The following introduction to consultancy piece is the first in a serialisation of more than 100 pages of career editorial from The Definitive Guide to UK Consulting Firms. Professionals seriously considering the option of furthering their career in consulting may download the full guide (see instructions in the footer of this piece).
An introduction to the UK consultancy industry
Management consultancy is both the industry which, and practice that, helps organisations to improve their performance, primarily through the analysis of existing business problems and the development of plans for improvement.
The MCA defines management consulting as ‘The creation of value for organisations, through improved performance, achieved by providing objective advice and implementing business solutions.’ Organisations hire the services of management consultants for a number of reasons:
• To provide expertise not available in-house (too specialist, too many people required, too new/leading edge, too expensive to hire as permanent employees)
• To bring fresh, innovative and objective thinking
• To carry out unpopular policies
• To help management make decisions.
Due to their relationships with numerous organisations, consulting firms are also said to be aware of industry ‘best practices’. The US is the largest market in the world followed by Europe. Within Europe, the UK is the second largest market, having been displaced by Germany.
What do consulting firms do?
Though difficult to segment, consultancy can be divided into three broad categories. Strategic firms that look at what organisations could be doing over the next five to ten years, operational firms that look at business process and ‘operations’, and change management firms, that help businesses deal with the challenges posed by their people. Strategy projects generally cost more per day, but they tend to be much shorter, whereas delivery and transformation projects last across lengthier periods of time. The large multidisciplinary consultancies try to cover all areas, offering a full service in every industry. Smaller consultancies win work off the back of their specialism, often coming in for small parts of larger programmes.
Consultancies may also provide organisational change management assistance, development of coaching skills, technology implementation, strategy development, or operational improvement services. Management consultants generally bring their own intellectual property methodologies or frameworks to guide the identification of problems and to serve as the basis of recommendations for more effective or efficient ways of performing business tasks. Some firms only undertake ‘pure’ management consulting work, some of which are part of larger firms that also undertake IT systems development, outsourcing and, increasingly, numerous other activities.
The first management consultancy firm ever established was Arthur D Little, which opened their doors for the first time in the US in 1886. In the UK, the consulting industry began to grow quickly in the 1950s. This was fuelled by the arrival of US consulting firms, waves of new technology and management techniques, along with increasing demand from clients for highly specialised skills.
In 2010, the UK consulting industry was worth just over £8 billion, employing around 40,000 people, and just under £1 billion extra work was performed by the UK consulting industry overseas (MCA, 2010).
How do consulting firms make their money?
Consultants charge for their time. Day rates range from £350 for trainee IT consultants, through to £5,000 per day for a partner from a top strategy firm. Consequently, firms make more money depending on how many days in a year their people are working, or are ‘billable’. In most consultancy firms, consultants are targeted on their utilisation rate. A standard target for a delivery consultant would be in the region of 85%. The remaining 15% would be for training, bid work, other internal activity and holidays. Often, in order for consultants to get their bonuses, they have to achieve this level of utilisation.
As you move up the levels in consulting firms, the targeted levels of utilisation go down, as practice management and business development becomes more important. Certainly once salaries move into six figures, sales targets of at least half a million pounds per annum are common.
This fee model does not necessarily target a consulting firm to complete a project in the fastest time possible, although the prospect of repeat business does encourage that aim. Increasingly, some consulting firms are looking at fee models where the consultancy also takes on some of the project risk. Applied Acumen is a particular leader in this area.
Alvin Jackson, Director at Mulberry Consulting, said that in the future ‘there needs to be a focus on ROI and the bottom line rather than the initial cost of the consulting service. The consultancies with the answer to this question will do better than others. ‘
What is it like being a consultant?
Why would you want to be a consultant? This question will be answered in greater depth during later chapters; however it really comes down to the amount of experience you can gain in a short amount of time, the intellectual challenge and the variety of the work. ‘It is, however, a lifestyle decision,’ said Tony Tarquini, Head of Financial Services at Capita Consulting. ‘It is very mentally rewarding, but you have to work very hard, and be prepared to be away from home a lot.’
How have things changed since the first edition of The Definitive Guide?
The last few years, since the first edition of this guide, have been tough on consulting firms. They have been vilified within the national media throughout 2010. In many ways, this comes down to a wanton misunderstanding of what a consultant is. Interim man agers that carry out senior level roles for a year at a time on temporary contracts, at day rates of over £1,000, are not management consultants. This guide is about the employed management consultancy sector, and seeks to look at businesses that create value, as previously defined. Tom Blacksell, Head of Consulting at Capgemini, observed that ‘the marketplace has changed rapidly in last 1 0 years. Consultancy has become more specific and more targeted. There is pressure on fee rates, and pressure to produce results.’
Following the consolidation of the 2000s, management consultancy both operates as a truly global and local business. Firms like the Big 4 leverage their size, working across all the countries in which their clients operate. Boutique firms leverage their specialism, working on niche projects won by the strength of their expertise. An example is WCI, who have built a business offering regulatory advice to the pharmaceutical industry. Jim Tizzard, CEO from WCI, said: ‘It is our specialism that means our clients want to purchase our services from us.’ Kirsty Harvey at REL Consultancy told me about how the deep working-capital expertise that REL brings to the table has meant that business has remained strong for them through the recession. ‘If companies have a working-capital issue, they know to come to REL; that hasn’t changed.’
This is true across the market, where consulting firms have continued to be able to leverage their core business. Stefan Spohr, Partner and CEO of the UK and Ireland office of BearingPoint, said: ‘The UK recession has allowed BearingPoint to be much more focused. We are specific on where we are strong and where we can add value. We have a distinct proposition in the marketplace which makes us very appealing to our clients.’ At Sapient Global Markets, they have historically seen growth rates of 30% year-on-year. David Newland, Vice President, said: ‘In order to improve profitability we are becoming more specialised and focusing on our key markets which are commodities and capital markets where we have great expertise.’ Alvin Jackson, Director at Mulberry Consulting, emphasises this point by adding: ‘The new challenge for consultants is to prove they can add value, stepping away from the old adage of “lend me your watch and I’ll tell you the time”.’
Niche consultancy Applied Acumen always shares the project risk with their clients. ‘Sharing exposure with our clients shows commitment and confidence that we can deliver measurable results together. We’ve always felt clients should expect nothing less,’ said Applied Acumen Director, Richard Shipperbottom.
Tom Blacksell at Capgemini agrees: ‘If you’re good enough, in a risk and reward fee model you can earn the same amounts. We welcome this as it is a mature way of doing business and better for the market. Some firms may not survive, but they will be the ones who cannot produce results.
Another observation from people I have spoken to is a significant shift in client behaviours. Richard Goodson, Vice-President at Hitachi Consulting, Richard Shipperbottom at Applied Acumen and Tony Tarquini at Capita Consulting have all observed an increased shrewdness in the purchasing of consultancy services. ‘Clients are more canny and wiser these days. They don’t want an A-team that sell the services, and a B-team of graduates that come in and deliver the services. This way of working isn’t sustainable,’ said Richard Goodson. James Platt, Partner at The Boston Consulting Group, said they have also seen a shift in what their clients want: ‘It’s no longer about giving great ideas; clients don’t even just want change. What they want from us is not only to provide change but to sustain it. Rather than just catching fish for them, they want us to give them the rod.’
In conclusion, management consultancy is an industry that exists to support other organisations. It is the very essence of what it means to be a professional service. Over the last few years there have been significant changes in fee models, the structure of organisations and the type of projects that come up. However, it is also an industry that has to keep ahead, always creating new services to bring to the client base. This is still the same, and will continue to be the case. It is therefore a very exciting industry to work in, both as a step ping stone to gain experience, but also to stay in for the long term. Having gained long-term experience, you earn a position of trust with the CEOs of the world’s largest companies and governments, enabling you to advise them on what the organisations they run should do.
This piece is reproduced from The Definitive Guide to UK Consulting Firms, a 400+ page careers guide for candidates looking to pursue a career in management consultancy. A free resource, this guide contains over 100 pages of career editorials followed by a directory of consulting firms active in the UK market – with over 380 employers listed and 189 employers profiled.
The guide is free to download in PDF format, with hardback copies also available from October 2011 onwards. Access your copy of The Definitive Guide to UK Consulting Firms (2nd Edition).