An increase in demand for strategy consultants at financial services and technology groups is driving a surge in demand for MBA graduates in advisory roles.
Consulting as a function has grown more popular as MBA students move into strategic roles at banks, healthcare companies and retailers, while the already popular management consulting firms, which are being buoyed by double-digit growth, continue to hire droves of newly-minted MBAs each year.
US-based Tuck School of Business graduated 40% of 2014’s MBA class into consulting and strategy functions, by far the highest of any other functions including finance which attracted 25% of the class.
Tuck’s figures are symptomatic of a shift at many large corporations to hire internal consultants from business schools to advise on business strategy and development.
At ESADE Business School in Spain, 26% of 2013’s MBAs were employed in a consulting function, the highest. At HEC Paris, the French business school, 21% of last year’s MBA class were hired into a consulting function, joint-top with financial services.
When the latest 2014 employment figures are released, consulting is again expected to be the top hiring function, careers directors say.
“We do see student demand for internal consulting,” says Stephen Pidgeon, associate director of career development at Tuck, adding that these roles allow more work-life stability than management consulting firms.
Carmen Gonzalez, associate director of ESADE Career Services, says in-house consulting is popular because it offers the possibility of seeing the entire consulting cycle, as opposed to external consulting firms which focus on recommendations.
Industrial giants including consumer goods company Unilever, Schneider Electric, the electricity distributor, and engineering firm Siemens are hiring MBAs for internal consulting roles, according to Tony Somers, director of the Career Management Centre at HEC Paris.
MBA students say internal consulting roles offer more flexibility than banks and management consultancies. Technology companies have benefited particularly well from the decline in popularity of the banking sector at business schools.
As MBAs migrate away from traditional financial services roles, consulting firms are able to lure graduates with high salaries and clear career progression.
About 30% of students at the highest-ranked business schools will now work in consulting firms such as Bain & Company, Accenture or Strategy&, formerly Booz & Company.
This migration has been highest in the years after the financial crisis, when banks began culling staff, moving recruitment off campuses and shifting services online.
In 2007, 23% of London Business School’s MBAs joined consulting firms but last year 29% did. At Chicago Booth MBA consultants have risen from 24% to 31% over the same period, with McKinsey & Company, Bain, the Boston Consulting Group and AT Kearney accounting for 19% of the nearly 500 Chicago students employed in 2013.
Stephen says this surge is being driven by company demand and student interest – 35% of Tuck’s MBAs were hired by consulting firms this year.
“Consulting firms need people who have a combination of skills that is actually hard to find – a combination of being very clever… Very driven to work hard and succeed, [with] people skills, and a desire to work in a corporate environment,” he says.
The massive paychecks may also be driving demand. Consultants from Tuck’s most recent MBA class are earning $135,000 in average salary, more than investment bankers who are earning $100,000 in salary.
The entire MBA experience is an ideal preparation for consulting, according to Tony from HEC. “You very often work to serious deadlines [that] require sharp bursts of activity – close to what an MBA [program] does,” he says.
He adds that working in teams with likeminded people, and the case-study method that most business schools have adopted, make MBA students a perfect fit for management consulting groups. “It’s a logical next step,” Tony says.
MBA programs are also viewed as generalist management degrees. Students study to work in a wide variety of functions and industries – exactly what a consultant might be expected to do at a large firm.
“It is a program offering a holistic view of business and it strengthens both the numerical and analytical skills that are so vital to consulting,” says Carmen from ESADE.
But she adds that consulting firms are looking for candidates who are able to “think outside the box” and come up with creative solutions to problems, not simply follow standardized case frameworks.
But MBA’s interest may also be driven by a mentality that being hired by a management consultancy is some sort of pinnacle achievement. Stephen says that recruiters from these firms are viewed as the most prestigious at Tuck.
“If you take a pool of very motivated people who want to climb every mountain you put in front of them, and you tell them that company X is the ‘highest mountain’, many of them will want to scale it,” he says.
Conor McVeigh was lured to London’s Cass Business School to transition from financial services to management consulting. He says that an MBA is ideal for people who want to switch careers, particularly professionals from a banking background.
“I have gained invaluable experience [while] consulting on projects that ranged from bureaucracy in the Cabinet Office to international expansion for a UK train company,” he says of the Cass MBA.
A period of significant revenue growth and M&A activity is cementing a need for more new hires at consulting firms.
The “Big Four” professional services groups have been on a buying spree, moving towards a more consolidated market. Former accounting firms which have expanded into advisory work including Deloitte and EY are hiring more MBAs, according to Stephen.
“As they rebuild and expand their strategy practices, they are increasingly looking to top tier business schools for their staffing needs,” he says.
But he adds that there will still be a perceived brand advantage for the “pure-play” consulting firms like McKinsey and BSG.
Careers directors also say that consulting is an ideal career path for MBAs that want to change careers in the future. Tony adds that HEC students often flock to these firms immediately after graduation, only to change jobs a few years down the line.
“One of the strengths of starting a career as a consultant is that it prepares an MBA for a broad variety of onward jobs,” says Stephen.
At London Business School this year, the largest single contingent of MBA students comes from McKinsey, followed by BSG and Accenture. Former consultants account for 27% of 2014’s class.
The future of consulting employment for MBA students, however, may be in professional services groups such as PwC and Deloitte.
By expanding beyond their roots in audit into areas such as advisory, professional services firms want to offer a “one-stop shop” to clients.
Grant Thornton UK, for example, has expanded significantly this past year but revenue growth is being driven by its advisory practice, while tax revenues were flat.
Stephen says that the “management consulting pie” is increasing in size: “This translates [into] increased opportunity for graduates of top tier MBA programs.”
Tony adds that the trend is not yet reflected in raw employment data – yet to be released by HEC this year – but he says he expects an uptick soon.
“I expect the EYs and KPMGs of the world to be the recruiters of choice very soon,” he says. “They’ll be offering jobs in the crossover of consulting and finance.”