Consulting Case Example: Improve Performance of a Manufacturing Company

Another case I received during my interviews. Again, I was told that this was a real case performed to perfection by real consultants 🙂

Interviewer: Okay, so there is this company in New South Wales in Australia. It makes wheels for railway carriages. Our client just bought this company and they feel that its performance can be improved. We have been called in to help.

Interviewee: (In this case, its me) Is it the production performance they are concerned about, or is the performance related to the revenues and costs?

Interviewer: Its a production issue.

Interviewee: What’s the issue?

Interviewer: Not many wheels are being manufactured.

Interviewee: Not many wheels compared to the competitors, I assume.

Interviewer: Yes.

Interviewee: Okay, how many wheels are we currently making? And how many are our competitors making?

Interviewer: We don’t have much information about our competitors except that they are making more wheels than we are. We currently make around 63,000 wheels per year.

Interviewee: Okay so 63,000 wheels per year is approximately 5250 wheels per month or 175 wheels per day. (I divided the monthly number by 30 to ease up my calculations). We need to make more than 175 wheels per day, right?

Interviewer: Yea, how do we do that?

Interviewee: How are the wheels made currently? Like what is the wheel making process?

Interviewer: We buy 1m x 10m bars of steel which are cut into 30cm slices called cheese. This cheese is melted and put into a milling furnace. While the hot cheese is spinning, heavy rollers squash it out into a wheel shape. This is then taken to a finishing area where it takes 2 days to cool down.

Interviewee: So each wheel takes 2 days to cool down?

Interviewer: That is correct.

Interviewee: Is there something that can be done differently in this process? Like quicker cooling?

Interviewer: No.

Interviewee: Could there be some process inefficiencies? Such as the steel bars not being the optimal shape for cutting, or steel impurities so that the cheese doesn’t melt as fast?  Do we buy enough steel to produce more than 175 wheels/day? Could there any wastage of raw material?

Interviewer: Those are interesting observations. To your point, there aren’t any process inefficiencies that could be the cause of our low output. But we do buy enough steel to produce more than 175 wheels/day.

Interviewee: That is interesting. So we do have enough raw material, but somehow aren’t producing enough wheels. Could it be that some of the wheels being produced aren’t usable?

Interviewer: Good point! 5% of all wheels produced get rejected due to operational error. The wheel punching machine isn’t calibrated well. Another 5% get rejected during testing due to structural problems in the wheels.

Interviewee: So only 90% of the wheels we produce are usable?

Interviewer: That is correct.

Interviewee: Is the calibration issue due to human error? How can we improve the rejection rate?

Interviewer: Yes. The calibration issue is due to human error. Some of the factory workers are not well trained to operate the machines. The structural problems we cannot address. So, why don’t you tell me how we can improve the rejection rate?

Interviewee: Well, we can reduce the rejection rate from 10% to 5% if we can address the operational errors. As these errors are caused by poorly trained workers, we can implement training programs and quality control measures to ensure that lesser wheels get rejected.

Interviewer: Okay, very good. How will this improve my monthly output?

Interviewee: So let’s say we currently make x wheels/day out of which 10% are rejected. So 90% of x = 175.  So x = 175/90%. As the rejection rate has gone down to 5% due to our improvements, our output increases to 95%. So the total number of wheels we will make after these improvements is: 95% of x = 184.7 (or 184 as we cannot have fractional wheels). The number of wheels we can make monthly would be 184 * 30 = 5520.

Interviewer: Very good. Now let’s stick to our 175 number. We did a little more digging, and we found out that even with this 5% improvement, we were still behind our competitors in the number of wheels produced.

Interviewee: Why? Is the factory running under capacity? How many wheels can the factory produce in a day?

Interviewer: We don’t know how many wheels the factory can produce in a day, but it is definitely running under capacity.

Interviewee: Okay, so we know that we buy enough steel to produce more wheels. Could it be that the factory is not running 24/7?

Interviewer: Excellent point. We asked around, and realized that each day, the factory experienced 8 hours of downtime:

• 30 minutes due to MRO
• 190 minutes of unplanned maintenance due to machine breakdowns
• 260 minutes due to production run changeovers where the operators change the wheel measurements

Interviewee: Which of these can we affect? Can we improve unplanned maintenance by buying new machines?

Interviewer: We don’t have the money to buy new machines.

Interviewee: What are production run changeovers? Why are wheel measurements changed? Can we shorten this?

Interviewer: Well – we make wheels in 2 sizes. During a production run changeover, we recalibrate the punching machine to change the size of the wheel being produced.

Interviewee: Are there inefficiencies in this process? Let me elaborate with an example – Let’s say we produce a big wheel and a small wheel. Suppose for the first quarter of the day, we make small wheels. Then we switch to making big wheels. In the third quarter of the day, we switch back to making small wheels – and so on. Each of these switches is contributing to wasted time during changeovers. If such inefficiencies exist, we can improve by only having 1 changeover. Lets make small wheels in the morning and big wheels in the evening. Hopefully, you get my drift =)

Interviewer: Great point. We actually did end up facing a similar issue. Let’s say, by improving the process , we can now reduce the time spent in production run changeovers to 80 minutes. How many more wheels will we make in a year?

Interviewee: Alright, let me have a couple of minutes to do some quick math.

Before: 24 – 8 (downtime) = 16 hours makes 175 wheels. In one hour – we make 175/16 wheels

After: Downtime is now 30 + 190 + 80 = 300 minutes or 5 hours. (Means we have 3 more hours each day to produce wheels) So each year, we would make 3 * 365 * 175/16 = 11,976 (roughly 12,000) more wheels

Interviewer: I think that sounds about right. Now do you have any questions for me?

Consulting Case Framework – Growth Strategies

Disclaimer: Again, this is by no means the correct or complete framework to solve cases. Its just something that I have come up when practicing case interviews. It best suits my logic and thinking and anyone on the same wavelength is welcome to use it.

Sometimes you get long cases, like really long cases. One where you do a market sizing, then a valuation followed by a session of strategy brainstorming. I think MBA students get cases which combine all of the above, while undergrads or those applying for pre-mba analyst positions get a version without (probably) the valuation aspect. (Undergrads are generally not expected to know the term valuation)

Okay so situation is something like this – company wants to grow. You are asked to provide some strategies to grow a company.

First of all – What is meant by growth? I never really understood this. A company can experience different kinds of growth – profit growth, revenue growth, market share growth, employee growth, market or share value growth. Verify company growth objectives before proceeding.

I generally assume growth to be 2 things – increase in customer base & increase in sales. Although an increase in either does not necessarily ensure that the company is profitable either. A great example would be Facebook – it was growing at an aggressive pace, yet it did not have a positive cash flow until recently. Amazon took around 7 (or more) years to become profitable. An obvious reason would probably be that one needs cash to grow a business in the first place, right?

Anyhow, I digress. Just trying to introduce some very basic ideas and outlines to address different growth strategies a company can employ. I like the Ansoff Product-Market Growth matrix because it is simple and gives a good base to start off with when thinking of growth strategies during an interview. The matrix considers 4 ways to grow a business – through existing and/or new products in existing and/or new markets. Given below is the matrix and translated examples of growth.

Bear in mind the examples are pretty simplistic to give a general idea of how these growth strategies translate in to real life examples.

These growth strategies can be implemented in 2 ways.

Inorganic Growth – Meaning you buy another company to achieve your growth goals. (Acquisitions) HP buys Palm to gain entry into the smartphone market.

Organic Growth – You invest your own company money to grow your company by increasing sales etc. Apple is an excellent example of Organic Growth.

Inorganic growth can be in the form of strategic alliances, mergers or acquisitions. The objective could be any of the following 3 –

Integration – This is when a company buys out its suppliers (or some other company along its supply chain). Large retailers often buy out their suppliers to remove the middle men and consolidate profits or improve efficiency along its supply chain.

Horizontal Growth – This is when a company buys out its competitors to increase market share, achieve operational synergies (lower costs) or both.

Vertical Expansion – This is when a company buys another firm in a completely unrelated business, probably to diversify. Examples are conglomerates such as GE, Virgin Group (UK), Tata Group (India).

Getting back to growth strategies – I like to look at growth = sell more products. Here is a chart to look at ways to increase sales.

Lets start at the top – what is our objective – Increase Sales! We can do this in 4 ways –

Increase sales per customer – In short, make each customer buy more products. This can be done by giving volume discounts to large customers (buy more strategy) or introduce loyalty programs (buy often strategy).

Steal customers from competitors – Pretty self explanatory. How to do this would depend on the industry. In a price sensitive industry (commodities), cutting prices would be a great start to steal market share. Else a good marketing campaign would probably work as well.

Introduce new products – This can be done in 2 ways. Introduce a new or improved product in the current market ex. HP rolls out a faster computer. Or introduce a completely new product for a completely new market ex. Microsoft when it first launched the XBOX.

Expand in to new markets – The new market could be a new geographical area, outside of what the company currently caters too. Like McDonald’s entering a new country. Or one could tap into potential customers within their own geographical boundaries by expanding their distribution channels. Most apparel retailers have taken their business online where they can target a lot more consumers compared to traditional brick & mortar stores. Or traditionally gender specific domains such as gaming and cosmetics are now targeting the opposite sex to boost sales can also be a form of expansion within the same geographical market.

Notice that the outline above pretty much encompasses the principles of the Ansoff Matrix. I generally like to think of it this way because it is more intuitive now that all the jargon is gone. =) Again, this outline will not necessarily work in every case, it is possible that your case constitutes a company in an extremely bizarre and niche industry where these concepts wont really help, but it is generic enough to work out for most cases. Ideas and opinions are welcome!!

Consulting Case Frameworks – The PE Framework (To buy or not to buy)

Disclaimer: Again, this is by no means the correct or complete framework to solve cases. Its just something that I have come up when practicing case interviews. It best suits my logic and thinking and anyone on the same wavelength is welcome to use it.

I mostly use this framework for Mergers & Acquisitions (M&A), Private Equity (PE) or Market Entry cases. The reason I call it the PE framework is because I first used this outline when I was given a PE related case. I then realized that it can be used in any situation where one firm decides to buy another, or enter a new market as well.

Undergrads interviewing for consulting positions will probably not have to go too deep into the case. A good analytical overview will be very appreciated. MBA students however will probably be expected to do an in depth analysis and valuations. Undergrads will probably get brownie points for uttering the word ‘Valuation’.

Lets say you get a case – Should company A buy company B?

Before diving into the case and doing wild market analysis, you should try to understand why does A want to buy B? What are A‘s objectives? A could be a medium sized company, a conglomerate or a PE firm. B would most probably be a mid sized company in a certain industry. Once you understand A‘s objectives, go ahead with case analysis.

There are 3 areas which I like to focus on –

External Reasons for why A should or should not buy B.

Industry – How is B‘s industry doing? What is its size, growth rate? Is it Emerging/Maturing/Declining (E/M/D)? This would give us a sense of how attractive the industry is to enter.

Market Share – Is B a big or small player in the industry?

Competitors – Who are B‘s competitors and how are they performing relative to B? The points above will give us an idea of B‘s general performance in the industry. B may have greater market share but its competitors may be more profitable or have better growth rates. This would be an interesting scenario. Will A still want to buy B knowing this?

Consumers – How sensitive is the market to consumer demand? Take the mobile phone industry for example. The consumers are extremely fickle and will rush to the next ‘cool phone’ in the market. B may be a market leader now, but may not be one in the future. Think Motorola, Nokia ….. all being pummeled by tech, marketing & branding expert giant – APPLE!!

Suppliers – How much power do the suppliers in this industry hold? Is the supply market extremely consolidated? Can they band together and demand higher prices for raw materials? Or are raw material prices protected by the government?

Risks – What would be the risks of entering this market? Legal risks encompasses anti-trust laws, country laws & regulations (if entering a new country market) & sensitivity to political changes in the country. Other risks could be threat of substitutes, entry/exit barriers and sensitivity to the economy.

Internal Reasons (Target) – Analyze if B is an attractive company to buy.

Product – What is B‘s product mix? Are their products competitive/proprietary? How are they faring in the market? Drugmakers generally buy each other out to gain competitive advantage in patented drugs.

Profitability – Has the company been profitable? Now would be the time to check out its revenues, costs & some basic debt ratios and compare it with its industry peers.

Growth – Has the company been growing the past few years? What are its growth rates relative to its competitors and the industry in general?

Valuation – How much would you value the company at? What are you willing to pay for B? Would be a good idea to do some basic (Discounted Cash Flows) DCF and (Price to Earnings) P/E valuations. Also should see if B has any liabilities such as accrued taxes over the years or lawsuits.

Competencies – Maybe company B has some assets that make it an attractive buy. Great management team or superb research & development facilities or brand new factories. Will B be a good corporate fit for A?

Synergies – Can A & B find operational or financial synergies?

Internal Reasons (Acquirer) – Analyze if A has the capabilities to buy B.

Objectives – We need to keep objectives in mind while doing our analysis. Company B may be a great buy but may not fulfill A’s objectives.

Resources/Competencies/Financing – Does A have the managerial resources or expertise for the acquisition? Have they done this before? How are we going to pay for this (Cash/Debt/Share Swap)? Can we get good interest rates to finance this acquisition?

To buy or not to buy? I personally find these cases the most interesting to solve. And they aren’t always very straightforward either. I have got cases when companies want to buy firms that aren’t doing so well. Why? To strip them of their assets and cash. Google the term – Strip and Flip. Another case was about a company that targeted a firm whose profits were deteriorating. And other cases when the target firm seemed like a great buy, but wasn’t really.

In short – do not forget the OBJECTIVE when doing your analysis!! There is no need to analyze possible synergies if the acquirer only wishes to strip the target of its assets. The target company may have poor sales, but the acquirer could still want to buy it because of its superior technology. The target here may just be doing a bad job of selling itself. You can go wild with your analysis and come with a thousand brilliant ideas, however, keeping the objective in mind will enable you arrive at a reasonable and sound conclusion.

On that note – I find the acquisition of Palm (ex smartphone innovator and leader =) by HP an extremely interesting deal. Palm is in my opinion one of the deteriorating tech giants of yesteryear and HP just provided it a lifeline when agreeing to buy it for a little more than a billion. What motivated HP to buy Palm? Maybe to gain entry into the huge smart phone market? Or maybe Palm was just an undervalued company with technological brilliance but poor marketing skills. Can’t say, I have never had a Palm. Though now I hope to see some more competition in the smartphone market =)

Consulting Case Frameworks – Internal/External proft drivers

Disclaimer: Feel free to use the framework below, however, beware of  its shortcomings. I personally prefer to solve cases using the frameworks mentioned on this blog as they are suited to my logic and thinking. By no means is this the ‘correct framework’.

The profit drivers framework that I have written about earlier works great for a lot of cases, especially ones that involve companies in the retail sector.  It works great for cases where a company produces something like clothing, food, hardware etc. However, I realized that I used to stumble with the framework when I was given a case where a company sells services like truck leasing for example. That’s when I thought the Internal/External framework would be more intuitive for developing a case outline.

The premise here again is – profits/volumes or sales declining. What could be the possible causes?

Lets start with the possible External causes. Things beyond the control of the company.

I like Diagrams, so here is one –

Notice that the framework above incorporates the famous Porter’s five forces?

Why are profit margins/sales dropping? It would be best to analyze some external factors first.

Supply – Our suppliers have gone bankrupt. Or they now band together and decide to charge us a higher price. Or their own supplies are in shortage. It could be possible that a problem in an entirely separate industry is causing our volume woes.

Competition – First thing to analyze in a falling volume/profits case is – “What are our Competitors Doing?”. Do they face the same problem? If so, then this could be an industry wide problem. If not, then are they stealing our market share? What do they have that we do not? Better Marketing? A new or improved product? Cheaper products? Or perhaps an entirely new and separate product (or substitute) that is now competing with our own?

Demand – Although I would prefer to call it Market Analysis. This area would focus on how the industry is performing as a whole. Is it emerging/maturing/declining? If we have falling volumes in the first 2 scenarios, we then have a problem obviously. Also, it would be good to analyze if consumer tastes are changing, ex. the shift towards healthy/organic foods? And then, obviously a recessionary economy can severely impact sales.

If this doesn’t solve our problem, it must mean that we need to look internally. Possible Internal factors could be-

Notice how the 4 P’s have been incorporated?

Again, lets try to analyze why sales/profits could be dropping? The 4 P’s framework is great for analyzing sales volumes.

Price – Are our products getting more expensive?

Product – Is our product quality dropping? Or is it becoming obsolete?

Marketing – (Promotion) – What is our marketing strategy? Do we have high sales targets? Are we targeting the right customers?

Distribution – (Place) – Inefficiencies in distribution can cause our products to not reach customers in time.

Costs – High costs will cut into Margins. Look at the profit drivers framework to get a cost breakdown outline.

Capacity – Maybe our output is decreasing?

Competency – Sometimes sales are affected by incompetent or poor management decisions and strategies.

I don’t know how often a consulting firm will point out management inefficiencies during a consultancy project. I mean, will you really tell the guy who hired you that his management style sucks?

Consulting Case Frameworks – Profit Drivers

Disclaimer: Again, this is by no means the correct or complete framework to solve cases. Its just something that I have come up when practicing case interviews. It best suits my logic and thinking and anyone on the same wavelength is welcome to use it.

Very often, in a case interview, you are expected to start a case by forming a basic structure. Firms mostly want to see that you have a logical and structured thinking process. You are expected to ‘be prepared’ for a variety of cases but it should look like you are building the methodology to solve the case for the first time!! Or it may be possible that you have never before seen a case like this. In which case, it is good to know a couple of ready made outlines so that you don’t get overwhelmed when you first come across an odd case.

If you have already started practicing for case interviews, then you would know that there already exist frameworks like the 4 P’s, 5 C’s etc. I don’t particularly find these frameworks too appealing as I feel that they aren’t generic or intuitive enough to be used with just about any type of business case. That is why I use my own framework, which is more or less a combination of all other frameworks and can be modified easily enough to be used with most cases.

I like to call it – The Profit Drivers Framework

Lets say that a company’s profit margins are decreasing every year. There can be many reasons for profit decline. We will need a structure to breakdown a company’s profit drivers to ensure that we cover all or most of those reasons.

So we know -> Profit = Revenues – Costs [or P = R – C as some Consultants like to see it]

Declining Profit can mean 3 things –

• Revenue is decreasing
• Cost is increasing
• All of the above

Lets focus first on Revenue: Revenue = Price * Volume [modify accordingly for n number of products]

A company generates revenues when it sells its products (or services like consulting firms =) for a certain price. So if revenues are declining, it can mean either Price, Volume or both are declining. In some rare cases, it could also be that one of them increases, but the other decreases substantially causing a net decline in revenues. For ex. a slight increase in price could cause a substantial drop in sales volume causing a net decline in revenues.

So the first question to ask is – have prices dropped or risen? What are price drivers?

I believe products are priced in 3 different ways – competitively, cost based or brand premium based.

Most commodity items are priced competitively and competitors try to undercut each other to attract consumers away from other brands. Ex. Coca Cola & Pepsi cans are priced competitively.

Cost based pricing is when a company tacks on a certain profit percentage on top of the product’s cost. This generally happens for a new (maybe patent protected) product which has no competition yet like drugs.

Brand Premium based pricing is generally used by luxury brands which attach a certain premium over the market value of their product category. They cater to a different consumer class and price their items according to the value of the brand. Example, a coach bag is probably produced in the same China factory as the $10 bags sold by street hawkers, however it costs around $400 more due to its brand premium.

The case interview is never going to be that simple, so i think its best to focus on the next issue –

Have sales volumes increased or decreased? Either way, you are expected to figure out why? The diagram below shows some of the drivers for sales volumes.

Again – by no means complete and can be modified as per the case.

Internal Factors

Product – old/obsolete/deteriorating quality/change in look, packaging, ingredients or raw materials can cause consumers to stop buying it.

Production – perhaps the factories have lower output due to breakdowns, labor strikes

Distribution – Inefficiencies in supply chain can also cause fewer products to reach the final consumer. Ex. the Sony Playstation 3

Sales & Marketing – Inefficiencies in marketing (ex. targeting wrong consumers) & sales targets could also kill volumes

External Factors

Competition/Substitutes – Actually the most common reason for volume drops & lost market shares. Apple iPhone anyone??

Market Saturation – There just aren’t anymore people left to sell the product to

Endorsements/Negative Publicity – Perhaps a recent endorsement by a pop star increased volumes or bad press decimated it

Economy – A recessionary economy can cause consumers to buy less

Once you are satisfied that revenues are not the issue for falling profit margins, you can now concentrate on costs. I have a nice diagram breaking down product costs for a company.

Again, you will probably have to think a little more about the above breakdown when given a more complex industry – lets say Telecom or ISPs. But for the most part the breakdown above works quite well if you think about it in a sequential manner. What are the steps taken by a company from first conceptualizing a product to getting it out there to the public? And what are the costs associated with each step?

1. Research & Development (R&D) – Research, develop & test a prototype. This requires initial cash input.

2. Production -The prototype has passed all tests and you decide to bring it to the public. Production begins. Costs arise from the following

• Sourcing raw materials
• Buying the factory (if one does not exist) or Maintenance, Repair & Operations (MRO) costs
• Factory worker salaries
• Utilities (electricity, water used to run factories)
• Packaging the finished product

3. Distribution – Now that you have the final product all ready to go, you want to send it out to consumers. To do this, you incur more costs like

• Transportation of goods either to distributors or warehouses. Costs go up if fuel prices increase.
• Storage costs due to keeping goods in inventories. The more you store, the more you pay.
• Taxes and tariffs if you are shipping your goods from another country (like China =)

4. Other – I like to club in all other costs (ex. office space leasing, admin salaries, customer service reps, lawsuits) into this category. Basically all costs arising after the product is on the shelf already.

That above is my generic framework for cost drivers case. It is helpful to keep in mind during a case interview, but obviously fresh thinking and perspective is always encouraged when coming up with a framework. I hope the structures described above gives anyone reading a good idea of developing case outlines. Feel free to add in your own ideas and comments if you feel that I am missing out on something.

Consulting Case Example: Lower Cleaning Costs for Company

Actual Case I received during one of my interviews. This is how I approached the problem, it is by no means the “correct” way. You may have your own ideas and methodologies, and there are a lot of different ways to solve the same case. And my charts weren’t as pretty.

Interviewer: Your client is a large departmental store in Manhattan which competes with Macy’s. The objective is to cut costs across the company due to lower profit margins during the recessionary economy. Your engagement manager assigns you the task of cutting down costs by 50% in the Cleaning/Janitorial Services Division.

Interviewee: So, let me reiterate the problem at hand to make sure I got down all the important points.

Client – Large department store competing with Macy’s

Objective – cut cleaning costs by 50%

Is there something that I have missed out or are there any other objectives that I should be aware of?

Interviewer: No, that seems about it.

Interviewee: Sounds interesting. Could I have a moment to collect my thoughts?

Interviewer: Sure, go ahead.

Interviewee: (Draw the following Chart)

I would first like to see what are the different Drivers of Cleaning Costs in a department store.

Is there anything else I am missing out?

Interviewer: What about flagship stores vs. other stores?

Interviewee: (Though I think that’s a redundant question but anyway)

That’s a good point, let me add that to my chart.

Interviewer: That looks like a good way to start.

Interviewee: I would like to know if the cleaning/janitorial services is in-house or outsourced.

Interviewer: They are currently outsourced.

Interviewee: Do we know if we are getting a good price compared to our competitors?

Interviewer: We have no idea as to what our competitors are doing with respect to cleaning.

Interviewee: Okay then, does our client just have one store?

Interviewer: The client runs 4 stores in Manhattan.

Interviewee: And we want to cut down cleaning costs across these 4 stores by 50%, right?

Interviewer: That is correct.

Interviewee: Do we use the same supplier for all the 4 stores?

Interviewer: (Smiles) No we use a different supplier for each store. Well, the client also gave us this chart.

Interviewee: (This doesn’t really tell me anything, quiet for a couple of minutes due to confusion)

Well, I suppose I will get a better idea if I knew the spend/store.

Interviewer: That’s a good point. Take a look at this chart.

Interviewee: Wow, stores 1 & 4 seem to be the reason for most of the spend.

Interviewer: Good Point. Why do you think that is the case?

Interviewee: Maybe because stores 1 & 4 are larger than the other stores. Would you happen to have the size for each store?

Interviewer: Yes, the sizes of the stores are as follows:

Store 1- 20,000 sq ft

Store 2 – 5000 sq ft

Store 3 – 2500 sq ft

Store 4 – 8500 sq ft

Interviewee: That’s really helpful. Now let me figure out the cost/sq ft for each store.

Store 1- $2.5 k/sq ft

Store 2 – $1.5 k/sq ft

Store 3 – $3.4 k/sq ft

Store 4 – $4 k/sq ft

So it seems that Store 2 is getting the lowest price per sq ft for cleaning services. What if I decide to contract the cleaning/janitorial services to supplier of Store 2? Can I achieve even lower prices due to economies of scale?

Interviewer: There will be no volume based discounts. What kind of savings are you looking at if we contract the cleaning services to Supplier #2?

Interviewee: I would like to have a minute to do the math. (Furiously crunch out some numbers)

Total Current Spend: $100 million

Possible Future Spend if contract cleaning of all stores to Supplier #2:

Store 1- 20,000 sq ft * $1.5 k/sq ft = $30M

Store 2 – 5000 sq ft * $1.5 k/sq ft = $7.5M

Store 3 – 2500 sq ft * $1.5 k/sq ft = $3.75M

Store 4 – 8500 sq ft * $1.5 k/sq ft = $12.75M

Total = $54 million

Possible Future Savings if contract cleaning of all stores to Supplier #2: $46 million (which is 46%)

Need another 4% in savings.

Interviewer: Very Good, now how do you plan to get the rest of the 4% in savings?

Interviewee: Perhaps we can now look at the Suppliers cost and help him get some savings which he can pass on to out client.

Interviewee: We are in no position to negotiate with the Suppliers.

Interviewee: Going back to Chart one, I see that although Supplier #2 has the lowest supplies cost. Supplier # 4 has really low percentage of labor costs.

Interviewer: I see, but how does this help us?

Interviewee: Maybe, we can lower Supplier # 2’s costs by using the low labor costs, like those of Supplier # 4.

Interviewer: Hmm… Well, out suppliers do not want to collaborate, so that is out of the question. But why don’t you try it and see if we get significant savings?

Interviewee: (Doing some quick math and getting the hint that it might not be worth it)

On second thoughts, it looks like that idea will not really help us much.

Interviewer: Are you sure?

Interviewee: (Thanks for totally confusing me now) Yes, I think I am sure.

Interviewer: Okay then, moving on, how will you get another 4% of savings?

Interviewee: (Umm… I don’t know… Pondering over Charts)

Interviewer: How about some strategic ideas to lower costs?

Interviewee: (Oh of course!! Hit head with hand… Some Qualitative Ideas!!)

Yea, there are a couple of ways we could achieve another 4% savings.

We could cut down the frequency of store cleaning. For example, we could have the stores cleaned every other day instead of everyday.

Interviewer: Well, we are sort of a high end store and we do not want to compromise on our quality.

Interviewee: Of course, we would need to empirically figure out how much we can cut down on the cleaning frequency to ensure that the look and feel of the store is not compromised.

• Maybe we can extend this idea to the stores themselves. Cleaning frequency can be cut down in Stores other than the Flagship Store.
• Maybe certain areas of the stores which receive less foot traffic can be cleaned out a lot less frequently. We will have to monitor which areas get maximum traffic and focus on those areas.
• Perhaps we can find cheaper cleaning supplies or substitutes without compromising on quality.
• We could negotiate with our current supplier for volume discounts.
• We could try to find a further cheaper supplier of janitorial services altogether.
• We could try to build an in house cleaning services team. That way, we may be able to save on some of the premium we probably have to pay our suppliers.

Interviewer: Yes, these all seem like pretty good ideas. Now suppose you have a meeting with our client. What are you going to tell him about your findings?

(This means sum up your case in a minute)

Interviewee: Well, initial studies show that we would be able to achieve a 50% cost reduction in cleaning/janitorial services. Currently, we use 4 different suppliers, each offering a different pricing schemes, for our 4 Manhattan stores. We can achieve 46% of our targeted savings by contracting the cleaning services of all 4 stores to supplier #2. Furthermore, we can achieve an additional 4% of savings if we cut down the frequency of store cleaning, use cheaper cleaning material substitutes or focus on certain areas of the store getting more foot traffic, as long as it does not compromise our quality standards. A combination of both will give us our 50% savings target.

Interviewer: Thank you, those seem like excellent ideas.

Answers to behavioral questions in consulting interviews

Disclaimer: All answers posted below are based on my personal experiences. Feel free to use them but it in no way implies that these are the “correct” answers. Also, I have not had any formal training on how to answer these types of questions. There are other sites that “teach”/”coach” aspirants on how to answer these questions. (Check out managementconsulted.com – a blog written by ex-McKinsey consultants on how to crack behavioral as well as case questions in consulting interviews)

I hate these questions because I mostly feel fake and insincere answering these types of questions. Also I am totally scared of giving generic (eye roll – yeaa.. like I haven’t heard that one before) or stupid (really… that’s the best you can come up with?) answers. A combination of both has often led me into nervous panic attacks.

Also – feel free to comment if you have opinions/questions or feel that I should have answered these questions differently.

Tell me about yourself?

The simplest and yet the most dangerous of them all. 120% likely hood of getting this question in every interview round. I dread this question, mostly because I never know how to answer it. I mostly combine with a brief personal & resume based history leading to why I want to go into consulting.

ex.

• I grew up all over the world.
• Did an Engineering undergrad.
• Worked for a year.
• Wanted to go into business.
• Did a masters in Operations Research.
• Wanted to go into a field which combines thorough research & analytical skills (from engineering), management & communication skills (from my work experience) and interest in business => AHA => CONSULTING!!!

And nowadays it always helps if you have had some global exposure. Especially in consulting, since you will probably work with brilliant people from all over the world. Or you may have to work across continents for the same client.

Why do you want for McKinsey/BCG/Booz/Bain etc.?

What I really wish I could say – Because it is McKinsey/BCG/Booz/Bain etc. DUH!!

What I end up saying (and I honestly, personally, sincerely do mean all of my points below)

• I know I want to work in the consulting industry, and “Firm Name” is one of the best management consulting firms in the world today.
• I personally thrive in an environment which promotes intellectual curiosity and a zest for success.
• “Firm’s” international presence gives me a chance to work in a global environment and scope.
• “Firm” has Clients in every field/sector/industry which can provide me with the learning and exposure that no other firm can.
• “Firm” has come up with so many ground breaking management theories/solutions/articles (read up company case studies, white papers etc. to learn the new ideas floating around), I would like to be a part of this innovation and creative thinking.
• I will get to work with some of the best minds in the industry

Why do you want to work with us as opposed to “Other Firm”?

Because “Other Firm” isn’t hiring me!! =) Generally, I believe it’s the smaller firms that ask this question. I would like to take it as a compliment. You are so good that this small firm can’t believe you would think of joining them as opposed to a McKinsey!!

I personally work in a small consulting firm. Definitely not my first choice, but now that I am here, I can see why someone would want to work in a small firm as opposed to a large firm. Some reasons are –

• I have an entrepreneurial streak. I want to work in an environment where I can experience all aspects of a business’ operations.

In a smaller company, you often have to go over and beyond and take on greater responsibility than whats specified in your job description. Just as an example, you might start recruiting and interviewing people a lot earlier in a smaller firm than in a McKinsey.

• I want to be a part of the company’s growth.

Smaller firms normally have the fervor & passion to prove themselves. You also move up faster within a small firm especially if its growing and hiring aggressively.

• The relatively flat organizational structure.

You will have a better chance of interacting & learning from senior management in smaller firms. Furthermore, you also get to interact with top client heads a lot more – just because the upper management may be too busy marketing and trying to rope in new clients.

Why do you want to do consulting?

Sometimes this seems like a no-brainer. I mean why else would you be giving the interview right?

The thing is, most people don’t know what they’re in for when they choose to go into consulting. This is more so for students who aren’t business majors. The employer wants to know if you really know the consulting industry. Are you getting in just for the money? Or because it sounds cool? Or you don’t know any better?

Even if the above is true, you should appear to be a well researched individual who knows what he/she wants. A lot of consulting is about marketing yourself/your company/your skills – take your pick. And this starts at the interview level.

I generally take the EDII approach to answer this. The 4 reasons why I wanted to go into consulting.

Exposure – The learning never ends. You tend to gain a wealth of industry knowledge and business issues depending on the project you are working on. You interact and work with the most talented and brilliant minds in the business.

Depth – Every new project provokes a different thought process, new ideas and innovation.

Impact – Millions of dollars of savings for clients is quite an impact. Also, you get to build strategies to assist organizations improve their performance and attain new levels of productivity from their business processes

Internal – Most consultants love their jobs and lifestyle. If you can deal with it, Consulting is a profession which provides job satisfaction like none other.

Why should we hire you?

The cynic – Like seriously, wtf!!! Doesn’t my resume ratify my awesomeness already????

The braggart – Get ready to be blown away with my awesomeness!!!

The doubter – In shock that I am giving this interview….

To answer this question right, you first have to know what are the qualities that make a good consultant. And second, why you will be a good fit for the company.

• “Company Name” should hire me because I have great Analytical/Quantitative/Interpersonal (Teamwork)/Communication skills. Elaborate with a short example.

It’s easy to be led away with this question, and one can keep harping how great they are. The thing to remember is that this will only form your first point – so keep it simple and succinct.

• I have a keen desire and determination to succeed in every endeavor. If you hire me, I promise you will receive nothing short of a stellar performance from me.

Or something to that effect. Basically show enthusiasm for the job. You can probably couple this with the first point.

• I will be a good fit for the company. Elaborate on how/why.

Read up the job posting. What qualities is the company looking for? (They are mostly generic, you can turn anything into a skill set that the company is looking for)

What is your definition of success?

Totally not expecting this because it isn’t one of the more generic questions. I didn’t hesitate at this one though, because I know what makes me happy and the things that tick me me off. Basically know thyself!! =)

To me success is honestly when I feel like I have made an impact. Even the smallest of all impacts. In fact my favorite success story is one during my undergrad years. I was a Teaching Assistant for an Advanced Calculus class. Now I love math, especially calculus, and I put in a great deal of effort into my lectures, drawing and visualizing concepts so that other students could understand it as naturally as I could. At the end of one semester, a bunch of students came up to me and told me that I was the best TA they had ever had and that they got an ‘A’ in the class because of me. Despite the millions of dollars of savings that I have achieved for my clients, that has been the most rewarding experience of my life and I truly felt successful at that moment.

This case success = impact.

Another success story that I use is one where I overcame my personal fears. I hate talking on the phone, calling up clients etc. (This can be deadly if you are in consulting because there is can be a lot of cold calling and phone interaction with random people) I interned at a plastics manufacturing company one summer and my boss wanted me to call up potential clients and sell our product. (Now I am an awful sales person, I can’t even market myself well during interviews). With the help and encouragement of my boss, I did finally manage to get over my fear and hesitation and managed to rope in a client which could lead to a $20k profit (okay so it was a small client)

This case success = overcoming personal obstacles

Whats your greatest strength/weakness?

Thank God I never got this question. I have way too many strengths and no weaknesses. I truly believe that I am God’s gift to mankind. Only wish others could see that too. =)

But I have thought about these questions, and here is how I would answer them if they are thrown at me.

Strengths – honestly my greatest strength would be the ability to adapt. Adapt to different philosophies, ideologies, cultures, atmospheres and be able to mingle with and relate to people from all over the world.

I would like to emphasize a strength that would differentiate me from the rest. Not that having no international exposure is a drawback. But I think one should set themselves apart by highlighting the ‘cool factor’ in their personality arsenal. I personally like the whole ‘international outlook’ thing and believe that this is especially important in today’s world as businesses get more globally interlinked.

Weakness – (even tough I admittedly have none =) – my habit of spreading myself too thin. I have a variety of interests and love to take on additional responsibilities. This has often led me to lose focus and burning out prematurely. However, I am learning to eat one spoon at a time and not bite off more than I can chew. I have learned that it is not worthwhile to be a jack of all trades, yet master of none. Elaborate (again) with a story.

Wow, that was pretty cheesy, filled with metaphors and idioms. I would also advise against excessive use of these, unless spewing philosophy comes to you naturally. Also note that most other interview experts would advise against using my example above as a weakness. It seemingly comes across as a strength portrayed as a weakness. Personally, I feel its a major weakness if you take on way too much and lose sight of the big picture. (Think of a time when you did intramural sport, were president of the debate team, volunteered to help out mentally challenged kids and screwed up your loaded 18 credit semester) I kinda did that. And I don’t have any other flaws. =)

Tell me of a time when you influenced/persuaded a group.

DO you know how hard it is to convince a group? And what are you supposed to say if your persuasion skills are worse than Sarah Palin’s and you have failed to influence anyone in your life?

You sort of ’embellish the truth’. Maybe you influenced a small group (like maybe 2) to do something your way. It doesn’t really matter. The point is, firms are looking at your approach. Are you dictatorial? Or do you just let brilliant ideas go by just because you are too timid to voice out your opinion? Consulting firms unfortunately want intellectual barbies – geniuses with high EQs and leadership abilities.

So how do you influence a group? Here is what I usually say, based on my undergrad experiences and anecdotes.

• Had a brilliant idea (could be anything from changing cafeteria food vendors to implementing a mentorship or student counseling program)
• Governing body and other higher ups didn’t like my idea because of stretched resources/no solid plans/plain pigheaded
• I came up with a detailed plan to implement my idea, using minimal resources and highlighting its benefits
• Gathered support of student body
• Was persistent
• Eventually Governing body saw my way and approved my idea after minor modifications

Or something to that effect. It could be as simple as you persuading your project team to work on another topic. The point is to see approach a situation where your ideas are not easily accepted. Basically a plan (highlighting the advantages of your idea) and a little persistence. Without shoving your idea into everyone’s faces.

Tell me of a time when you lead a team.

I love telling people this story, mostly because I really did step up to the occasion on this one. I also love being team leader!! It comes from my time in high school when I was the head of my house. (For North Americans who don’t get this – its like Prefects in Harry Potter. If you haven’t read the HP series, you are missing out on the best series written in this century – I am a huge fan!!)

I was part of a team which had to organize an event to showcase Indian Culture. (For those not familiar with Indian work ethics, we pretty much jerk off till we get threatened) True to our stereotype, we were pretty disorganized, with lots of people contributing great ideas, but no one takes on the responsibility or the initiative to do anything about it. 10 days before the event, I overhear someone commenting that Indians were the most lethargic group that they had ever seen. With my national pride on the line, I decided to step up and get the show running.

The hardest part of leading a team – is motivating people to work. Also, it is extremely difficult to inspire a bunch of volunteers who have little incentive to work. In this case, it is best to use subtle tactics – hand out responsibilities, reward people with appreciation and admiration when they get the work done. You also can’t get mad at people who don’t perform because you aren’t running a firm where you can kick out a shoddy worker. You have to shake sluggish people into being more productive by giving them only as much as they can handle – and letting them know that you believe that they are the best for the job and that you trust them to get it done on time.

Point is – a leader stays calm during stressful times especially when approaching deadlines or when team members start to play the blame game. The interviewer wants to see how you manage these types of situations.

Tell me of a time when you resolved a team conflict.

Again, a personal story.

• Was set up in a team of four for a course project.
• Project was broken into 2 modules so we decided to split the team into 2.
• Nobody wanted to work with one of the team members because her programming skills were extremely weak.
• Team was on the verge of splitting up because of this.
• I realized that she had better writing skills than any of us & could help out majorly by writing out the report (was 20% of our grade)
• I decided to work with her on the simpler module and split the work so that I could program and she could test & debug it.
• Came to a compromise where everyone was happy!!

Team friction happens often due to differing schedules, skill sets and mostly because of unequal motivation levels amongst members. Every group has the “know it all genius”, “slacker”, “person who talks a lot but brings nothing to the table”… Keep in mind one of the times when you had to deal with such a person in a group and elaborate on how you resolved the issue. Consulting firms are looking for leadership abilities as well, and they certainly wont hire someone who sits in a corner while other team members resolve issues.

Important – Consultants often work in teams and human interaction is a huge part of the job!!

Tell me of a time when you had a conflict with your Boss.

I have never had a conflict with my boss. Even they get my brilliance. =) But I have had some tiffs with a PhD student who I was helping out with a research project during my undergraduate years.

• I was given a lot of work during peak mid term season
• PhD student had his thesis deadline and had promised to end my life if I did not deliver
• I told him to give me 3 weeks & I would give him his results
• He threatened to tell the supervising professor because he thought I was slacking off
• I decided to talk to him in front of my professor. I agreed to allocate at least an hour everyday towards his research & update him every other day on my progress
• In return, the grad student agreed to be less overbearing and demanding. He was a lot more helpful once he realized that I am putting in the effort despite my hectic workload.
• In the end, everything worked out just fine!!

Imagine that you are married. You are a consultant at “some firm”. After weeks of hard work, you finally take a day off and plan an anniversary dinner with your spouse. 2 hours before your dinner, your client calls you and tells you that he wants a report by tonight. What are you going to do?

This was a creative one. My immediate response to this one was – I hope my future husband is very understanding =)

After some smiles, I thought about the question, completely bewildered. I tried to go towards “lets make a compromise” route.

Well, I would try to negotiate with the client. Let him know that I am busy tonight but that I will get him the report as soon as possible.

The client is not happy to hear this, not ready to compromise and demands that he wants the report tonight.

In that case, I would ask my team members if they can help me out. If the client’s demands are too unreasonable, then I could perhaps talk to my manager to resolve this issue.

The interviewer smiles!! Jackpot!!

And yea – that is the correct answer. When in a tough spot, especially with your client (FYI client = king in Consulting), do not try to take him head on. Try to compromise, and if that doesn’t work, get help from team members and/or your manager who will be more experienced to handle such issues. You may be a great mediator amongst your friends, but never try to resolve a client sensitive issue all on your own!! Or at least tell the interviewer that =)

Answering Behavioral Questions

I think the best way to come up with a sincere and meaningful answer would be to research the company, more than what you read on the website. Reach out to current employees, perhaps some grads from your university. I feel that Analysts will be more than happy to give their views and perspectives. Also, recruiters like to see that you have taken the extra effort to meet with people from the firm and warm up more quickly.

Another thing – it is important to prepare for these behavioral/fit interview questions. All the big firms want you to come prepared with answers for these questions, and then pretend that you heard these questions for the first time in the interview. Also try to come up with stories/anecdotes for each type of question. Sometimes interviewers keep pressing you on for specific details. It’s important that you highlight ‘your capabilities’ and ‘what exactly you did’ in the story.

Other behavioral interview questions:

• Tell me of a time when you were part of a team working on a project, and the project did not go as well as you would have hoped for it to have gone.
• Tell me of a time when you client gave you a very high level strategy and not much direction with respect to the project.
• Tell me of a time when you faced high pressure and tight deadlines.

Check out the links below for more behavioral questions!

http://www.jsdconsult.co.uk/candidate/questions.htm

http://www.graduate-consulting.com/interview/competency-questions

Feel free to post other questions you got during your interviews!!