The effect of 'up or out' policy

[Ian Cai]

Many top consulting firms have an ‘up or out’ policy, which means other companies will know that consultants who leave are not competent enough. Is it a terrible thing for consultants who are asked to resign? How does it affect their career after consulting? Does it mean that consulting is a high risk industry?

[Monro]

  I think maybe its a good thing for the consultants who are asked to resign.

1. First, the job they do currently maybe is not a good fit with his skills. Let's suppose that someone works in a famous consulting firm now, when he is asked to resign, other small consulting firms may need him. And investment banks (and many other companies) who are looking for people with consulting skills may need him.
2. Second, the experience in working in a big consulting firm is good for his CV, and will open up more opportunities than a graduate.

  Also, I think consulting is a high risk industry because it has a high turnover rate. A critical reason is the "up or out" policy, but it may be risky for other reasons as well.

[Tom Spencer]

In consulting firms, the "up or out" policy is a requirement that consultants be selected for promotion within a certain period of time, or they will be "counselling out" of the firm.

Is this a bad thing?

Well, on the one hand, if you are a super star consultant, then the "up or out" policy is a good thing since it can give you the chance to progress your career at an accelerated pace, gaining valuable work experience within a relatively short period of time. 

However, on the other hand, consulting firms typically have a pyramid structure (with a few partners at the top, and lots of juniors at the bottom), which means that every year some consultants will inevitably be encouraged to pursue other opportunities. But since top consulting firms only hire the best of the best, leaving after two years should not be viewed as a failure.  It is very common for this to happen. 

A few years of management consulting experience can open up various attractive exit opportunities including:

1. Pursuing an MBA at a brand name business school (Harvard, Stanford, Oxford, INSEAD)
2. Going to work at another consulting firm (just because you leave one firm, doesn't mean you have to leave the industry)
3. Going to work for a client (you already know their business, and so if they like your work they may try to poach you)
4. Build a startup. Consultants gain experience in understanding various industry sectors, and this knowledge could be used to identify opportunities for a new start-up company. The connections and networks built during your years in consulting may also come in useful when trying to raising start-up funding.  

Some of the commentary I read elsewhere suggests that junior consultants need to be guarded, and avoid making friends so that they can remain as competitive as possible in an "up or out" environment.  While consulting firms are no doubt very competitive environments, I would suggest instead that junior consultants focus their attention on maximising their contribution (both in a professional and social setting). This will naturally attract positive attention (but be careful not to let others steal your credit). Consulting is probably not a good career path for people looking for affirmation from colleagues and clients. As New York based consultant Alan Weiss puts it, "if you want to be liked, get a dog".

Is a consulting career high risk?

In my view, students looking to start their career in the management consulting industry should view it as a continuation of their education. You may not remain a consultant for your whole career, but you may get to work on interesting projects and learn a lot for a few years before you reassess what you want to do with your life. 

[Ian Cai]

On 14/03/2017 at 8:25 PM, Tom Spencer said:

Some of the commentary I read elsewhere suggests that junior consultants need to be guarded, and avoid making friends so that they can remain as competitive as possible in an "up or out" environment.  While consulting firms are no doubt very competitive environments, I would suggest instead that junior consultants focus their attention on maximising their contribution (both in a professional and social setting). This will naturally attract positive attention (but be careful not to let others steal your credit). 

Wow! What u wrote is helpful. Viewing the experience as a contribution is a really good idea, and maximizing our contribution to the company truly reminds me of what I am supposed to, thanks a lot!