Daybreak - The “Big 3” consulting firms have a talent problem

Episode Date: September 10, 2023

For the longest time, consulting at the “Big 3” strategy consulting firms—McKinsey, Boston Consulting Group, and Bain & Co.—is not only one the most sought-after careers but also one of the highest-paying jobs.Five years ago, 30% of graduates from the top IITs with bachelors degrees chose consulting. For those from the IIMs in Ahmedabad, Bengaluru, and Kolkata, 35% of graduates chose a consulting job at one of these companies.But ever since 2022, something’s changed. The Ken spoke to four placement coordinators of IITs and IIMs and they told us that these jobs, especially at the entry level, are not as popular anymore.Why?Tune in to find out.Recommendation  A job with McKinsey, Bain, or BCG trumps everything. Or it used toFree ReadHow brands decide what your favourite snack tastes likeDaybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me. My interruptions, my analogies and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor have been working on an ambitious new podcast. It's called Intermission.

We want to tell the same. secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they managed to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into.

to the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get an alert, as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcast. or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode.

In India, it is easily one of the most highest-paying careers and naturally also the most wanted. I'm talking about a job at the big three strategy consulting firms, McKinsey, Bayan Company and Boston Consulting Group, often also called the MBB. And it makes sense. A 22-year-old IIT graduate told us that his starting salary at Bain would be 1,066,000 rupees.

And then come the perks, of course. Company-paid trips where you're taken around and chauffeur-driven cars, put up at the fanciest of hotels, and you get to eat the best food. To give you a sense of how popular the big three are, let me throw some numbers your way. Five years ago, 30% of graduates from the top IITs in India with bachelor's degree. chose consulting jobs. For those from the IIMs in Ahmedabad, Bangalore and Kolkata, it was 35% of graduates. But ever since 2022, something has changed. The Ken spoke to four placement coordinators of IITs and IIMs,

and they told us that these jobs, especially at the entry level, are not as popular anymore. See, a certain extent of attrition is normal at these companies. People will come as freshers, work for a couple of years and move on with one of the Big Three on their resume. You can imagine the kind of weight that these names carry when these folks go to work elsewhere. The exit opportunities are phenomenal for them. But now, the Big Three firms are in danger of being reduced to the best training grounds for freshers to come, sharpen their skills and move on to some other place. attrition at the entry level at the big three has gone as high as 20%. What could be going on?

Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nickda Sharma, and I don't chase the news cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time. Today is Monday, the 11th of September. My colleague and the Ken reporter, Vanita Bhattnagar, spoke to a 22-year-old engineer from one of the IITs. Bain & Company had offered them a job back in 2022 when they were still studying. So the plan was to complete their graduation in April and

join the management consulting firm by September this year. It goes without saying how excited they were to begin work. After all, working for Bain and Company, one of the big three is the dream for some of the brightest engineering and management graduates. But guess what? Months passed, and it was June 2023 and still no word from Bain. Absolute radio silence. They had no idea about the joining date. It was months filled with anxiety. It was only one whole month later in July

that Bain told them that their joining date had been deferred to early 2024. More than a year since they received the offer letter. This is not the only such case. And it is all a sign, a sign that consultancy work at the big three is reducing in popularity. What could be the reason? Stay tuned to find out, but before we get there, my colleague Aksha has a message for you.

Have you ever wondered how brands decide what your favorite snack should taste like? For instance, how crunchy should your biscuits be? Or, does your kale juice have the right amount of bitterness? These are small but weighty decisions for FMCG products, especially when companies are trying to win this. cut-throat competition. So brands of all use from giants like Britannia and ITC to niche companies like Raw Pressery and Unibik build elite teams of food scientists. That's right. Food scientists,

whose only job it is to figure out just what gets our taste buds going. In fact, this is just the tip of the iceberg. In the battle over your taste butts and your wallets, the companies go to great lengths to manufacture flavor as well. There are dedicated flavor and fragrance. There are dedicated flavor and fragrance, firms, known as FNF firms that determine what some of these products should taste and smell like. This global FNF industry, believe it or not, is worth $26.3 billion. We have an intriguing deep dive into this world of packaged food. And it has been made available for free for exactly 24 hours just for today, the 11th of September. So go ahead, give it a read, and share away with your friends before the counter runs out. I am actually,

from the Ken's Newsroom. Thank you for listening to us. If you like what we do, please rate and review us wherever you get your podcasts. And now back to Snigda. The most important asset for consulting firms like Bain, McKinsey and VCG is human capital. They hire the smartest professionals from business schools and graduate colleges who in turn advise their clients on how to fix the most difficult problems. Think of the work structure in these companies like a pyramid. These professionals start at the entry-level position and slowly climb up. But this structure is now getting disrupted and it is happening at the base of the pyramid. The most apparent reason for the fall in popularity of these kinds of jobs is what is happening to tech companies.

A senior executive at McKinsey told Vanita that technology companies are regular corporate clients of consulting firms. But since that sector has shrunk globally, it is impacting consulting demand. Vanita looked at the placement data of IIT Madras and it reflects this. The big three are taking it slow with pre-placement offers or PPOs. In 2022, they'd offered 7, 9 and 5 PPO's. This year, it is down to 4, 2 and 3. It is the same with internships. In 2022, Bain hired 14 interns.

and BCG hired 17. This year, Bain hired 3 and BCG just took in 6. So what does this all mean? You see, usually MBBs hire a lot of freshers and then train them for leadership roles within the firm. So less people joining at the entry level and more leaving after two, two and a half years means that these companies have to hire senior or mid-level executives laterally. That is an expensive affair. Globally, firms like Deloitte, KPMG, BCG and McKinsey have cut jobs and stopped hiring freshers until 2024. In India, Bain & Company and BCG have delayed joining dates by over eight months. The Ken found, though, that McKinsey hires are on track to join from September this year.

So how are these fresh graduates managing this change? Another IIT graduate whose job at Bain has been deferred to next year told us and I'm quoting, in hindsight, I now regret why I did not consider offers from FMCG or technology companies. I feel stuck now and will be behind my peers in promotions and work experience. End quote. Even those freshers who started work a few years ago are not the happiest. Many of them are being put on the bench. A consultant who joined Bain in 2020,

after completing their MBA from IAM Lucknow, told the Ken that they'd been on the bench for the last two months. They said how everyone was fully deployed in 2021 and till mid-2020. It was only from late last year that people had been seeing extended time on the bench. Another consultant hired around the same time told the Ken that they were using this time on the bench to help the team with drafting proposals or internal research work instead of working for a job. client. But their morale has suffered. And as for the big three having to hire mid-level folks

laterally, one, it is expensive like I told you, and two, it is causing a fair bit of confusion within the team. For example, a 25-year-old consultant recalled his one-and-a-half-year stint at Bain and Company to Vanita. He worked on four projects during his tenure, but his manager and team changed with every project, which became hard to adapt to. He said, and I'm quote, In the beginning, I was excited to jump on new project as it would allow me to dive deep into a new industry. But now, I feel that I have only made Excel spreadsheets and PowerPoint presentations and read thousands of research reports. I cannot say if all this has made any impact on the clients that I was working with. End quote.

And now coming back to these big three companies, how are they taking this employee turnover? Turns out, instead of taking it negatively, they are actually diving in into their alumni networks. Dear listeners, this is just a part of Vanita's complete story on the Big Three consulting firms. To find out all about how the MBB is dealing with this increase in attrition, do read the report on the ken.com. I'll add the link to the show notes of this episode. Thank you for listening. I'll be back on Wednesday with a brand new story. Daybreak is produced from the newsroom. of the Ken, India's first subscriber-focused business news platform.

What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps and podcast extras. Head to the Ken.com and click on the red subscribe button on the top of the website. I am Snigda Sharma, your host, and today's episode was edited by my colleague Rajiv Sien.