The big 3 consulting firms: why McKinsey, BCG, and Bain are the most prestigious
There are hundreds of management consulting firms. However, at the top three players compete for the crown. McKinsey & Company, Boston Consulting Group (BCG), and Bain & Company are universally acclaimed as the top firms in the consulting universe.
In this article, we want to look into why the 3 top-tier strategy consulting firms outshine all competitors based on their profile.
What are the similarities between McKinsey, BCG, and Bain?
The top 3 share many common traits that put them above everyone else. These 3 firms have created a virtuous cycle that fuels itself and helps the McKinsey’s of this world to dominate the rest. It is generally agreed upon that the elements of this cycle are strongest for McKinsey > BCG > Bain. The components of this cycle are:
The triumvirate in top strategy consulting exclusively works with the biggest clients of a particular industry as well as governments and the most influential NGOs. Their client base usually comprises >80% of firms listed at major stock indices around the world. They rarely work with small and medium enterprises.
C-level mandates only
The consulting mandate of the top 3 comes directly from the C-suite of the corporations mentioned above. They are tasked by and report to CEOs, CFOs, COOs and other senior organizational leaders only.
Most impactful projects
Since these firms work for the CEOs of large corporations, they are usually entrusted to sort out the really big issues a company is facing. A large batch of their work is actually to devise a corporate strategy. Following the CEO agenda approach, their work has the biggest real-life impact on their clients among all consulting firms.
Highly selective recruiting
Top-tier strategy consulting firms are highly selective and only employ candidates from top universities with superb grades and professional experience, who have demonstrated leadership abilities in previous roles. Additionally, their case interviews are the toughest across all consulting firms. To illustrate, Forbes Magazine ranked McKinsey repeatedly as the employer with the most difficult interviews. Only 1% of applicants actually make the cut.
Relentless focus on quality
The top firms are driven by a relentless focus on quality and strict adherence to their professional values and standards. As a result, they deliver the same quality of work across all geographies, industries, and functions and as external advisors enjoy the highest trust from their clients. For instance, McKinsey has the principle to bring the best of the Firm to the client. The firm has a global staffing model and will connect the best people for the engagement with the client, even if they live 3 continents apart.
Highest price tag
Serving the biggest companies on their most pressing issues with the highest caliber people, the big 3 are able to charge significantly higher consulting fees than their peers. Higher fees enable them to invest more in training, acquisition, and expansion of the business in general.
Best alumni network
Consultants of the top three are sought after by employers once they decide to leave their job. With the pedigree of a top-tier firm on their resume as well as the skills they have acquired while working, they make excellent organizational leaders. Not surprising, we find many alumni of McK, BCG, and Bain in the most senior organizational positions of the biggest and most influential companies.
Highest salaries and better bonus packages
As the war for the best talent is becoming ever more fiercely, it is not surprising that consultants of the top three earn more than consultants of other firms. As discussed, their fees billed to the client are also significantly higher. The difference to less prestigious consulting firms increases with career progression, meaning that the gap between employees of tier-1 and tier-2 firms widens as they move through the ranks and eventually make partner.
Highest knowledge investment
The top-tier, MBB, invests a significant amount each year in high-quality research to drive industry and functional expertise. The knowledge-building activities developed internally for clients as well as published in business publications such as the McKinsey Quarterly help strengthen their thought leadership position in the business world. Large consultancies drive the global management agenda to a large degree. It is difficult for other firms to get access to world-leading experts and funds to embark on a similar strategy.
Investment in their employees
McK, BCG, and Bain invest a significant amount each year to train their consultants. Training starts before employees even join the firm and accompanies them throughout their journey across the ranks. The quality and content of training that young consultants are able to enjoy is something that large industry companies only use for their senior leadership roles.
MBB have significant financial resources to constantly expand their business through organic growth and acquisitions of specialized firms (e.g. analytics, design, etc). Additionally, they buy out the best performing partner groups of other consultancies.
What are the differences between McKinsey, BCG, and Bain?
McKinsey & Company
McKinsey & Company is a partnership and widely acknowledged as the most prestigious consulting firm. It was founded in 1926 by James O. McKinsey, however, underwent a significant transition through the leadership of Marvin Bower, who established the principles of the McKinsey for which it is known today.
McKinsey is hired by the world’s leading organization, be it in the public, private, or NGO sector on all matters and functions of business. All of its work done with a strong commitment to confidentiality.
McKinsey consultants have an obligation to dissent, even from junior levels onwards whenever they feel that something is not right. This is only one part of the three-part code of conduct that puts client interests ahead of those of the firm, giving superior service and maintaining the highest ethical standards.
A big difference in McKinsey compared to other firms is the ‘one-firm’ partnership model. The firm operates as a single, global entity with a very strong shared culture and norms. This allows for both bringing the best of the firm to clients as well as truly global staffing for its consultants. The degree of international mobility is the highest among its peers (with the obvious downside of a less sustainable lifestyle).
Compared to the other two strategy consulting firms, McKinsey has the biggest expenditure on research through their internal knowledge developing efforts as well as their external arm, the McKinsey Global Institute.
McKinsey also invests significantly in maintaining its alumni network. The firm has also developed the biggest number of Fortune 500 leadership executives, with whom it still has close ties. McKinsey regularly organized knowledge and networking events with alumni and current consultants alike.
Currently, McKinsey employes close to 35.000 people and is rapidly expanding both organically as well as through the acquisition of high profile niche specialists in technology, analytics, design, and many more areas. The role of traditional consulting is definitely changing.
McKinsey has a very favorable leave policy. Consultants can take up to 3 months of extra unpaid vacation per year. In many offices, consultants can take an educational leave to continue their studies with a PhD, MBA, engage in social work or take on a secondment.
Common feedback about McKinsey from its employees:
+ “Large impact at a very early stage of your career.”
+ “Incredibly smart colleagues and interesting type of work.”
+ “Huge learning curve, best reputation, and very good compensation”
– “Long hours and weekly travel.”
– “Very high pace and constant pressure.”
– “Clients and leadership are very demanding.”
Boston Consulting Group (BCG)
BCG was founded in 1963 by Bruce D. Henderson, it quickly grew to one of the most influential management consulting firms, constantly expanding its functional and industry expertise. Contrary to McKinsey, it was initially focused on external processes that affect a business. As a consequence, BCG became the pioneer of business strategy, developing several famous business concepts such as the BCG 2×2 matrix. Over time, Henderson turned BCG into a partnership.
Similar to McKinsey, BCG launched a think tank, the Strategy Institute, to investigate and provide solutions for challenges of global magnitude. Today, BCG has ~20,000 employes in close to 100 offices around the world.
BCG tackles the lifestyle question with a program called PTO, which stands for predictability, teaming, and open communication. The program should allow its consultants to get a better sense of control, accomplishment as well as reduce their working hours.
Common feedback about BCG from its employees:
+ “Good career trajectory at higher levels.”
+ “Interesting mix of people who are committed to doing great work.”
+ “Good compensation and learning opportunities.”
– “The lifestyle is very unpredictable.”
“Slower promotion opportunities at the junior level.”
Bain & Company
Bain & Company was founded in 1973 by Bill Bain, a partner who left BCG to start his own consulting firm. While they have a slightly smaller client base compared to McKinsey or BCG, their clients are of similar caliber. Bain excels in the advisory of private equity funds, where its client base represents 75 percent of global equity capital. In fact, Bain was the first of the top three to consult PE funds, and supported more than half of the largest buyout deals over the last couple years.
Compared to the other two, Bain is very big on measuring success. The firm claims that 85 percent of its performance improvement projects make the client 10x the consulting fees. Merger integrations generate 20 percent higher excess returns when Bain is involved. The firm also claims that its clients stock prices are 4x the one of non-clients, which is not surprising when considering that the top performing organizations usually higher the most prestigious consulting firms. Everyone else would not be able to afford them. Keep that in mind when interpreting such numbers.
Addiitionally, Bain uses a prediciting system for every project to measure and manage risk as well as realize more consistent results. This is tied with the concept of success-based fees. Other firms such as McKinsey are slowly adapting a similar fee-at-risk fee structure on selected engagements.
Among peers Bain is considered as the best for work-life balance. Consultants travel less due to a more local staffing model. Currently, it employs roughly 11,000 employees.
Common feedback about Bain from its employees:
+ “Engaging and challenging work.”
+ “Good leadership engagement and nice people.”
+ “High impact and growth.”
– “Slow organization when it comes to change.”
– “Tough lifestyle”
– “Lose a good amount of competitive proposals to McK and BCG.”