Up or out model is similar to a legal Ponzi scheme
I've been asked quite recently for some advice on which career path starting point to chose. Main questions were around the "real" benefits for individuals of consulting companies and specifically about the "up or out" model which is one of the common standards in the industry.
I will try in this post to give my 2 cents on the key attention points :
- before joining a consulting company, to be aware of the ins and outs of how it works
- and when joining a consulting company, how to get the best and prevent frustration
Up or out model, the promise that anyone can win the lottery
I've been in consulting for years, and I continue to truly like this kind of job. However, I've experienced a lot, and must admit promoted a lot, this "up or out" model, but never thought of this : Isn't the wonderful career promise a fake, as in fact it will only be applicable to a really small percentage of happy few?
And then, I found following YouTube video, quite simple but interesting. Of course, it is aiming at the "real" scam jobs that can be found based on fake products, marvelous financial investments and so on... But looking at the 4 simple criteria given, it would surely make a consultant think a bit about it...
1. They have to convince you to join them
Consulting companies are still attractive for engineering or commerce students. This french report confirms this trend, at least for this territory.
However, it has always been difficult to hire the appropriate "talents" and market demand is even increasing. A few years ago, joining a big consulting company was nearly the only possible first step on a successful career path. Now competing options are available with startups for example. This makes competition between consulting companies even tougher.
Core values are becoming a sales pitch
Companies using the up or out model are now trying to compete not only on the reputation of their brand, but on the "side" aspects : how wonderful and numerous fun events are, the so much "GAFA" style core values... which have, of course, nothing to do with competitors...
Not to do finger pointing (or what could be considered as finger pointing) to one of my past or current employers, bellow types of core values is what you always find (can be true for these examples not directly linked to consulting companies though) :
But do they exist in real life?
To understand if this is completely fake or really part of the company culture (yes sometimes having fun can really be part of a company management style), ask how core values are taken into account in the evaluation process. Indeed, in the end, "up or out" means being compared and in constant competition with peers. Evaluation criteria directly drives real life within a company, whatever the resource level.
If core values are somehow translated into the evaluation process, this is a positive trend. If not, well, may not be such a big issue, but know that you will face quite some difference between real life and the promise made.
Ask not only for your own evaluation process but also for the one of top/entity management. Indeed, if their incentives are only based on revenue with nothing about core values or staff tenure, it is highly probable that wonderful jobs will not be so common. Volume of activity and thus a lot of "commodity" jobs are the only possible outcome in that case.
2. They avoid talking about their product
Most of consulting companies will explain why they are the best on the market (or have plans to become the best soon). The missions are great and challenging. And indeed a few examples can be given of large or strategic transforming programs. It is however hard to really understand the role of one given company in such programs, as in reality several ones are usually involved. Moreover, comparing the number of such great worldwide opportunities to the number of employees, chances to participate in one of these can be seen as winning the lottery.
In addition, methodologies used are "complex" or "secret" so of course not to be detailed before joining the firm. But all are fine tuned to be best in class on the market. As an example :
Our methodology is designed to exceed national and international standards [...] KPMG has its own quality procedures.KPMG
One would say this is completely normal. Michelin would not reveal its manufacturing processes. Yes, but Michelin produces tyres which can checked and compared before buying them... (worked for them by the way, really good products :-)).
3. They want you to work for them when they know nothing about you
In the very large majority, recruitment process is based on school for juniors and on buzzwords on more experienced consultants. It is not so common to check if there is a real fit for the job and for the career path. This would in a way also require more transparency on the missions done in the company… It is of course rule of offer and demand. Demand is so big that companies are less regarding on individuals.
This can make a bit sense for juniors. There is a full trust in the educational system and reputation of the different schools. "Resources" are also required to fit into the company "culture" and learn its "methodologies". This was, by the way, one of the true real advantages of joining first a consulting company.
However, it is a bit different for experienced hires. Some companies are doing great and really recruit profiles to get inspired by their past experiences. The difference with the company culture and practices is in this case seen as a strength brought to the company. Most of them unfortunately are recruiting keywords to put in front of clients demands, but take little to no consideration to what it means in terms of job potential (and expectations).
Whatever the hire level, feel free to ask what the short term expected outcomes from you are (fact based of course), the real missions you'll be on, and ask to meet your possible future team mates.
4. You have to pay to earn money
Of course in consulting companies (which are completely legal), you are not asked to directly pay money to be able to earn money. Process is a bit more insidious.
What "up or out" model really is
The up or out pyramidal model relies on 4 pillars :
- struggling for growth (organic) so that need for experienced resources is increasing. This generates room for entry level to fill in these above slots
- the promise that everyone can have its piece of the cake and that everybody is given the opportunity to succeed
- a cost structure highly leveraging inexperienced profiles (thus low cost) but balanced with a high level of industrialization and repeatable procedures.
- "Unfortunately" inexperienced resources become experienced and ask for better wages. New inexperienced hires need to be staffed in order to keep the cost structure at its level. Unfortunately, growth, even if steady these last years, is not big enough to let room for everybody. By design, people need to leave :
It made sense one day (maybe)
For years this management model has been described as a win-win(-win) strategy.
- Employees won great experience and knowledge really quickly. They were given responsibilities far beyond what could be expected from their level (the famous "acting-as")
- Clients won cheap labor force, eager to solve any problem and make unpaid/unbilled overtime corresponding to 1.5 to 2 FTEs (full time equivalents, i.e. person working). Some seem to discover how it works, but this was implicitly part of the "deal". Can't we consider in that case that part of the employee money is going away? Aren't you in that case literally buying your job and the promise to be able to climb up?
- And the full ecosystem of consulting companies and end clients won trained resources once these ones left their "mother" consulting company.
Say goodbye to good old days
Constant growth of consulting companies is mainly based on "digital transformation". I'm doing that for a living... We then sell a lot of digital transformation and new ways of working to our customers. One client asked me one day "Ok, and what do you do on your side to be more digital and have new ways of working?". Mmmh, lets plan an ideation session on this topic... Quite an interesting post on evolution of consulting business here.
The balance between what can be brought by young employees and what the company can bring to them is changing. Cf. new ways of working, knowing what it is to "live digital" instead of talking about it, knowledge on hype technologies... No surprise new schools like "école 42" are more and more interesting targets for recruitment.
In the open economy, methodologies which were one of the highest value brought to employees are also becoming open. Worse, open standards are sometimes better than internal methodologies, unable to deal with need for agility and creativity.
In addition, in order to optimize their cost structures many consulting companies have tried to work on "higher value business". This means for example for IT companies to outsource or offshore "low tasks". There is no more opportunity to learn the "hard way" and really understand what all the impacts of what we are selling are about. Some companies put in place "trainings" to explain what IT is, give "certifications" after looking a few videos. But this thin layer of knowledge cracks pretty easily when it comes to real life and making something work. Employees will still learn how to work quick and hard but added value of experience within such structures is decreasing.
Should I avoid consulting companies then?
Consulting companies is still (for the moment) a good option. As an employee, it is quite critical to be able to understand the learning path to get a grip on end to end aspects of delivering transformation. Understand which trainings are available, if they are relevant. Know if having different roles is possible, of which kind... And of course identify which "low value" have great value for medium term career.
A new HR model is not an option
This has already started in a clumsy way with the change from "up or out" to "grow or go". In theory, career paths can now be different, are open to expertise and to difference between individuals. It is however still really difficult in reality even for highly demanded profiles.
It comes of course a bit from what I mention above. But main reason is in fact a progressive misalignment between clients expectations (and evolving ways of working) and what the up or out model can propose.
This up or out model is not only becoming an issue for employees. Clients of consulting companies can also suffer from it. Thoughts on this on next post : Up or out model has become a scam – Part 2, struggling with clients expectations.
For both their employees and business, consulting and IT companies need to acknowledge their difficulties and uncertainties and try to find new ways of working with an open ecosystem of startups, freelance and re-internalized competencies.