For a job that even elite business school graduates can have difficulty explaining, top-tier management consultants can make ridiculously high salaries.
Recent college grads who get offers from top firms can see compensation approach or exceed $US90,000 in their first year. Meanwhile, top business school grads who enter or return to firms make well over six figures in base salary — and that’s before their bonuses.
Firms start early, too. MBA consulting internships, where firms try to lock down good prospects, pay a median of $US10,500 a month to summer interns at top schools.
Why do they make so much? It’s actually pretty simple. A lot of it is about prestige and convincing corporate executives to trust their business strategy and private data with people decades their junior.
At the end of the day, junior consultants with somewhere between zero and five years of experience d0 much of the work that companies pay big bucks for.
So consulting firms, especially, want to hire the best and brightest, since the pedigree of their employees is a top selling point. Firms such as McKinsey, Bain, and BCG are pretty explicit about only hiring top performers from highly prestigious and competitive schools.
McKinsey, for example, is by far the largest single hirer of MBAs, and typically hires its consultants from top-tier schools like INSEAD, Harvard, and Wharton.
High salaries have become the norm for consultants because they function as a signaling mechanism for companies: These may be young people, but they’re the most intelligent ones out there.
In a way, the consulting firms created this cycle. Before McKinsey started aggressively hiring at Harvard Business School, getting an MBA and going into consulting wasn’t all that prestigious. Now, sparked by the consulting industry’s demand, the MBA is among the most popular and lucrative degrees out there.
The other part of this is that firms need people who can actually get the work done. Top schools and MBA programs teach a great deal, but the real benefit is an education in confidence and presentation, essential for a job that basically sells knowledge and advice.
Additionally, these firms have a very specific way of approaching problems that’s been developed over decades. They want people they can mould to that way of thinking, who are not going to challenge a framework that’s worked exceptionally well. As described in Duff McDonald’s book on McKinsey, “The Firm,” these young consultants are thrown in the deep end and expected to excel.
For all of the benefits of consulting — the prestige, the broad-ranging experience, the well-traveled path to senior positions at other companies, and the vast and powerful alumni networks of top firms — there are some drawbacks.
The job requires extremely long hours, there’s not much opportunity for advancement, and there’s a risk of being pegged as a generalist. Bonuses, while high, aren’t near the level of those in the financial industry.
And as expensive as this talent is, it actually ends up being more cost efficient for the firms. There are relatively few upper-level consultants. Most people only stay for three or four years. It would be more expensive to keep people on at a senior level and to hire them away from banks and large corporations.
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