Today’s post departs from its usual focus on recruiting to take a 5,000 mile view of the consulting industry and its purpose.

Consultants can have a negative reputation – charging $2 million for 12 week’s work
that results in stacks of PowerPoint slides, all of which are archived into a dusty closet (digital or otherwise) soon after McKBain Group leaves the premises.

When consultants’ recommendations are implemented, employees often argue that the actions are not beneficial and don’t reflect day-to-day business realities.

That’s one side of the story.

Below, I’ll paint a more positive (and personally held) view on the 6 reasons why companies hire consultants. Through it, you’ll have a better view on business consulting and the consulting industry as a potential career.

1) Staff augmentation – the least impactful role that consultants can play and self-explanatory. Companies often have short to medium-term staffing needs (in the case of government work, this can extend for several years) due to a variety of factors (eg, recent downsizings, sudden expansion). Consultants in this situation “plug a hole” for the company by filling the role of full-time employees. While expensive, it’s common work for operational consultancies (eg, Deloitte and Accenture) and, to a lesser extent, for government consultancies (eg, Booz Allen)

Further reading: Interview with a Booz Allen consultant

2) External change force aka “political cover”. It can be hard for companies to do what’s right (sacred cows and all that jazz) – particularly when it comes to job layoffs, salary and benefit changes/reduction, major operational and strategic shifts. Hiring consultants can be a way to reach the desired conclusions with sufficient political cover in case certain parties are unhappy (eg, a displeased Board or disgruntled employees) or things go wrong (“Despite the significant cost uptick, we implemented BCG’s recommendations to the letter – I’m not sure what we could have done better”)

3) Best practices across industries and functions (eg, organization, supply chain) – consultants have the rare privilege of:

• Serving multiple clients in the same sector (eg, Beverages, Enterprise Software)
• Serving multiple clients facing similar problems across different sectors (eg, Latin American expansion, Southeast Asia outsourcing)

This enables them to recognize common attributes of effective solutions, applying lessons learned in applicable situations. This knowledge is partially institutionalized at each consulting firm (in the form of white papers, databases, post-project reviews, etc); however, much of the information exists in the collective heads of partners and to a lesser extent, senior consultants.

A former McKinsey partner put it best when he called business consultants “masters at reinventing the wheel”

4) Analytical horsepower

A corollary to staff augmentation, companies may need help solving issues and executing strategies where their skillsets and knowledge are insufficient. Consultants can be of great value given their training and capabilities. A note here on big vs boutique: big consultancies have a breadth of resources that they can bring to bear on problems (eg, data mining and analytics, primary market research). Boutiques may have specialized expertise on specific dimensions (eg, retail pricing best practices, financial industry benchmarks).

Further reading: Global consulting firms versus boutiques

5) Fresh perspective

Companies often need a fresh set of eyes – you’d be amazed at the amount of value consultants can add based on the most mundane observations and insights. Critics contend that this is an example of consultants selling “glorified common sense”, but for front-line client employees, it can be easy to fall into daily routines without a critical eye towards measurement, analysis, and improvement.

6) Training and skillset augmentation

I’d argue that every consulting project – particularly ones with heavy client interaction – incorporates client training as a major ingredient. The best recommendations are worthless if clients can’t implement and maintain suggested changes. Thus, a large part of what consultants do is educate client employees on necessary knowledge, skills, and mindsets.

The cover letter is a required component of any job application – but often the biggest headache for applicants. In this post, I discuss the top 10 tips for consulting cover letters (from content to structure to syntax) that will avoid embarrassing mistakes and strengthen your candidacy.

For the complete guide to consulting cover letters, click here!

1) Your opening paragraph should include:

• The position you’re applying for
• Qualities that make you a good fit (eg, leadership experience, analytical thinking skills)
• Optional: very brief highlights on work experience

2) Your body paragraphs (no more than 2) should include:

• Work highlights if not in the opening paragraph
• A section to describe one experience in detail (work, student group, etc). Focus on the impact you had and the skills you learned that would make you a good consultant. This should be your “star” experience and the one you want every reader to remember
• A section or paragraph on your interest in the job, your career goals, the research you’ve done to learn more about the firm

3) The closing paragraph should be brief and restate why you’d make a good consultant. Include your contact information here as well:

Please do not hesitate to contact me with further questions. I can be reached at (123) 456-7890 or via email at name@gmail.com.

4) Avoid an elaborate discussion of your educational background. A sentence about your school and major should suffice. It’s OK to expand this section if you have a very high GPA, nationally-recognized scholarships and fellowships, etc

5) It’s OK to drop names of current firm employees – but integrate them well.

Here’s a poor example:

I had a conversation with Sarah Foster, a current case team leader at Bain, at the on-campus presentation. I learned a lot from her about consulting and gained a deeper appreciation for the company.

Why is this a poor example? It doesn’t make a point. The interaction was generic, and it feels like a setup to name-drop.

Here’s a good example:

Bain is not only a prestigious firm, but one that really invests in the development of its consultants. My conversations with Sarah Foster, a current case team leader, reinforced my belief that this separates Bain from the other firms, and is my central reason for applying.

Why is this a good example? The name-dropping occurs in the context of a broader point – that Bain focuses on the development of its people.

6) Use anecdotes in consulting cover letters. Instead of saying “my past experiences have allowed me to become a strong leader of teams”, say this:

My projects at Oracle – where I led groups of up to 5 analysts on implementation projects – have made me a strong team leader and partner for my colleagues

7) Include current contact information at the top. Don’t assume it’s unnecessary because the information is on your resume.

8) Never use more than one page and use PDF format when possible. In the words of Consultant99 (a kind commenter):

Resumes and CLs should be submitted in PDF whenever allowed. Every resume screen finds us holding a half-dozen resumes where the font isn’t found, the margins are messed-up, it’s set for A4 rather than 8.5 x 11, or any of a million other problems that wreck havoc on your careful formatting. Worst of all, “track changes” might be turned on! Putting it in PDF avoids all these problems.

9) If it doesn’t fit with size 12 font and 1″ margins, it’s too long. This is not an iron-clad rule but a guiding principle. Cover letters with size 10 font, 0.5″ margins, and minute paragraph spacing hurt the reader’s eyes and hurt your candidacy.

10) Make sure the consulting cover letter is addressed to the right firm and person. Back to my initial thought – the risk is greater of messing up than standing out, and this is mistake number one. Label and save each cover letter by firm, and double-check to ensure the firm name, address, and position applied for (eg, Associate vs Senior Consultant) is correct.

The last thing you want to happen is for an Accenture recruiter or consultant open your cover letter and see that it’s addressed to Deloitte HR. At best, you’re incompetent. At worst, your application may not see the light of day

In previous posts, I’ve discussed interviews, resumes, and the general recruiting process. Today, I want to touch upon one of the most important but often overlooked aspects of the interview process – the case study.

What are case studies?

A critical component of the interview process. Case studies are descriptions of real or hypothetical business problems. Candidates are expected to understand, analyze, and recommend solutions to these problems.

Why do consulting firms use case studies?

Because doing well in cases requires the same skills that consultants use:

• Understanding of basic business concepts (eg, revenues and costs, suppliers and customers, market structure, etc)
• Analytical, structured-thinking
• Business-oriented creativity and insight
• Communication and presentation

A case study mirrors the work that consultants do day-to-day

What should I do to prepare myself for case studies?

• Practice as much as possible – with friends, colleagues, contacts within consulting firms. Even practice in front of a mirror to assess your communication style, body language, etc
• Review case study-specific resources – from the Vault Guides to Cosentino’s Case in Point. Don’t go overboard (in particular, Cosentino’s guide is helpful but not a must-have)
• Review general business problems – get your hands on as many case studies as possible. Most consulting firms post a few online, such as McKinsey here. The more exposure you have, the more familiar each question will seem. Even when you’re reading the Wall Street Journal, Fortune, etc – put yourself into the CEO’s shoes at every opportunity

Further reading: 2 smartest case study techniques

I released a guide on case studies and consulting interview questions. Click here to check it out!

I’m not that good at case studies. Can I get an offer by conquering the “fit questions” and my resume?

No. Your performance on case studies accounts for at least 50% (and usually more) of your “score” in determining offers. It is the most underprepared area for candidates, but something the best applicants excel at. If you want an offer, you’ll practice, practice, practice.

I’ve heard that some companies/interviewers don’t ask standard case studies. Instead, they ask questions like “How many golf balls would fit into a 747?” or “How would you rescue the auto industry today?”

That will happen, particularly in later rounds and with more senior interviewers. They may not be prepared to run you through a standard case, or they may want to see how you handle the unexpected. One question I faced (not at McKinsey but another firm) was the following:

Can you explain why Starbucks actively promotes the construction of locations that are so close to each other that they cannibalize sales?

If this happens, don’t panic. The interviewer is still looking for the same things – how crisp and logical is your thinking; how well do you communicate those thoughts; and how much do you understand of the basic business underpinnings.

Further reading: 10 steps to solving any sizing question

This is an important question for prospective applicants (in particular, undergrad/MBA students) looking for summer internships and fulltime jobs alike.

The decision was easier for me than for most people. The cons of investment banking – the long hours, the repetitive and unengaging nature of the work, the lack of non-finance exit opportunities – mattered far more to me than a 6-figure salary. I seriously considered sales & trading (in fact, I spent a summer at Credit Suisse First Boston in NY), and was tempted to continue in that line of work post-graduation.

Instead of defining the basic characteristics of each job (there are plenty of resources out there for that, including the Vault and Wetfeet Guides), I will address a laundry list of defining differences between the two professions.

Let me caveat by saying THESE ARE NOT YOUR ONLY OPTIONS. People get carried away into thinking that’s all there is.

#1 SALARY

This is the biggest superficial difference. That’s not to imply that salary doesn’t matter. Banking salaries average 50-100% higher than consulting salaries, with the difference increasingly significant as your seniority increases. Consulting compensates with perks that banking does not offer – from better travel allowances to more generous health and retirement packages.

Consultants always like to say this:

“I know investment bankers make more money. But from a cashflow perspective, it’s exactly the same!”

This simply means that consultants and bankers make comparable base salaries, and at the end of the year, bankers are awarded a bonus which can comprise more than 50% of their total annual compensation. Cashflow or not, the extra money is substantial and a defining driver of why many people do investment banking. This is also a difficult issue for consulting firms with respect to employee retention. In my time at McKinsey, easily half the people who left the firm went into the financial world (from hedge funds to PE), and salary was undoubtedly a major factor in the decision.

My advice is this – if after considering all 5 factors I’ve listed here, you still think the pay difference (for 1st yr analysts, averaging between $30-60K/year) would mean a substantial difference in your personal and professional job satisfaction, choose banking.

Further reading: Consulting salaries from analyst to partner

#2 LIFESTYLE

The key differences here are:

-Hours. Bankers work brutal hours, no surprise. They can average 14-16 hours/day but it can get FAR WORSE.

My roommates in New York (both investment bankers at Goldman Sachs) would sometimes go several weeks before we’d even exchange a word. Which meant not only were they getting in after I went to sleep (around 2am), but going back to the office before I woke up (around 7am).

Your second year as an investment banker gets better – in the 10-14 hours/day range but also with unpredictably tough periods.

Consultants average 12 hours/day, with the typical variations depending on client, team goals, etc

-Travel. Bankers do some for roadshows, due diligence, etc but spend 90% of their time in one office until you’re partner-level (this is investment banking; you can expect more travel in private equity and investment management). Consultants – depending on firm – travel anywhere from 25-75% of their time. At the Big 3 (Bain, Boston Consulting Group, McKinsey), you can expect travel 50-75% of the time. I’ve heard of boutiques

-Relationship with coworkers, managers, and firm. This is less discussed but equally important. Consulting firms have a very collegial atmosphere, where the focus is on getting the work done but also ensuring your professional success. This attitude permeates all interactions. Managers rarely yell, coworkers try to help each other out whenever possible, and companies are organized to provide consultants support with training, expertise, etc. Finally, networking is important at consulting firms, and social events are focused on helping consultants build contacts and relationships throughout the firm.

Investment banks, on the other hand, have a more competitive, hierarchical setup. You can expect more tense relationships with your bosses, you’ll probably be yelled at from time to time for mistakes, and coworkers are much less willing to help each other out (they’ve got enough on their plates, and your success means theres more competition for the biggest bonuses). In addition, you’ll have limited exposure across the company to other groups, departments, etc – less ability to network across the company.

Further reading: Consulting travel; Day in the life of a consultant

#3 SKILL DEVELOPMENT

Call me biased, but I received the best years of business training possible in my time at McKinsey. Thorough and at times intense exposure to textbook business principles and practices. In addition, the project team model leads to mentorship opportunities with managers, partners, and coworkers. Finally, you have constant client interaction which develops “client skills” – from managing client teams to running meetings to learning how to navigate different corporate environments.

That being said, here’s a quick list of what you can expect to learn in both fields:

By “hard skills”, I mostly mean software (ie Microsoft Office Suite), analytics (ie financial valuation). By “soft skills”, I mean the interpersonal, qualitative interactions that you have with coworkers, the broader firm, clients, etc

CONSULTING

Hard skills:
1) Microsoft Powerpoint – you will (and have to) become a master at this, and will eventually have the ability to produce presentations quickly, concisely, and meaningfully
2) Microsoft Excel – less exposure than investment banking. Still, “modeling” is a meaningful component of a consultant’s work, and something every consultant is expected to have significant exposure to. Note -firmsodeling” done in case work may not be directly comparable to the financial modeling more common at investment banks
3) Business knowledge – typically broad exposure across different topics like strategy, operations, organization and several areas where you’ll have expertise. This expertise may be as broad as “operations turnaround” and as specific as “benchmarking for insurance companies”.

Soft skills:
1) Client interaction (explained above)
2) Heavy team interaction
3) Presentation skills – this is a cornerstone of consulting work. After all, findings don’t mean anything if you can’t convince the client to believe in and adopt them
4) Project/workflow planning and execution – this is subtle but important. Much of the time at investment banks, you are given incremental work – eg, add these updated numbers to the model, bind these presentations, insert a graph on chart 11. Consulting is focused on you OWNING a piece of the entire project, setting your own deliverables and timeline, and executing against that framework. This helps you develop the ability to be “standalone” in consulting lingo.

INVESTMENT BANKING

Hard skills:
1) Microsoft Excel – clearly you will become a master at this, and is a mandatory for success. You’ll know the ins-and-outs, every keyboard shortcut known to man (and then some), and so forth
2) Microsoft Powerpoint – much less exposure here depending on the focus of your work (for instance, more in Corporate Finance, less in Mergers & Acquisitions). Very little experience in building a presentation from scratch.
3) Financial valuation – self-explanatory. Differs based on group/focus, but at the very least you’ll understand financial statements inside and out, and have strong knowledge of how companies are financed

Soft skills:
1) Work endurance – this is the upside to those 100+ hour weeks, which is the ability to work incredibly long and incredibly hard. Basically, every job you take post investment banking will feel somewhat like a vacation. It’s a great trait to have
2) Seeing deals get done – investment bankers have, at times, better access to the leading business leaders of the day. As a junior banker, you may not have direct interaction but will be exposed through countless meetings, conference calls, etc to these people and see how deals are done and groundbreaking changes in business emerge day-to-day.

Further reading: 5 big mistakes that will get you fired

The last 2 points in this post are shorter, because I plan to write separate entries on each of them in the future

#4 NETWORKING

Less discussed but important. Consultants move on to a vast array of fields – from industry to academia, government to non-profit. Investment bankers do so less – most continue within the financial world. Your professional network and future career opportunities will be heavily influenced by your colleagues and your firm alumni.

In addition – my perspective is that consulting firms (similar to point #2) facilitate more interactions between alumni and current employees as well as future networking between alumni than investment banks. However, bulge-bracket investment banks have a much larger alumni base, and it certainly isn’t impossible for you to build strong connections provided you are proactive and innovative enough.

Further reading: How to get a consulting job in a tough economy; Networking 101

#5 EXIT OPPORTUNITIES

Corollary to point #4, this is influenced by your firm’s alumni and also the following:

-the different recruiters/headhunters that reach out to you
-the different paths your “hiring class” takes and the knowledge and opportunities you share with each other
-the relationships you’ve built with more senior colleagues and the doors they can open for you

When it comes down to it, the conclusion is similar: if you want maximum career flexibility, consulting provides that in spades. If you want maximum career flexibility WITHIN finance (and corporate financial roles), investment banking provides that.

Interested in sales & trading? Click here for the major differences between consulting and trading.

It seems like everyone these days is a consultant – strategy consultants, business consultants, technology consultants, IT consultants, marketing consultants, the list goes on and on.

It’s a catch-all title for someone who gets paid to give their advice on particular subjects to companies

In this post, I’ll attempt to answer 3 big questions:

-Who are consultants?
-McKinsey, Accenture, Monitor…what’s the difference between different consulting firms?
-What do consultants actually do?

Who are consultants?

Business consultants as people are generally:

1) Knowledgeable about the topic at hand
2) Well-connected within the industry
3) Have a reputation and/or brand (based on experience, publications, etc)
4) Effective communicators

Companies often face questions that they are incapable of answering or too busy to properly address. This is where consultants come in, armed with the above 4 traits, to help address precisely those questions.

Further reading: Why companies hire management consultants

McKinsey, Accenture, Monitor…what’s the difference between different consulting firms?

The consulting industry can be segmented accordingly:

1) Management consulting firms (eg McKinsey, Bain)
2) One-stop-shop and technology-focused consulting firms (eg Accenture, Deloitte)
3) Niche/boutique consulting firms (eg Mercer HR, Kurt Salmon)
4) Independent consultants (self explanatory)

My categorization isn’t perfect – for instance, boutique consulting shops provide management advice; one-stop-shops often focus on IT/technology and less on strategy.

In addition – many corporations these days have in-house consultings groups (often populated by ex-McKinsey-Bain-BCG-types).

And much of what the venture capital industry does when working with portfolio companies is similar to what Monitor would do for their Fortune 500 clients.

Further reading: Interviews with a McKinsey and Bain consultant

Finally, what do consultants do?

The answer is that it depends. If you’re an analyst/associate (the focus of Management Consulted), your job is to do the grunt work necessary to answer client questions.

You will work with the following pieces of software:

1) Microsoft Powerpoint
2) Microsoft Excel
3) Email…lots and lots of email

You will be provided the following pieces of hardware:

1) Blackberry
2) Durable laptop

Your day will typically include the following (with a more detailed post on this later):

1) Client meetings
2) Team (internal) meetings
3) Data gathering and analysis
4) Slide creation
5) Conference calls

With all the above, your job is to come up with the most comprehensive, data-driven insights and answers that your clients don’t already know. These will form the basis for recommendations that your team will provide, and from which your clients will (ideally) make changes to their business to result in one or more of the following:

1) Increased revenue
2) Reduced costs
3) Clear strategic direction
4) Gameplan for hiring and firing of employees
5) And so forth