Consulting firm

A consulting firm or simply consultancy is a

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:

• Services related to the
  company's overall strategy, which are addressed to the CEO
  ,
• Services related to marketing, communication, sales and public relations, which are addressed to the CMO,
• Services related to management, financial management, taxation, accounting, compliance with regulations, for the CFO,
• Services related to the company's operations, intended for operational management, which may be different depending on the industrial sector (technology director, plant managers, operations directors, Research and Development managers), for instance COO and CTO,
• Service related to
  IT consulting) intended for information management, which are addressed to the CIO
  .

• Client needs being incontinuous, or continuous but otherwise volatile in that they may vary from time to time in nature and scope,
• A potential scarcity of skilled labour available on the market,[3]
• The possibility of offering a higher work level activity,^[4]
• The necessity for
  licensed
  labour or other qualified labour for tasks not making up the core task assembly of the client organization,
• Looking to get a hold of or utilize of third party intellectual property, intangible capital or other types of goodwill belonging to the consulting firm.^[5]

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

• Where internal consulting solutions (at which the client firm acts as a de-facto employer) may run into issues of scope once projects get too large, external consulting firms may be able to provide a better solution for the larger consulting deals on the market,^[6][7]
• Risk and compliance audits may be suitable for a consulting contract as a means of safeguarding neutrality,^[8]
• Consulting comprises the natural service model for large-scale transformation projects in client enterprises,^[9]
• Certain service models, such as
  tertiary sector,^[10]
• Some clients may decide to hand over entire assemblies of tasks to consulting firms for a period of time - this is akin to outsourcing agreements, however with the exception of a predestined due date which is atypical in outsourcing,
• Consulting is also used as a
  legal consulting and M&A
  activity,

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:

• Architecture and Engineering
• Financial services
• Health care
• Safety in the workplace
• Hotel and hospitality industry
• Human resources
• Information technology
• Legal
• Management^[21]
• Music
• Regulatory compliance

Some consulting firms also serve niche sectors, such as:

• advertising/marketing/public relations
• environmental consulting
• entertainment/media
• energy
• logistics
• public sector
• real estate
• recycling
• small business
• raw material supply

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

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 (

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, YABX, Westcliffe Strategic and many many more. These firms often offer solutions to smaller businesses than the bigger consulting companies.

See also

References