Archive | February, 2012

Consulting versus Investment Banking after Undergrad

23 Feb

Consultants in board roomAfter completing my undergraduate business degree, I pursued management consulting as a career, first at the Monitor Group then at Bain & Company.  While I left consulting three years ago to pursue a career in technology startups, I still get asked about consulting as a career, especially as compared to investment banking.

It’s easiest to frame my opinion in the context of what you can learn – this is because the majority of investment bankers and consultants end up moving into other careers within 2 – 4 years.  While consulting and I-banking are great training grounds, they aren’t necessarily great matches for everyone long-term.

What you Learn as a Management Consultant:

  • Data Analysis: Depending on the firm and specific clients your work for, you will either do a lot of Excel analysis or TONS of excel analysis.  While this can feel like drudgery at the time, it is an increasingly valuable skill in the workforce, especially in fields like online marketing.  Surprisingly few business people are trained how to think about and solve business problems with data – consultants are.
  • Problem Solving: Consultants are trained how to break down a complex problem into component pieces, understand the assumptions and hypotheses behind each element, and craft a path toward understanding and solving them.
  • Project Management: As the most junior person on the team, you’re often left handling the coordination between the consulting team and the client.  As you get more senior, you spend a lot of time crafting communications (often in PowerPoint decks) about project status, timelines, etc.  This constant management of what’s getting done, by who, and when it will be done is broadly applicable.
  • Communications: In line with the note above, consultants spend a LOT of time in PowerPoint, crafting and re-crafting communications for clients.  This often comes on the heals of analytical work that you’ve done.  When combined with the ability to break down a problem and do analysis to help solve it, the ability to then synthesize and communicate those answers to another professional is extremely valuable.

What I Didn’t Learn as a Consultant, but you Probably Learn as an Investment Banker (based on those I’ve worked with who come from that background):

  • Financial Modeling: While in some cases the data analysis I mention above can take the form of creating a financial model, it rarely does.  More often, you’re analyzing results of a customer survey, pulling apart operational numbers within a business (how many phone calls to customer service, at what average handling time, resulting in what average cost-to-serve?), or calculating market sizes and growth rates.
  • Corporate Finance: While you might be deep within the operational metrics of a business, rarely does that analysis bubble up to the level of looking at corporate financial statement (Balance Sheets, Profit and Loss statements, Cash Flow Statements, etc).  Most everything I know about this stuff I learned as a business undergrad, not in consulting.
  • Public Markets: Similarly, the evaluation of a business as a potential investment target really isn’t part of what the typical consulting project.  A consultant might be looking at the likelihood that a potential joint venture will work out operationally (is there demand for this new product? what capabilities does each side deliver?), they aren’t often tasked with making the ultimate investment decision.

These are obviously just my own experiences and thoughts, but something I thought was worth sharing.  What have your experiences been?