What consulting firms are struggling with
The management consulting industry is booming and the McKinseys of this world are reporting healthy growth rates across geographies. However, three trends dominate the leadership agenda of institutions such as McKinsey, BCG, and Bain. Ultimately, the MBBs are struggling to cope with these trends that are threatening their authority.
Let’s have a look at what keeps senior partners up at night:
The single biggest struggle of today’s consulting firms is getting and keeping the best people. For a consulting firm, its people are really the core assets that drive and develop the business. At the same time, the industry is seeing continued strong growth rates globally. As a result, the war for talent is becoming ever more fiercely.
Then, there is a constant tension between the dominant dogma in each consulting firm to deliver the best results for the client and the internal responsibility and maxim to create a working environment to retain excellent people in the organization. Such conflicts become evident on a day-to-day basis and are mostly related to work-life balance concerns. It is no secret that the average hours at consulting firms are significantly higher than for most industry roles. However, with a new generation of graduates flooding the job market, lifestyle has become a key priority for many. Unfortunate for the top tier firms in consulting, tech firms such as Google score much better in these metrics and have a significant pull on high potentials. Consequently, the consulting industry needs to find a way to solve this struggle. One reaction we currently observe is that consultancies challenge the traditional up-or-out model and transform it into a grow-or-go mentality that offers more flexible career paths.
Over the years, clients have become much more experienced both in working with external consultants as well as doing the work of consultancies themselves. With regard to the latter, with tens to hundreds of projects that are often conducted at Fortune 500 companies and the associated knowledge transfer corporations were able to establish their own internal consulting departments. As a result, external consultancies often have to compete with in-house consultancies, which are significantly cheaper and obviously closer to their client. Additionally, client expectations of the work produced by the MBBs are continuously rising.
While revenue was guaranteed for the top tier firms over decades, new contracts with clients often contain a success based fee structure. This puts strategy teams at an even greater pressure to deliver the desired results and consultancies as a whole at a greater risk of failing to reach their ambitious growth targets.
Changes in the delivery model and expertise
The business world is changing at an ever-increasing speed. Digitization and everything related such as advanced analytics etc. are the buzzwords of this generation. There is hardly any consulting project sold today that does not touch digital at least in one of its work streams. In the hyper-competitive world, businesses face much more complex problems that require new solutions, capabilities and delivery models. The MBBs are currently investing significant amounts in the development and acquisitions of such new practices and most of their growth is coming from new areas of expertise.
Aa a result, the typical operating model is changing. The classic team set-up with 2 consultants and 1 project manager at the client site is – in many cases – no longer valid and the significance of other support functions is increasing.