This is part 2 of my 2 article series on why I left McKinsey.

In article #1, I explained why I left and dove into what I perceived to be McKinsey and the consulting industry’s shortcomings.

Below, I’ll dig into why I loved working there and the general benefits of a management consulting background.

As I said before, I wouldn’t trade my McKinsey years for anything. Many fortunate people face the choice between an MBB (see consulting lingo if you’re like “huh?”) and prestigious companies in the financial services industry (from Goldman Sachs to mid-market private equity, from well-known venture capital firms to prestigious corporate management programs).

9 times out of 10, I recommend MBB.

The reasons below explain why.

1. Benchmark for what it takes to be a great business leader

This was probably my biggest learning from McKinsey.

I came into the company pretty confident in my abilities, and frankly, was used to putting in 80% effort and still doing well at most things.

I was quickly disabused of that notion at McKinsey – not only were the people very smart, but also hard-working and socially savvy.

Of course, there’s some variation in abilities at the top consulting firms, but in general, I’d say the benchmark was set pretty high for good performance. I quickly realized I had to work very hard in order to be successful, and I realized the benchmark I needed to reach to be considered a strong business leader.

That knowledge is invaluable, and it’s something I carry with me today.

2. Valuable training in the HOW and WHAT

By HOW, I mean the approach to solving business problems and creating value as a business leader.

Examples include:

• Hypothesis driven problem-solving: the benefits of quickly determining a potential solution set, and utilizing data to iterate on this answer until its crisp and accurate
• 80/20 principle: how to be efficient with your time and your information to arrive at answers that are “good enough”
• Data-driven decision making: the importance of empirical findings and a fact-based approach. As one wise man said, “If you don’t have any facts, we’ll just use my opinions”

By WHAT, I mean specific tactics and tools that are valuable in any business situation. Examples include:

• Things like the “Influence model” (which teaches you specific ways to exercise leadership and build influence) and the “Skill/will matrix” (which is a quick way to understand organizational culture and how to improve employee performance)
• MECE (“Mutually Exclusive, Collectively Exhaustive”) – most of you have heard of this by now, but it’s a good mental fact-check to make sure you’re thinking comprehensively and in an organized fashion
• Issue trees – a way to disaggregate large, ambiguous problems into smaller chunks for work-assignment and problem solving purposes

The list goes on.

3. Alumni network

I’ve mentioned this several times as a key asset of the top firms, and I’ve reaped its benefits multiple times in my career already. In particular, I wouldn’t have joined shopkick without reaching out to Cyriac Roeding, its CEO and a McKinsey alumni. And I wouldn’t have contacted Cyriac (and in all honesty, he may not have responded) if I didn’t first hear about him through the McKinsey Alumni newsletter.

In addition, even in the startup world – which is underrepresented as an exit opportunity among consultants – I’ve bumped into many McKinsey alumni and its a special experience that we all share.

4. Credibility and signaling

One of the “laziest” benefits is just having a name like McKinsey on your resume. Similar to getting into an Ivy League school, it lends you instant credibility in all sorts of things – personally relevant moments for me include in the job hunt, in finding startup investors, in business development and partnership opportunities.

There are several reasons for this but the primary one is signaling. McKinsey has already done the due diligence on my background and abilities and given their OK. Other companies can leverage this.

5. Client skills

One of the key benefits of consulting – far more than any other business occupation – is the client interaction. You’ll work directly with client counterparts, and in some cases you may even lead client teams!

You’ll add a valuable bullet to your resume and build valuable long-term skills. In addition, you may develop client relationships that will last beyond your tenure. It’s not uncommon for consultants to jump directly to a client in a permanent role (more on exit options).

6. Firm relationships

Stronger than any client relationships will be your relationships with fellow consultants – especially those of your class. One of the most valuable things I took away from my McKinsey years are these relationships, because everyones’ gone on to do some very amazing things.

Some have started companies; others work at the top private equity and venture capital firms; still others are at all the top business and law schools.

They’re successful – and not only do they provide motivation for you to continue working hard – but are great friends.

In addition, you’ll develop great relationships with your team leaders (aka engagement managers/project leaders) and partners. I still keep in regular contact with several of them and they’ve been invaluable for career advice and business contacts.

7. (Some) domain expertise

Becoming an expert in X industry or Y function generally doesn’t come until many years into your consulting career.

There are several reasons for this, the primary one being that until you develop meaningful client relationships, you’re most valuable as a utility infielder (essentially a person who can wear many hats).

However, sometimes you can dive quite deep into a particular area and find that, even after several years, you’ve become a de facto firm expert on that particular topic.

On one of my projects, I lead the implementation of a barcode scanning technology that systematically tracked and assessed how employees spent their time. This was a new data-focused approach to identifying inefficiencies and streamlining tasks.

Once this technology was proven to deliver client value, I suddenly became the “barcode expert”. In my final year at McKinsey, I spent a considerable fraction of my time parachuting into projects as a consultant (to consultants, yeah yeah) on how to incorporate this technology.

While this is somewhat unusual, even junior consultants can develop expertise in an industry (eg, pharmaceuticals) early. Functional expertise (eg, expertise at long-term strategic planning) is more rare.

8. Entrepreneurial…as big companies go

The top consulting firms can be entrepreneurial environments. If you have a particular passion (say, education in sub-saharan Africa), firms like BCG will generally do what it can to provide you that opportunity.

In my years at McKinsey, several of us were very interested in creating opportunities to essentially do “consulting for startups”. While the idea never got off the ground, this was primarily because of a lack of effort on our part. My feeling is that while McKinsey may not have given us free reign, they would have provided support and guidance to make it happen.

I say “…as big companies go” because ultimately, big companies simply can’t marshal resources, pivot ideas, and seize opportunities as quickly as startups can.

They are subject to their own processes and inertia. It’s key for their very survival.

9. Optionality

I’ve touched upon this in previous articles on consulting exit opportunities.

I believe preserving optionality is the most important thing that any young professional can do

McKinsey helped me do that incredibly well – after leaving, I could have pursued any number of professional and/or educational opportunities. And even years after leaving the company, I can leverage the name to re-open some of those doors if I choose to (for example, if for some unexplainable reason I became very interested in corporate strategy it wouldn’t be too hard to line up the right interviews).

Preserving optionality is important early in your career because you simply don’t know what’s to come. As confident as you are that you’ll be the next Steven Schwarzman or Jeffrey Immelt or Geoffrey Canada, these things can change rapidly – whether in your control or outside of it.

Leaving doors open is the smartest way to arm yourself.

Now you know why consulting’s so great :) And click here if you haven’t read part 1 on why I left.

Here are the companies which we have 2011 management consulting compensation data:
-A.T. Kearney
-Bain (post-MBA)
-BCG (undergraduate and post-MBA)
-Booz & Co (U.S. and Dubai)
-L.E.K. (post-MBA)
-McKinsey (undergraduate and post-MBA)
-Mercer (undergraduate and post-MBA; includes all areas – human capital, actuary)
-Oliver Wyman (Financial consulting)

This is for fulltime jobs that start in the Fall of 2011.

For A.T. Kearney…

Signing Bonus: $5,000
Base: $65,000
Performance Bonus: up to $13,000 (20% of base salary)
Profit Sharing: up to $6,500 (up to 10% of base depending on firm performance)
- – - – -
Total compensation: up to $89,500

Retirement & relocation: Firm matches 25% of your 401(k) contributions up to 6% of your pay. Relocation assistance depends on the distance between your office and your school residence. 0-50 miles = $3,000, 51-800 miles = $5,000, and 801+ miles = $10,000.

*Our source also noted that in their contract, A.T. Kearney explicitly states that the base salary will not be increased until January 2013, which is approximately 1.5 years after starting fulltime. Interesting!

Retirement Contribution: 10% of base + 5.7% of bonus

For Booz & Co in New York… (Dubai numbers in parenthesis; key difference is Dubai has no income taxes and a wonky housing market)

Signing Bonus: $10,000 (Dubai: $5,000)
Base: $60,000 (Dubai: $62,000)
Performance Bonus: up to $12,000/20% of base (Dubai: up to $9,300/15% of base)
Relocation/Housing Allowance: $5-15,000 (Dubai: $20,500 for housing + $5,000 for relocation)
- – - – -
Total compensation: up to $96,800

Retirement: $6,000/10% of base + up to $684/5.7% of bonus

For Boston Consulting Group…

Signing Bonus: $5,000
Base: $72,000
Performance Bonus: up to $16,200 (22.5% of base salary)
Profit Sharing Retirement Fund: up to $4,400 (expected to be 5% of sum of base salary and performance bonus)
- – - – -
Total compensation: up to $97,600

Retirement: BCG also contributes 15% of your base + bonus into your 401(k) retirement account, with $0 required contribution.

For Mercer…

Signing Bonus: DNK
Base: $60,000 based on 40 hour work week
Performance Bonus: no bonus, instead paid time and a half for all hours over $40 = approximately $45/hour
- – - – -
Total compensation: Variable

Retirement & relocation: DNK

For McKinsey…

Signing Bonus: $5,000
Base: $75,000
Housing: $5,000
Performance Bonus: none for BAs
- – - – -
Total compensation: $85,000

Retirement & relocation: 12% of total annual compensation

For Oliver Wyman (Financial Consulting)…

Signing Bonus: $10,000
Base: $75,000
Performance Bonus: up to $15,000 (20% of base salary) for your first year, and 40% of base salary for your second year (guaranteed)
- – - – -
Total compensation: $100,000

Retirement: Do not know about 401(k) contributions or retirement funds.

*Our source also shared that Bain’s numbers are very similar, a total of approximately $97K take-home in your first year, including the signing bonus

Some more niche roles…

• Accenture Systems Integration: $66,500 base + $1,500 relocation expenses
• Deloitte Consulting Human Capital: $70,000 base + $10,000 signing bonus
• Deloitte Consulting BTA (IT Consulting): $70,000 base + $10,000 signing bonus
• Milliman Actuarial Consulting: $60,000 + bonus of up to 25% of base

For Bain…

Signing Bonus: $20,000
Base: $125,000
Performance Bonus: up to $39,000 for your first year
- – - – -
Total compensation: $184,000

Retirement: 401(k) contribution up to $7,400

According to my Bain post-MBA source:

Deloitte’s offers were very similar, except they had MUCH higher signing bonuses ($40k + $10k for signing early + pay for 2nd year of b-school). This was for folks who interned there, so the latter two parts of the bonus might not apply otherwise.

That means Deloitte covered your second year of bschool tuition for signing – wow!

For BCG…

Signing Bonus: $20,000
Base: $135,000
Performance Bonus: up to $40,000 for your first year
Relocation: $2-5,000 depending on distance
- – - – -
Total compensation: at least $197,000

Retirement: up to $9,000/5% of bonus+salary is put into retirement fund, no contributions required

Our source also noted that project leaders at BCG (approximately 2-3 years out of bschool) were paid $185,000 base.

For L.E.K….

Signing Bonus: $25,000
Base: $135,000
Performance Bonus: up to $25,000 for your first year
Relocation: $5,000
- – - – -
Total compensation: at least $190,000

Retirement and profit sharing: up to $30,000 (not sure of split between 2)

For McKinsey…

Signing Bonus: $20,000
Base: $125,000
Performance Bonus: up to $40,000 for your first year
Relocation: $2-5,000 depending on distance
- – - – -
Total compensation: at least $187,000

Retirement: up to $19,000/12% of bonus+salary is put into retirement fund, no contributions required

Please note that BCG and McKinsey post-grad/MBA salaries are almost identical, despite McKinsey having a $10K lower base due to a $10K higher retirement contribution.

For Mercer…

Signing Bonus: DNK
Base: $85,000
Performance Bonus: up to $17,000/20% of base
- – - – -
Total compensation: at least $102,000 (does not include signing bonus)

Retirement & relocation: DNK

Some perspective

Compared to 2008 consulting salary levels, it’s about a 25-30% increase over 3 years…which is actually somewhat muted given the poor economy over the past few years.

I would love to share compensation data if you have it for other firms/seniority levels. I will directly update this post as they come in. Thanks in advance!

What do you guys think – is this fair compared to other careers and industries? It still lags banking pretty significantly…

This is the concluding part 2 of my series on consulting exit opportunities.

The previous post covered finance and entrepreneurship.

Graduate school (MBA, JD, masters & PhD)

Percentage: 25%

Many undergraduate consulting hires pursue graduate school after a few years. Often paid-in-full by their firms (with the agreement to return post-matriculation for several years), it affords a break from the intensity of daily consulting work and an opportunity to pause before moving on to “phase 2″ of their careers.

The majority pursue business school, with law school and Masters/PhD programs coming in 2nd and 3rd, respectively. Consulting can position an applicant well for the best universities – particularly for MBA programs. Some thoughts on business school and consulting can be found in my interview with Marquis.

Which consulting firms are best depends on your intended academic path. For business and law school, aim for the top strategy consultancies. It’s good to look at:

• Where consultants at your firm went to school – this is a good indicator of the paths available
• Alma maters of partners at your firm – a good indicator of where your firm will be known and influential

If you’re interested in Masters/PhD programs, look at companies that specialize in that particular topic if applicable. For instance, Cornerstone – with its economics research focus – is great for prospective Economics PhDs.

Corporate roles predominantly in Fortune 500

Percentage: 25%

Another consulting exit opportunity is a jump to Fortune 500 corporate roles.

Consulting firms are feeders to strategy groups at large Fortune 500s – from Pepsi to Siemens, from Citigroup to Target. These relationships are mutually beneficial, as Fortune 500 companies hire consultants to support their own strategy work.

Click here for reasons why companies hire management consultants

Outside of strategy, consultants are a good fit in roles requiring research, analytics, project coordination, and personnel management. Functions that fit the above criteria include business development, corporate development, select Mergers & Acquisitions, and operating roles.

Benefits of corporate roles include a lighter work day, a more stable work environment, and potential to build an operating skillset. Cons include unpredictable upward mobility, reduced pay and benefits, and less flexibility in choosing projects, managers, and colleagues.

Every management consulting firm is well-suited for this path, although the more prestigious firms provide more opportunities.

Nonprofit consulting

Percentage: 10%

Many consulting firms offer nonprofit consulting cases as a perk. Many consultants choose to pursue nonprofit consulting work fulltime, which comes in several formats:

• Independent nonprofit consulting firm (eg, Logistics Management Institute, Wellspring Consulting)
• Non-profit consulting firms closely affiliated with for-profit consultancies (eg, McKinsey’s Touch Foundation, Bain’s Bridgespan)
• Internal nonprofit fellowships – more common at the largest strategy consultancies
• Actual nonprofits with a track record of hiring consultants (eg, The Clinton Foundation)

The benefits of this career path are clear – eliminating poverty in sub-Saharan Africa is more exciting than increasing operational efficiency 7% at a Philippines call center. Non-profits are closely tied to public sector institutions, so this path can be an interim step to public policy and government roles.

Cons include reduced pay and benefits, long hours, and challenging environments.

If you’re interested in this path, target consulting firms that are known for nonprofit and pro-bono case work, either internally or through strategic partnerships.

There are independent nonprofit consulting firms that offer flex-work arrangements regardless of your background as long as you have a valuable skillset. This can be a great way to get your feet wet. Company names are escaping me now, but I’ll update when I remember

Public sector and government roles

Percentage: 5%

The least typical of consulting exit opportunities.

Many consultants pursue political careers – Bobby Jindal (ex-McKinsey) and Mitt Romney (ex-Bain) are 2 visible examples. Few consultants enter politics and government service directly.

Those that do gravitate towards diverse roles, from advising political candidates to direct political appointments (witness Nancy Killefer’s failed attempt to become Obama’s Chief Performance Officer) to campaign work. These roles are flexible, prize business skills, and provide upward mobility. Few become civil servants in the normal, bureaucratic-sense.

Benefits to this work are clear for those interested in pursuing government careers. Cons include reduced pay, longer hours, uncertain career paths, and less talented colleagues (I’m aware this is a generalization).

Consulting firms best suited for this career path do a lot of public sector consulting. Booz Allen is one obvious example. DFI Consulting is another.

That wraps up our tour of consulting exit options. They are more diverse than investment banking exit opportunities.

I’ve briefly discussed consulting exit options before.

This article is part 1 of 2 that will “deep dive” into the topic (with a precise estimate of the percentage pursuing each).

I considered bumming on a beach in Koh Samui when I left consulting, but for more ambitious folk, here are the main paths:

Private equity

Percentage: 12%

Mergers and Inquisitions briefly covers this topic in its private equity recruiting post. Consultants are well-suited for private equity jobs – but they need to pick their spots.

• Most consultants exit to middle-market PE firms that are operationally-focused on portfolio companies and leverage consulting skillsets well
• Most consultants exit to PE firms with a tradition of hiring consultants. Golden Gate Capital is one example. Others include Audax and Capstone (the “consulting arm” of KKR)
• Larger shops like Carlyle and TPG prefer consultants with corporate finance project work or prior banking experience (eg, a summer internship at Morgan Stanley)

What are the benefits of leaving consulting for private equity? PE offers better pay, great prestige, and an opportunity to work on industry-shaping deals.

If you want to work in PE and have the opportunity, take it now. It’s easier to enter the industry before business school than after

What are the best consulting firms to enter private equity? Target the big guys (McKBain Group) and those with a financial sector focus (eg, Oliver Wyman).

Hedge funds

Percentage: 7%

Like private equity recruiting, consultants can break into the hedge fund industry but opportunities are limited. Focus on funds where consulting skillsets are valued. For example, equity long-short and macroeconomic funds emphasize market research and operational due diligence in investments. Specialized funds (such as mezzanine debt) would not be a good fit.

What are the benefits of leaving consulting for a hedge fund? Like private equity, hedge funds offer better pay and industry-changing opportunities. This is another industry where entering before business school is easier than after.

Asset management and equity research

Percentage: 9%

Business consulting skillsets are a great fit for jobs in asset management and equity research. Work for the best consulting firms and target modeling-heavy projects.

With all consulting exit options into finance, your path is made easier by taking a finance job to begin with. Investment banking with prestigious M&A groups offers a better shot at strong private equity and hedge fund exits

Entrepreneurship

Percentage: 16%

Consulting provides a strong platform for entrepreneurs – you’re exposed to multiple industries, complex business problems, and a wide network of business-savvy people. I took this path upon leaving McKinsey.

There are 2 options:

• Start a company – this is common across tenures. In fact, Bain was started by a former BCG partner! A colleague of mine is CEO of GiveReal, if anyone wants to send me a drink
• Join a startup – consulting firms are full of entrepreneurial people, and usually have strong startup communities helpful for recruiting

That’s it for now. Expect the concluding part 2 on Consulting Exit Opportunities tomorrow (topics include graduate school, Fortune 500, and more).

Our Recruiting in a Down Market talks from last week covered a lot of useful material that I’d like to share with readers.

The key takeaways for lazy people are:

• Networking is everything – focus on a few quality channels and be proactive
• Spread your net wide – you can’t afford to be picky
• Have a Plan B but be careful that you don’t cut off future options

That said, here is an abbreviated version of our talks. Note that some of this content is from Mergers and Inquisitions.

We’re no longer in the boom years of 2004-2007

Consulting hiring has been deeply impacted. From firm-wide hiring freezes and layoffs (eg, Accenture) to reduced hiring at the Big 3, recruiting is not as easy as it used to be.

However, in the words of Jim Cramer – there’s always a bull market somewhere. Consulting firms focused on corporate restructuring are doing well in these times, and big firms such as Bain and BCG are building their expertise in these areas.

In addition, there are significant regional differences in hiring – but I’ll get to that below.

There are several things you can do to set yourself apart and break into consulting

The key here is to be proactive, rather than reactive. To get yourself in front of people, instead of waiting for them to recruit you. Even the strongest candidates with big brand names on their resumes and 3.9 GPAs aren’t guaranteed interviews, much less offers.

There are a few areas to help you standout in consulting recruiting:

1. Spread your net wide – consider all boutique consulting firms that recruit. After all, strategy consulting experience is much better than technology consulting if you want to break into MBB
2. Consider all geographies – large metropolitan markets like New York are always tough, but near impossible in these times. Look to international markets like Dubai and East Asia. If you can overcome language differences and don’t mind the travel, you stand a better chance
3. Consider adjacent jobs in corporate America and even entrepreneurship – particularly if you’re looking at summer internships

Finally, network, network, network. This is an area where few do well. I’m a believer in 80/20 – so look at your primary channels including:

• School alumni networks
• Family and friend networks – be open about what your goal is!
• Work networks

Network skillfully. See here for some more networking tips. Use the Law of Attraction to your advantage by being open about your goals to anyone and everyone.

I, like many of you, used to think networking was annoying. I didn’t do much of it. I thought it was fake and superficial. But it played a huge role in getting me to McKinsey. Don’t overlook it

Some companies have learned lessons from the last recession, but all of them are getting hit by the markets

Remember when the tech bubble burst? It was painful for companies, their employees, and new recruits. Offers were rescinded, people were fired, everything was a mess.

This time around, companies want to avoid those same mistakes. After all – who wants to recruit for a company that took away job offers and summarily fired people without warning?

Some companies have attempted to adopt hiring policies that look beyond this recession. They want to invest in people for the future, and not worry about cyclical drops in demand now that may leave them suffering from a staff shortage in 3 years.

But let’s face it. The vast majority of firms have cut hiring. BearingPoint even filed for bankruptcy protection.

You’ll need backup options.

Have a Plan B, C, and D…but be careful when pulling the trigger

Everyone has different passions – you may think this is the perfect time to go to Japan and teach English, or pickup surfing in Hawaii.

Be careful – too much time off, and you may never get back on the management consulting track if that’s your goal. It’s tough because no one knows when markets will recover – but if we learned anything from the last recession, we know that the pain won’t disappear immediately.

Business school is a bad idea without work experience. Consider a Master’s program at a top institution instead. It buys time, you learn something you’re interested in, and you get another chance at recruiting.

Anecdote: a friend of mine was unsuccessful recruiting for MBB at Stanford. She enrolled in a Yale master’s program, re-recruited, and received offers to all 3. Masters programs can be a great option, but don’t do it for the sake of recruiting alone

Lastly, consider long-term ramifications of your decisions. If you pursue marketing or accounting, it may be difficult to get back on the strategy consulting train. Entrepreneurship is another option – but unless you’re obscenely successful, you may need to go back to school if you want to work at Bain.

I encourage people to think about their 5-year plan. Does management and strategy consulting play a clear role? If not, start pursuing your longer-term dreams now. If it does, then follow my advice above, continue recruiting and networking, and you’ll get your chance. You can also contact me if you need more extensive help