Consulting: Everybody's Doing It, Should You?

Management consultants solve problems. They are the hired guns brought in to assess the business operations of an organization looking for ways to improve efficiency and cut costs. They then bring these solutions to management - usually in PowerPoint form. Corporate managers, always sniffing around for new ways to unlock shareholder value, use consultants to improve the way a company does business.

Read on to learn about management consulting, what the job entails and how consulting might not be the shortcut to the executive suite that many assume it is. (For an overview of careers available in the world of business, see Finding Your Niche in the Financial Industry.)

Consultants may be employed either internally within an organization, or externally through the offerings of a professional services firm.

• External consultants must have a diverse set of skills. They never know what company they could be working for next, so the deeper their range of experience, the better. Many of the large, recognized consulting firms provide best-in-class training to include methodologies, analytical techniques, change agent values, and presentation skills that give the consultant the critical problem-solving skills and leadership traits necessary for upward career movement.
• Internal consultants are more inclined to develop deep and expert knowledge of their particular industry, and have more intimate knowledge and insight into how a particular company runs. They also have a historical perspective on the business, allowing them to quickly identify and cut through the internal politics often associated with organizational change.

A change agent has a passion for improving an organization. They sniff out overly bureaucratic or inefficient areas of the business and then recommend a new process (often accompanied by an updated flow chart). They then sell the organization on this new way of doing business. Often, they are skilled in overcoming initial resistance to change, as well as implementing the new process. (To learn about another type of consulting - investment consulting - read The Gatekeepers: Consultants Hold the Key.)

Many of the larger management-consulting firms have "benchmark practices" - these methods, which are often proprietary, are seen as the best way of executing a process. Determining and implementing these new methods is how consultants earn their keep. (To learn about some of the professional designations that can help set a consultant apart from the crowd, read The Alphabet Soup of Designations.)

Whether internal or external, consultants must bring a fresh set of eyes to the assessment of a company's processes. For external consultants, their experience working in different fields means they understand how many organizations do business, including competitors. For internal consultants, it is their in-depth understanding of the industry and the particular organization's history, that allows them to bring new solutions to the table.

Projects may involve virtually any area of the business, from procurement to human resources to finance or plant operations. The list of projects consultants tackle can be quite exhaustive. Examples include simplifying an unusually complex procurement process, improving customer satisfaction, decreasing waste, eliminating redundant tasks (and jobs), reducing risk by requiring additional layers of oversight, or digitizing a manual process through the implementation of IT systems. 

Compensation structures include hourly charges, a percentage of savings, revenue or equity value increase participation, a guarantee of future engagements or services, or a combination of several of these structures.

It is important to note that consulting solutions work well for the routine, repetitive and redundant tasks, but they are not meant to be applied toward creative endeavors like advertising, research and development and product design. Improving a company requires business processes to be aligned to high-level strategic objectives (such as faster ordering cycle times, lower scrap, higher profit margins), and the various tasks that comprise a single process should be coordinated and executed in such a way as to produce less costly and more predictable outcomes.

Management consultants are expected to improve operations and optimize results in a given project area based on predetermined metrics and scope.

Consulting used to be the fast track to the boardroom, but this may no longer be the case. Professionals who wish for a well-rounded set of skills in business should stay in consulting for no more than a few years if they hope to evolve into a top-flight CEO or operations manager. The reasoning behind this is that many, if not all, of the tools and approaches of consulting are too science-driven - flow charts, decision trees and standard persuasion approaches. Consulting is full of standardized processes and mechanics, yet most people agree that leadership can't be honed through repetitive training alone - it also involves art and intangibles.

Similarly, if the consultant undertakes many projects that are strictly operations driven, he or she may not be exposed to valuation and other financial-statement-related analyses. This can leave consultants lacking when compared to investment bankers and private equity professionals. The same lack of diversity can pop up in more "arts driven" critical areas of the company such as sales and marketing, mergers and acquisitions (M&A), recruiting, management and strategy.

Additionally, while strategy consulting has historically been a popular breeding ground for future CEOs, working too long in this field may detract from more hands-on leadership roles like building a successful track record of leading operations, interfacing with customers or leading research and development (R&D) initiatives.

Aspiring or current consultants should assess their long-term professional goals. Management consulting allows you to hone skills in improving a company's strategy and operations in a variety of settings. Leadership skills will be sharpened, allowing you to effect positive change through persuasion and insight. Consultants can become experts in a few focused areas, or aim to accumulate other types of skill sets found in other parts of the business, such as valuation and operations management.

To gain additional business skills - and contend for higher-up leadership roles - management consultants should explore areas of the business that are out of their comfort zone. Flow charts and PowerPoint presentations are nice, but areas such as M&A, financial planning, R&D, marketing and operations will balance out a budding CEO's value-driven repertoire.

For more tips on jumping into the executive suite, see 6 Steps to Successfully Switching Financial Careers.