The ongoing Crisis at McKinsey, BCG & Bain (2024)

job cuts across all consulting firms start dates for new joiners getting delayed an army of Junior Consultants on the beach delayed promotions across all levels when you follow the news and discussions online you'd think that the end of Consulting is near is that actually the case in short no but the current crisis in Consulting isn't exactly fun let's Dive Right In and check out what's actually going on let's give you some context first Consulting has always been a cyclical industry when the economy is doing well companies have big Consulting budgets a slowing economy on the other hand meant less work for Consultants but why is it so much worse this time around well it all started with the co pandemic prior to covid the Consulting industry was booming the economy was doing well and new projects were launched constantly so a junior consultant was hardly ever on the beach because it was also busy then the pandemic hit and companies had to partially shut down or move to work from home models which no one was prepared for we saw clients carry home their desktop PCS because their company simply didn't have enough laptops quite funny to see a sea-level executive trying to fit half his office into a porish tough life I guess Consulting projects were halted and no company in their right mind started new projects if they weren't highly critical but just a couple of months into the pandemic to the to the surprise of everyone the economy rebounded and business and consulting firms exploded so much had changed in the corporate world from hybrid working models to distribution channels shifting towards e-commerce to disrupted Supply chains and so on and all this change meant that consulting firms had their hands full helping companies to adjust to the new normal the hiring spree until summer of 2022 the Consulting industry kept growing and posted record Revenue so much so that it was hard to find enough people the consulting firms fought hard to secure enough Talent McKenzie BCG and Bane raised their recruiting targets aggressively of course they'd never publicly admit that they lower the recruiting standards but somehow they always manage to hit their targets anyways what happens is that an offer is extended way in advance so it's possible that someone who still has a whole another year left at University already has an offer in the bag consulting firms have to hire blindly and based on the assumption that business between now and a year in advance continues on the same trajectory on average it's 6 months between handing out an offer and the recruit actually starting on the job if you think about it it's actually the right thing to do for consulting firms to be optimistic about future business hiring someone and not Staffing that person on a project is bad it costs The Firm a couple of thousand a week but not being able to staff a project for a week because you don't have the people is way costlier we're talking about six figure opportunity costs in any case if demand increases beyond what firms initially anticipated then you don't have enough people on board as we explained before the time period between someone getting an offer and that person starting on the job is already more than half a year so you're kind of playing catchup and as long as you're short staffed you'll keep handing out offers which is okay as long as the demand keeps growing but eventually the tides were turning of course and the economy slowed down it wasn't really a major recession but a multitude of discouraging factors the ongoing war in Europe the energy crisis labor shortage and the inflation crisis many of those factors are interlined the result of this uncertain environment is that business confidence was the lowest it's been in 20 years except for the great financial crisis and the height of the covid pandemic so technically we're not in a recession but companies are extremely reluctant to launch Consulting projects and that's why Consulting demand has dried up in 2023 and this is where we're now consulting firms were very optimistic went on a hiring spree and handed out offers like crazy as a result an armada of young Consultants joined the firms within the following 12 months at the same time Consulting demand collapsed the result was that Consulting firms cut back on recruiting but there were still plenty of people who had valid offers from the firms and who then joined this led to an oversupply of young Consultants predicting demand for Consultants is hard and especially a sudden change of Market sentiment can present the firms with problems if demand is growing a lot you can't find the people and young Consultants jump from one project to the next with no time on the beach in between that's kind of a nice problem to have but when the market suddenly goes sour you have the opposite problem the Consulting firm's profitability will suffer but the over supply of young Consultants also leads to them having a bad experience on the job and that's the nature of a business with long lead times in hiring and a volatile demand you're going to have phases where you have an undersupply of people but you also have phases where you have too many and that phase of oversupply is the one we're currently in the results are clear first many new joint us were on the beach right from the start they sometimes spend months without being staffed on their first project this is of course extremely frustrating and can take a mental toll on you you're a super motivated High performing graduate and all you get to do is sit in the office and write proposals without any client interaction second and a direct consequence of that is that young Consultants don't develop the Consulting toolkit that's required to be successful by Consulting toolkit we mean the skills in PowerPoint Excel project management and client interaction that turns a junior consultant into a senior consultant we've worked with Junior colleagues with a tenure of more than a year that never built a proper Excel model third it's much harder to get the projects you want even senior Consultants can't be too picky you're passionate about sustainability and renewable energy well if there are currently zero projects in that space you might end up working for an insurance client on an IT transformation you can of course try and avoid projects that you don't want but at a certain point you'll have to accept what's being offered to you if you don't want to be fired fourth promotions are delayed given the low utilization of Consultants how would you assess the skills of a consultant who could only showcase these skills for three months on the client project and the rest of the year he was on the beach and obviously delaying promotions saves the consulting firms money fifth the regular performance approach are getting harsher more people than usual are getting bad reviews and are encouraged to leave the intention is obvious if you have over hired and there are too many consultants for too few projects you want to get rid of some people and preferably you only keep the strong performers and while this is logical it's also frustrating even strong performers suffer because firms are more reluctant to give out good performance ratings that usually come with promotions or nice bonuses and six six even finding good exit opportunities gets more difficult the reason is that many consultants try and exit in times like these and all of a sudden there are five mbb Consultants interviewing for the same job which makes it just that much more competitive so it's definitely not a fun situation and unfortunately it wasn't just 2023 even in early 2024 business remains tepid at best but how does the future of Consulting look like well will this downward spiral continue and will Consulting as we know it come to an end it's always hard to make predictions but we highly doubt it the world is ever changing and there's always demand for Consulting Services even if we're in the slump relatively speaking there are still thousands of projects happening right now it's just that there are too many consultants for too few projects this temporary mismatch however should not discourage young consultants if you are driven and willing to go the extra mile you will succeed once you found the core group you love working with you will find projects you'll learn a lot and you will have an impact and you will also find Stella exit opportunities and there you have it we hope this provided you with some unique insights into what's going on in today's Consulting World our perspective is mainly from the mbb firms but it's pretty similar across the board now the question to you how did you experience the past year at your firm let us know in the comments if you enjoyed this video don't forget to like And subscribe and activate the bell for more content like this let us know in the comments below if you have any questions or if there's a topic you'd like us to cover next thanks for watching and we'll catch you in the next one

Channel: Case Interview Hub

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Length: 9min 17sec (557 seconds)

Published: Sun Mar 31 2024