but the problem with all this is that Consultants don't operate on the same
incentives and logic as civil servants consulting firms since their private
Industries operate on the logic of businesses and profits we want people to know how this
company affects their lives how it affects their children how it affects them and how
it affects their future and how it impacts one of the worst problems in America today
which is inequality which is a problem that is really eating at the soul of this country
there's an old saying that people who can't do teach and people that can't teach consult
running a company is hard and no matter how big and successful a business becomes and no matter
how many entrepreneur tags a Founder puts in their Twitter bio there will always be challenges that
are unexpected and outside of the capabilities of anybody within the firm that's where Consultants
come in Consultants are supposed to be skilled experts in the narrow field of business that
they consult in for example if a business wants to introduce a new online payment processing system
but nobody within the company has any experience setting up such a system a smart manager could
employ the help of a consulting firm that firm might have a team that does nothing but set
up payment systems for other companies and since that's all they do they are very good at it if the
business hires this firm the Consultants will get everything set up and train someone in the company
to keep the system operating after they are finished this can often be cheaper with much less
downtime than trying to train or hire an employee to roll out big projects like this example of a
new payment system some Consultants might not even call themselves Consultants depending on what they
specialize in but specialize in experienced Consultants like these are not the same group
that are causing problems those are the management Consultants some of the harm that they've done to
people around the world whether in the United States elsewhere through their work was very
compelling The Big Three management confirms Bain Boston Consulting Group and McKinsey and Company
make billions of dollars every year by telling corporate Executives and government leaders how
to do their own jobs Consultants can be a very valuable resource if they are giving advice in
an area that they have a lot of experience in or better yet something that they do over and over
again for different businesses employing their services but Senior Management challenges are
always unique and these prestigious firms might not know nearly as much as they lead people to
Believe Management Consulting not only costs businesses and governments billions of dollars
every year in direct fees it could be costing us all billions more in poor business performance
and unnecessary layoffs as bad as this problem is consulting firms also have a few semi-legal tricks
up their sleeves that make sure they are probably not going anywhere anytime soon but I am getting
ahead of myself management Consultants like all Consultants are supposed to be brought into a
business for a short amount of time to help management fix a problem launch a big project
or an old favorite streamline business operations Management Consultant will be given access to the
company's operations so that they can observe how the business Works talk to employees and sometimes
even customers they will use their findings from this investigation to recommend areas of
improvement or devise a strategy to achieve goals as easily or as cheaply as possible unlike most
other Consultants the final product they deliver to a business will not be a completed project but
it will instead be a series of recommendations for managers in the company to follow usually
presented in the form of a slide Deck with lots of beautiful looking graphs filled with the data
they collected during their investigation there are three reasons this relatively simple process
so often goes terribly wrong the first is that management Consultants really have any actual
experience doing the things they are Consulting on regular non-management Consultants typically move
into those roles after a long career of doing what they will be giving advice on senior managers and
companies are a lot more rare than typical roles and by the time they have years of experience as
a c-suite executive they are generally looking more towards retirement than starting the next
phase of their career as a consultant this means that the pool of people that can potentially give
experience based advice is small and expensive which makes it hard to put a team together but
manage consulting firms also don't really try either they like to take a different path The
Big Three firms hire almost exclusively out of universities through graduate programs that top
students from prestigious colleges fight very hard to get accepted into these young graduates will
become analysts at these firms and do a bulk of the grunt work on Consulting projects under the
supervision of a managing director or partner unfortunately when a lot of these students get
hired by McKinsey and start working there they're disabused of that and they're often working for
things that have absolutely nothing to do you know with these lofty goals the managing directors and
partners are usually promoted from within as a big three management consulting firms have an upper
out Staffing policy this means that if after three years Junior analysts are not promoted they are
asked to leave the problem that this creates is that the people doing the bulk of the Consulting
not only don't have any Senior Management experience they often don't have any experience
working in a big company at all despite this obvious flaw management consulting firms continue
this practice because it is become ingrained in the corporate culture a partner who has worked
their way up from being an analyst might not want to hire someone for their team with too much Real
World Experience because they might successfully challenge their expertise the graduates are also
much cheaper to hire management consulting is based on billable hours so analysts are expected
to put in Long weeks average salaries at McKinsey for first-year analysts range from 90 to 110
000 which is a lot but is not that competitive when the expectation is 80 hour weeks with lots
of stress and very little job security it's also lower than what those same graduates could earn
if they went into Investment Banking private Equity or fintech the reason they take these
consulting jobs over more lucrative Alternatives is because the exit opportunities since their
job is nothing but making companies run better workers with management consulting experience
become highly demanded for management roles in regular companies once they have a few years of
experience this is the reverse of how it should be which is Consultants getting experience doing the
things they are going to give advice on before they give the advice to make matters worse the
fact that management Consultants don't have any experience in the field they are Consulting in
is the least troubling of the three problems with these companies so it's time to learn how money
Works to find out how Corporate America got hooked on Consulting and why it's here to stay no matter
how bad it gets this week's lesson was sponsored by Aura a few weeks ago I was searching the
internet for a news article about an achievement one of my parents earned in their early career
only to learn that their personal information appeared on a variety of sites I learned that
this information is so prevalent because data Brokers are actively selling her information to
robocallers telemarketers spammers and anyone else who wants our information that's just not right
Aura identifies data Brokers that are exposing your information and automatically submits opt-out
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visit aura.com forward slash how many Works to try two weeks free to see how many data Brokers
are sharing your information and much more the second problem with management consulting firms
is that they will take on assignments no matter how ill-prepared they are to deliver good results
in that field Bane McKinsey and Boston Consulting Group do not accept direct liability for any of
their recommendations going wrong the worst that can happen to them is reputational damage so there
is little incentive for profit share motivated Partners to give up lucrative contracts just
because they won't be able to give good advice the culture has become to oversell their infallible
business Acumen and then work out what the hell they are doing after they have landed the job in
her book the big con Rosie Collington a college professor and business reporter speaks about how
much damage this strategy can do especially on government contracts in 2019 and 2020 the
British government spent nearly a billion pounds roughly 1.3 billion dollars on brexit strategy
Consulting with these big management consulting firms despite the egregious waste of taxpayer
money it's difficult to understand what these Consultants were really doing because nobody
had any experience in a situation like brexit the firm surveyed lots of businesses and created lots
of reports but didn't add anything that couldn't or shouldn't have been done by elect did public
servants the third problem with Consulting is that it costs much more than anybody ever expects
the 1.3 billion dollars spent by the British government was not unusual the French government
has also been embroiled in scandals involving overly generous contracts to consulting firms
and at home here in the states big government projects like healthcare.gov involved more than 55
Consulting contractors and subcontractors that's right the government hired Consultants that then
hired their own Consultants to consult their Consultants on how to consult all to roll out
an online service that still failed big companies often have the same problem where Consulting fees
end up being a significant cost in the business with some company managers spending 10 percent
of their operating budget on Consultants to tell them how to do their jobs the direct costs are
not even a factor when compared to the indirect costs of relying on Consultants governments and
businesses that consistently hire Consultants will prevent their own ability to develop
in-house capabilities if Consultants are hired to solve any problem a business or government runs
into then they don't need to hire teams of people internally to deal with those problems Consultants
brought in to improve business operation friends also have a fondness for reducing head count
wherever possible there are lots of people in big companies that exist to fix things when they go
wrong if Consultants ignore the real role of these people in the company they can identify easy Cost
Cuts and look like business Geniuses if something does go wrong in the future after the Consultants
fire the person that was responsible for fixing those problems then the business can always just
hire more Consultants so with so many problems high costs and questionable performance why do
governments and Business Leaders keep hiring big management consulting firms to help with things
they were never meant to help with there are again three big reasons reason one is that hiring
Consultants can be really good for the careers of the people that get to do the hiring the number
one career move for elected officials after they leave office is into Consulting senior Consultants
can earn a lot of money the average partner salary at being in company is 527 thousand dollars with
some senior Partners earning more than a million dollars a year this is a lot more than politicians
make in office so these jobs are highly coveted the best way to make sure they git offered these
roles is to build relationships with these firms by using their services while in office this is
known as a political corporate revolving door and so long as they don't directly hire a consulting
firm with the understanding that they will get hired themselves after they leave office it's
not corruption it's one of the only ways that politicians can monetize their position without
it being counted as corruption a million dollars a year is enough to tempt almost anyone apart from
the other group of people that are regularly choosing to hire management consulting firms
c-suite Executives like chief operation officers Chief Financial officers and chief executive
officers regularly make five million or more every year at public companies becoming a management
consulting partner would be a downgrade for these people so they don't hire them just to get a job
but Consultants can still help their careers in other ways some companies will hire management
consulting firms to help them with executive job searches finding a good CEO can affect the stock
price of a company so a lot of Human Resources departments Outsource this responsibility to a
third party under the instruction of their board of directors Consulting partners are more likely
to hire Executives for these key roles that they have worked with in the past so that they can make
recommendations based off first-hand experience they are also likely to recommend a CEO that has
employed their consulting services in the past because they will continue to book billable hours
when they get their new job for the career driven executive the solution is simple give business
to consultants and the Consultants will give jobs to them the second reason is that a lot
of business and political leaders don't know what they are doing this point is simple enough a lot
of senior positions and companies don't always go to the most deserving people and Consultants can
tell them how to do their jobs so they don't get exposed for being unqualified reason number three
is that hiring Consultants is the single most effective ass covering tool that a senior manager
can employ there is an old saying that nobody ever got fired for hiring McKinsey if an executive is
facing a tough decision hiring a consulting firm to confirm that the decision is a good idea based
off their independent research can cover the executive in the scenario where the decision
goes badly nobody could blame them for not doing enough due diligence and shareholders can be told
it was extenuating market conditions that were the reason for the company's poor performance
these Executives will have already made up their lines and will bring in outside Consultants to
silence critics in the company or on the board if things go right they will get all the credit
and if things go wrong they will just blame the Consultants that were paid to agree with them
Consultants will not try to create reports that oppose the vision of the executive responsible
for hiring them because they are less likely to be hired again if they do it's also not their
job Consultants are not paid to make decisions for the company they are hired to present the research
they conducted regarding big decisions but like a lot of information dense presentations it's
open to interpretation even if the Consultants do have a lot of experience in similar projects and
they aren't lying about their ability to work on what they had been hired to their advice is
only worth anything if it changes someone's mind now if you are thinking after all of this that
consultants for Corporate America are bad then they have nothing on the Consultants that could
be threatening our national Safety I am talking about former military generals that are earning
Millions by going to work for foreign militaries in countries like Saudi Arabia and Libya go and
watch my video on that to find out how this is possibly legal a special thanks again to Aura
for making it possible for everybody to keep on learning how money works my God Church [Music]