This article continues on from Part 1, in which I shared some of my experiences of working with an internal strategy team at a large financial institution, and some of the main projects and activities I undertook.
In this article, we will explore the 7 main differences between internal strategy and management consulting. Note that these observations are based on my personal experience and may not be common across the entire industry.
7 differences between internal strategy and management consulting
1. Flexibility
In a management consulting firm, you will be carefully taught a rigorous problem-solving approach, which you can apply to any situation. The three most general elements are being hypothesis driven, thinking mutually exclusive, collectively exhaustive (MECE), and having the flexibility to apply frameworks to structure problems and recommendations. This flexibility is one of the values of management consulting, which you are trained in, constantly practice, and are critically evaluated on.
In internal strategy, however, you will generally be working on very similar issues. As a result, it is unlikely that you will learn the ability to apply a general problem-solving approach across issues and industries. You will acquire industry knowledge and rely on this knowledge to understand the fundamental issues.
2. Office politics
When you work in internal strategy, you will have to consider office politics. This will be the case whether you are providing a groundbreaking strategy recommendation or just reporting a simple KPI. Unlike in management consulting where you are in a neutral position to objectively advise clients in whichever direction is best, unfortunately when you work in internal strategy the existing power structure strongly coerces you to put out politically correct recommendations.
Since you will be encouraged to bond with your peers, colleagues, and senior leaders in other divisions, it is politically infeasible to produce analysis calling for a particular department to be right-sized or point out that the leader of the largest and most important business division is underperforming. Generally, these actions need to be driven by the CEO, CFO, or the COO (i.e., top down rather than bottom up) in order to gain full traction, or else your recommendations will surely be sidelined. For example, after my team created the 5-year strategy, which involved downsizing certain business units and investing in certain others, we hired a managed consulting firm to validate our findings, pressure-test our thinking, and communicate this to the executive leadership team to avoid any political blowback.
3. Profit and Loss Ownership
Speaking about power structures, in financial institutions the power and influence lies with the operating units as they are the profit centers, and the leaders of these operating units own the profit and loss (P&L). On a day-to-day basis, internal strategy teams are there to support the leaders (sometimes too much handholding), but the bottom line is that internal strategy units are viewed as killing fields for under-performing executives. This point of view may be debatable, but it is widely held.
4. Repetition
Consultants, even those from top consulting firms, are given a tough time when they work in an internal strategy team. Despite their moniker of being an internal strategy unit, they end up picking up fairly mundane work. They focus on building the same reports for multiple stakeholders, have an unreasonable number of meetings and interactions to socialize messages, and struggle with inefficient processes that can’t be improved due to their “legacy” nature.
This point could be more prevalent for junior members of the team who constantly aspire to learn more but quickly realize that the steep learning curve flattens after a few quarters. Work becomes repetitive, the need for critical thinking becomes less frequent, and your position can become too comfortable. While I’m certainly not suggesting internal strategy is a cushy 9-5 job for someone looking for work-life-balance, I’d like to warn that it can from time-to-time feel like non-value adding work that doesn’t make an impact.
5. Mobility
Whether you like it or not, you must realize that in a financial institution, to rise you must run a business. Please make sure you understand this distinction. Consulting firms are designed to promote and reward thinkers. That is how you make partner. In internal strategy, your reward for doing great work is to have fast-tracked entry into the operating units. Even if you have some incredible brands on your resume, and excellent performance in internal strategy, you will still need to prove yourself on the operating side. Very few people will become Head of Strategy or the Chief Strategy Officer by taking the pure strategy route.
Additionally, mobility to other teams is quite limited for junior members of the internal strategy team. Due to the inflated titles in financial institutions (i.e., being a Manager or Senior Manager without managing anyone), the people with business accountability are Directors and above. So, for anyone who is below the Director level it is more difficult to make a business case to justify a transition to another team. This observation aligns with the advice of my internal strategy co-workers that I made the right decision to return to consulting for professional development and that I should aim for Director+ positions if I want to come back to industry.
6. Ideas
Internal strategy does not reward smart ideas. A financial institution’s currency is its share price, net profits, and risk profile. If a financial institution produces these then it is a success. Those who help to produce these things are rewarded and recognized. Smart internal strategy units are not rewarded unless they meaningfully and directly contribute to the bottom-line.
Management consulting firms on the other hand build value via ideas, publications, and influence. Can you see the mismatch? Internal strategy units within financial institutions will always march to the beat of a very different drum.
7. Skillset
This point comes at the end, but it is probably the most important. People who served at the junior levels of consulting firms think true management consulting is all about analysis. They are wrong and I was wrong. Unless they made Engagement Manager and above, they have likely never learned how to take the pieces of information from analysis and fully construct recommendations.
This is a critical point. Knowing how to break down an issue with analysis is only part of an engagement. The other part is to bring it all together to create a set of recommendations. Additionally, soft skills are often overlooked, which are significantly developed during client management. In internal strategy, my greatest challenge was to facilitate meetings with very senior stakeholders, mediate decisions from multiple pulls, and unveil sensitive information without offending the other party.
The key point is that you can only be exposed to the full collection of required skills at a management consulting firm. Moreover, you need to learn the consulting value system. It is vague but learning how to size a market without knowing the bigger picture means little. Learning the culture and value system of management consulting takes time to understand.
Final thoughts
Internal strategy can be a great exit from consulting to build your expertise in a specific industry and make a real impact for a dedicated firm. But as the saying goes, “the grass is always greener on the other side”. Consider the above points before you decide to join an internal strategy team.
Jason Oh is a Senior Associate at Strategy&. Previously, he was part of the Global Wealth & Asset Management Strategy team of a large financial institution and also served EY and Novantas in their strategy consulting business with industry focus in the financial services sector.
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