The History of Consulting: An Overview

James McKinsey was an American accountant who became a certified public accountant in 1919 and started working for the State of Illinois. The management consulting industry as we know it today didn’t exist until this point.

The idea to start a consulting firm came to his mind when he was working for the U.S. Army Ordnance Department and witnessed military suppliers being inefficient. McKinsey started a firm called “Accounting and Management Firm” through which he started advising people to use accounting principles for efficient management.

After James McKinsey, the two most important figures in the firm were its first partners, Tom Kearney and Marvin Bower. Kearney was hired in 1929, while Bower joined four years later in 1933.

In 1944, the firm opened its third office in the U.S. in San Francisco. With other offices in New York and Chicago, the leaders decided to commit to forming a single firm with shared values and missions instead of having different names for offices in different regions.

In 1959, McKinsey opened its first office outside the United States. This office was in London. The company kept expanding its empire into more continents and countries and delivered outstanding results to a wide range of clients.

But most importantly, McKinsey gave the world something really special—the idea of management consulting as a legitimate full-time profession.

McKinsey enjoyed a monopoly over the consulting industry for a few decades. But it was clear that the market had validated the idea of paying consultants for their advice. Competition was now inevitable, and it was Bruce Henderson who grabbed the opportunity.

The firm was first called “​​Management and Consulting Division” as it was meant to be the consulting subsidiary of “The Boston Safe Deposit and Trust Company”.

Within a year, Henderson was marketing BCG using a tactic that most companies use presently—content marketing. He started publishing a series of provocative essays on strategy, which was known as Perspectives.

So disruptive were the ideas that Henderson and his colleagues published, that businesses use them to this day. For example, BCG’s Growth-Share Matrix is a tool that divides a company’s products into four categories: Cash Cows, Stars, Question Marks, and Dogs. BCG kept differentiating itself by releasing similar innovative strategies. In the 1980s, there was a new addition to the Perspectives essay series—time-based competition. It discusses how companies can gain a competitive advantage by managing time efficiently.

In this way, BCG was one of the first companies, not just in the consulting industry, but in any industry, to leverage content marketing to provide value to its customers and position itself as a figure of authority.

Deloitte, KPMG, PwC, and Ernst & Young are part of the Big Four firms. These firms are more inclined towards accounting and not management consulting. Still, they played a significant role in shaping the consulting industry the way it is today.

Deloitte’s predecessors have been in existence for more than a century, and the firm has gone through mergers with several other companies to reach the level it is currently at. The rest of the Big Four have a similar story.

KPMG, as we know it today, was formed in 1987 after a big merger with three other predecessors known as KMG. These include Klynveld Kraayenhof & Co., McLintock Main LaFrentz, and Deutsche Treuhandgesellschaft. The accounting services giant generated a revenue of over $32 billion in 2021, and as of now, employs more than 230,000 people around the globe.

PwC, just like other big firms, merged with predecessor companies to become a global phenomenon. Coopers & Lybrand and Price Waterhouse, two accountancy practices that were founded in London, merged in 1998 to form PricewaterhouseCoopers. As you notice, only P and C are capitalized in the actual word, and the abbreviation of that is written as PwC. The firm has three main areas of services: Assurance, Advisory, and Tax. The biggest portion of their multi-billion-dollar revenue comes from assurance, while the smallest one comes from tax services.

Ernst & Young, once again, like almost every other billion-dollar consulting firm, was founded after mergers with several predecessors. The oldest predecessor of EY is ​​Harding & Pullein, a firm that came into existence in 1849. Then, in 1989, the merger of Ernst & Whinney with Arthur Young & Co. resulted in the Ernst & Young that we see today. Unlike PwC, EY offers services in the business consulting and strategy sector, along with accounting-related services like assurance and tax.

Final Thoughts

From what we can see, there’s one common denominator between all the consulting firms—proactive entrepreneurs who rolled up their sleeves and decided to put in work. Another common pattern, which is only present in the Big Four, is mergers with other companies that offer similar services. Truly, if you don’t join forces with companies that offer services in the same niche, they will become competitors. The saying “Together we stand, divided we fall” applies to this scenario perfectly. Hopefully, you are more motivated than ever to join the consulting industry after reading its epic history!