The consulting “training machine” and how corporates and startups benefit
The plethora of career opportunities open to consultants, partnered with the “up or out” policy, means the attrition rate has always been high. We’ve run the numbers on our 16,000 strong community, and found that one third of our members moved in 2015, with the average tenure of consultants 2.4 years!
67% of these moves are into corporates or startups. What’s really interesting, is once they’ve moved out of consultancy, the average tenure jumps up to 3.5 years. That got us thinking… do corporates and startups get a great return on someone else’s investment when they hire ex-consultants?
How long candidates last
The attrition rate in consultancy is famously high. In 2015, almost one third of our members moved from a company to another:
% of MMO members who found a new job in 2015
We also found that the average tenure for consultants was just 2 years and 4 months with their current employer. This was markedly different to the 3 years and 5 months that alumni stay in their next job.
Number of years within the same company
Where do the consultants go?
Whilst some members stay in consulting, the majority of consultants move into corporates or startups (67%). It’s also interesting to see that PE and VC hire a lot of former consultants, considering the small number of firms and teams.
Destination (industries) of MMO members in 2015
The return on investment
As a general rule of thumb, a new employee isn’t expected to add value for their first six months. If we make the assumption that the value added is proportional to the pay (which seems to hold true at the more junior level!), the ROI calculation of consultants becomes rather simple:
In a consultancy, the return on investment is 22 months of value/ 6 months of investment = 3.6 times
In industry, the return on investment is 35 months of value/ 6 months of investment = 5.8 times
Partnered with the fact that consultancies invest heavily in their training, and that post this training consultants are usually able to bring value faster, this suggests corporates and startups are getting a far higher return on their investment as a result of the longer tenure of their employees. This is before we’ve included the cost of recruitment (which can obviously be much reduced by using movemeon ;)), and the normally higher salaries paid in consulting.
So it seems that consultancies continue to be a great training ground for top talent. And that cunning corporates and startups are doing well to profit from this.
Why this may not be all bad for consultancies
I’m sure this won’t be a complete shock to the consultancies. And to be honest, I’m pretty sure it’s not something they are particularly worried about. Whilst increasing the tenure of great people will obviously have a good impact on the business, the “up or out” policy clearly ensures the quality of consultants processing through the firm. Further to this, it develops competitive environment which tends to bring the best out of these driven employees.
However, potentially most pertinent of all, is that the wider the consulting alumni net is cast, the more likely they are to re-engage their old consulting firm. So by keeping high attrition, but keep their alumni close, the network becomes a very effective sales channel.
Maybe the initial low return in investment isn’t such a worry after all!
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