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Consulting Industry

What is consulting?

When people think of consultants, they tend to visualize professionally suited employees, degrees from the best schools, high pay-checks and fancy travel stories. Some people also call consulting a ‘talk-job’ – you go to the clients, you talk about what the ideal world scenario would be for a particular project, product or market, and your billable hours are sorted.

Consulting though has many aspects – it’s not just about smooth talking.

In this post, we will explore 3 questions that many students have about consulting:

  1. What does consulting mean?
  2. What are the different types of consultants?
  3. What value do consultants provide?

1. What does ‘consulting’ mean?

Three years ago, I first Googled the word ‘consulting’. This is what the Oxford Dictionary showed me:

It was as simple as that, consultants are people who are ‘engaged in the business of giving expert advice to people working in a professional or technical field’. As this definition makes clear, ‘consulting’ is a very broad term, and so it can be used to describe a business giving expert advice in almost any field. For instance, financial consultants provide advice to organizations on financial matters. This might include advice on asset management, tax structuring, or capital structuring to reduce financing costs and sources of risk (e.g. liquidity risk, interest rate risk, default risk).

2. What are the different types of consultants?

There are three main types of business consultants.

2.1 Management Consultants: Management consultants, in practice also known as business consultants or organizational advisors, are consultants who focus on all sorts of organizational concerns from strategy to a variety of elements within management. In the methodology upheld by Kennedy as well as Consultancy.org, Management Consulting is a collective term used for all services that fall under Strategy Consulting, Operations Consulting and HR Consulting. For that reason, management consultants form the vast majority in the advisory branch – more than half of all advisors can be defined as a management consultant.

  • Strategy Consultants: Within management consulting, Strategy Consultants operate at the highest level of the consultancy market, focusing on strategic topics like corporate and organizational strategy, economic policy, government policy and functional strategy. For this reason, strategy consultants generally carry out work assigned by top managers, like CxOs, directors and senior managers. Seeing that the nature of strategy consulting differs from the other more implementation and operational driven areas, strategy consultants generally have a different profile than their peers. Their focus lies more on quantitative/analytics skills, and their job description revolves more around giving advice than overseeing implementation.
  • Operations Consultants: Operations consultants are consultants who help clients improve the performance of their operations. Consultancy activities in this segment vary from advisory services to hands-on implementation support, for both primary functions (e.g. Sales, Marketing, Production) and secondary functions (e.g. Finance, HR, Supply Chain, ICT, Legal). Operations Consultants form the largest segment within the advisory branch, and the majority of consultants are active within one of the many underlying operating areas. Seeing as operations is often associated with the strategy and technology side of a company, active operations consultants regularly work side by side with experts from these domains.
  • Human Resource Consultants: HR consultants help clients with human capital questions within their organizations and with improving the performance of the HR department. Chief topics central to the job description of HR consultants are, among others, organizational changes, change management, terms of employment, learning & development, talent management and retirement. HR consultants may also be brought in by organizations to help transform the business culture or transform the HR department. HR consulting, together with strategy consulting, forms the smallest segment of the management consultancy industry, and the number of consultants active in this domain is, therefore, lower than those in other parts of the industry.

2.2 Financial Advisory Consultants: Consultants who operate in the Financial Advisory segment generally work on questions that address financial capabilities, and, in many cases, also the analytical capabilities within an organization. As a result, the profiles of consultants active in this segments can differ greatly, from M&A and corporate finance advisors to risk management, tax, restructuring or real estate consultants. Consultants specialized in forensic research and litigation support also fall under the Financial Advisory segment. The majority of financial consultants work for the large combined accounting and consulting firms, or else for niche advisory offices.

2.3 IT Consultants: Technology consultants, focus on helping clients with the development and application of Information Technology (IT) within their organization. IT consultants focus on transition projects in the ICT-landscape, contrary to regular IT-employees who work on day-to-day IT operations. The majority of ICT-consultants work on implementation projects, for instance, extensive ERP systems applications, where their role may vary from project management to process management or system integration. Within IT consulting, the fastest growing markets are digital, AI, data analytics (also known as data science), cyber security and IT forensics.

3. What value do consultants provide?

Consultants provide advice to those who are willing to pay for it. However, why would anyone want to pay many thousands of dollars per day to get advice from third party consultants who have less knowledge and experience of a company and its employees than the people who currently run it?

If a company wants to attain a specific goal or to restructure, reinvent, or transform its business then it will often wish to seek the advice and support of a consulting firm.

The company may have a good understanding of its current business, and where it would like to end up. However, there may still be unanswered questions:

  • What are the paths available to arrive at the desired end state?
  • What are the potential risks and challenges that may be involved along the way?
  • Do we have the knowledge, skills, resources, and experience required to get things done quickly and effectively?
  • A fresh perspective from a third party could help to see the problem more clearly.

For example, if a company currently has 2 offices in the American market and wants to scale up its business, how should it best go about this?  How many offices should it aim to open? Within what timeframe? Which cities should it prioritize?  By hiring a consulting firm, the business will be able to more quickly develop a reliable roadmap for selecting the most attractive cities based on certain metrics: e.g. market size, market growth rate, cost of raw materials, supply of talent, and strength of the existing competition.

Conclusion

This post provided a brief overview of consulting, and attempted to answer three questions that students often have about the industry. What is consulting? What are the main types of consulting? And, why do clients hire them?

I hope you found this blog post interesting. Please stay tuned for more posts from me on this thread, which will aim to explore the life of a consultant – the glamour and the hard work.

Till then keep reading www.spencertom.com.

Shivani Shankar previously worked as a Cyber Security Consultant at PwC India. She is pursuing her master’s degree from Columbia University in Management of Science and Engineering, and is the President of the Columbia Consulting Club leading a team of ~40 members. Alongside her school coursework, she is working with Louis Vuitton as a Consultant. Shivani plans to work with a Consulting firm in the US from January ’21.

Image: Pexels

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