Did you know that the first mention of the term ‘consultant’ is thought to have been from an 1893 story featuring the mastermind detective Sherlock Holmes? Drawing its roots from the Latin term ‘consultare’ which means ‘take the advice of’, this word has eventually come to represent a multi-billion-dollar global industry.
Management and business consulting form a substantial part of the consulting industry. But what do these two fields entail?
Business and management consulting are oft-confused for each other, but there is a difference between business consulting vs management consulting.
Business consulting focuses on improving operational efficiency and business processes while management consulting focuses on developing long-term strategic plans. Business consultants also work more with smaller businesses while management consultants work with large organizations.
Let’s take an in-depth look at them both:
What Is Business Consulting?
Business consulting is the practice of providing advice and guidance on how to improve business operations. Business consultants usually work with small businesses or start-ups and identify areas where they need improvement and provide recommendations on ways to achieve those improvements.
According to a Quora answer by an ex-consultant, “Business consulting is a term used a lot more often when consulting to people who were the majority owners of the business. These clients also tend to be smaller, privately owned enterprises, and these consultants often bundle in business services that include accounting, trade, and compliance.”
Some examples of the problems a business consultant may solve include:
- How do we streamline our hiring methods?
- What legal aspects do we need to consider before launching our product?
- Should we change suppliers?
- What should be done with this product line?
When Do Organizations Need Business Consulting Services?
Organizations usually hire business consultants when they are just starting out and need outside help in streamlining processes or in a particular aspect such as marketing, HR, or customer service.
It’s usually small or medium businesses that hire business consultants as they offer a more comprehensive yet cost-effective package that meets holistic business needs.
How Much Do Business Consultants Make?
According to Indeed, business consultants earn an average salary of $73,750 on an annual basis in the US. However, an entry-level job in this field pays an average of $46,807 a year, according to ZipRecruiter.
What Is Management Consulting?
Management consulting is the practice of providing advice and working closely with senior executives within an organization to develop solutions and implement plans designed to increase overall efficiency, performance, and profitability. This includes everything from defining future goals to strategic planning to organizational design.
Management consultants usually work with large corporations, governments, and the public sector. They use their specialized industry knowledge and experience to make data and research-backed expert decisions to improve the functioning of an organization.
And the scope of management consulting covers all types of industries including manufacturing, retail, healthcare, technology, finance, among others.
Some common functions performed by management consultants include:
- Strategy development
- Vision management
- Performance measurement
- Risk assessment
- Identify future opportunities
- Competition analysis
- Change management
- Redesigning company structure
- Talent acquisition & retention
- Process reengineering
- Financial analysis
What Are Some Examples of Projects That a Management Consultancy Might Work On?
- A UK-based television channel wants to expand into new markets. A management consultancy can advise them on which countries would be best for them to enter.
- An oil refinery has been hit hard by low crude prices. The owners want to restructure how it operates so that it will have better financial results. A management consulting firm helps them figure out what changes need to happen.
- The government wants to reduce unemployment rates. They ask a management consultancy to find ways to attract young workers back into the workforce.
Here’s a look into what a management consultant does on a day-to-day basis:
When Do Organizations Need Management Consulting Services?
Companies seek management consultancy services when they feel the need for an outside, expert, and unbiased perspective to help them plan their growth and vision strategy. Consultants provide valuable insights into what works well and what doesn’t.
In addition, management consultancies have access to information about competitors’ strengths and weaknesses, market trends, and other important data that allows them to create effective strategies.
How Much Do Management Consultants Earn?
Management consulting is a profession that pays on the higher end of the spectrum. According to Glassdoor, the average salary drawn by a management consultant in the US is $103,853.
In fact, entry-level jobs for undergraduates at top-tier consulting firms McKinsey, Bain, and Boston Consulting Group command a base salary of around $83,000 apart from the signing and performance bonus, according to CaseInterview.
What Does the Global Management Consulting Market Look Like?
Management consulting is a major player in the global consulting market, accounting for little over half of total market share, according to Consultancy.org.
According to Statista, there were around 730,000 management consultants employed in the US in 2020. And the value of the management consulting industry in the US alone is $253.1billion in 2021 (IbisWorld).
What Are the Differences Between Business Consulting vs Management Consulting?
- The client: In business consulting, most often than not, the client is a small business owner or a start-up. However, in management consulting, the clients tend to be larger organizations such as corporations, government agencies, non-profit institutions, universities, hospitals, and schools.
- Time-period: Most businesses tend to focus on short-term objectives while large organizations usually plan over longer periods of time.
- Scope of work: While business consulting focuses more on improving day-to-day operational activities and business processes within a company, management consulting typically involves strategic planning and long-term goals.
- Pay-scale: As mentioned earlier, management consultants usually earn more than business consultants. While business consultants earn around $70,000 annually on average in the US, management consultants earn above $100,000. This can go above $500,000 if you’re a partner in a top-level firm. The reason for the difference in pay could be due to the nature and size of the clients each consulting type works with as well as because management consultants have specialized skillsets and industry experience.
- Growth Opportunities: Career growth opportunities are slightly limited in business consulting. On the other hand, management consulting provides ample scope for professional and personal development. It offers numerous avenues for learning and advancement including leadership positions, managerial roles, executive jobs, research & development, marketing, finance, human resources, legal services, and strategy.
Hope this article has helped you understand the differences between business consulting vs management consulting and which one might be a better fit for you!