Why you should not get into consulting (or maybe yes)

This article will help you critically assess whether consulting is truly the right fit for you. We’ll guide you in estimating the utility of careers across different sectors by providing a scoring system to quantify your priorities, along with real-life examples to illustrate the decision-making process. In theory I should try to sell you the dream so you work with us and purchase some package but I won't do it (just for today). By the way, if you prefer the video version, please find below.

Approach

To decide if consulting is the career path for you, we’ll estimate the total utility of working in consulting compared to other similar options.

We’ll use a weighted matrix approach to break down each career choice into distinct parameters. Here’s how it works:

• Assign a Score: You’ll rate each parameter on a scale from 0 to 10, assessing how favourable it is. This should be based on analysis, helping ensure you’re consistent in your evaluations.

• Assign a Weight: Each parameter will also get a weight that reflects its importance to you personally. Unlike scores, these weights are subjective and will vary based on your individual priorities and values.

We’ll focus on key parameters like:

• Financial: What kind of salary and benefits can you expect?
• Personal Wellbeing: How does this job impact your work-life balance and overall happiness?
• Professional Development: Are there clear paths for growth and learning?
• Job Satisfaction: Will you enjoy what you do day-to-day?

We’ll provide some guidelines on how to assign scores and weights over time for several sectors; however, you are the only one who can do it!  To make this process easier, we’ve put together a Google Sheet (you will need to email us to get access) that you can duplicate and play around with. Feel free to change timeframe, sectors and other variables so that it fits your specific needs.

Caution! Not IKIGAI

It’s important to call out how many HR managers and life coaches have taken the concept of Ikigai and turned it into a simplistic Venn diagram to sell a quick way to find purpose in your career. This westernized version misses the true depth of the original Japanese concept and feels like cultural appropriation. It reduces something rich and meaningful into a catchy but shallow formula. While Ikigai is about finding deeper meaning in life, finding meaning in your career can be more straightforwardly quantified using a utility function, which we formalize in this article. For more insights on this topic, check out this resource.

Macro trends

Someone once told Walt Disney that most people would find a cartoon mouse repelling. Making predictions is always hard but trying to get a feel for what the future holds can be helpful.

To predict where the consulting industry is heading, it’s important to understand why firms hire consultants and how these firms generate revenue:

• Reasons for Hiring Consultants:

  • Top Talent on Demand: Companies seek hard-to-find expertise.
  • High Functional Expertise: Consultants provide specialized skills (e.g., HR, customer support) that may be missing in-house.
  • Networks and Best Practices: Consulting firms offer access to extensive networks and proven methodologies.
  • Fresh Perspectives: They bring new insights to complex problems.
  • Political Support: C-level executives often need external validation for difficult decisions.

Consulting firms primarily operate on a billable hours model, resulting in low operational costs compared to their revenue potential. Several macro trends could impact the growth of consulting firms:

• Scalability Issues: the traditional consulting model is not inherently scalable; while efficiency can improve through tools, it cannot scale like tech giants (e.g., Google).

• Information Democratization: greater access to information allows companies to obtain insights independently, reducing reliance on consultants.

• Proliferation of B2B SaaS Solutions: tools like Atlassian and Notion address many functional challenges, diminishing the need for consulting services.

• Easier Access to Data: more readily available data means consultancies don’t need to conduct as many analyses as before.

• Changing Needs of New Companies: new companies often operate with innovative approaches and may not require traditional consulting support.

Revenue Insights

Examining McKinsey's financial performance reveals a concerning trend for the company:

• Revenue per Employee: Dropped from $432,000 in 2014 to $355,000 today, somewhat linearly 
• Real-Term Revenue Decline: The 2014 figure, adjusted for inflation, equates to approximately $575,370 today, indicating a nearly 50% decrease in real terms.

These factors indicate that the consulting industry may be grappling with significant challenges as it adapts to a rapidly evolving business landscape. A notable concern arising from these trends is the potential decline in the firm's reputation. The decrease in revenue per employee suggests that average rates are declining, or that a larger number of consultants are now required to deliver the same level of work. This shift points to a possible lowering of project complexity, moving from high-level strategic initiatives to more implementation-focused tasks. Now, these are just hypotheses, no one can predict the future (a much deeper analysis would be needed anyways to understand where the decline comes from etc.) but it's simply to show you that the past may not be an accurate predictor of the future.

Scores

In this section, we provide guidance on the rationale for scoring each factor. You are encouraged to tailor the scoring to reflect your specific circumstances and role.

Financial

When assessing the financial parameters of a career in consulting, it’s important to note that consulting salaries are highly competitive globally. Entry-level consultants can expect salaries ranging from $70,000 to $100,000, with mid-career professionals earning between $120,000 and $200,000. At the partner level, this can soar to $300,000 or more, significantly outpacing average salaries across most industries. The chart below shows the average salaries across some sectors.

Consulting compensation primarily consists of cash and bonuses, which tend to be less volatile than stock options and generally have a smaller bonus component compared to finance roles. Additionally, consulting offers excellent perks, allowing professionals to enjoy a luxurious lifestyle without excessive spending—something not guaranteed in finance or entrepreneurship.

However, the past cannot predict the future! Career progression and partner compensation in the next 20 years may not reflect the trend observed in the previous 20 years.  

Given these factors, consulting may yield a better-expected return on investment than tech and finance - but there is a little uncertainty about the future. Therefore, when scoring compensation, consulting might receive an 8, finance an 8, tech a 7, corporate a 6 and entrepreneurship a 5. Again, the exact scoring depends on your particular situation; if you are a very gifted software developer, for instance, rewards in tech will be higher.

Personal wellbeing

When considering personal well-being in your career, several key factors come into play:

• Working conditions

  • Consulting: top firms typically demand 60-80 hours per week, making it highly client-facing and intensive. Stress is high (not as high as in finance) so make sure you can handle it. On the bright side, consulting is by nature collaborative so your team will be there to support you because you either all win or all lose. 
  • Tech: Offers a more balanced schedule, often ranging from 40-45 hours. In fact, you can earn a solid salary while working less, prompting figures like Elon Musk to suggest it’s time to "trim the fat" from the workforce.
  • Finance: really depends on where you work but top jobs have the worst working conditions here, long hours in a very stressful and competitive environment
    
    

• Benefits

  • Tech Companies: Generally provide better benefits, including:
    • More generous vacation days, often exceeding 4 weeks.
    • Progressive parental leave policies that support work-life balance.
  • Consulting and Finance: While they offer good compensation, benefits may not be as extensive.
    
    

• Geographic Location

  • Consulting and Finance: Often concentrated in major cities with high living costs.
  • Tech: Offers a variety of living options, from urban hubs to more affordable suburban areas.
    
    

• Passion for the Industry

  • Consulting: Appeals to those who thrive on solving complex problems.
  • Finance: Attracts individuals interested in market dynamics and investment strategies.

Overall, while scoring personal well-being is subjective, it’s evident that tech likely scores higher than consulting in this regard. Choosing a career that prioritizes your well-being can lead to greater satisfaction and success in the long run.

Professional development 

In the realm of professional development within consulting, several key factors stand out:

• Promotion Pathways: Traditionally, consulting firms have offered steady paths for advancement, but 2024 marked a shift with the first wave of layoffs and harsher performance reviews, raising concerns about the stability of career progression. It's also important to consider your predisposition for the profession here. If you are likely to perform well, you are more likely to get ahead in your career.

• Exit Opportunities: While exit opportunities remain favourable, competition has intensified. McKinsey, for instance, has grown its workforce at a 10% CAGR, now employing around 45,000 consultants. This growth means that aspiring consultants face stiffer competition for business development roles and internal strategy teams.

• Skill Development: Consulting primarily focuses on developing soft skills—such as problem-solving, communication, and client management—without emphasizing hard technical skills. This emphasis on adaptability and interpersonal effectiveness can be beneficial in a variety of roles; however, there is no development in hard skills.

• Networking Potential: The networking opportunities in consulting are exceptional, perhaps the best in the business, given the diverse range of clients and colleagues consultants interact with regularly. Building a robust network can be invaluable for future career moves.

• Economic Stability: Consulting firms typically enjoy a good level of economic stability, as they are often less susceptible to market fluctuations. This reliability makes consulting an attractive option for professionals seeking long-term career prospects.