thorough analysis of the business and the industry. Unfortunately, it doesn’t look like
they did their job correctly.” As you can see, management consultants are the perfect scapegoat
when it comes to justifying hard decisions and blaming if the decisions don’t quite work out.
DEADWEIGHT: In the end, objectively speaking,
management consultants are indeed overpaid dead weight. 100% of the time, they’re gonna be less
experienced than you, they’re gonna know less about your business, and they’re gonna come to
the same conclusions. And even if they don’t, well it’s not like you’re gonna listen to them
anyway. So, managements consultants rarely ever provide any tangible value. And in an ideal world,
they would be completely pointless, but we don’t live in a perfect world. In the real world,
companies are filled with politics, bureaucracy, drama, ego, and leaders want to deflect as much
responsibility as possible. And it turns out that management consultants are the perfect scapegoat
when it comes to dealing with all of these corporate inefficiencies. Now, I know that we’ve
been trashing on consultants this entire video, but it’s not all bad. In fact, from a career
perspective, it’s actually quite appealing. For starters, you don’t have any technical skills. You
don’t need to know C++ or Java or the intricacies of running servers of networks. You simply need to
have strong communication and people skills. And while this doesn’t come naturally to all of us,
for most people looking into consulting, it does. Aside from not requiring any hard skills,
consulting jobs often come with a lot perks for people who like to explore and experience. For
example, you wont be the same thing over and over again. With each project, you’ll be working with
new companies, traveling to new locations, and consulting on different issues. To make things
even better, consulting firms often rank extremely favorably when it comes to company culture. BCG,
for example, literally ranks number 1 when it comes to employee approval of the CEO. Also,
let’s not forget about the compensation. Not only are you paid super well,
but you’re entire compensation is in the form of cash and bonus. So, for the better
or for the worse, you don’t have to deal with stock compensation. With all that being said,
like any job, this job has it’s cons as well. You’ll be working long hours, you’ll rarely be
at home, you’ll always be on call, and at the end of your career, you’ll have little
to quantifiably show for you’re work. I mean, its in the name of the job. You don’t manage,
you don’t lead, you don’t engineer, you don’t create, and you don’t produce change. Instead,
you simply consult. If you’re an impact driven person who wants to produce quantifiable change
throughout your career, well, management consulting is probably not for you. However,
if you see your job as just a means to an end and as a source of income,
management consulting may be a great choice for you. You’ll get to make a bunch of money,
meet a bunch of people, and simply experience the world. But just keep in mind that these are
the real reasons that companies actually hire you. Would you become a management consultant? Comment
that down below. Also, drop a like if this video gave you a better idea as to why companies pay
consultants so much. And of course, consider checking out our discord community to suggest
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