Prestige of Engineers

sakky
Sun, 20 Jan 2008 12:23:51 +0000

2. Consulting firms simply have nothing better to do with the profits they make than split it amongst their employees. An engineering firm could invest in some new project or try and expand in some way whereas the consulting firm’s product is basically the employees.



Well, no, that’s not quite true. Believe me, consulting firms are just as rapacious as any other firms (in fact, arguably more so), and would love to pay their employees diddly-squat if they could get away with it.

Let’s keep in mind that many consulting firm are publicly traded. Hence, these firms feel relentless pressure from their stockholders to return cash to them in the form of dividends or stock buybacks. That is where the excess profits tend to go. Those consulting firms that are privately held are owned as part of a partnership, and it is those partners who run the company and determine where the profits will go. They of course would like to direct as much of the profits as possible to the partnership shares (meaning to their own pockets).

But consulting firms also realize that they need to pay well enough to keep top talent around. Consulting employees have highly marketable skills and they know it. So if you want them to stick around, you have to keep doling out large salaries and bonuses. Plenty of them will leave anyway in order to take even more lucrative opportunities elsewhere.

I think it actually gets back to what you said before - that consulting revenues are actually highly traceable to knowledge (or, at least, perceived knowledge). In contrast, what I see as an issue with engineering is that a lot of engineering jobs are, frankly, not that hard to do and consequently you can hire somebody who isn’t really that smart or that hard-working (as long as he has an engineering degree from some school). Or, put another way, a star consultant really can generate millions of extra profits, compared to a mediocre consultant. But a star engineer in an engineering firm often times can’t really generate much extra profit over a mediocre engineer.