# Consulting firm > Mediated Wiki article. Canonical URL: https://mediated.wiki/source/Consulting_firm > Markdown URL: https://mediated.wiki/source/Consulting_firm.md > Source: https://en.wikipedia.org/wiki/Consulting_firm > Source revision: 1337449065 > License: Creative Commons Attribution-ShareAlike 4.0 International (https://creativecommons.org/licenses/by-sa/4.0/) {{Short description|Firm of experts providing professional assistance}} A '''consulting firm''' or simply '''consultancy''' is a [professional service](/source/professional_services) [firm](/source/business) that provides expertise and specialised labour for a [fee](/source/fee), through the use of [consultants](/source/consultants). Consulting firms may have one employee or thousands; they may consult in a broad range of domains, for example, [management](/source/management_consulting), [engineering](/source/engineering_consulting), and so on. Management consultants, in particular, typically work with company executives and provide them with generalists and industry-specific specialists, known as [subject-matter expert](/source/subject-matter_expert)s, usually trained in management or in business schools. The deliverable of a management consultant is usually recommendations for achieving a company objective, leading to a company project. Many consulting firms complement the recommendations with implementation support, either by the consultants or by technicians and other experts. Consulting services are part of the [professional services](/source/professional_services) and account for several hundred billion dollars in annual revenues. Between 2010 and 2015, the 10 largest consulting firms alone made 170 billion dollars growth revenue and the average annual growth rate is around 4%. According to ''[The Economist](/source/The_Economist)'', the industry's most important firms are the "Great eight" consulting firms which consist of [Bain](/source/Bain_%26_Company), [BCG](/source/Boston_Consulting_Group), [McKinsey](/source/McKinsey_%26_Company), [Deloitte](/source/Deloitte), [EY](/source/Ernst_%26_Young), [KPMG](/source/KPMG), [PwC](/source/PwC) and [Accenture](/source/Accenture).{{Cite news |title=Have McKinsey and its consulting rivals got too big? |url=https://www.economist.com/business/2024/03/25/have-mckinsey-and-its-consulting-rivals-got-too-big |access-date=2024-03-27 |newspaper=The Economist |issn=0013-0613}} == Segments == The segmentation of advisory services varies widely across organizations and countries. Categorization is unclear, in part because of the upheavals that have occurred in this industry in recent years.{{Cite news |date=2013-10-01 |title=Consulting on the Cusp of Disruption |work=[Harvard Business Review](/source/Harvard_Business_Review) |url=https://hbr.org/2013/10/consulting-on-the-cusp-of-disruption |access-date=2017-12-30}} One approach is to separate services into five broad service delivery families, considering the managers they are targeting: * Services related to the [company's overall strategy](/source/business_strategy), which are addressed to the [CEO](/source/Chief_executive_officer), * Services related to marketing, communication, sales and public relations, which are addressed to the [CMO](/source/Chief_marketing_officer), * Services related to management, [financial management](/source/financial_management), taxation, accounting, compliance with regulations, for the [CFO](/source/Chief_financial_officer), * Services related to the [company's operations](/source/operations_management), intended for operational management, which may be different depending on the industrial sector (technology director, plant managers, operations directors, Research and Development managers), for instance [COO](/source/Chief_operating_officer) and [CTO](/source/Chief_technology_officer), * Service related to [information technology](/source/information_technology) (see [IT consulting](/source/IT_consulting)) intended for information management, which are addressed to the [CIO](/source/Chief_information_officer). == Models of business == A consulting firm's model of business may be compared to [staffing](/source/temporary_work), wherein the objective is to lower labour costs for [clients](/source/client_(business)) for an intended result, or relative to an intended result or output, in order to charge for a [profit margin](/source/profit_margin) for the consulting firm. Clients are looking to procure or purchase external help and assistance. Consulting firms sustain their revenues from a [labour economic](/source/labour_economics) point of view as a method for distributing labour, where certain positions, roles or fields of expertise within the [labour market](/source/labour_market) find it more suitable for [contract](/source/contract) work, as contrasted to in-house employment, for a few conceivable reasons: * Client needs being incontinuous, or continuous but otherwise volatile in that they may vary from time to time in nature and scope, * A potential scarcity of skilled labour available on the market,{{cite journal |last1=Maister |first1=David H. |title=The Anatomy of a Consulting Firm |journal=The Advice Business: Essential Tools and Models for Managing Consulting |date=2004 |url=https://davidmaister.com/articles/the-anatomy-of-a-consulting-firm/ |access-date=22 May 2022}} * The possibility of offering a higher [work level activity](/source/division_of_labour),{{cite journal |title=The Best and the Brightest: The Construction, Significance and Effects of Elite Identities in Consulting Firms |date=2006 |url=https://journals.sagepub.com/doi/pdf/10.1177/1350508406061674 |publisher=SAGE Journals|doi=10.1177/1350508406061674 |last1=Alvesson |first1=Mats |last2=Robertson |first2=Maxine |journal=Organization |volume=13 |issue=2 |pages=195–224 |s2cid=206696349 |url-access=subscription }} * The necessity for [licensed](/source/licensure) labour or other qualified labour for tasks not making up the core task assembly of the client organization, * Looking to get a hold of or utilize of third party [intellectual property](/source/intellectual_property), intangible capital or other types of goodwill belonging to the consulting firm.{{cite web |title=Strategy and Organization Consulting |url=https://ceo.usc.edu/wp-content/uploads/2003/05/2003_19-g03_19-Strategy_and_Organization_Consulting.pdf |publisher=Center for Effective Organizations |access-date=6 April 2023}} Aside from the economic arguments stated above, consulting also acts as a [corporate services](/source/corporate_services) model: * Where internal consulting solutions (at which the client firm acts as a de-facto employer) may run into issues of scope once projects get too large, external consulting firms may be able to provide a better solution for the larger consulting deals on the market,{{cite journal |title=Similarities and Differences of Internal and External Consultants |year=1974 |url=https://journals.aom.org/doi/abs/10.5465/ambpp.1974.4980555 |publisher=Academy of Management |doi=10.5465/ambpp.1974.4980555 |access-date=6 April 2023 |last1=Swartz |first1=Don |journal=Academy of Management Proceedings |volume=1974 |page=17 |url-access=subscription }}{{cite journal |title=Should you have an internal consultant? |year=1979 |url=https://europepmc.org/article/med/10244211 |publisher=Europe PMC |pmid=10244211 |access-date=6 April 2023 |last1=Kelley |first1=R. E. |journal=Harvard Business Review |volume=57 |issue=6 |pages=110–120 }} * Risk and compliance audits may be suitable for a consulting contract as a means of safeguarding neutrality,{{cite web |title=Caveat Compliance: Can Firms Rely on Advice Received from Compliance Consultants? |url=https://us.eversheds-sutherland.com/portalresource/lookup/poid/Z1tOl9NPluKPtDNIqLMRV56Pab6TfzcRXncKbDtRr9tObDdEoSZDmO3!/fileUpload.name=/PCRM_02-17_Rubin-Runyon.pdf |access-date=6 April 2023}} * Consulting comprises the natural service model for large-scale [transformation](/source/business_transformation) projects in client enterprises,{{cite book |chapter=The Changing Global Consulting Industry |chapter-url=https://www.taylorfrancis.com/chapters/edit/10.4324/9781315648293-2/changing-global-consulting-industry-flemming-poulfelt-thomas-olson-flemming-poulfelt-arvind-bhambri-larry-greiner |publisher=Taylor & Francis Group |doi=10.4324/9781315648293-2 |access-date=7 April 2023 |title=Management Consulting Today and Tomorrow |year=2017 |last1=Poulfelt |first1=Flemming |last2=Olson |first2=Thomas H. |last3=Poulfelt |first3=Flemming |last4=Bhambri |first4=Arvind |last5=Greiner |first5=Larry |pages=5–36 |isbn=978-1-315-64829-3 }} * Certain service models, such as [financial audit](/source/financial_audit)ing and [economic consulting](/source/economic_consulting), are effectively required to offer their services in the form of consulting agreements due to a lack of industry position outside of the [tertiary sector](/source/tertiary_sector),{{cite journal |title=External auditors' reliance on internal audit: the impact of sourcing arrangements and consulting activities |year=2009 |url=https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1467-629X.2009.00322.x |publisher=Wiley Online Library |doi=10.1111/j.1467-629X.2009.00322.x |access-date=7 April 2023 |last1=Munro |first1=Lois |last2=Stewart |first2=Jenny |journal=Accounting & Finance |volume=50 |issue=2 |pages=371–387 |s2cid=154459504 |hdl=10072/29902 |hdl-access=free }} *Some clients may decide to hand over entire assemblies of tasks to consulting firms for a period of time - this is akin to outsourcing agreements, however with the exception of a predestined due date which is atypical in outsourcing, *Consulting is also used as a [third party](/source/third-party_source) service model as could be seen in for example contract formations of [b2b](/source/business-to-business)-deals, [legal](/source/legal) consulting and [M&A](/source/mergers_and_acquisitions) activity, consequently acting as a source of profit for clients, consulting firms and society as proffered.{{cite journal |last1=Momparler |first1=Alexander |last2=Carmona |first2=Pedro |last3=Lassala |first3=Carlos |year=2015 |title=Quality of consulting services and consulting fees |url=https://www.sciencedirect.com/science/article/pii/S0148296315000478 |journal=[Journal of Business Research](/source/Journal_of_Business_Research) |volume=68 |issue=7 |pages=1458–1462 |doi=10.1016/j.jbusres.2015.01.033 |access-date=19 May 2022|url-access=subscription }}{{cite book |last1=Armbrüster |first1=Thomas |url=https://books.google.com/books?id=glaStEamCu4C&dq=consulting&pg=PR8 |title=The Economics and Sociology of Management Consulting |date=2006 |publisher=[Cambridge University Press](/source/Cambridge_University_Press) |isbn=978-0-521-85715-4 |location=Cambridge, UK}}{{cite journal |last1=Shogun |first1=Steve M. |date=May 2004 |title=Editorial: Consulting, Research, and Consulting Research, Volume 23, Issue 2, May 2004 |url=https://pubsonline.informs.org/doi/abs/10.1287/mksc.1040.0078 |journal=[Marketing Science](/source/Marketing_Science_(journal)) |publisher=[INFORMS](/source/INFORMS) |volume=23 |issue=2 |pages=173–179 |doi=10.1287/mksc.1040.0078 |access-date=19 May 2022|url-access=subscription }} The consulting business model can be seen as a result of the [knowledge economy](/source/knowledge_economy), and as a subset of the [knowledge industry](/source/knowledge_industry).{{cite journal |last1=Sarvary |first1=Miklos |year=1999 |title=Knowledge Management and Competition in the Consulting Industry |url=https://journals.sagepub.com/doi/pdf/10.2307/41165988 |journal=[California Management Review](/source/California_Management_Review) |volume=41 |issue=2 |pages=95–107 |doi=10.2307/41165988 |jstor=41165988 |access-date=19 May 2022 |s2cid=154894228|url-access=subscription }}{{cite journal |last1=Jacobson |first1=Nora |last2=Butterill |first2=Dale |last3=Goering |first3=Paula |year=2005 |title=Consulting as a Strategy for Knowledge Transfer |journal=[The Milbank Quarterly](/source/The_Milbank_Quarterly) |volume=83 |issue=2 |pages=299–321 |doi=10.1111/j.1468-0009.2005.00348.x |pmc=2690143 |pmid=15960773}} Today it is not rare for consulting firms to offer what may be considered [turnkey](/source/turnkey) solutions to clients.{{cite book |last1=Nissen |first1=Volker |url=https://link.springer.com/book/10.1007/978-3-319-70491-3?page=2&oscar-books=true#toc |title=Digital Transformation of the Consulting Industry: Extending the Traditional Delivery Model |date=2018 |publisher=Springer Cham |isbn=978-3-319-70491-3 |series=Progress in IS |doi=10.1007/978-3-319-70491-3}}{{cite web |last1=Sandberg |first1=Robert |title=Corporate Consulting for Customer Solutions: Bridging Diverging Business Logics |url=https://ex.hhs.se/dissertations/221391-FULLTEXT01.pdf#page=193 |access-date=23 May 2022 |website=ex.hhs.se |publisher=[Stockholm School of Economics](/source/Stockholm_School_of_Economics)}} [Knowledge transfer](/source/Knowledge_transfer) is also a prevalent sales argument for consulting services.{{cite journal |last1=Butterill |first1=Dale |last2=Goering |first2=Paula |last3=Jacobson |first3=Nora |title=Consulting as a Strategy for Knowledge Transfer |journal=The Milbank Quarterly |date=16 June 2005 |volume=83 |issue=2 |pages=299–321 |doi=10.1111/j.1468-0009.2005.00348.x |pmid=15960773 |pmc=2690143 }} === Outsourcing === It is common practice for consulting firms to be involved in the sale of [outsourcing](/source/outsourcing) services as well. Similarly, outsourcing firms may offer consulting services as a way to help [integrate](/source/enterprise_integration) their services with the client. Many consulting firms offer several service packages as part of their business [portfolio](/source/portfolio_(finance)). While consulting services and outsourcing services are compatible, issues arise if the clients are not aware of the differences between the two. From an [ethical](/source/business_ethics) standpoint, it is important that clients are aware of what type or types of services they are [procuring](/source/procurement), as consulting services are meant to be a complementary service to the client firm, whereas outsourcing effectively aims to [replace](/source/Outsourcing) parts of the client firm that are imperative to their operational ability.{{cite journal |last1=Anderson |first1=Stephen J. |last2=McKenzie |first2=David |title=Improving Business Practices and the Boundary of the Entrepreneur: A Randomized Experiment Comparing Training, Consulting, Insourcing, and Outsourcing |journal=Journal of Political Economy |date=January 2022 |volume=130 |issue=1 |pages=157–209 |doi=10.1086/717044 |hdl=10986/34979 |s2cid=240535903 |url=https://www.journals.uchicago.edu/doi/abs/10.1086/717044 |access-date=21 September 2022|hdl-access=free }}{{cite journal |last1=Czerniawska |first1=Fiona |title=Outsourcing: Death Knell for Consulting? |journal=Consulting to Management |date=June 2006 |volume=17 |issue=2 |pages=57–59 |url=https://www.proquest.com/openview/8dd1a8db4a91c33279a2c83576291352/1?pq-origsite=gscholar&cbl=46088 |access-date=21 September 2022}} == Types == There are different types of consulting firms serving different sectors. They mainly fall under the following fields: * [Architecture](/source/Architecture) and [Engineering](/source/Engineering) * [Financial accounting services](/source/Financial_accounting) * [Health care](/source/Health_care) * [Safety in the workplace](/source/Safety_in_the_workplace) * [Hotel](/source/Hotel) and [hospitality industry](/source/hospitality_industry) * [Human resources](/source/Human_resource_consulting) * [Information technology](/source/Information_technology_consulting) * [Legal](/source/Practice_of_law) * [Management](/source/Management_consulting){{cite web| url= https://www.gonogo.co.il/ |title= Business plan examples }} Monday, 25 November 2019 * [Music](/source/Music_industry) * [Regulatory compliance](/source/Regulatory_compliance) * [Process safety](/source/Process_safety) Some consulting firms also serve niche sectors, such as: * [advertising](/source/advertising)/[marketing](/source/marketing)/[public relations](/source/public_relations) * [environmental consulting](/source/environmental_consulting) * [entertainment](/source/Entertainment_industry)/[media](/source/Mass_media) * [energy](/source/energy) * [logistics](/source/logistics) * [consulting in politics](/source/Political_consulting) and the [public sector](/source/Public_sector_consulting) * [real estate](/source/real_estate) * [recycling](/source/recycling) * [small business](/source/Small_and_medium-sized_enterprises) * [raw material supply](/source/Raw_material) == Successful consulting firm cases == === Mexico === In 2013, there was a randomized trial in Mexico where 432 small and medium enterprises were allowed access to management consulting services for one year.{{Cite journal|last1=Bruhn|first1=Miriam|last2=Karlan|first2=Dean|last3=Schoar|first3=Antoinette|date=April 2018|title=The Impact of Consulting Services on Small and Medium Enterprises: Evidence from a Randomized Trial in Mexico|url=https://www.journals.uchicago.edu/doi/full/10.1086/696154|journal=Journal of Political Economy|volume=126|issue=2|pages=635–687|doi=10.1086/696154|hdl=1721.1/121090|s2cid=5814460|issn=0022-3808|hdl-access=free|url-access=subscription}} As a result of this trial, there were many positive impacts. Such positive impacts include: increase in entrepreneurial spirit, increases in employment and higher wages for employees. Even after 5 years after the trial, positive impacts are still active.{{Cite web |date=2022-10-01 |title=Why Big Data is becoming so Important in Supply Chain {{!}} Big Supply-Chain Analytics – Assuras – Providing Assurance & Confidence For Today's Leading Businesses |url=https://www.assuras.com/why-big-data-is-becoming-so-important-in-supply-chain-big-supply-chain-analytics/ |access-date=2022-10-24 |language=en-US}} These results were achieved by advertising a consulting program to 432 enterprises and recorded data on the positive effects. == Impact of consulting firms in emerging economies == === Negative impacts === The impact of consulting firms on local businesses in [emerging economies](/source/emerging_economies) do not always have positive effects.{{Cite journal|last1=Back|first1=Yujin|last2=Praveen Parboteeah|first2=K.|last3=Nam|first3=Dae-il|date=2014-12-01|title=Innovation in Emerging Markets: The Role of Management Consulting Firms|url=https://www.sciencedirect.com/science/article/pii/S1075425314000337|journal=Journal of International Management|language=en|volume=20|issue=4|pages=390–405|doi=10.1016/j.intman.2014.07.001|issn=1075-4253|url-access=subscription}} One reason for this is that firms in emerging economies suffer from the inferiority of their technologies and innovation capabilities, thus, although they have access to consulting firms, they cannot make the most of the advice given. Advice given by consulting firms to clients may not be used efficiently as clients firms in emerging markets tend to suffer due to a lack of infrastructure, organisation, and education. Another reason firms in emerging economies struggle to effectively use consulting services is that innovation is very costly and risky. === Positive impacts === As noted above, consulting firms in emerging economies do also have positive impacts. Positive impacts include: increases in employment, increase in entrepreneurial spirit and higher wages for employees. == Impact of consulting firms in developed economies == The impact of consulting firms varies greatly between sectors, countries, and use cases. Consulting firms typically market similar services and solutions across industries and client groups, which can lead to "one-size-fits-all" approaches whose suitability for particular clients can vary. In the public sector, scholarship has identified a globally growing reliance on consultants in the past decades, which can lead to problems such as dependencies on external consultants and reduced accountability, as public governance and service provision gets veiled behind business secrecy practices.{{Cite journal |last1=Ylönen |first1=Matti |last2=Kuusela |first2=Hanna |date=2019 |title=Consultocracy and its discontents: A critical typology and a call for a research agenda |url=https://onlinelibrary.wiley.com/doi/abs/10.1111/gove.12369 |journal=Governance |language=en |volume=32 |issue=2 |pages=241–258 |doi=10.1111/gove.12369 |issn=1468-0491|hdl=10138/300845 |hdl-access=free }} Both management and tax consultancies have also been recurrently in the center of scandals involving the promotion of questionable business practices or defending clients with troubled track record, for example, in human rights or environmental responsibility issues.{{Cite book |last1=Bogdanich |first1=Walt |title=When McKinsey comes to town: the hidden influence of the world's most powerful consulting firm |last2=Forsythe |first2=Michael |date=2022 |publisher=Doubleday |isbn=978-0-385-54944-8 |edition=First |location=New York}}{{Cite book |last=Shaxson |first=Nicholas |title=Treasure islands: tax havens and the men who stole the world |date=2016 |publisher=Vintage Books |isbn=978-0-09-954172-1 |location=London}}{{Cite book |last1=Mazzucato |first1=Mariana |title=The Big Con: how the consulting industry weakens our businesses, infantilizes our governments and warps our economies |last2=Collington |first2=Rosie |date=2024 |publisher=Penguin Books |isbn=978-1-80206-026-3 |location=Dublin}} One study shows that there is a significant difference between efficiency between consulting firms in America ([developed economy](/source/developed_economy)) and consulting firms in Asia Pacific regions (emerging economy).{{Cite journal|last1=Park|first1=Gowangwoo|last2=Lee|first2=Seok-Kee|last3=Choi|first3=Kanghwa|date=January 2021|title=Evaluating the Service Operating Efficiency and Its Determinants in Global Consulting Firms: A Metafrontier Analysis|journal=Sustainability|language=en|volume=13|issue=18|article-number=10352|doi=10.3390/su131810352|doi-access=free|bibcode=2021Sust...1310352P }} Efficiency scores of consulting firms in America were significantly higher than consulting firms in Asia Pacific regions. This is because firms in developed economies have better infrastructure, organisation and education, thus advice given by consulting firms is used efficiently. == Examples of consulting firms == Many consulting firms provide services across a range of industries. Notable firms include [McKinsey & Company](/source/McKinsey_%26_Company), [Boston Consulting Group](/source/Boston_Consulting_Group), [Bain & Company](/source/Bain_%26_Company), [Kearney (consulting firm)](/source/Kearney_(consulting_firm)), [Deloitte](/source/Deloitte), [KPMG](/source/KPMG), [PwC](/source/PwC), and [Ernst & Young](/source/Ernst_%26_Young). == See also == {{cols}} * [Consulting](/source/Consulting) * [Information technology consulting](/source/Information_technology_consulting) * [Knowledge economy](/source/Knowledge_economy) * [Knowledge industry](/source/Knowledge_industry) * [Knowledge intensive business services](/source/Knowledge_intensive_business_services) * [Knowledge transfer](/source/Knowledge_transfer) * [Management consulting](/source/Management_consulting) * [Professional services network](/source/Professional_services_network) * [Staffing](/source/Staffing) * [Temporary work](/source/Temporary_work) {{colend}} == References == {{reflist}} {{Authority control}} Category:Consulting firms Category:Knowledge firms Category:Legal entities --- Adapted from the Wikipedia article [Consulting firm](https://en.wikipedia.org/wiki/Consulting_firm) by Wikipedia contributors ([contributor history](https://en.wikipedia.org/wiki/Consulting_firm?action=history)). Available under [Creative Commons Attribution-ShareAlike 4.0 International](https://creativecommons.org/licenses/by-sa/4.0/). Changes may have been made.