Management consulting
The industry that sells business strategy
Description
In 2024, McKinsey reported revenues of approximately sixteen billion dollars. BCG and Bain were each in the ten-to-twelve billion range. Deloitte, Accenture, and the other accounting-firm consulting arms reported revenues well above those of the strategy firms. The total global management consulting industry was between three hundred and four hundred billion dollars. The people doing the work — a few hundred thousand consultants worldwide — were drawn disproportionately from top universities. For an industry whose deliverables are fundamentally advice, management consulting is astonishingly large, well-paid, and well-credentialed.
The industry is also, depending on who you ask, either essential infrastructure of the modern corporation or one of the great scams of contemporary business. Defenders argue that consultants bring external expertise, analytical rigor, and cross-industry perspective to problems firms cannot solve internally. Critics argue that consultants provide cover for decisions executives wanted to make anyway, charge enormous fees for analysis that could be done in-house, and produce harm both in specific engagements and in the broader corporate culture. Both positions have evidence. The industry is large and varied enough that virtually any claim about it is true for some engagements and false for others.
What management consulting actually does, and whether the value it delivers justifies what it charges, has generated a substantial critical literature over the past decade. The critique has become mainstream enough that some of the largest clients — including governments and major corporations — have begun questioning their long-standing relationships with top firms. Understanding the industry is prerequisite to understanding how a lot of corporate and governmental decisions actually get made, because consultants are involved in more of them than most outside observers realize.
● The question we're asking: what is the management consulting industry, how does it actually work, and what does it sell?
● What we'll see: the origins of the industry, the consulting business model, the critique that has accumulated, and what consultants actually do.
Table of contents
01The origins of the industry
The modern consulting industry emerged in the United States in the early twentieth century, as an outgrowth of scientific management and the accounting profession. Taylor's work in the 1880s and 1890s created the first systematic external-advisor role. Harvard Business School, founded in 1908, produced the graduates who would populate early consulting firms. James O. McKinsey founded McKinsey & Company in 1926. Marvin Bower, who took over in 1937, reshaped the firm into its current form — focused on strategic advice to senior executives, with a professional ethos modeled on law firms.
The industry grew substantially in the 1950s and 1960s as American corporations expanded internationally. The postwar decade saw the founding or early growth of firms that would dominate the next half-century — Booz Allen, Arthur D. Little, A.T. Kearney. BCG was founded in 1963 by Bruce Henderson, who introduced the growth-share matrix and experience curve, frameworks BCG used as marketing to distinguish itself from McKinsey's general advisory work. Bain was founded in 1973 by Bill Bain, who had left BCG and introduced working intensively with a small number of clients.
02The consulting business model
The consulting business model rests on several features. The first is the pyramid structure. A consulting engagement is typically staffed with a partner who sells and oversees, a few senior consultants who manage, and a larger number of junior consultants doing most of the analytical work. Juniors are billed at rates far above their compensation, which generates the margins paying partners well above individual billable time would produce. The pyramid is the financial engine. It also means most work is done by people a few years out of college or graduate school, with limited direct involvement from the most experienced firm members.
The second feature is up-or-out promotion. Consultants are either promoted on a fixed timeline or pushed out to careers elsewhere. The structure produces substantial turnover and strong incentives for juniors to work hard, which lowers per-consultant cost. It also produces alumni networks — former consultants in senior positions at client firms or government agencies — that are one of the firms' most valuable assets. The up-or-out structure is punishing for those who go through it but has proved effective at producing the consulting work at the industry's cost structure.
03The critique that has accumulated
The critique has become substantially more mainstream in the past decade. Duff McDonald's 2013 The Firm examined McKinsey's history. Mariana Mazzucato and Rosie Collington's 2023 The Big Con argued consulting firms had progressively hollowed out state capacity. Bogdanich and Forsythe's 2022 When McKinsey Comes to Town documented specific cases of harm — the opioid crisis, work with authoritarian governments, specific corporate failures. The accumulated critique has moved consulting from a neutral-if-expensive service category to a contested industry.
The first line of critique concerns outcomes harmful to third parties. The opioid crisis — in which McKinsey advised Purdue Pharma on marketing strategies that contributed to tens of thousands of overdose deaths — is the most visible example. McKinsey paid nearly six hundred million dollars in settlements. Similar critiques have been made of consulting for tobacco companies, fossil-fuel producers, and authoritarian governments. The critique is that the industry's willingness to serve any paying client without much examination of consequences has produced harms more careful client-selection would have avoided. Defenders argue firms cannot anticipate all consequences and that consulting is morally neutral advice clients choose to act on.
04What consultants actually do
What consultants actually spend their time on is different from what the industry's self-presentation suggests. A substantial portion is structured information gathering — interviews with executives, employees, customers — then synthesis. Another substantial portion is data analysis — financial models, operational metrics, benchmarking. A smaller portion is genuine strategic thinking. Much of what is sold as strategy consulting is, in practice, information synthesis, data analysis, and applying frameworks the firm developed on previous engagements.
The value of this work depends on circumstances. Large organizations with internal analytical capability often do not need consultants for the analysis itself; they hire consultants for external legitimacy, dedicated capacity, cross-industry comparisons, or the political function consultants serve in executive decision-making. A consulting engagement for external legitimacy is essentially paying for a credible third party to endorse a conclusion — the political cover function. A consulting engagement for dedicated capacity is paying for labor the firm could not hire permanently. A consulting engagement for genuine outside expertise is the category where the value proposition is clearest and the variance in delivery is smallest. The other categories are where the economic value is most disputed.
05Conclusion
Management consulting matters as a subject because it is one of the main ways corporate and governmental decisions actually get made in the contemporary economy. The industry sits at the center of enough important decisions that understanding what it does, what it is good at, and where its limits are has become prerequisite to understanding how the modern institutional economy operates. Most major corporate strategic choices, most significant government reform initiatives, most large technology implementations involve consulting firms at some stage. The decisions that result are often substantially shaped by the analytical frameworks, recommendations, and political cover the consultants provide.