Annual Management Consulting Rankings – 2010/2011
After a brutal recession, consulting hirings are starting to pick up again. BCG, McKinsey and Bain have all announced bumper hiring seasons across freshly minted MBA’s, analysts and experienced hires. That has left aspiring consultants scrambling for the rankings. What bothered us most was the anecdotal method that went into ranking consulting firms. Everyone praises McKinsey, but many seem to have very little understanding of what truly drives a great consulting firm. It’s not just the salary, client roster and credentials. Those things, although important, are an outcome of doing several other things consistently well over a long period.
Our ranking is unique in two ways. We went out and collected lots of facts to compile the rankings. We explain the sources and, if needed, you are welcome to replicate our analyses.. Second, we crucially distinguish between the health and performance of a consulting firm. We are the first ranking of any kind to do this. Performance is the current outcome of doing things correctly in the past. Healthy decisions are the things done today to keep up great performance in the future. Why is this important? Firms who do things to keep up their health, at the expense of performance, were not always punished in the rankings. On the flip-side, firms who aggressively discounted fees or did work loosely related to management consulting simply to meet revenue targets were punished in the ranking. Not distinguishing between performance and health would have led to us making the same mistakes as the rating agencies and commending good performance when the health of a business could be suffering. Any ranking worth its weight needs to look at both – performance and health. Like all rankings, there is subjectivity. However, many criteria are far more accurate than previous ranking and so are our data sources. We went straight to employees and clients. In many cases, we collected public data. We also shared our criteria.
In this new ranking by FirmsConsulting, McKinsey again came out on top from the 19 firms we ranked. It was followed by the new triumvirate of Bain, BCG and Roland Berger, who displaced the traditional fast-followers of Deloitte, Booz and Monitor Company. With the exception of Roland Berger, this was clearly an All-American show as no other foreign firm with the exception of OC&C finished in the top 5. Even so, the gap between the top 4 and the rest is substantial.
This FirmsConsulting ranking is based on a review of 33 criteria which, based on our own experience and discussions, distinguishes great firms. For example, we carefully examine whether or not a consulting firm is a true global partnership like BCG or a set of loose affiliations like PWC or Deloitte. We also look at whether a consulting firm licences its brand like Capgemini. We also assess if firms test all competencies during interviews or are swayed by fancy degrees into making nice offers on the spot. We even measured how long a firm takes to respond to candidates after an interview! Surprisingly, McKinsey was punished on this criterion as we have heard stories from around the world of delays from at least 15 separate offices: in some cases a delay of up to 8 days before candidates receive any feedback.
Veterans of management consulting will hardly be surprised to find McKinsey, Bain and BCG at the top. After all, they make up the famous MBB acronym littering countless bulletin boards. However, most rankings up to know have not really analysed these firms in any quantitative detail. They have simply presented surveys and then provided rankings to support pre-conceived ideas. Based on our ranking it is clear there is a difference between Bain and BCG. Clients certainly see the difference and actually will not pay Bain as much as BCG. McKinsey is seen on par with BCG but in the halls of government, McKinsey easily wins the day. Booz is also strong in government, but not likely to be called in when it really counts – especially for issues reported in the media. Roland Berger has until now never received much attention. It had always been seen as the regional player. Sort of like a LEK for Germany. That is certainly not what we are seeing from the executives we interviewed. Moreover, Roland Berger’s decision to remain private said much about the strength of its value system.
Despite the rise of emerging markets, we could not find a single major consulting firm originating from these regions. We found a handful of small players with less than 100 employees but none whom we could identify as a potential breakout player. Europe remains the next logical area, after the US, for producing leading consulting firms. Roland Berger, OC&C and LEK all speak to this. And for the first time ever, a non-London based player is challenging the US – Roland Berger. In Asia we were surprised to find no trans-national players. A fair number of ex-McKinsey partners have set up regional shops in Vietnam, China, Korea, India and Japan. Yet, none have managed to win work outside their borders. The same applies to regional players in Chile, Brazil, Mexico and South Africa. Australia was the exception where we found several regional players serving clients across South-East Asia. One outfit, Partners-in-Performance seemed to have their network from the icy offices of Vale Inco Sudbury to the depths of the mines in South Africa. Yet, they are far from being a global challenger to any of the established firms.
Coming out of the worst recession was particularly brutal for many firms. Many candidates described being wined and dined at far less prestigious restaurants in London, New York or even hot emerging markets like Jakarta. Hiring bonuses all but disappeared. That has now changed as candidates have been receiving bonuses of up to 20% of their salaries at BCG.
McKinsey, widely seen as the standard-bearer of consulting eminence, clearly sets the standard. The firm is rumoured to have increased knowledge management expenditure by 23% this year and is planning a new Asian Studies research centre out of Beijing. McKinsey’s formidable alumni network which reaches into government, commerce and academia grew far quicker than usual as several high profile alumni like Diana Farrell entered government. In fact, during the recession, 67% more McKinsey alumni took, reported, senior government positions versus the same two year period before the recession.
Dominic Barton, McKinsey’s new Managing Partner has not yet crystallised his focus for the firm. Given his roots in having built the Seoul office and his Canadian heritage, we can predict a custodianship with far less limelight than the likes of Rajat Gupta and a laser focus on Asia. Although, there are rumours that several powerful senior partners are advocating stronger focus on Eastern Europe as well. Surprisingly, despite the heritage of Marvin Bower, and his focus on ethics, McKinsey did suffer actainted image as an influential partner, Anil Kumar, was indicted for insider trading. The firm was quick to respond, but it is fair to say this caused more than the usual hand-wringing and appointment of PWC to conduct a risk audit.
Either way, clients are starting to buy again and very soon it’s going to be like 2004 all over again when consulting firms the world over were buying up talent to win work. The Middle East, which took the most ungraceful hit, seems to be back as well. Booz, E&Y, McKinsey, Bain, BCG, E&Y, Deloitte and PWC have all stepped up hiring. Have they all learnt from past mistakes? One definitely did not. Deloitte Dubai is purely an office focused on doing feasibility studies of hotels and other planned construction projects. Their increased hiring means they assume these projects are coming back. So much for diversification! Bain is now entering the South African market for the third time. Or is it the fourth time? Anyway, the bottom-line is that Bain sees an uptick in work and will jump in, only to jump out again when things look shaky.
“The ramp-up has definitely started. We are seeing more consulting partners reaching out to us with dinner invitations in the last month than we saw all of 2009. It’s going to be a bumper year.” So says a prominent SAB Miller member.
|1||McKinsey & Co.||100.0|
|3||Bain & Co.||90.5|
|4||Roland Berger Strategy Consultants||86.0|
|7||Booz & Company||70.0|
|13||Accenture Management Consulting||57.5|
|16||IBM Global Services||56.0|
(Criteria in bold signifies a high weighting)
|1||Is the firm international?||This means the firm can serve multinationals who are usually spread between countries and need consultants who can understand the local environment. If the firm is not international, it is unlikely to be very successful at serving multinationals. It is probably a niche firm.||Counted the number of multinational clients by reviewing firms websites and media references|
|2||Does it have multiple offices?||This means the firm has grown and understands the challenges of managing a global business. It probably is capable of working across cultures and views that as a strength.||Counted the location of a firms offices. Affiliate offices were scored almost zero and multiple offices in the same country and continent were scored less than those between continents.|
|3||Is it a single partnership?||This is one of the most important criteria. Single partnership firms can make tough decisions, ensure consistency and enforce quality. Where partnerships are legally separated, there is no way to enforce quality.||Confirmed with the firm|
|4||Does it have a strong and consistent value system?||The firms which are highly admired see their profits as an outcome of having strong values. Less prestigious firms crassly talk about growth and profits||Based on a survey of up to 50 current/former employees and an absolute mininum of 20 current/former employees|
|5||Is it willing to apply that value system at the loss of revenues?||Look for firms which have turned away work when it has gone against their values. Very, very few firms turn away work.||Based on a survey of up to 50 current/former employees and an absolute mininum of 20 current/former employees|
|6||Does the firm market itself too aggresively or underplays the challenges of consulting to recruit?||Less prestigious firms need to try harder to recruit quality candidates. They market the firm too heavily and underplay the tough expectations.||Based on a survey of a minimum of 10 interview candidates per a firm. In the case of the smaller firms, we only interviewed 3 candidates.|
|7||Is quality between offices/regions the same?||This is a very important criterion. If quality is not uniform, it implies the core partnership is unwilling or unable to enforce high standards.||Based on a survey of up to 50 current/former employees and an absolute mininum of 20 current/former employees|
|8||Is the firm dominated by one or two regions/offices?||A firm of equals never has one or two dominant offices. Dominant offices change over time as trends change and global issues change. If one office dominates and you are not a member of that office, it will impact your career development.|
|9||Does it have a consistent and distinguishable brand?||Inconsistency in the branding or poor branding is a problem. It speaks to poor quality control and a lack of understanding of how to position a premium business.||Based a survey of 50 clients who have bought consulting services. 32 were American clients, 6 Canadian, 6 UK and the rest in Asia.|
|10||Are its stars home-grown or recruited?||Join a firm which knows how to produce stars. A firm which mostly recruits stars does not know how to produce them and therefore cannot develop you.|
|11||Are its senior people home-grown or recruited?||Consulting values are passed from senior partner to senior partner. They usually have extensive tenure. Recent senior hires are unlikely to preserve the values since they do not necessarily have them.|
|12||When recruited do you join an office, region or the entire firm?||This is important. If a firm is truly global, then you may have joined the Paris office but can seamlessly work anywhere. If you cannot, it is warning sign about the strength of the partnership.|
|13||Are performance metrics heavily skewed towards sales and profits?||No matter what a firm says, if it rewards you purely on sales and profits, then it has the wrong values. You need to make sure that partners are measured for the value they bring to clients. Not on profits.|
|14||Is it large and/or is it proud of its size?||There are just not enough smart people in the world to staff a very large management consulting firm. If a firm is touting its 20,000+ workforce, that should raise serious warning bells about the type of work it is doing.||Based on a review of recruiting and advertising literature.|
|15||Does it have an up-or-out policy?||Not everyone can make it, even if they come from Harvard, and that’s okay. However, the firm must be willing to let them go. It must have, and must enforce, an out-or-out policy. Otherwise, it is willing to keep people purely for their résumé and not their performance.|
|16||Are competencies tested in the interviews via case studies?||The best firms do not place value in where you worked before. They place value in your ability to solve business problems. They test this ability. The best firms will have strenuous tests both written and oral in the form of math and case questions.||Based on a survey of a minimum of 10 interview candidates per a firm. In the case of the smaller firms, we only interviewed 3 candidates.|
|17||Is the quality and approach consistent between offices and regions?||The quality must be the same across all offices and regions. All consultants must be trained in the same way and to the same standards. Without this, staffing international teams will be impossible since it is unclear what to expect.|
|18||Is it easy to get access to knowledge, experts and required IP?||Consulting value is largely underpinned by the ability to find, understand and extract the key nuggets of information from earlier work. A powerful and easily accessible knowledge managementsystem is essential.|
|19||Is the firm actively investing in key developing markets?||This is another important criterion. If a firm decides to enter a market, it must be willing to invest for the long-term to build a sustainable base. Markets like Brazil, Dubai,Bucharest, Moscow, Kiev, Santiago and Buenos Aires are important for long-term growth. Firms chasing short-term profits will eschew these investments.||Based on a survey of up to 50 current/former employees and an absolute mininum of 20 current/former employees and a review of efforts to open offices in emerging markets|
|20||Is the firm noted for producing Fortune 1000 executives?||True management consulting firms are training grounds for future executives. If you struggle to find a large number of alumni who are executives at Fortune 1000 firms, then this is not a management consulting firm.||Based on a review of the board of director biographies of the 1000 largest listed companies.|
|21||Does the firm produce recognized intellectual property?||An influential firm produces ideas and analyses which are highly sought after. If you cannot name the major thinkers, research platforms and appearances in the influential media, then this firm is not élite.||Based a survey of 50 clients who have bought consulting services. 32 were American clients, 6 Canadian, 6 UK and the rest in Asia.|
|22||Does the firm appear in the Harvard Business Review?||The HBR is the most influential business publication. Unless a firm appears here, it is not an élite consulting firm.||Based on a count of the number of articles, per a firm, appearing between 2005 and December 2010.|
|23||Does the firm have a defined problem solving approach?||If you can join the firm and it also allows you to apply your own methods to solve a business problem; that is a major warning sign. No amount of education is enough to equip you solve complex business problems. This needs to be taught. A firm not doing this is taking a huge risk.||Based on a survey of up to 50 current/former employees and an absolute mininum of 20 current/former employees and a review of efforts to open offices in emerging markets|
|24||Does the firm define itself by who it is not?||Firms who can only articulate their value when mentioning a competitor usually do not have a distinctive value. They can only tell you who they are not. Be wary of firms who say “There is only McKinsey and us in the market” This shows an enormous amount of immaturity. Also worry about firms who say “we play in the space between McKinsey and Accenture.”||Based on a survey of up to 50 current/former employees and an absolute mininum of 20 current/former employees and a review of efforts to open offices in emerging markets|
|25||Does it hire from the best schools and universities?||The best firms hire from Harvard, Wharton, Sloan, Booth, Stanford, Columbia, Yale, Oxford, Ivey etc|
|26||Does it pay a premium salary?||If a firm wants you, but is unwilling to pay you a premium salary, then it is not commanding premium rates and its work is not valued. Walk away.|
|27||Does it consistently command premiums fees in the market?||The market decides who the best is. If the rates are low, then it is an average firm. Think of a firm’s billing rate as its stock price.|
|28||Are its ideas, work and samples heavily trafficked on the internet?||No matter what anyone says, if a firm is producing influential work, its ideas are usually, illicitly, trafficked on the internet. The one exception to this rule is likely to be Bain & Company who keeps an iron grip on documents.||Based on a Google Search of Key Consulting Document key words and phrases.|
|29||Does the firm produce recognized research?||If a firm needs to explain its publications to you then it is a problem. Does the McKinsey Quarterly, Strategy + Business or BCG Perspectives need an introduction? No.||Based a survey of 50 clients who have bought consulting services. 32 were American clients, 6 Canadian, 6 UK and the rest in Asia.|
|30||Is the advertised research/work produced by the same unit/team?||This is an important point and widely overlooked. Some firms hire smart people to sit in a nice office and produce research. Avoid these firms. You want to join a firm where it trains everyone to do great work and eventually write great articles. You want to join a firm which can train YOU to do this.||Based on a review of all published research by a firm between January 2010 and November 2010|
|31||Is the firm quoted in prominent publications like Forbes, WSJ, and NYT etc?||Leading business publications work with the best firms.||Based on a review of said publications between January 2010 and November 2010|
|32||Does the firm advertise?||The best firms do not advertise since they are unwilling to make promises to the market.||Based on a review of major business publications during 2010|
|33||Were they professional in the interview process?||If they took weeks to get back to you, were rude or forgot about the interview, then run for the hills. The best firms manage all parts of their reputation well, including interviews.||Based on a survey of a minimum of 10 interview candidates per a firm. In the case of the smaller firms, we only interviewed 3 candidates.|
- All-time, Top 10 most popular articles on McKinsey, BCG, Bain, Deloitte, Monitor, Booz, AT Kearney, Oliver Wyman & Roland Berger (firmsconsulting.com)
- Why consulting case interviews are only half the battle (firmsconsulting.com)
- Oliver Wyman vs. Roland Berger vs. Marakon (firmsconsulting.com)
- How Gemini Consulting, the one-time McKinsey killer, shot itself in the foot (firmsconsulting.com)
- “I have a chance to work with ex-McKinsey consultants setting up an internal consulting unit at Bank of America – should I take it?” Be careful what you wish for. (firmsconsulting.com)
- Is McKinsey still top dog? (blogs.freshminds.co.uk)