The Rise of Management Consultants

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The always-entertaining Freakonomics podcast recently devoted a full episode to the emergence of management consulting firms in the U.S. The podcast got our attention right away when Stephen Dubner rattled off labor market statistics — something that always piques our interest — for management consultants.

DUBNER: Raise your hand if you know somebody who works as a consultant. Yeah, I thought so – pretty much everybody. There are more than 500,000 management consultants in the U.S. – more than 700,000 if you count the self-employed. And there are even more on the way. The Bureau of Labor Statistics estimates the consulting field will grow another 22 percent over the next decade, which means there will be more new jobs for consultants than there will be for computer programmers or lawyers. Now, how does consulting pay? Quite well, thank you. A median salary of about $78,000. That’s more than architects, postsecondary teachers, and a lot of scientists and engineers.

What Dubner referred to as management consultants are actually known, according to the Bureau of Labor Statistics, as management analysts (SOC 13-1111). In this post we’ll explore the growth of this field, especially among those who work as self-employed or contract consultants, and where it’s grown the most (hint: Washington, D.C. and state capitals with government-heavy workforces).

Overview of Management Analysts

Management consulting firms specialize in solving companies’ problems and providing outside advice. And judging by the uptick in employment, they’re providing more of this expertise. The number of management analysts — the wage-and-salary variety who work as employees for big or little firms — has grown 13% since 2001 (from just over 500,000 jobs to an estimated 566,282 in 2012). Approximately 62% of these workers are men, and as Dubner points out, they tend to be young (55% are 25-44 years old). Their median salary is indeed about $79,000 per year ($37.74 per hour), and their wage curve steepens quickly for the top percentile of workers ($68.16 per hour, or nearly $142,000).

But would you guess that there are more self-employed and extended proprietors than salaried employees in this field? Check out EMSI’s class-of-worker breakdown for management analysts:

  • Salaried employees: 566,282 jobs, 13% growth since 2001
  • Self-employed: 155,801 jobs, 52% growth since 2001
  • Extended proprietors: 462,005, 77% growth since 2001

Taken together, there are nearly 1.2 million management analyst jobs in the workforce, and 617,807 of those are in the self-employed or extended proprietor category. And as you can see from our breakdown, those last two segments of workers have seen immense growth since 2001, almost all of which occurred before the recession.

Why So Many Self-Employed and Extended Proprietors?

What’s driving the huge number of self-employed and extended proprietors in management consulting? One possible explanation is that as business executives near retirement, they start working on their own — or on a contract basis with firms — as management analysts. Consider that 62% of the self-employed and extended proprietors in the field are at least 55 years or old (and 25% are 65 and above). That’s a drastic difference from the age breakdown of salaried workers, as illustrated in the following chart.

Note: What we refer to as “extended proprietors” are workers who are counted as proprietors, but classify the income as peripheral to their primary employment. Many industries (primarily oil & gas extraction, finance & insurance, and real estate) include people who are considered sole proprietors or part of a partnership, yet have little or no involvement or income in the venture. Read more here.


The Geography of Management Analysts

Two of the largest management consulting firms, Boston Consulting Group and Bain, are headquartered in Boston. But the epicenter for management analysts is the Washington, D.C. metro. For salaried employees, the nation’s capital is 4.4 times more concentrated with management analysts than the national average. Overall, D.C. has an estimated 87,486 of these jobs — about the same number as the Boston and Los Angeles metro areas put together.

D.C. is also the most saturated with self-employed and extended proprietors, with more than twice the national average. But as the table below shows, San Francisco, San Jose, Boston, and Bridgeport, among others, have much larger percentages of independent management analysts as compared to the total workers in the field in each metro. And when it comes to proprietor growth, Atlanta — the second-most concentrated metro overall — has added a whopping 140% since 2001, compared a more tepid 7% among salaried employees.

Smaller metros also have significant shares of management analysts. Looking at just salaried employees, Madison, Wis., Richmond and Virginia Beach, Va., and Harrisburg, Pa. are among the 10 most concentrated metros.

The bottom line: Metros with a considerable presence of government workers — state capitals and D.C. — have higher saturations of these workers than metros of comparable size.

The following map is for all U.S. metros and shows the percentage job growth since 2001 (ranging from 306% growth to 73% decline). Notice the overwhelmingly widespread growth, with a few pockets of job loss.

MANAGEMENT ANALYSTS - LARGEST 100 METROS
Salaried Employees Self-Employed and Ext. Proprietors
MSA Name 2001 Jobs 2012 Jobs Job Change % Job Growth 2012 Conc. Median Hourly Earnings 2001 Jobs 2012 Jobs Job Change % Job Growth Median Hourly Earnings 2012 Conc. Proportion of Total Workforce
Washington-Arlington-Alexandria, DC-VA-MD-WV 40,607 56,751 16,144 40% 4.44 $45.37 14,538 27,124 12,586 87% $33.49 2.25 32%
Atlanta-Sandy Springs-Marietta, GA 21,430 23,013 1,583 7% 2.43 $41.06 6,206 14,913 8,707 140% $29.67 1.16 39%
Madison, WI 2,367 2,938 571 24% 2.07 $32.72 1,000 1,753 753 75% $21.05 1.4 37%
Richmond, VA 4,468 5,151 683 15% 2 $38.93 1,229 2,478 1,249 102% $24.01 1.1 32%
Virginia Beach-Norfolk-Newport News, VA-NC 4,963 5,986 1,023 21% 1.76 $36.96 1,390 2,674 1,284 92% $25.60 1.08 31%
Boston-Cambridge-Quincy, MA-NH 16,997 17,469 472 3% 1.7 $45.44 11,925 17,955 6,030 51% $32.90 1.86 51%
Harrisburg-Carlisle, PA 2,106 2,210 104 5% 1.68 $30.40 601 937 336 56% $28.38 1.05 30%
Baltimore-Towson, MD 7,504 8,876 1,372 18% 1.63 $42.86 4,041 7,403 3,362 83% $26.70 1.4 45%
San Francisco-Oakland-Fremont, CA 12,255 13,547 1,292 11% 1.6 $45.77 12,990 20,311 7,321 56% $34.46 1.87 60%
Des Moines-West Des Moines, IA 1,954 2,185 231 12% 1.6 $30.50 643 1,139 496 77% $31.60 0.99 34%
Columbus, OH 5,459 5,904 445 8% 1.52 $35.68 2,179 4,047 1,868 86% $26.43 1.11 41%
Columbia, SC 1,764 2,251 487 28% 1.52 $29.89 565 1,223 658 116% $25.74 0.79 35%
Bridgeport-Stamford-Norwalk, CT 2,792 2,523 -269 -10% 1.47 $43.97 2,541 4,188 1,647 65% $37.38 1.5 62%
San Jose-Sunnyvale-Santa Clara, CA 5,957 5,619 -338 -6% 1.45 $49.58 5,313 8,241 2,928 55% $36.07 2.18 59%
Chicago-Joliet-Naperville, IL-IN-WI 24,843 25,364 521 2% 1.43 $40.02 11,001 18,566 7,565 69% $30.13 1.04 42%
Hartford-West Hartford-East Hartford, CT 3,883 3,554 -329 -8% 1.42 $35.62 1,675 2,754 1,079 64% $23.68 1.13 44%
Sacramento--Arden-Arcade--Roseville, CA 4,219 5,096 877 21% 1.4 $34.80 3,090 4,806 1,716 56% $24.93 1.16 49%
Palm Bay-Melbourne-Titusville, FL 932 1,054 122 13% 1.3 $38.08 571 1,024 453 79% $21.81 1.08 49%
Tampa-St. Petersburg-Clearwater, FL 5,340 6,075 735 14% 1.29 $31.06 2,496 4,946 2,450 98% $23.22 0.96 45%
Seattle-Tacoma-Bellevue, WA 8,023 9,266 1,243 15% 1.25 $41.54 5,669 10,546 4,877 86% $31.69 1.6 53%
Minneapolis-St. Paul-Bloomington, MN-WI 8,461 9,228 767 9% 1.25 $38.97 4,905 8,771 3,866 79% $27.07 1.33 49%
San Diego-Carlsbad-San Marcos, CA 5,932 7,085 1,153 19% 1.21 $35.99 6,157 9,098 2,941 48% $28.58 1.4 56%
North Port-Bradenton-Sarasota, FL 979 1,201 222 23% 1.18 $28.50 1,018 2,152 1,134 111% $29.83 1.11 64%
Indianapolis-Carmel, IN 3,680 4,292 612 17% 1.17 $31.81 1,927 3,726 1,799 93% $31.06 1.16 46%
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD 12,418 12,873 455 4% 1.16 $42.35 7,766 14,334 6,568 85% $33.44 1.4 53%
New York-Northern New Jersey-Long Island, NY-NJ-PA 38,299 40,317 2,018 5% 1.16 $44.99 23,811 42,734 18,923 79% $30.64 1.06 51%
Jacksonville, FL 2,329 2,889 560 24% 1.16 $33.43 1,310 2,624 1,314 100% $23.78 0.92 48%
Albany-Schenectady-Troy, NY 1,905 2,040 135 7% 1.15 $33.13 1,309 2,049 740 57% $24.65 1.32 50%
Kansas City, MO-KS 4,248 4,656 408 10% 1.14 $34.10 2,350 3,949 1,599 68% $30.75 1.01 46%
Dayton, OH 1,814 1,771 -43 -2% 1.14 $35.69 961 1,286 325 34% $25.49 0.99 42%
Phoenix-Mesa-Glendale, AZ 7,608 8,340 732 10% 1.13 $32.40 4,639 9,169 4,530 98% $33.22 1.14 52%
Albuquerque, NM 1,616 1,689 73 5% 1.11 $32.90 1,194 1,863 669 56% $22.58 1.22 52%
Nashville-Davidson--Murfreesboro--Franklin, TN 2,798 3,465 667 24% 1.09 $35.65 1,974 3,693 1,719 87% $30.35 0.98 52%
Charleston-North Charleston-Summerville, SC 835 1,372 537 64% 1.09 $33.58 553 1,384 831 150% $35.79 0.84 50%
Miami-Fort Lauderdale-Pompano Beach, FL 8,493 9,935 1,442 17% 1.08 $32.23 5,861 11,662 5,801 99% $25.00 0.78 54%
Worcester, MA 1,460 1,449 -11 -1% 1.07 $38.83 1,226 1,823 597 49% $25.44 1.32 56%
Ogden-Clearfield, UT 693 889 196 28% 1.06 $35.29 516 1,053 537 104% $21.40 0.92 54%
Denver-Aurora-Broomfield, CO 5,020 5,475 455 9% 1.05 $35.87 4,363 8,222 3,859 88% $31.82 1.28 60%
Salt Lake City, UT 2,228 2,820 592 27% 1.04 $29.72 1,487 2,495 1,008 68% $28.77 0.98 47%
Oxnard-Thousand Oaks-Ventura, CA 1,174 1,311 137 12% 1.02 $35.60 1,381 1,783 402 29% $28.25 1.1 58%
Orlando-Kissimmee-Sanford, FL 3,268 4,289 1,021 31% 1.02 $32.16 1,652 3,374 1,722 104% $21.70 0.84 44%
Los Angeles-Long Beach-Santa Ana, CA 21,063 22,906 1,843 9% 1.01 $40.18 20,890 27,397 6,507 31% $28.44 0.95 54%
Milwaukee-Waukesha-West Allis, WI 3,035 3,228 193 6% 0.97 $34.75 1,363 2,343 980 72% $24.85 1.05 42%
Colorado Springs, CO 1,116 1,144 28 3% 0.95 $39.33 895 1,456 561 63% $24.09 1.11 56%
Providence-New Bedford-Fall River, RI-MA 2,463 2,628 165 7% 0.95 $36.02 1,986 2,511 525 26% $23.94 0.97 49%
Cincinnati-Middletown, OH-KY-IN 3,590 3,925 335 9% 0.94 $37.23 2,287 4,179 1,892 83% $29.33 1.13 52%
Dallas-Fort Worth-Arlington, TX 9,432 11,664 2,232 24% 0.93 $39.31 7,543 16,252 8,709 115% $32.06 1.03 58%
Cleveland-Elyria-Mentor, OH 3,823 3,779 -44 -1% 0.92 $34.77 2,527 4,022 1,495 59% $27.45 1.07 52%
Omaha-Council Bluffs, NE-IA 1,548 1,782 234 15% 0.91 $35.49 809 1,336 527 65% $21.03 0.87 43%
Austin-Round Rock-San Marcos, TX 2,318 3,106 788 34% 0.9 $38.24 2,768 6,827 4,059 147% $30.82 1.52 69%
Charlotte-Gastonia-Rock Hill, NC-SC 2,525 3,126 601 24% 0.89 $37.00 1,535 3,500 1,965 128% $26.99 1 53%
Boise City-Nampa, ID 860 973 113 13% 0.88 $25.77 701 1,371 670 96% $26.39 0.97 58%
Springfield, MA 1,100 1,068 -32 -3% 0.87 $38.83 905 1,341 436 48% $21.14 1.14 56%
Syracuse, NY 1,033 1,094 61 6% 0.86 $33.49 750 1,084 334 45% $23.92 1.07 50%
Greensboro-High Point, NC 1,074 1,239 165 15% 0.86 $33.31 583 1,120 537 92% $21.04 0.93 47%
Oklahoma City, OK 1,832 2,113 281 15% 0.85 $32.65 1,261 2,116 855 68% $21.18 0.76 50%
New Haven-Milford, CT 1,388 1,259 -129 -9% 0.84 $35.65 1,203 2,018 815 68% $24.78 1.19 62%
Augusta-Richmond County, GA-SC 642 738 96 15% 0.81 $31.58 326 793 467 143% $25.98 0.7 52%
Greenville-Mauldin-Easley, SC 941 955 14 1% 0.79 $30.95 475 964 489 103% $29.36 0.79 50%
Rochester, NY 1,536 1,612 76 5% 0.78 $42.31 1,509 2,093 584 39% $24.08 1.18 56%
Honolulu, HI 1,414 1,638 224 16% 0.78 $38.00 1,119 1,713 594 53% $23.04 1.03 51%
Cape Coral-Fort Myers, FL 418 650 232 56% 0.78 $29.02 623 1,192 569 91% $34.26 0.9 65%
Chattanooga, TN-GA 746 758 12 2% 0.78 $30.21 452 769 317 70% $32.13 0.8 50%
San Antonio-New Braunfels, TX 2,182 2,798 616 28% 0.74 $36.56 1,898 3,762 1,864 98% $25.26 0.84 57%
Raleigh-Cary, NC 1,327 1,563 236 18% 0.72 $35.67 1,181 3,057 1,876 159% $28.88 1.4 66%
Pittsburgh, PA 3,462 3,407 -55 -2% 0.72 $39.85 3,022 4,724 1,702 56% $29.95 1.22 58%
Houston-Sugar Land-Baytown, TX 6,450 8,067 1,617 25% 0.72 $45.88 7,166 14,480 7,314 102% $34.85 1.06 64%
Portland-Vancouver-Hillsboro, OR-WA 2,571 3,029 458 18% 0.71 $35.49 3,198 5,632 2,434 76% $29.72 1.22 65%
Riverside-San Bernardino-Ontario, CA 2,264 3,586 1,322 58% 0.71 $33.82 3,241 4,991 1,750 54% $21.48 0.73 58%
Knoxville, TN 914 964 50 5% 0.7 $36.29 986 1,579 593 60% $30.40 1.06 62%
Little Rock-North Little Rock-Conway, AR 869 980 111 13% 0.69 $25.44 614 1,056 442 72% $25.47 0.9 52%
Louisville/Jefferson County, KY-IN 1,472 1,758 286 19% 0.69 $32.21 1,090 1,905 815 75% $29.22 0.87 52%
Provo-Orem, UT 403 543 140 35% 0.67 $27.33 569 1,394 825 145% $25.34 1.14 72%
Detroit-Warren-Livonia, MI 6,388 4,878 -1,510 -24% 0.67 $38.72 3,847 7,756 3,909 102% $25.81 0.99 61%
Tucson, AZ 901 997 96 11% 0.66 $26.22 1,322 2,098 776 59% $23.63 1.22 68%
Akron, OH 752 872 120 16% 0.65 $32.30 790 1,243 453 57% $28.09 1.07 59%
St. Louis, MO-IL 3,908 3,529 -379 -10% 0.65 $36.83 2,717 4,619 1,902 70% $29.33 0.95 57%
Tulsa, OK 1,141 1,096 -45 -4% 0.63 $32.87 1,045 1,634 589 56% $21.73 0.78 60%
Bakersfield-Delano, CA 592 760 168 28% 0.63 $41.27 539 809 270 50% $26.87 0.68 52%
Memphis, TN-MS-AR 1,499 1,505 6 0% 0.61 $36.09 1,115 1,860 745 67% $28.32 0.68 55%
Allentown-Bethlehem-Easton, PA-NJ 759 828 69 9% 0.59 $37.07 795 1,219 424 53% $27.54 0.98 60%
Buffalo-Niagara Falls, NY 1,175 1,266 91 8% 0.57 $35.82 1,106 1,634 528 48% $21.49 1.04 56%
Las Vegas-Paradise, NV 1,580 1,954 374 24% 0.57 $34.80 1,832 3,555 1,723 94% $30.50 0.96 65%
Wichita, KS 769 688 -81 -11% 0.57 $36.40 583 785 202 35% $25.83 0.67 53%
Birmingham-Hoover, AL 1,123 1,083 -40 -4% 0.54 $39.70 904 1,893 989 109% $29.65 0.81 64%
New Orleans-Metairie-Kenner, LA 1,347 1,176 -171 -13% 0.53 $34.93 1,322 2,094 772 58% $34.33 0.74 64%
Poughkeepsie-Newburgh-Middletown, NY 559 522 -37 -7% 0.5 $34.21 669 1,182 513 77% $26.26 1.04 69%
Jackson, MS 468 499 31 7% 0.49 $25.35 507 1,011 504 99% $25.58 0.82 67%
Baton Rouge, LA 686 760 74 11% 0.49 $31.81 705 1,518 813 115% $25.83 0.81 67%
Stockton, CA 432 437 5 1% 0.49 $33.90 419 606 187 45% $23.69 0.65 58%
Modesto, CA 330 336 6 2% 0.49 $35.82 279 394 115 41% $21.03 0.58 54%
Grand Rapids-Wyoming, MI 745 740 -5 -1% 0.48 $31.45 620 1,239 619 100% $21.66 0.88 63%
Toledo, OH 649 580 -69 -11% 0.47 $38.54 622 935 313 50% $25.12 0.9 62%
Lakeland-Winter Haven, FL 347 367 20 6% 0.45 $30.15 303 534 231 76% $21.03 0.61 59%
Fresno, CA 515 590 75 15% 0.41 $33.26 610 851 241 40% $23.13 0.61 59%
Scranton--Wilkes-Barre, PA 424 419 -5 -1% 0.4 $34.74 362 588 226 62% $23.07 0.73 58%
Lancaster, PA 330 355 25 8% 0.37 $39.37 484 765 281 58% $27.27 0.76 68%
El Paso, TX 355 411 56 16% 0.32 $31.72 374 775 401 107% $21.03 0.6 65%
Youngstown-Warren-Boardman, OH-PA 246 186 -60 -24% 0.2 $28.78 382 571 189 49% $24.92 0.67 75%
McAllen-Edinburg-Mission, TX 158 195 37 23% 0.2 $35.50 222 555 333 150% $21.03 0.43 74%

Data and analysis for this infographic came from Analyst, EMSI’s web-based labor market tool. Follow us on Twitter @desktopecon. Email Josh Wright if you have any questions or comments, or would like to see further data.

Young woman in a field photo by BigStock.



















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I am very happy that you share the detailed stuff on the management staff with us and people are willing to read about it. The craze of business consultancy and business help are increasing day by day and I hope you will keep update us.
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Regarding the growth in self-employed management consultants:

In Robert Townsend's classic Up the Organization, there's a chapter entitled "Management Consultants". The first sentence is: "The effective ones are the one-man shows." Townsend goes on to denounce, without reservations or qualifications, the "institutional" management consultants.

I'm not as down on the big firms as Townsend. I'm not in that business, but as part of my own business I talk to a number of people who work for such firms. Against my instincts, I'm rather impressed. In particular, it seems as if these firms reward and cultivate talent to a degree that is unusual in American business.

On the other hand, in my position, I tend to get the rosier view of things. More importantly, I would suggest that the rise of management consultants correlates with the rise of "professional management"--of people who regard management as the primary skill in any industry, and who regard managers as being above the sort of details that distinguish one company from another and even one industry from another. Such people are often not competent to manage anything in particular, and prefer to make up the deficiency by resorting to outside firms, which will be content to walk away with a fat fee--as opposed to a subordinate, who will cost less (of the company's) money but who might want some credit and even some extra compensation for extraordinary effort. The subordinate might also say something, if only out of self-defense, if the program isn't implemented as planned. (If he is silent, he will be blamed for the results.) The consultant, however, will just get a new contract to clean up the mess, since the manager who hired the consultant won't want to say he chose a bad one.

The situation is getting even more extreme. At least some of the big management consulting firms aren't just consulting--they're actually business service providers on a large scale. They manage things like HR and purchasing within the organizations of some very large clients--things that were traditionally considered purely internal functions, especially at large firms.

(A propos of the issue in general, "professional managers" are also often extremely gullible, since they're often in need of 11th-hour solutions to problems they don't understand.)

It seems only reasonable to suspect that the larger any company gets--including management consulting companies--the more vulnerable it is to "professional management", to too many fingers in each pie, and to the general inefficiencies of organizational scale. So a one-man show may well be able to outperform Bain or Boston on many tasks. (I've been an independent contractor for most of the past thirty-odd years, and sometimes it comes down to the fact that my big-name clients' IT departments can't set up computers to do a specialized core task that my home computer does without a hitch.)

On the other hand (being an independent often requires three hands), you note that "One possible explanation is that as business executives near retirement, they start working on their own -- or on a contract basis with firms -- as management analysts." Some do well at this, but the dark side is that when many senior managers lose their jobs before they're ready to retire, the first thing they do is to set up as independent consultants. They may or may not get any business, but being an independent means never having to say you're unemployed. They may still show up in the statistics, either way.

Strange

An article about old farts (like me) is illustrated with: Young woman in a field photo by BigStock.

Dave Barnes
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