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In reply to Amit from December 20 2003 on 23:45
"Nobody can be so amusingly arrogant as a young man who has just discovered an old idea and thinks it is his own." Sydney J. Harris, American journalist
בתגובה ל: ארכיון 1: שאל את ארינגו: תהליך הקבלה #805In reply to עומר from September 14 2003
check it out – http://www.fortune.com/fortune/articles/0,15114,450751,00.html
AT&T used to love hiring management consultants. At any given time there were as many as 300 people from the country's most elite and revered strategy firms–McKinsey & Co., the Boston Consulting Group, and Bain & Co.–running around its offices. You name it, consultants were doing it: restructuring the organization, formulating acquisition plans, and generally helping steer the corporation's broad strategic vision. Teams of people would decamp in the telecom giant's Basking Ridge, N.J., headquarters and division offices in New York City and practically live there, occupying their own offices and staying for what seemed like forever. Billings were enormous: AT&T's annual fees to consultants sometimes approached $1 billion a year.
McKinsey, the nation's top strategy consulting firm, was the biggest beneficiary of this largesse. Every year it celebrated its good fortune by sending the 40 or so McKinseyites who worked on AT&T projects, plus their families, on an all-expenses-paid ski trip to Stratton, Vt.
Today, alas, there are no more trips to the slopes. That's because the former consulting junkie seems to have kicked the habit. Beginning around 1998, AT&T "eliminated most of what we used to use consultants for," says spokesperson Sue Fleming. Now the telecom company either is doing most of the work in-house or isn't doing it at all. AT&T is hardly alone. Two years ago Ford Motor Co. greatly reduced consultant spending by consolidating projects under a centralized gatekeeper: All consultants must be approved by COO Nick Scheele. Investment banks Lehman Brothers and Credit Suisse First Boston have gone even further, imposing companywide bans against management consultants. Explains one Lehman executive: "We think we're pretty good at cutting people, so we don't need help with that. And there's no point in hiring a consultant to tell us how to grow in a market that's not growing."
All over corporate America, the long-running love affair between big companies and traditional management consultants has come to an abrupt end. We're not talking about IT consultants like IBM and Accenture, which focus mainly on integrating technology. The ones in particular trouble are the pure-play strategy guys, dominated by McKinsey, Bain, and BCG. Two years into an economic slump, executives are questioning why they've spent the past ten years pouring so much money into consulting coffers and what exactly those huge outlays of cash have produced. Execs are also realizing that consultants from the so-called prestigious firms just might not be as brilliant as they're cracked up to be. The rationale for consultants' monstrous fees (up to $5,000 a day per partner and $1,500 for rank-and-file consultants, many fresh out of business school) used to be that, well, they're really smart. But you have to wonder about the wisdom of the advice McKinsey gave to its longtime client Enron. Or the value of the analysis it did for Kmart and Global Crossing, two other companies that paid the firm for strategic insights and subsequently slid into bankruptcy. (McKinsey declined to talk to FORTUNE for this story.)
At the formerly highflying strategy firms, the suffering is palpable. The length of an average strategy-consulting engagement has dropped from between six and 18 months in the mid-1990s to just 90 days today, according to Tom Rodenhauser, a longtime industry analyst who runs Consulting Information Services in Keene, N.H. Getting revenue numbers from these famously secretive firms is difficult. But Consultants News in Peterborough, N.H., estimates that total revenue at McKinsey was down 12% over the past two years, to $3 billion. BCG was down 13%, to $960 million; Bain down 5%, to $761 million (see chart).
The Big Three are eager to promote the impression that they are handling all this just fine, thank you very much. But privately, many senior consulting partners confide that it is the worst slump they've ever had to deal with. Other recessions, such as those in the early '80s and early '90s, prompted many observers to sound the death knell for strategy consulting. And each time the economy picked up, consulting revenues came roaring back. But dozens of experts FORTUNE talked to say that things really are different this time. "You can say, 'Well, consulting is an up-and-down business,' but I think one of the fundamental changes is that clients aren't going to become dumb again," says analyst Rodenhauser. "FORTUNE 500 companies that spent hundreds of millions of dollars on consulting are saying, 'No more.'" Michael Eckstut, a former partner at strategy firm Booz Allen Hamilton, says flatly, "The pure- strategy, big-picture stuff is over."
The concept of management consulting was pioneered by McKinsey, which was founded in 1926 by an accounting professor from Northwestern University. The upstart firm established itself by helping companies navigate their way out of the Depression and, later, gear up for wartime production. Decades later, former General Electric executive Bruce Henderson saw huge opportunity in the consulting business. In 1963 he started a competing firm, BCG, with innovative theories about business growth and the belief that consultants should be brutally honest with clients. Ten years later BCG partner William Bain formed Bain with the intention of working intimately with only one client in each industry–a concept that served nicely until the firm started getting big and needed new clients.
All three firms thrived by doing basically the same thing: delivering lofty thinking and giant, buzzword-filled reports to top execs. More important, perhaps, they convinced clients that the consultants were smarter and more objective than the companies themselves. Because many companies' competitors were using consultants, top execs worried they'd fall behind if they didn't use them too. And as time went by the work consultants did for a client often became open-ended, with one engagement bleeding conveniently into another. For most of the middle to late '90s, revenues grew by as much as 20% a year. Headcount increased too. Leader McKinsey more than doubled its size during the past eight years, to 7,000 consultants worldwide. Bain and BCG's ranks ballooned to 1,800 and 2,600, respectively.
Big consulting firms work a lot like big law firms: Partners make the big bucks–usually several million a year–and throngs of cocky 27-year-olds do most of the day-to-day work. (That high partner pay is one reason that, even now, McKinsey, Bain, and BCG regularly appear at the top of the list of places MBAs most want to work.) And a large cast of characters is typically involved on each project. "When you hire [McKinsey], you're going to get a senior director, a senior principal, a junior principal, a senior engagement manager, an engagement manager, and a project manager. And that's before you even get to the consultants that are doing the real work," says Jon Katzenbach, a former McKinsey partner who left the firm in 1999 to form Katzenbach Partners. "It's a relatively high-priced, inflexible model."
That's a model that today's clients emphatically don't want. They want small, nimble teams of seasoned people who have years of knowledge and experience. And they want practical, highly targeted information and insights that can do one of two things: make them money or save them money. Terry Laughlin, head of corporate strategy and development at FleetBoston and the guy in charge of hiring consultants for the bank, puts it this way: "We don't say, 'Come in for six or nine months and tell us what Fleet is all about and what our strategy should be.' When we hire consultants, it's for one or two months, and we tell them exactly what we want done– like maybe size a market we're thinking of entering or do an analysis of certain competitors."
Clients are also demanding discounts, once unthinkable. "Every pricing scheme is in play right now," says Dan Lewis, co-head of Booz Allen, which does a lot of government work. Says Rodenhauser: "What firms will do is throw in free services or do a market study for free, where normally they'd charge $200,000 or $300,000 for it."
That's when companies hire consultants at all. Many large companies have spent the past few years beefing up in-house strategy teams and are using them instead. Fleet concluded that the practice of constantly hiring consultants prevented it from developing the related skills, knowledge, and expertise internally. The bank now has outside consultants work alongside teams of Fleet people. "This way we can pick up a lot of the knowledge and start to do it on our own," explains Laughlin. Or they simply raid the consulting firms for talent. At AOL Time Warner (the parent of FORTUNE's publisher), which is spending 75% less on consulting than it did five years ago, 12 of the 19 people in the company's strategy group are recently hired ex-consultants from McKinsey, Bain, and BCG. American Express, which spends a fraction of what it used to on consulting, has picked up at least five people from McKinsey in the past year.
"What's the future of consulting firms, given that there is much less to differentiate us from our clients now that clients have that talent within?" worries one current McKinsey consultant. That question is one that McKinsey, BCG, and Bain will have to grapple with over the next few years as they try to prove to clients that they're still relevant–and not, in the words of one West Coast CEO, a bunch of "beefed-up MBAs with big egos who charge a lot to tell executives what they should already know."
For people who make a living telling others how to fix their businesses, the Big Three have been remarkably slow and tentative in taking action to fix theirs. McKinsey's recently elected managing director, Ian Davis, a 52-year-old Brit who officially assumes the job in July, hasn't made his plans public. BCG's new president, 50-year-old German Hans-Paul Burkner, also declined to talk to FORTUNE. But George Stalk, a senior partner who works out of BCG's Toronto office, says that the firm is reducing headcount and the ratio of consultants to partners in order to offer clients the greater access to senior people they're demanding. In early 2002, BCG shed 30% of its staff in North and South America. Stalk says that the consultant-partner ratio in the U.S. is now six to one, the lowest it's been in at least a decade. (Bain and McKinsey have also cut staff over the past two years, but they won't talk about numbers.)
As for Bain, its worldwide managing director, John Donahoe, a 17- year company veteran who lives in Silicon Valley and works out of the San Francisco office, says that it has started hiring partners from outside its ranks–a major departure. To satisfy clients' demands for seasoned pros, over the past 18 months the firm has brought on 20 new partners, some poached from McKinsey and BCG. Yet at the same time Donahoe defends the practice of importing boatloads of MBAs and sending "case teams" of the young consultants to work with clients. He argues that their number-crunching and spreadsheet skills provide clients with fresh data and insights. "Rather than say we know the answer on day one because we've done it five times before, we're focused on developing customized strategies for our clients," says Donahoe.
But the Big Three seem to be doing little to counter another threat: the large technology consulting firms like Accenture, IBM Business Innovation Services, and EDS. Those firms have traditionally helped companies install and integrate complex IT systems, but now they want a piece of the strategy pie. As technology becomes closely intertwined with the overall business objectives of a company, an increasingly big piece of the consulting market is within their reach. In 2000, IT services constituted 57% of the U.S. consulting market, according to Consulting Information Services. By next year, it's projected to be 70%. How much of a threat do these firms pose? Well, check out the deal Accenture signed last year with AT&T. The company that has trimmed McKinsey, Bain, and BCG from its budget will be paying Accenture $2.6 billion over five years to "transform AT&T's consumer long-distance sales and customer-care operation."
Donahoe says he's not worried, because Bain is in a much better position to deliver advice to clients about technology than Accenture or IBM: "Clients are looking for a trusted advisor who can be completely objective. We think that clients are going to be a little suspicious of an outsourcing provider who says, 'Outsource everything.'" Michael May, Accenture's strategy practice leader, counters that Bain's objectivity is worthless without a deep knowledge of technology–something he says the Big Three don't have.
None of this is to suggest that McKinsey, Bain, or BCG are going out of business. The firms still house enormous talent and a wealth of knowledge about how successful businesses operate. But their future will look very different. Many people believe that they are going to get a lot smaller. Their partners may splinter off into several smaller boutique firms. Or they may merge with an IT outfit to gain tech expertise and access to new markets.
One thing's for certain, though. There will be no more lavish ski trips anytime soon.
בתגובה ל: ארכיון 1: ???Any Israeli Applicants #694In reply to boazr98 from September 01 2003
Go for BABSON – it's the #1 MBA program for entrepreneurship. The 2-year program is unique and highly rigorous, the faculty is top-notch and the brand name is quite strong. Plus, they have a special track (EIT) for MBAs who start new ventures during the program. The problem is that they take 0-1 Israelis every year out of 20-30 applying to the 2-year program. Check it out – http://www3.babson.edu/Newsroom/factsandfigures.cfm
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