Thank you to Aura for sponsoring this video! See if your personal identifiable info has leaked online. Try 14 days for free: https://aura.com/howmoneyworks Sign up for my newsletter https://compoundeddaily.com 👈 ----- Edited By: Andrew Gonzales Music Courtesy of: Epidemic Sound Select Footage Courtesy of: Getty Images For sponsorship inquiries, please contact sponsors@worksmedia.group All materials in these videos are for educational purposes only and fall within the guidelines of fair use. No copyright infringement intended. This video does not provide investment or financial advice of any kind. #consulting #management #business ----- Running a company is hard and no matter how big and successful a business becomes and no matter how many entrepreneur tags the founder puts in their twitter bio, there will always be challenges that are unexpected and outside of the capabilities of anybody within the firm. Consultants are supposed to be skilled experts in the narrow field of business that they consult in. For example, if a business wants to introduce a new online payment processing system but nobody within the company has any experience setting such a system up a smart manager could employ the help of a consulting firm. If the business hires this firm the consultants will get everything set up and train someone in the company to keep the system operating after they are finished. This can often be cheaper with much less downtime then trying to train or hire an employee to roll out big projects like this example of a new payment system. But specialized and experienced consultants like these are not the same group that are causing problems, those are the management consultants. The big three management consulting firms, Bain, Boston Consulting and McKinsey and company make billions of dollars every year by telling corporate executives and government leaders how to do their own jobs. Consultants can be a very valuable resource if they are giving advice in an area that they have lots of experience in or better yet something that they do over and over again for different businesses employing their services, but senior management challenges are always unique and these prestigious firms might not know nearly as much as they lead people to believe. Management consulting not only costs businesses and governments billions of dollars every year in direct fees it could be costing us all billions more in poor business performance and unnecessary layoffs. Management consultants will be given access to the company’s operations so that they can observe how the business works, talk to employees and sometimes even customers. They will use their findings from this investigation to recommend areas of improvement or devise a strategy to achieve goals as easily or cheaply as possible. Unlike most other consultants the final product they deliver to a business will not be a completed project but it will instead be a serious of recommendations for managers in the company to follow, usually presented in the form of a slide deck with lots of beautiful looking graphs filled with the data they collected during their investigation. Regular non-management consultants typically move into those roles after a long career doing what they will be giving advice on. Senior managers in companies are a lot more rare than typical roles and by the time they have years of experience as a C-Suite executive they are generally looking more towards retirement than starting the next phase of their career as a consultant. The big three firms hire almost exclusively out of university through graduate programs that top students from prestigious colleges fight very hard to get accepted into. These young graduates will become analysts at these firms and do a bulk of the grunt work on consulting projects under the supervision of a managing director or partner. The managing directors and partners are usually promoted from within as the big three management consulting firms have an up or out staffing policy. This means that if after three years junior analysts are not promoted, they are asked to leave. Despite this obvious flaw management consulting firms continue this practice because it has become ingrained in their corporate culture. The graduates are also much cheaper to hire. Management consulting is based on billable hours, so analysts are expected to put in long weeks. Average salaries at McKinsey for first year analysts range from 90-$110,000 which is a lot but is not that competitive when the expectation is 80 hour weeks with lots of stress and very little job security. It’s also lower what those same graduates could earn if they went into investment banking, private equity or fintech. The reason they take these consulting jobs over more lucrative alternatives is because of the exit opportunities.