Even so, several recruiters of top managers have gone public in recent years, as have some specialized consulting firms, such as Electronic Data Systems Corp. If KPMG goes ahead with its IPO, it will be the first of the five big accounting firms to sell shares. In August, the firm's partners voted to spin off the assets of its consulting business, the sixth largest office in the world, into an independent entity, called KPMG Consulting. While it's common for businesses ranging from grocery stores to strip clubs to be public, professional services firms have maintained a partnership structure because conflicts of interest can arise if the property is large.
The hardest job for management consulting firms these days may not be solving their customers' organizational problems, but figuring out how to retain their own employees. For five years, the rate has been rising, says Dean McMann, CEO of the Manhattan-based Ransford Group, which tracks the consulting business. McMann, from the Ransford Group, says he normally gets about four or five calls a month from consultants about compensation issues. It takes a lot of patience, trust and brand building to set up a management consulting company, and that's probably why so few of them go public.
Mercer Management Consulting allows employees to take up to two months off a year for everything from developing their own businesses to climbing mountains. If the board of directors were to rule that owning shares in a publicly traded management consulting firm would be a threat to KPMG's auditing independence, KPMG would likely abandon the IPO. Before proceeding with the IPO, KPMG needs approval from the Independent Standards Board, which decides whether a company's structure will violate its ability to remain independent during audits, an SEC requirement for all accountants. KPMG International, which lost 21% of its workforce last year, has decided that the answer lies in being the first major accounting and consulting firm to go public.
It is considering allowing its employees to buy an equity stake in the company's customers. We also have a few publicly traded consulting firms. Booz Allen, Huron, and Oliver Wyman (through Marsh McLennan) come to mind. There are some drawbacks, but if the company tried to raise money before expanding (most of them aren't as old as BCG, for example), it's hard to go back to being a private company (I'm not sure if that ever happened).
Because of the long hours and the travel involved, consulting firms tend to lose around a fifth of their employees every year. The problem of analyzing giant firms like Acn that I have is to find out how they actually make money with consulting, since they deal with everything from staff leasing, system integration, project management, strategy and all of that could be called “consulting”.