6 reasons why Companies spend $2 million to hire Management Consultants

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, we’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, Strategy&)

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, and 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

We’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.


Not sure if consulting is the right career choice for you? Take our tried and tested Consulting Roadmap on your journey of discovery and find out if management consulting is the right fit for you!


17 Responses to “6 reasons why Companies spend $2 million to hire Management Consultants”

  1. eric

    I think House of business consult is the best consultancy in management and marketing service that will get you strategic business plan for your company growth and their charge is affordable and they can let you see significant profit within weeks.

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  4. valakos

    consultancy is a load of crap that employs a significant number of airheads

  5. tristan the great

    You can support that with empirical evidence of course. right?

  6. valakos

    ask Elon Musk what he thinks of management consultants

  7. tristan the great

    I’m guessing less than he thinks of government subsidies?

  8. valakos

    Management consulting is a form of socialism to give retaards and morons that could not cut it as doctors, engineers, programmers etc a job and place in society

  9. tristan the great

    hmmm a they didn’t post your other comment. Oh well, at any rate,
    1) retard only had one a, not two
    2) None of those professions that you mention, doctor, lawyer, engineer or programmer teach management skills to their practitioners
    3) As such, many medical and legal educational tracks offer an MBA (management degree) as an optional addition to their curriculums, or encourage their practitioners to earn one.
    However, based upon the tone or tenor of your comment, I would guess that you were either downsized as a result of a consultant’s recommendation, or you feel somehow slighted that your employer hired consultants, rather than going with your sage advice, or you are a failed management consultant.
    Either way, you represent yourself as a fool.

  10. valakos

    I run my own company – we don’t hire MBA’s. As far as the spelling was
    concerned, I added the extra a to get past the censor. Here’s a few
    interesting articles about how useless MBA’s are “Actually, 40 Years Of
    Data Show The MBA Effectively Does Nothing — It Has No Impact”Business insider (link removed) some interesting quotes “Aaron Patzer, founder of Mint, expressed the sentiment well when he said, “When valuing a startup, add $500k for every engineer, and
    $250k for every MBA.” My friend Peter Thiel once warned a young
    entrepreneur: “Never ever hire an MBA; they will ruin your company.””. I
    live by these mantras – in highly technical fields, MBA’s are useless

  11. tristan the great

    Perhaps, and industry views, while anecdotal, do provide insights into attitudes, which matter quite a bit.

    Having said that, your article did not actually provide any data, which the title implied, nor did it provide any actual examples.

    It was simply an opinion piece touting itself as a thought leader, and that is bad writing.

    But at any rate, what ever. One mans trash is another mans treasure.

  12. tristan the great

    Wow, this is such a well crafted and very subtle distortion of the value of an MBA. In doing so you have created quite the straw man.
    An MBA is not meant to be a substitute for a hard science or other professional degree, it is meant to round it out. Engineers in the finance, accounting, equity or marketing fields are equally worthless. But you miscast the MBA into your straw man and then you attack the degree.
    Furthermore, is a doctor/lawyer/engineer with an MBA any less valuable to a firm that one without? Are the only worth a net of $250,000 in a start up?
    Finally, in the end, there is a whole world that exists outside of your small, small, small little piece. Your niche may be specialized enough that your product or service may offset your tunnel vision and inability general, all around unprofessional demeanor, but there are other fields where everyone is not as blessed.

  13. valakos

    there are plenty of investment banks that hire mathematicians and financial engineers as well as some very advanced computer programmers to write algorithms that automate trading – in fact a fair chunk of JP Morgan, UBS, Credit Suisse and various other investment banks revenue comes from automated trading that is very complex and mathematically grounded. An MBA does not equip you to understand these complexities. Machine Learning is another hot area in finance – the mathematics involved is mind boggling. Look MBA’s have their place in fields where people are not too bright – running factories, producing food, retail etc

  14. tristan the great

    Those firms also hire lots of MBA holders and management consultants.

  15. valakos

    And those MBA’s do not generate the same revenue that a person who writes an advanced trading algorithm does – its pure and simple

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