Individual wage rates, of course,. Preparing for interviews? Get RocketBlocks Now that we have a mental model to think about the industry and some of the trends affecting it, let's broaden the picture and analyze the results of a consulting firm. Almost invariably, the result is a series of data-based recommendations that focus on the problem at hand. The delivery of this product consists mainly of a presentation or, in many cases, a series of presentations (for example,.
In addition, supporting data and data assets (for example,. However, it's important to note that the key product is the recommendation itself, not the data assets. Ultimately, data assets are just supporting arguments, essentially derived from the work they did to arrive at the recommendation. The greatest variation exists here, as it depends both on the company itself and on the nature of the work.
However, in most cases, consulting firms tend to be located at their clients' premises for most of the week so that they can be available to collect data, interview stakeholders, present it to interested parties, and so on. Companies like McKinsey and BCG typically staff teams at the customer's premises four days a week, usually Monday through Thursday, and then bring the teams to the central office on Fridays. Bain is an exception and, in most cases, tries to keep consultants working out of their central office, unless travel is necessary to research clients or to make a presentation to a client. To help bring the above description to life, let's look at a specific hypothetical case example and examine what the unit economy of the consulting business looks like.
Just like in a case interview, you may find yourself analyzing the profitability of a company's product, analyzing the revenue and cost structure of hiring a consulting case so that we can understand it at a deeper level. This is the same thing you'll do in a case interview, except that, for example, instead of analyzing the profitability of a high-end furniture company, we'll look at the unit economy of a consulting firm. Let's say a large consumer electronics company hires McKinsey to help it assess whether it should enter the online advertising space through its presence on digital devices. Based on initial conversations with the client, the firm agrees to take charge of the case, assigns a deadline of 12 weeks and agrees on delivery and a flexible framework for the type of analysis and research that the company will carry out throughout the case.
For the type of sample participation described above, the revenue side is likely to be the simple part. Customers will agree in advance with the consulting company the price of the contract and what the final product will be (p. e.g. This type of model is called a fixed rate, since, regardless of the result, the customer will pay the agreed rate for the work.
While the flat rate is a common pricing model used in consulting, it's worth noting that there are a few other alternative models. If you put together all the data mentioned above, here is the approximate unit economy of a case. First, once a fixed commission or milestone fee is agreed with the customer, the company has only one lever to boost its own profitability, and that is to reduce costs. Since the vast majority of the cost is labor, this often comes down to reducing the labor involved.
If you've ever wondered why consultants work so hard, you now have a fundamental structural key to solving the puzzle. Not only is the job challenging, but the schedule and economy can also be challenging. Partners are encouraged to generate revenues and profits for the company, so, once the price is set, it makes sense to try to staff the teams as minimally as possible and, at the same time, to offer quality work. This structural dynamic has a lot of interesting second-order effects.
For example, many partners like to hire really senior analysts on their teams. Why? Senior analysts are already trained (therefore experts) and are significantly cheaper than an associate. For the partner, everyone wins, they get high-quality work at a discount. Usually, the real price of consulting contracts is a closely guarded secret.
Even at the firms themselves, prices are managed by senior staff and younger associates and consultants aren't aware of all the details. On the customer side, it's a similar situation. Usually, only top management, such as directors, vice presidents, and C-level executives, know all the details and costs. Below, you can view several workflows that McKinsey has planned, the number of consulting staff assigned to each one, the length of the contract, and the total cost.
Where do you fit in? The next key question is, where do you fit into this picture?. Let's start by looking at the entry points to the consulting business, what salaries are available to you, and what your career progression could look like. Sample answers from former McKinsey, BCG, and Bain consultants. In addition to top-quality technical descriptions and personalized expert advice.
The hourly pay ranges for the same job position may differ depending on location and responsibilities, skills, experience, and other requirements for a specific job. In fact, the situation is so serious that, earlier this year, the Inspector General of the General Services Administration recommended in a report that the GSA cancel the entire McKinsey government contract. Salary paid may differ for the same position at Mckinsey & Company depending on experience, skills and competencies, and education. .