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The Real Poop

McKinsey, Bain, Booz-Allen, Boston Consulting Group. Many students are surprised that an entire industry exists for general business consulting. But it does. And it's pretty powerful. Exactly what they do, however, is a more elusive matter.

Some history: In the early part of the 20th century, most or at least much of Corporate America was private. That is, the great companies on the planet were still in the hands of the founders. Private companies simply do things different from how public companies do things. In private companies, "greed" is very long-term. Companies don't really care if they've had a bad quarter or two as long as they see nice growth coming down the pipeline, like in the form of new products, improved distribution, better processes, etc.

But public companies can't really live that way. Wall Street would bludgeon them with violent stock price swings and ambulance-chasing lawyers would sue them for "bad disclosure" or other elements that might get them a settlement. And public companies work for shareholders—some companies, such as Disney, have over a million of them. That's even more than they have crying children at Disneyland on a Saturday during the summer. 

Private companies often have one guy or a small family group that controls the direction of the company. And for that family group, certainly a hundred years ago, it was often more important that Billy Rae was nice, rather than that he was competent; that Annie Mae was a good Christian rather than a fast typist, and so on. But then competition grew and many or most of the private companies who did business "the old fashioned way" were forced to change. Those changes in many cases meant "going public." At the very least, it meant hiring professional managers—think: MBAs trained in how to optimize processes and test markets and develop new products...to run things.

The changes were often gut-wrenching because the 82-year-old owner had employed the same chief accountant for 40 years. But when professional managers inspected the books of the company, they found that hundreds of expense items had been missed or revenues improperly booked or tax savings ignored. That old chief accountant not necessarily bad—he was just not up to current professional standards.

So he had to be fired. And the 82-year-old owner knew it. But he didn't want to be the one to do it. However, if he had a consulting firm employed to do it for him, things were much easier. And that's largely how the management consulting practice started in the United States, as companies had to streamline their processes and prepare to compete against other companies who could make the widget lug nuts for 13 cents a unit while the private, poorly run company couldn't produce them for less than 20 cents. (We'll do the math for you: 20 > 13.)

Management consultants cut waste and aligned companies for a professionally competitive world, for Wall Street IPOs and for global scale. And then they stopped. That is, most of the giant waste that was out there was dealt with and companies ran relatively smoothly. The fixes were no longer easy and depended on wide ranges of very tightly moving parts…areas where consulting firms could no longer add "easy value."

So that left hungry mouths to be fed, and problems to solve became elusive. As a result, consulting practices angled themselves to advise companies on "strategic initiatives"—only to meet with cataclysmic failure—a famous case of McKinsey advising eBay that Google (when just an early start-up) was "of no threat" is a famous flop in Silicon Valley. 

Consulting remains a great gig today, however, for those without formal presentation skills and knowledge in how to turbo charge a spreadsheet, do basic accounting, or count cereal boxes on shelves. If you have killed in your classes and don't mind spending lots of time on airplanes—and you want to earn a decent living—this is a great gig to get into a couple of years out of college.

As a consultant, you may be advising a single company that hires you on for a while to help manage their financial affairs, or you may do consulting work for a number of companies that would contract and pay you separately. The variety of hopping around from one business to another is one of the things that's attractive to some people considering this path, as it keeps things fresh and keeps new and interesting challenges coming your way. If, on the other hand, you really want your own office with your own desk and your own potted plants, you might consider going into some other avenue of the business world that offers more stability and structure. Otherwise, you're going to be bouncing around too much, and those poor plants of yours are going to die. Regardless, we promise not to call PETF (People for the Ethical Treatment of Ferns) on you.

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