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Management consultants are all over the place. You do not simply find them in McKinsey, Bain, BCG, Roland Berger, Booz and so on. The rise in the use of management consultants throughout the 1990’s and their rising fees led to some clients trying to replicate consulting skills.
The banks have been particularly guilty of this. They also never seem to learn. Every three years or so another banking executive, in the same bank, thinks he can set up an internal consulting unit which will work. Despite years of failure, he thinks it can be done correctly this time. It’s a predictable pattern; like death and taxes. Every bank we have met is doing this, trying to do this or exploring the idea. If I tried to name them all I would need a few pages. Nonetheless your private, retail, corporate, merchant or investment bank is also planning this. The thinking is almost always the same:
- Hire ex-McKinsey/Bain/BCG/Monitor/Booz managers.
- Hire a team of “managers”to run and control assignments.
- Hire senior consultants and analysts to do the work.
- Save money by not hiring management consultants.
- The idea that a few smart people can find ideas for improvement and opportunities for growth is a supposed no-brainer.
Each week we get several queries from readers asking about joining these internal consulting teams at banks. The reader reasons that since the team is led by ex-BCG partners and managers then the it would be the same as joining a consulting firm. The reader is trying desperately to justify their wish to take the opportunity. And why would they not? Given how hard it is to get into McKinsey surely the idea of working for an internal consulting unit staffed with consulting alumni must be the second best option.
There are some major and critical differences between working for an internal consulting unit at a bank versus joining an élite management consulting firm. If you really want to join an internal consulting firm, then that is fine. Just do not justify it on the basis that it is the same as joining a top management consulting firm. It is not. Here are the critical reasons why:
- In a consulting firm you will be carefully taught a rigorous problem solving approach which you can apply to any situation. This flexibility is one of the values of management consultants. They can work in any situation, at any time, anywhere in the world and at a moments notice. In a bank, you will be working on very similar issues. Therefore it is unlikely you will learn the ability to apply the problem solving approach across issues and industries. In a perverse case, you will acquire industry knowledge and rely on this knowledge than applying rigorous problem solving. If you see how much effort goes into testing the case interview capabilities at the top firms, you will realize just how important problem solving really is.
- When you work in a bank, you will be encouraged to bond with your peers, colleagues in other divisions and basically make friends. Given that close bonding and the fact that recommendations need to be publicly debated for them to have any impact, how likely is it that you will produce analyses calling for a colleagues department to be right-sized. What about an analyses pointing out that the leader of the largest and most important business division is actually underperforming? Do you have the backbone to do this? Are you willing to put your career on the line given that fact that power lies in the operating divisions? Unfortunately, when you work in internal consulting units at banks, the existing power structure forces you to put out politically correct recommendations. You have not choice. If you put out correct material which challenges an important person, it is sidelined. You can choose to continue being sidelined or play the game and progress. Offering lukewarm recommendations to get ahead is not management consulting.
- Speaking about power structures; in any bank anywhere in the world, the power and influence lies with the operating units and the operating leaders. It is a badge of honour, a sign of recognition to be awarded the chance to run an operating unit. In fact, you can Google this, read about the careers of Jamie Dimon and Mike Carpenter. Dimon was a brilliant HBS graduate who led Sam Weill’s strategy and planning. Dimon did everything in his power, according to his own biography, to get into the operating units and lead a profit centre. In his words, “planning was half of the game”. Carpenter was a star BCG partner who was recruited by Jack Welch. He ran Kidder Peabody and eventually went to Citigroup. There he was “exiled” into strategy planning when his performance dipped.Sir Deryck Maughan the former head of Salomon Brothers experienced the same issues. When his performance dropped he was asked to move into strategy planning. The bottom line (no pun intended) is that strategy units at banks are seen as killing fields for under-performing executives. It’s hard to admit this but it is true. The exception to this rule is Goldman Sachs. Of course, they do not staff the unit with ex-consultants and the unit works on organisational issues. Assuming you are not going to Goldman Sachs’ internal consulting unit, why would you want to work in a part of the business with such a bad reputation and absolutely no influence?
- Consultants from even the top firms are given a really tough time when they work at banks. What makes you think you will fare any better? It will be much worse by a factor of 10 to 50! Your advice will be ignored, analyses openly ridiculed and questioned. It can become debilitating. This would not happen to you if you were a BCG case-team assigned to JP Morgan. You would get respect even if the employees resented you.
- The internal consulting units inevitably respond to these internal organizational issues in two ways.
- Despite their moniker of being an internal strategy unit they end up picking up fairly mundane work. They focus on conducting surveys, and, especially, undertaking business-process-rengineering work. There is nothing wrong with BPR work, but even here, they struggle to get any traction for the reasons listed above.
- They also become quant jockeys. They put out fancy analyses which makes them feel all warm inside but which is never ever used. A management consultants job is to give the correct recommendations AND make an impact at a client. Consultants are sometimes unfairly mocked for producing reports which sit on a clients desk, I would argue that dishonour belongs to internal consulting teams at banks.
- Whether you like it or not, you must realise that in a bank, to rise you must run a business. Please make sure you understand this distinction. Consulting firms are designed to promote and reward thinkers. That is how you make partner and eventually senior partner. In the internal consulting unit at a bank, your reward for doing great work is to have your entry into the operating units fast-tracked. Understand that for a minute. No matter how well you do in the internal consulting unit, you will still need to very much prove yourself in the operating side. At least if you came to Bank of America from BCG as a manager you would have that incredible brand on your résumé and respect it confers.
- Banks do not reward smart ideas. A banks currency is its share price, net profits and risk profile. If a bank produces this then it is a success. Those who help the bank produce these things are rewarded and recognized. Smart strategy guys are not rewarded unless they meaningly and directly contribute to the bottom-line. How many guys who are just smart but have no operating control can actually pull this off? Not many. Consulting firms on the other hand build value via ideas, publications and influence. Can you see the mismatch? Your unit will march to a different beat.
- About 70% of McKinsey, Bain and BCG employees are managed out of the firm. That means they are asked to leave since the firm did not think they would make partner. In laymen terms, they are no good enough. So when you meet an alumnus of these firms you have to ask yourself the following:
- Were they managed out?
- They may be a McKinsey alumnus, but how long where they actually there?
Do not be afraid to ask these questions. Its your career on the line. Can you learn anything from someone who was managed out? What can anyone teach you who spent just 12 or 18 months at a consulting firm? If they shot to partner that is a different story. The bottom line is to be wary or working with internal consulting units stocked with alumni of the top firms. Quality is an issue.
- This point comes at the end but it probably the most important. People who served at the junior levels of consulting think true management consulting is all about analyses. They are wrong. Unless they made case manager or associate principal then they have likely never learned how to take the pieces of information from analyses and construct recommendations. This is a critical point. Knowing how to break down an issue with analyses is only part of the way in an engagement. The other part is to bring it all together to create the recommendations. Only partner level consultants can do this. Junior employees are always analyses junkies. You can read more this here at the end of the post. My point is that you can only be exposed to the full collection of required skills at a consulting firm. Moreover, you need to learn the consulting value system. It is vague but without it, learning how to size a market means little. Learning the culture and value system of management consulting takes time to understand.
So if you get an offer to join the internal consulting team at a bank because it is led by “ex-McKinsey managers” think very carefully about what you are getting into. I can assure you it will not teach you to be a management consultant or expose you to even 10% of the true experience. If anything, you will learn the wrong skills and never gain the correct training.
If you do not get into McKinsey, Bain or BCG then do not subject yourself to an internal consulting unit. It will not help your chances. Rather wait and apply again.
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