At BCG the second round of interviews is also their "decision round" interview. These are conducted by the partners and managing directors of the office in which you would eventually be employed. For me, that office was Boston.
Because I was being interviewed "off cycle," it was more difficult for them to find a single day when all of the partners would be around to interview me. As a result, I would have to come back to the office on more than one day. The first interview started at 7:15 am on a Monday morning...ugggh. This interview was with a partner who was part of the health care practice. He had a PhD from MIT, but was from Belgium and had been with BCG since 1999.
The 7:15 interview was not my time to shine. We started talking about my resume some and he asked about starting an antibody company that I had co-founded in 2004...we talked about that and what the difficulties were with getting that company funded and off the ground. From there we moved into the case. This was where I really noticed a difference between the styles of the first round interviews and the decision round interview. His question was "Your client is a pharma company that is less productive than its competitors. You have a team of 4 people to figure out what is wrong and how to fix it in 6 weeks. What do you have everyone on your team do?"
We spend a pretty good amount of time discussing what "productivity" actually means and how to valuate a pipeline...we got to an answer with how to improve R&D pipeline value and how to bring that in line with the competition by divesting unfruitful programs, licencing non-core products and focusing more attention of the products we could bring to market...that being said, we probably didn't ever address productivity for the rest of the organization...I don't know if I lost points there or not.
The next interview was where it all fell apart. This particular partner (HBS MBA) was in consumer goods....not at all involved in the health care practice that I was interviewing for. The resume talk went fine (I've gotten pretty good and selling my CV by this point...the whole key is to give an answer and then relate it back to why you would be a good consultant). The case was rough...actually VERY ROUGH! We were working with a toy store and over time we have seen the profit margins decrease. What is going on and what should we do about it? I didn't really understand exactly what he wanted. I kept thinking that because profits are a function of revenue and costs that either our revenue was decreasing or out costs were increasing. He said costs were not changing with respects to the toys were were buying and our revenue was actually increasing. I thought maybe the cost of rent or the fixed costs associated with owning a toy store may have changed...he said that wasn't relevant. At this point I was stuck...I threw out a few other suggestions and got the response "anything else, anything else, anything else." At some point he says, " for the sake of time, let's consider we started selling more video games which have a very low profit margin." From there I jumped through the hoops, determined why we were selling more video games, determined it didn't matter that we had a lower profit margin because our gross profits were still increasing, etc... In my mind, it was too little too late...that was an error that I could never recover from.
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So, what happened? Did you hear back from them?
ReplyDeleteI did hear back...read the next posts...didn't get the offer
ReplyDeleteDid you find out the answer in the end? I think that it could be that he meant that variable and fixed costs remain the same. Revenues rose because more quantity is sold, but prices have dropped. Therefore marginal profits have dropped (variable costs remains similar), thus, the firm is making a loss
ReplyDeleteit's a revenue mix problem
ReplyDeleteyour costs are the same and you are selling more of your overall products but less of the profitable one so your margins will decrease
Hey as a current associate consultant at Bain let me give you as well as any future readers some perspective on how to approach a question like the one explained above. If a partner says for instance that toy store profit margins have gone done its important to structure your approach. For instance you could approach your problem solving by saying "Well if profit margins have gone done I am going to hypothesize that its cause is either (1) decrease in product pricing power (2) decrease in quantity, (3) increase in fixed costs or (4) increase in variable costs. You set up a structure that is MECE (mutually exclusive collectively exhausitble) which is the case here because you know revenues can only be a function of revenues and costs.
ReplyDeleteNow you can structure your problem solving by asking the partner what has changed on any one of these 4 categories. So if he mentions for instance that revenue has gone up its important to isolate in what manner it has (i.e. increase in prices or quantity). Although you don't make it clear in your description I would imagine the revenue went up due to a higher quantity sold. So now you can rule out (1) price as well as (2) quantity as casual factors behind the profit margin issue.
You can also logically conclude that if quantity has gone up in the toy store and margin has gone down the issue must be variable costs since fixed costs exist independent of changes in quantity.
At this point you can now tell the partner "I am going to revise my hypothesis and conclude that reduction in profit margin is being caused by a change in the variable cost structure of the client. If the partner says as you indicated that there was no change in costs, your next steps would be to segment the variable costs of the new product sales to see if there is a change in what mix of products are being sold.
Although we won’t know for sure I think its say to assume the partner would of say yes we were selling more video game products which have a lower margin (i.e. higher variable costs) whereby you could respond by saying “that’s interesting, what is the exact difference in margins as well as how much has the increase in quantity of sales can be attributed to the video game product line.
You could finish out your analysis by synthesizing to the partner that based off of your discussion the profit margin is being caused by a change in the mix of products being sold and that you would advice the client to either find a cheaper way to sell the video games or emphasis only products that have margins consistent with their overall financial objectives.
Again the key to landing jobs in management consulting is not just saying the issue is a product mix issue but rather creating a structured, hypothesis driven approach that is consistent that guides you to conclusion that gives the partner the sense that you could solve a variety of business challenges regardless of your background or experience.
I hope this helps and good luck everyone.
Thank you!
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