Tuesday, September 18, 2007

Working for a consulting firm

Yesterday I had a conversation with someone regarding billing rates. Having worked for two middle-market consulting firms (Daugherty Business Solutions and G.A. Sullivan) and three top-tier firms(KPMG Peat Marwick, PricewaterhouseCoopers, and Avanade) I am here to say the rate charged by the big guys may not necessarily mean you are receiving any-better quality from their consultants.

So, what is the difference between the $175/hour and the $75/hour consultant? The difference is likely consultant’s support network because most of the time, the quality of the consultant is exactly the same. Let me explain by drawing an example from a previous project.

When Compaq came to one of the BIG-5 firms to help them with their e-commerce initiative, the firm brought in plane-loads of people from all over the US. Many of these people were junior-level and had only been out of college for 1-2 years. Sure, they were mixed in with some seasoned consultants, but even the seasoned ones were still cutting their teeth in the business world. The point I am getting at is Compaq was paying a pretty billing rate for people with little, or no, experience. Compaq was paying the firm to use this project as a “Training” site to indoctrinate fresh meat. Compaq would have received the same quality from a middle-market firm (although maybe not the same quantity).

The big firm has the ability to summon large numbers of people to a project and offer a support-network to help insure these people do not fail. They do this well because it is done this way time after time, project after project, client after client. As I mentioned above, working for three of these firms, they are all the same. Here are some other tricks to help justify their hefty billing rate:

1)They fly people in from all over the US. This helps to give the illusion of a shortage of local talent. When you go to the airport on a Monday morning (or Friday evening), you can play spot-the-consultant by the logos on their laptop bags. Bring a friend and see who has more people in the air, Accenture, IBM, PricewaterhouseCoopers, or BearingPoint.

2)Look for the management pyramid. A dozen juniors, several mid-range, two-three managers, and one partner. The people doing the bulk of the work are the bottom two layers and the people doing the schmoozing are on the top. When you get the bill for a partner’s work of $300-$500/hour, see if you can identity what exactly that work entailed (other than signing the contract).

3)Laptops, Laptop, and more Laptops. Each consultant brings with them a mini data processing center with all of the hardware and software to run a business. Never mind their computers are probably not permitted to be connected to the corporate network; rest assured they are using them to surf porn back at the hotel.

4)Turn over. Working as a consultant for a top-tier firm does have many advantages, if you are single, don’t have kids, or can live the nomadic lifestyle. Since many people have aspirations of having a family, a home, or other “Traditional” lives, there is some degree of turn over within the ranks. These firms count on this to keep the staff rotating with junior-level people (young and don’t have to pay as much).

On my next blog, I will go into the perks of working for a top-tier firm (yes! There are P-L-E-N-T-Y) of perks.

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