What is consulting?

For professionals working in the professional services, ‘consultant’ and advisor’ are often used and fall under common terminology, but what exactly do these terms mean? Consultancy.org zooms in on this field to get a closer look at the origins of the consulting industry, and provides insights into the main features of consultancy and the ecosystem in which consultants operate.

Consulting is defined as the practise of providing a third party with expertise on a matter in exchange for a fee. The service can involve either advisory or implementation services. For the consultant, taking an independent and unbiased stance on an issue is central to their role. A consultant can, in principle, service any sector. Over the past decades, the term has become synonymous with business advisory – which focuses mostly on business strategy, management, organisation, operational processes and technology.

The history of the consulting industry traces back to the late nineteenth century, with the founding of the world’s first modern consulting organisations, also known as business advisory firms. In the early days of the consulting industry (starting in the US and later crossing over to Europe and the rest of the world) the first consultancies focused their advisory services mainly on solving technical and financial concerns. Today, over 300,000 consulting firms in the UK alone – of which the majority are sole proprietorships – offer all sorts of different services, spanning across countless fields, disciplines and sectors.

Consultants’ right to exist
What do consulting firms base their right to exist on? One key feature of the industry is the so-called 'knowledge advantage’ that consultancy firms hold in relation to their clients. Consultancy firms are hired to help their clients with a dilemma, for which specialist expertise or knowledge is needed which is otherwise lacking on the clients’ end. Another feature is that consultancy firms form an independent party, which can give the client an objective perspective on the problems their organisation struggles with, and can offer them solutions toward the problem. Involving a consultancy firm can also, in some cases, be more cost effective than if an organisation where to hire experts themselves. Furthermore, an organisation often simply does not have sufficient capacity to manage its change portfolio, which, can instead be done by hiring an external consultancy firm.

Professionals working within the consultancy industry are generally called ‘consultant’ or ‘advisor’. Often, specific titles are used based, for instance, referring to their knowledge of a certain advisory area or through which their sector expertise is described (e.g. strategy consultant, healthcare consultant, procurement consultant, etc.)

Even though the term consultant is not a protected title – in essence anyone could ascribe themselves the title of consultant from one day to the next – the consultants active within the industry are mostly highly educated professionals. They have gained their expertise in a particular field, or within a specific sector, after years of studying, training as well as by building work experience. From within their organisation, consultants are deemed to work with a professional demeanour, holding the right qualifications and capable of providing a high standard of service to clients. Consultants can work at a consultancy firm, operate as an independent consultant (freelance), or work as a consultant within an organisation outside the consulting industry (‘internal consultant’).

According to estimates from the ONS, the UK roughly has 300,000 consultants working as an external advisor, of which a large majority (around 80%) work as freelancers.

Fields of expertise
The consulting industry consists of six main functional areas: Strategy Consulting, Management Consulting, Operations Consulting, HR Consulting, Financial Advisory and Technology Consulting. In total, these six advisory areas combine with other service areas to create more than 200 different fields of expertise and propositions.