Consulting firm

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A consulting firm or simply consultancy is a professional service firm that provides expertise and specialised labour for a fee, through the use of consultants. Consulting firms may have one employee or thousands; they may consult in a broad range of domains, for example, management, engineering, and so on.

Contents

Management consultants, in particular, typically work with company executives and provide them with generalists and industry-specific specialists, known as subject-matter experts, usually trained in management or in business schools. The deliverable of a management consultant is usually recommendations for achieving a company objective, leading to a company project.

Many consulting firms complement the recommendations with implementation support, either by the consultants or by technicians and other experts.

Consulting services are part of the professional services and account for several hundred billion dollars in annual revenues. Between 2010 and 2015, the 10 largest consulting firms alone made 170 billion dollars growth revenue and the average annual growth rate is around 4%.

According to The Economist , the industry’s most important firms are the "Great eight" consulting firms which consist of Bain, BCG, McKinsey, Deloitte, EY, KPMG, PwC and Accenture. [1]

Segments

The segmentation of advisory services varies widely across organizations and countries. Categorization is unclear, in part because of the upheavals that have occurred in this industry in recent years. [2]

One approach is to separate services into five broad service delivery families, considering the managers they are targeting:

Models of business

A consulting firm's model of business may be compared to staffing, wherein the objective is to lower labour costs for clients for an intended result, or relative to an intended result or output, in order to charge for a profit margin for the consulting firm. Clients are looking to procure or purchase external help and assistance. Consulting firms sustain their revenues from a labour economic point of view as a method for distributing labour, where certain positions, roles or fields of expertise within the labour market find it more suitable for contract work, as contrasted to in-house employment, for a few conceivable reasons:

Aside from the economic arguments stated above, consulting also acts as a corporate services model:

consequently acting as a source of profit for clients, consulting firms and society as proffered. [11] [12] [13] The consulting business model can be seen as a result of the knowledge economy, and as a subset of the knowledge industry. [14] [15] Today it is not rare for consulting firms to offer what may be considered turnkey solutions to clients. [16] [17] Knowledge transfer is also a prevalent sales argument for consulting services. [18]

Outsourcing

It is common practice for consulting firms to be involved in the sale of outsourcing services as well. Similarly, outsourcing firms may offer consulting services as a way to help integrate their services with the client. Many consulting firms offer several service packages as part of their business portfolio. While consulting services and outsourcing services are compatible, issues arise if the clients are not aware of the differences between the two. From an ethical standpoint, it is important that clients are aware of what type or types of services they are procuring, as consulting services are meant to be a complementary service to the client firm, whereas outsourcing effectively aims to replace parts of the client firm that are imperative to their operational ability. [19] [20]

Types

There are different types of consulting firms serving different sectors. They mainly fall under the following fields:

Some consulting firms also serve niche sectors, such as:

Successful consulting firm cases

Mexico

In 2013, there was a randomized trial in Mexico where 432 small and medium enterprises were allowed access to management consulting services for one year. [22] As a result of this trial, there were many positive impacts. Such positive impacts include: increase in entrepreneurial spirit, increases in employment and higher wages for employees. Even after 5 years after the trial, positive impacts are still active. [23] These results were achieved by advertising a consulting program to 432 enterprises and recorded data on the positive effects.

Money laundering in consulting firms

A consulting firm is a suitable instrument for money laundering. [24] Illegally obtained money is laundered by the employment of consulting companies. The reason consulting firms are so effective at laundering money is because consulting services are immaterial, therefore, pricing is non-transparent.

Another reason consulting firms are effective at laundering money is because sometimes consultants regularly leverage their clients into charging higher prices. [25] When a client of the consulting firm is satisfied, the consultant can charge higher fees through more leverage while setting prices through the contracting prices. Therefore, when auditors inspect financial statements provided by the consulting firm, the consulting firm can state that a certain consulting project costed an 'x' amount of money and auditors are unable to detect fraud, thus allowing money laundering to occur.

Impact of consulting firms in emerging economies

Negative impacts

The impact of consulting firms on local businesses in emerging economies do not always have positive effects. [26] One reason for this is that firms in emerging economies suffer from the inferiority of their technologies and innovation capabilities, thus, although they have access to consulting firms, they cannot make the most of the advice given. Advice given by consulting firms to clients may not be used efficiently as clients firms in emerging markets tend to suffer due to a lack of infrastructure, organisation, and education. Another reason firms in emerging economies struggle to effectively use consulting services is that innovation is very costly and risky.

Positive impacts

As noted above, consulting firms in emerging economies do also have positive impacts. Positive impacts include: increases in employment, increase in entrepreneurial spirit and higher wages for employees.

Impact of consulting firms in developed economies

One study shows that there is a significant difference between efficiency between consulting firms in America (developed economy) and consulting firms in Asia Pacific regions (emerging economy). [27] Efficiency scores of consulting firms in America were significantly higher than consulting firms in Asia Pacific regions. This is because firms in developed economies have better infrastructure, organisation and education, thus advice given by consulting firms is used efficiently.

Examples of Consulting Firms

There are many consulting firms out there that provide services across a range of industries, Notable firms include KPMG, BCG, Deloitte, PWC and EY.

Worth noting there are also a myriad of other smaller more niche firms including Ecorys, RLP Strategies, Westcliffe Strategic and many many more. These firms often offer solutions to smaller businesses than the bigger consulting companies.

See also

Related Research Articles

Outsourcing includes both foreign and domestic forms of outside contracting. It is an agreement in which one company hires another company to be responsible for a planned or existing activity which otherwise is or could be carried out internally, i.e. in-house, and sometimes involves transferring employees and assets from one firm to another. The term outsourcing, which came from the phrase outside resourcing, originated no later than 1981 at a time when industrial jobs in the United States were being moved overseas, contributing to the economic and cultural collapse of small, industrial towns.

Management consulting is the practice of providing consulting services to organizations to improve their performance or in any way to assist in achieving organizational objectives. Organizations may draw upon the services of management consultants for a number of reasons, including gaining external advice and accessing consultants' specialized expertise regarding concerns that call for additional oversight.

Freelance, freelancer, or freelance worker, are terms commonly used for a person who is self-employed and not necessarily committed to a particular employer long-term. Freelance workers are sometimes represented by a company or a temporary agency that resells freelance labor to clients; others work independently or use professional associations or websites to get work.

A consultant is a professional who provides advice or services in an area of specialization. Consulting services generally fall under the domain of professional services, as contingent work.

<span class="mw-page-title-main">McKinsey & Company</span> US-based worldwide management consulting firm

McKinsey & Company is an American multinational strategy and management consulting firm that offers professional services to corporations, governments, and other organizations. Founded in 1926 by James O. McKinsey, McKinsey is the oldest and largest of the "Big Three" management consultancies (MBB). The firm mainly focuses on the finances and operations of their clients.

Environmental consulting is often a form of compliance consulting, in which the consultant ensures that the client maintains an appropriate measure of compliance with environmental regulations. Sustainable consulting is a specialized field that offers guidance and solutions for businesses seeking to operate in an environmentally responsible and sustainable way. The goal of sustainable consulting is to help organizations reduce their environmental impact while maintaining profitability and social responsibility. There are many types of environmental consultants, but the two main groups are those who enter the field from the industry side, and those who enter the field from the environmentalist side.

A business consultant is a professional who provides professional or expert advice or service in a particular area such as security, management, accountancy, law, human resources, marketing, financial control, engineering, science, digital transformation, exit planning or any of many other specialized fields.

<span class="mw-page-title-main">Business process outsourcing in the Philippines</span> Overview of the process of outsourcing of various business processes

One of the most dynamic and fastest growing sectors in the Philippines is the information technology–business process outsourcing (IT-BPO) industry. The industry is composed of eight sub-sectors, namely, knowledge process outsourcing and back offices, animation, call centers, software development, game development, engineering design, and medical transcription. The IT-BPO industry plays a major role in the country's growth and development.

On-demand outsourcing is a trend in outsourcing wherein major internal operations processes of a company are being shifted to a provider that is paid for by the number of transactions involved. The business transferring the services pays for the quality, special skills and the competence of the service provider's employees. There has been an expansion of the outsourcing concept to include on-demand outsourcing. This refers to the process undertaken by business managers to adopt an outsourcing policy that ensures that the specific business and supplies including technical manpower are accessed as the need arises. It focuses a business strategy to improve its goods and services and to drive a business towards quality improvement.

<span class="mw-page-title-main">Boston Consulting Group</span> Global management consulting firm

Boston Consulting Group, Inc. (BCG) is an American global management consulting firm founded in 1963 and headquartered in Boston, Massachusetts. It is one of the Big Three along with McKinsey & Company and Bain & Company. Since 2021, the consultancy has been led by the German executive Christoph Schweizer.

<span class="mw-page-title-main">Mouchel</span> UK business services company

Mouchel Group, originally known as L. G. Mouchel & Partners Ltd, was an infrastructure and business services company headquartered in Woking, United Kingdom. It provided advisory, design, project delivery and managed services associated with infrastructure and business services across the highways and transportation, local government, emergency services, property, health, education and utility markets across the world.

<span class="mw-page-title-main">L.E.K. Consulting</span> International strategy consulting firm

L.E.K. Consulting is a global strategy consulting firm based in London and Boston. Founded in 1983 by three partners from Bain & Company, L.E.K. focuses on corporate strategy, marketing and sales, mergers and acquisitions, and operations. It provides expertise to life sciences and pharma, healthcare services, consumer products, financial services, energy and environment, media and entertainment, technology, travel and transport, industrials, and retail. The firm also has a strong private equity practice.

<span class="mw-page-title-main">CRA International</span> American consultancy firm

Charles River Associates is a global consulting firm headquartered in Boston. The firm provides expert testimony and litigation support, strategic advice, and analysis to law firms, corporations, accounting firms, and governments.

Sourcing advisory is the use of third-party advice during the sourcing process. As such, it may refer to advice sought during outsourcing, offshoring or global sourcing.

The Offshoring Research Network is an international network of researchers and practitioners studying organizations in their transition to globalizing their business functions, processes and administrative services. The ORN conducts annual surveys tracking global sourcing strategies, drivers, concrete implementations and plans across all business functions and processes.

FDM Group Limited is a British multinational information technology (IT) consulting company headquartered in London, United Kingdom. It is composed mostly of university graduates, returners to work and ex-military personnel, who are trained in the FDM Group academies before working as consultants for one of FDM Group's clients, primarily financial institutions and banks around the world. It is listed on the London Stock Exchange.

<span class="mw-page-title-main">Bain & Company</span> Global management consulting firm

Bain & Company is an American management consulting company headquartered in Boston, Massachusetts. The firm provides advice to public, private, and non-profit organizations. One of the Big Three management consultancies, Bain & Company was founded in 1973 by former Group Vice President of Boston Consulting Group Bill Bain and his colleagues, including Patrick F. Graham. In the late 1970s and early 1980s, the firm grew rapidly. Bill Bain later spun off the alternative investment business into Bain Capital in 1984 and appointed Mitt Romney as its first CEO. Bain experienced several setbacks and financial troubles from 1987 to the early 1990s. Romney and Orit Gadiesh are credited with returning the firm to profitability and growth in their sequential roles as the firm's CEO and chairman respectively.

<span class="mw-page-title-main">Aon Hewitt</span> American consulting company

Aon Hewitt was a provider of human capital and management consulting services headquartered in Lincolnshire, Illinois in the United States. From 500 offices in 120 countries, it provided consulting, outsourcing, and reinsurance brokerage services. The "Aon Hewitt" brand and legal entities have now been absorbed into the "Aon" business, leaving obsolete the names "Hewitt" and "Aon Hewitt."

Investment outsourcing is the process whereby institutional investors and high-net-worth families engage a third party to manage all or a portion of their investment portfolio. This arrangement can include functions such as establishing the asset allocation, selecting investment managers, implementing portfolio decisions, providing on-going oversight, performing risk management and other areas of portfolio management.

The following outline is provided as an overview of and topical guide to consulting:

References

  1. ↑ "Have McKinsey and its consulting rivals got too big?". The Economist. ISSN   0013-0613 . Retrieved 2024-03-27.
  2. ↑ "Consulting on the Cusp of Disruption". Harvard Business Review . 2013-10-01. Retrieved 2017-12-30.
  3. ↑ Maister, David H. (2004). "The Anatomy of a Consulting Firm". The Advice Business: Essential Tools and Models for Managing Consulting. Retrieved 22 May 2022.
  4. ↑ Alvesson, Mats; Robertson, Maxine (2006). "The Best and the Brightest: The Construction, Significance and Effects of Elite Identities in Consulting Firms". Organization. 13 (2). SAGE Journals: 195–224. doi:10.1177/1350508406061674. S2CID   206696349.
  5. ↑ "Strategy and Organization Consulting" (PDF). Center for Effective Organizations. Retrieved 6 April 2023.
  6. ↑ Swartz, Don (1974). "Similarities and Differences of Internal and External Consultants". Academy of Management Proceedings. 1974. Academy of Management: 17. doi:10.5465/ambpp.1974.4980555 . Retrieved 6 April 2023.
  7. ↑ Kelley, R. E. (1979). "Should you have an internal consultant?". Harvard Business Review. 57 (6). Europe PMC: 110–120. PMID   10244211 . Retrieved 6 April 2023.
  8. ↑ "Caveat Compliance: Can Firms Rely on Advice Received from Compliance Consultants?" (PDF). Retrieved 6 April 2023.
  9. ↑ Poulfelt, Flemming; Olson, Thomas H.; Poulfelt, Flemming; Bhambri, Arvind; Greiner, Larry (2017). "The Changing Global Consulting Industry". Management Consulting Today and Tomorrow. Taylor & Francis Group. pp. 5–36. doi:10.4324/9781315648293-2. ISBN   9781315648293 . Retrieved 7 April 2023.
  10. ↑ Munro, Lois; Stewart, Jenny (2009). "External auditors' reliance on internal audit: the impact of sourcing arrangements and consulting activities". Accounting & Finance. 50 (2). Wiley Online Library: 371–387. doi:10.1111/j.1467-629X.2009.00322.x. hdl: 10072/29902 . S2CID   154459504 . Retrieved 7 April 2023.
  11. ↑ Momparler, Alexander; Carmona, Pedro; Lassala, Carlos (2015). "Quality of consulting services and consulting fees". Journal of Business Research . 68 (7): 1458–1462. doi:10.1016/j.jbusres.2015.01.033 . Retrieved 19 May 2022.
  12. ↑ Armbrüster, Thomas (2006). The Economics and Sociology of Management Consulting. Cambridge, UK: Cambridge University Press. ISBN   978-0-521-85715-4.
  13. ↑ Shogun, Steve M. (May 2004). "Editorial: Consulting, Research, and Consulting Research, Volume 23, Issue 2, May 2004". Marketing Science . 23 (2). INFORMS: 173–179. doi:10.1287/mksc.1040.0078 . Retrieved 19 May 2022.
  14. ↑ Sarvary, Miklos (1999). "Knowledge Management and Competition in the Consulting Industry". California Management Review . 41 (2): 95–107. doi:10.2307/41165988. JSTOR   41165988. S2CID   154894228 . Retrieved 19 May 2022.
  15. ↑ Jacobson, Nora; Butterill, Dale; Goering, Paula (2005). "Consulting as a Strategy for Knowledge Transfer". The Milbank Quarterly . 83 (2): 299–321. doi:10.1111/j.1468-0009.2005.00348.x. PMC   2690143 . PMID   15960773.
  16. ↑ Nissen, Volker (2018). Digital Transformation of the Consulting Industry: Extending the Traditional Delivery Model. Progress in IS. Springer Cham. doi:10.1007/978-3-319-70491-3. ISBN   978-3-319-70491-3.
  17. ↑ Sandberg, Robert. "Corporate Consulting for Customer Solutions: Bridging Diverging Business Logics" (PDF). ex.hhs.se. Stockholm School of Economics . Retrieved 23 May 2022.
  18. ↑ Butterill, Dale; Goering, Paula; Jacobson, Nora (16 June 2005). "Consulting as a Strategy for Knowledge Transfer". The Milbank Quarterly. 83 (2): 299–321. doi:10.1111/j.1468-0009.2005.00348.x. PMC   2690143 . PMID   15960773.
  19. ↑ Anderson, Stephen J.; McKenzie, David (January 2022). "Improving Business Practices and the Boundary of the Entrepreneur: A Randomized Experiment Comparing Training, Consulting, Insourcing, and Outsourcing". Journal of Political Economy. 130 (1): 157–209. doi:10.1086/717044. hdl: 10986/34979 . S2CID   240535903 . Retrieved 21 September 2022.
  20. ↑ Czerniawska, Fiona (June 2006). "Outsourcing: Death Knell for Consulting?". Consulting to Management. 17 (2): 57–59. Retrieved 21 September 2022.
  21. ↑ "Business plan examples". Monday, 25 November 2019
  22. ↑ Bruhn, Miriam; Karlan, Dean; Schoar, Antoinette (April 2018). "The Impact of Consulting Services on Small and Medium Enterprises: Evidence from a Randomized Trial in Mexico". Journal of Political Economy. 126 (2): 635–687. doi:10.1086/696154. hdl: 1721.1/121090 . ISSN   0022-3808. S2CID   5814460.
  23. ↑ "Why Big Data is becoming so Important in Supply Chain | Big Supply-Chain Analytics – Assuras – Providing Assurance & Confidence For Today's Leading Businesses". 2022-10-01. Retrieved 2022-10-24.
  24. ↑ Teichmann, Fabian Maximilian Johannes (2019-01-01). "Money laundering and terrorism financing through consulting companies". Journal of Money Laundering Control. 22 (1): 32–37. doi:10.1108/JMLC-10-2017-0056. ISSN   1368-5201. S2CID   159328510.
  25. ↑ Momparler, Alexandre; Carmona, Pedro; Lassala, Carlos (2015-07-01). "Quality of consulting services and consulting fees". Journal of Business Research. Special issue on The Spirit of Strategy. 68 (7): 1458–1462. doi:10.1016/j.jbusres.2015.01.033. ISSN   0148-2963.
  26. ↑ Back, Yujin; Praveen Parboteeah, K.; Nam, Dae-il (2014-12-01). "Innovation in Emerging Markets: The Role of Management Consulting Firms". Journal of International Management. 20 (4): 390–405. doi:10.1016/j.intman.2014.07.001. ISSN   1075-4253.
  27. ↑ Park, Gowangwoo; Lee, Seok-Kee; Choi, Kanghwa (January 2021). "Evaluating the Service Operating Efficiency and Its Determinants in Global Consulting Firms: A Metafrontier Analysis". Sustainability. 13 (18): 10352. doi: 10.3390/su131810352 .
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