It is impolite to compare elite management consultants to call-centre bots. But at the top of McKinsey & Company, the comparison is becoming uncomfortably apt — at least when it comes to how clients want to pay. The world's most famous consultancy is under pressure to tie its fees to the outcomes it delivers — lower costs, higher profits, bigger market share — rather than to the hours its consultants spend producing advice. Charging for results, however, makes revenue less reliable, which helps explain why the firm will shunt a bigger share of partners' pay into equity and husband more cash.
The drive partly reflects the way billable hours are becoming less useful as a yardstick, thanks in part to consultants' own use of artificial intelligence for tasks such as data analysis and diagnosis. If a junior analyst's week of work can now be done by an AI tool in an afternoon, charging by the hour starts to look both stingy and absurd. More broadly, clients are questioning the value of advice while growing more accustomed to tariffs based on successful task completion. Fin, an AI customer-service agent, charges 99 cents for each case its bot resolves; iDenfy bills £1 per identity verification; Salesforce lets customers pay per task for activities like updating records. Pay-per-task makes budgeting predictable for both vendor and buyer.
Some industries are old hands at this kind of billing. Think 'no win, no fee' legal ambulance chasers. Even consultancies have history on the front: Alvarez & Marsal used similar pricing when working on Rolls-Royce's 2018 restructuring. McKinsey and its professional-services peers will still try to keep the bulk of work on billable hours, and giants of AI such as OpenAI still prefer subscriptions for some of their products, given the appeal of recurring, predictable revenue.
But here's the catch with paying for results: the results may turn out worse — or better — because of forces well beyond the consultant's control. Wars, tariffs, and stubborn line managers at the client firm can all kibosh the best-laid plans in, say, procurement or supply chains. One workaround might be to align consultants' incentives to the very metrics that determine the client executives' own bonuses, so both sides are pulling in the same direction.
Billable hours, subscriptions and flat fees will always remain part of the equation. But the proportion of outcome-based pricing will undoubtedly expand — and that goes down as a definite tick in the column under the benefits wrought by AI for the consulting business. For students eyeing a future at McKinsey or its rivals, the takeaway is sobering. The job once promised a steady climb from analyst to associate to partner, paid for in hours logged on slide decks. The job of tomorrow looks more like that of an investor: you make a bet on your client's success, and you only get paid handsomely if the bet pays off. The romance of the billable hour, in other words, may not survive the decade.
Source: https://www.ft.com/content/8318a754-7b63-4f1f-8978-7691e7ed3511
For a century, elite consultants sold one product: their time. Now AI can do an analyst's week in an afternoon — so McKinsey is racing to sell something far riskier instead: results.
McKinsey & Company, the world's most famous management consultancy, is changing the way it charges clients. Instead of billing for the hours its consultants spend on a project, it is increasingly tying its fees to outcomes — things like lower costs, higher profits, or bigger market share for the client.
The trigger is artificial intelligence. AI tools now handle a lot of the grunt work — data crunching, diagnostics, drafting — that junior consultants used to bill for. That makes 'hours worked' a weaker measure of value, and clients have started pushing back. The whole consulting industry, worth more than $700 billion globally, is rethinking its pricing model in response.
The cleanest way to understand this shift is to ask: are you paying for effort, or paying for results? Consultants have always sold effort. AI is making effort cheap, so they have to start selling results — which is a fundamentally different (and scarier) business.
Consulting has been one of the top destinations for ambitious graduates for decades — McKinsey, Bain, BCG and Deloitte hire thousands of new analysts every year, and the path runs straight through top universities. If AI is eating the entry-level work, the on-ramp to those careers changes too: fewer 22-year-olds building spreadsheets, more 25-year-olds expected to own measurable business outcomes from day one. That's a real shift for anyone thinking about business school, internships, or a 'safe prestige' career path.
The billable hour ruled professional services — law, accounting, consulting, advertising — for roughly a century. If AI breaks it in consulting first, law firms and ad agencies are next; their work is just as exposed to AI-driven productivity gains. Watch for two second-order effects: clients demanding outcome guarantees from any service vendor, and consultancies starting to look more like private-equity firms, taking equity stakes in the projects they advise on rather than just sending invoices.