A consulting firm or simply consultancy is a professional service firm that provides expertise and specialised labour for a fee, through the use of consultants. Consulting firms may have one employee or thousands; they may consult in a broad range of domains, for example,

management Management (or managing) is the administration of organizations, whether businesses, nonprofit organizations, or a Government agency, government bodies through business administration, Nonprofit studies, nonprofit management, or the political s ...

engineering Engineering is the practice of using natural science, mathematics, and the engineering design process to Problem solving#Engineering, solve problems within technology, increase efficiency and productivity, and improve Systems engineering, s ...

, 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 A subject-matter expert (SME) is a person who has accumulated great knowledge in a particular field or topic and this level of knowledge is demonstrated by the person's degree, licensure, and/or through years of professional experience with the su ...

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 Professional services are occupations in the service sector requiring special training in liberal arts and pure sciences education or professional development education. Some professional services, such as architects, accountants, engineers, d ...

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 ''The Economist'' is a British newspaper published weekly in printed magazine format and daily on Electronic publishing, digital platforms. It publishes stories on topics that include economics, business, geopolitics, technology and culture. M ...

'', the industry’s most important firms are the "Great eight" consulting firms which consist of Bain, BCG, McKinsey, Deloitte, EY, KPMG,

PwC PricewaterhouseCoopers, also known as PwC, is a Multinational corporation, multinational professional services network based in London, United Kingdom. It is the second-largest professional services network in the world and is one of the Big Fo ...

and Accenture.

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. 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, which are addressed to the CEO, * Services related to marketing, communication, sales and public relations, which are addressed to the CMO, * Services related to management, financial management, taxation, accounting, compliance with regulations, for the CFO, * Services related to the company's operations, 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 and CTO, * Service related to

information technology Information technology (IT) is a set of related fields within information and communications technology (ICT), that encompass computer systems, software, programming languages, data processing, data and information processing, and storage. Inf ...

(see IT consulting) intended for information management, which are addressed to the CIO.

Models of business

A consulting firm's model of business may be compared to staffing, wherein the objective is to lower labour costs for clients for an intended result, or relative to an intended result or output, in order to charge for a 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 point of view as a method for distributing labour, where certain positions, roles or fields of expertise within the labour market find it more suitable for

contract A contract is an agreement that specifies certain legally enforceable rights and obligations pertaining to two or more parties. A contract typically involves consent to transfer of goods, services, money, or promise to transfer any of thos ...

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, * The possibility of offering a higher work level activity, * The necessity for licensed 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 Intellectual property (IP) is a category of property that includes intangible creations of the human intellect. There are many types of intellectual property, and some countries recognize more than others. The best-known types are patents, co ...

, intangible capital or other types of goodwill belonging to the consulting firm. Aside from the economic arguments stated above, consulting also acts as a 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, * Risk and compliance audits may be suitable for a consulting contract as a means of safeguarding neutrality, * Consulting comprises the natural service model for large-scale transformation projects in client enterprises, * Certain service models, such as

financial audit A financial audit is conducted to provide an opinion whether "financial statements" (the information is verified to the extent of reasonable assurance granted) are stated in accordance with specified criteria. Normally, the criteria are interna ...

ing and 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, *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 service model as could be seen in for example contract formations of b2b-deals,

legal Law is a set of rules that are created and are law enforcement, enforceable by social or governmental institutions to regulate behavior, with its precise definition a matter of longstanding debate. It has been variously described as a Socia ...

consulting and M&A activity, consequently acting as a source of profit for clients, consulting firms and society as proffered. The consulting business model can be seen as a result of the

knowledge economy The knowledge economy, or knowledge-based economy, is an economic system in which the production of goods and services is based principally on knowledge-intensive activities that contribute to advancement in technical and scientific innovation. ...

, and as a subset of the knowledge industry. Today it is not rare for consulting firms to offer what may be considered turnkey solutions to clients. Knowledge transfer is also a prevalent sales argument for consulting services.

Outsourcing

It is common practice for consulting firms to be involved in the sale of

outsourcing Outsourcing is a business practice in which companies use external providers to carry out business processes that would otherwise be handled internally. Outsourcing sometimes involves transferring employees and assets from one firm to another ...

services as well. Similarly, outsourcing firms may offer consulting services as a way to help integrate their services with the client. Many consulting firms offer several service packages as part of their business portfolio. 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 Ethics is the philosophical study of moral phenomena. Also called moral philosophy, it investigates normative questions about what people ought to do or which behavior is morally right. Its main branches include normative ethics, applied e ...

standpoint, it is important that clients are aware of what type or types of services they are procuring, as consulting services are meant to be a complementary service to the client firm, whereas outsourcing effectively aims to replace parts of the client firm that are imperative to their operational ability.

Types

There are different types of consulting firms serving different sectors. They mainly fall under the following fields: *

Architecture Architecture is the art and technique of designing and building, as distinguished from the skills associated with construction. It is both the process and the product of sketching, conceiving, planning, designing, and construction, constructi ...

and

Engineering Engineering is the practice of using natural science, mathematics, and the engineering design process to Problem solving#Engineering, solve problems within technology, increase efficiency and productivity, and improve Systems engineering, s ...

* Financial accounting services *

Health care Health care, or healthcare, is the improvement or maintenance of health via the preventive healthcare, prevention, diagnosis, therapy, treatment, wikt:amelioration, amelioration or cure of disease, illness, injury, and other disability, physic ...

* Safety in the workplace *

Hotel A hotel is an establishment that provides paid lodging on a short-term basis. Facilities provided inside a hotel room may range from a modest-quality mattress in a small room to large suites with bigger, higher-quality beds, a dresser, a re ...

and

hospitality industry The hospitality industry is a broad category of fields within the service industry that includes lodging, food and beverage services, event planning, theme parks, travel agency, tourism, hotels, restaurants, nightclubs, and bars. Sector ...

Human resources Human resources (HR) is the set of people who make up the workforce of an organization, business sector, industry, or economy. A narrower concept is human capital, the knowledge and skills which the individuals command. Similar terms include ' ...

Information technology Information technology (IT) is a set of related fields within information and communications technology (ICT), that encompass computer systems, software, programming languages, data processing, data and information processing, and storage. Inf ...

Legal Law is a set of rules that are created and are law enforcement, enforceable by social or governmental institutions to regulate behavior, with its precise definition a matter of longstanding debate. It has been variously described as a Socia ...

Management Management (or managing) is the administration of organizations, whether businesses, nonprofit organizations, or a Government agency, government bodies through business administration, Nonprofit studies, nonprofit management, or the political s ...

Music Music is the arrangement of sound to create some combination of Musical form, form, harmony, melody, rhythm, or otherwise Musical expression, expressive content. Music is generally agreed to be a cultural universal that is present in all hum ...

* Regulatory compliance Some consulting firms also serve niche sectors, such as: *

advertising Advertising is the practice and techniques employed to bring attention to a Product (business), product or Service (economics), service. Advertising aims to present a product or service in terms of utility, advantages, and qualities of int ...

marketing Marketing is the act of acquiring, satisfying and retaining customers. It is one of the primary components of Business administration, business management and commerce. Marketing is usually conducted by the seller, typically a retailer or ma ...

public relations Public relations (PR) is the practice of managing and disseminating information from an individual or an organization (such as a business, government agency, or a nonprofit organization) to the public in order to influence their perception. Pu ...

* environmental consulting *

entertainment Entertainment is a form of activity that holds the attention and Interest (emotion), interest of an audience or gives pleasure and delight. It can be an idea or a task, but it is more likely to be one of the activities or events that have deve ...

media Media may refer to: Communication * Means of communication, tools and channels used to deliver information or data ** Advertising media, various media, content, buying and placement for advertising ** Interactive media, media that is inter ...

energy Energy () is the physical quantity, quantitative physical property, property that is transferred to a physical body, body or to a physical system, recognizable in the performance of Work (thermodynamics), work and in the form of heat and l ...

logistics Logistics is the part of supply chain management that deals with the efficient forward and reverse flow of goods, services, and related information from the point of origin to the Consumption (economics), point of consumption according to the ...

* consulting in politics and the

public sector The public sector, also called the state sector, is the part of the economy composed of both public services and public enterprises. Public sectors include the public goods and governmental services such as the military, law enforcement, pu ...

* real estate * recycling *

small business Small businesses are types of corporations, partnerships, or sole proprietorships which have a small number of employees and/or less annual revenue than a regular-sized business or corporation. Businesses are defined as "small" in terms of being ...

* raw material supply

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. 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. 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 do not always have positive effects. 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

One study shows that there is a significant difference between efficiency between consulting firms in America ( developed economy) and consulting firms in Asia Pacific regions (emerging economy). 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 KPMG,

Boston Consulting Group Boston Consulting Group, Inc. (BCG) is an American global management consulting firm founded in 1963 and headquartered in Boston, Massachusetts. It is one of the "Big Three (management consultancies), Big Three" (or MBB, the world's three large ...

, Deloitte,

, and Ernst & Young.

References

{{Authority control Knowledge firms Legal entities