Reader from 2012 training by Top of Minds Executive Search By Auke Bijnsdorp, Partner - Amsterdam office

Surviving the case interview A guide to job hunting in strategy consulting

Top of Minds is a candidate centered niche-agency specialized in strategy consulting and the life after

Candidate centered 1

Specialized in strategy consulting 2

Focus on added value through training and coaching 3

• Extensive attention to the needs of the candidate • Objective advice rather than a commercial push towards vacancies

• A closed group open only to top-5% academics • Strong position in the strategy consulting market

• Individual coaching and career counseling • Training program for consultants-to-be by an ex-strategy consultant

Agenda

General

10:00 Coffee

10:15 Being a consultant

Cases

10:30 Case: Buffy Bear’s

11:00 Discussion

11:45 The Pyramid Principle

12:00 Working lunch

12:45 Case: Shell Express

14:00 Discussion

15:00 Frameworks

Interviews

15:45 Live interview 1

16:00 Discussing interview 1

16:30 Live interview 2

16:45 Discussing interview 2

Closing

17:00 Q&A

17:30 Wrap-up

Becoming a strategy consultant

You want to be a strategy consultant because you’ll learn the most, because you can and because it’s the best start ever

You’ll learn the most 1

Because you can 2

It’s the best starting point for virtually every career 3

• You’ll work with ridiculously clever people pushing you to your limits • You’ll learn a complex abstract trick that works with everything in business

• As an insecure over-achiever, you want to prove you can • If you don’t, you’ll always be wondering if you could have

• Being a strategy consultant implicates high value • You’ll have a strong network and good visibility to headhunters

In The Netherlands, strategy consulting firms can be divided in three categories

Generalists (all international) 1

Strategic operations (The Netherlands), examples - non exhaustive 2

Specialists (The Netherlands), examples - non exhaustive 3

Clients hire strategy consultants because they’re smart, they work hard and have industry specific expertise

They’re smart 1

They work hard 2

They have industry specific expertise 3

• Fact-based approach without political bias • Methodological strength provides clarity in complex issues

• Strategic projects often have a tight deadline • Small teams ensure minimal communication overhead

• Although a junior won’t, the partner has industry specific expertise • Moreover, strategy consultants are good at drawing parallels between industries

Example positions for ex-strategy consultants, drawn from portfolio Top of Minds

Client Industry Position

Ahold Retail Lead Intelligence Consultant

AudioNova International Retail Business Development Manager

Anthony Veder Transport & logistics Business Development Manager

ING Financial Services Manager Strategy & Business Change

Coca-Cola Enterprises FMCG Strategic Planner

FrieslandCampina FMCG Customer Marketing Manager

AkzoNobel Chemicals Finance Manager

Jumbo Supermarkten Retail Commercial Controller

GrandVision Retail International Business Controller

Staples Retail Manager Sales Operations

Sanoma Media Online Senior Product Manager Mobile & Tablet

Consultants hire candidates when they’re smart, they work hard and learn quickly

When you’re smart 1

When you work hard 2

When you learn quickly 3

• Strong academic results are the most reliable indicator of brain power • You can structure your thoughts and get them across with empathy

• You think it’s the coolest thing in life • You are an insecure over-achiever

• You can quickly grasp a new industry • You are willing to follow orders and won’t be a liability

The case interview is the main barrier to entry when becoming a consultant – but don’t act like it’s a test

The consultant wants to know how you will perform on a project in his team. He likes: - brainpower - reliability - independence Above all, he wants to enjoy himself.

His objective Your approach

To perform as natural as possible, as if you’re not an applicant but a colleague. You show: - resourcefulness - empathic humor - self reflection

You’re having fun, because there’s no reason to fret.

There are two types of cases: business-cases and brain-teasers, usually mixed together

70% of time spent Three types: 1. Action planning 2. Performance gap 3. External change

Business-case Brain-teaser

30% of the time spent, usually mixed into a business-case when estimating missing data Two types: 1. Estimation by analysis (weight of a Boeing 747 through breakdown)

2. Estimation by analogy (number of car batteries sold via cars)

Case 1

Buffy Bear’s

Buffy Bear’s is a chain of 90 restaurants in the Denmark and but saw profits fall

• 100% privately owned my Mr. Green, a Danish millionaire

• Mr. Green wants to sell to retire but profits are falling, affecting the sales price

• Dishes are meat-oriented, mainly steaks

• Restaurants are located in major cities and next to high ways

Key data Buffy Bear’s

When defining the problem, we use the SCQ model to clarify the key question

Situation Mr. Green owns a chain of 90 restaurants, Buffy Bear’s

Complication

Profits have fallen by 20% which affects the potential for selling off the business

Question Can we restore profits to the level of 2008?

Note: The SCQ model is explained in detail in the book “The Piramid Principle” by Barbara Minto

STQ to clarify the key question

To identify the cause, we analyse the profit structure

profit decline

revenue decline

volume decline

market share decline

market size decline

price decline

cost increase

This structure helps us to ask the right questions. It turns out that our market share has declined because people want more health food. We also find an increase in costs.

Generic profit structure

To analyse the costs we use a set of common categories…

Costs

Cost of goods sold (COGS)

Cost of inputs

Process costs

Marketing costs

Communication costs

Cost of incentives

Distribution costs

Other costs

Other costs

R&D costs

Administrative costs

Cost of capital

Other costs

Generic cost structure

… and tailor them to the situation at hand, where we find that the price of meats has gone up

Costs

Cost of goods sold (COGS)

Meats

Vegetables

Marketing costs

Advertising

Promotions

Other costs

Salaries

Real estate

Cost structure Buffy Bear’s

Now we can come up with ideas to increase profits and test them

Increase revenue:

• Raise prices

• Diversify the menu with salads to attract new customers

• Extend the menu with typical road snacks, like ice-cream and apple-pie competing with petrol stations

• Use drive-ins to service quick customers

Decrease costs:

• Offer salads to reduce the effect of rising meat prices

• Offer meat replacements like soj burgers

• Provide free proteine-rich shakes as a starter (instead of desert) to reduce the hungry feeling of clients

Ideas for increasing profits

After shooting some ideas, the best one is picked and developed further

Diversifying the menu with salads has a double effect:

1. It attracts new customers

2. It decreases the influence of rising meat prices

The hypothesis giving the answer to the SCQ is now formulated as:

“We can restore profits to the level of 2008 by replacing 20% of our menu with vegetable–based dishes.”

Formulating the hypothesis

The interviewer will now ask you to make some quick calculations

Steak Salad

Production cost € 8 Retail price € 16

Production cost € 2 Retail price € 14

What is the effect on profitability of the introduction of salads?

Number of clients grows from 4.000.000 to 4.500.000 per annum thanks to the more diverse menu Number of salads in the new sales mix is 20% of all dishes

First you come up with a difficult formula

∆Profit = (∆Revenue - ∆Costs) / Profit[current]

= (4.500.000*(80%*€16+20%*€2)-4.000.000*€16)– (4.500.000*(80%*8+20%*2)-4.000.000*€8))/(4.000.000*€16-4.000.0000*€8)

First you come up with a difficult formula

∆Profit = (∆Revenue - ∆Costs) / Profit(current)

= (4.500.000*(80%*€16+20%*€2)-4.000.000*€16)– (4.500.000*(80%*8+20%*2)-4.000.000*€8))/(4.000.000*€16-4.000.0000*€8)

And you start to sweat and panic!

So you try it with percentages

Steak Salad

Production cost € 8 Retail price € 16

Gross profit € 8

Production cost € 2 Retail price € 14

Gross profit € 12

What is the effect on profitability of the introduction of salads?

+50% gross profit in

20% of dishes is

10% up in total gross profit

Number of clients grows from 4.000.000 to 4.500.000 per annum Number of salads in the new sales mix is 20% of dishes

+12.5% more clients

Leading to the conclusion: Yes, introducing salads will restore the profit level of 2008

Cost

+10%

Gross profit

Cost Gross profit

+12.5% customers

Cost/profit mix before and after introduction salads

110% * 112.5% = 123,75% is more than the profit level 2008 in of 120% (not 110% + 112.5% = 122.5%, although you could use that as an preliminary estimate, as long as you show that you understand the difference)

Price build-up

Price build-up

But of course you forgot all about the fixed costs

Costs

Cost of goods sold (COGS)

Meats

Vegetables

Marketing costs

Advertising

Promotions

Other costs

Salaries

Real estate

Cost structure Buffy Bear’s

But of course you forgot all about the fixed costs

Luckily, the interviewer has run out of time so he helps you out: “The new number of clients matches the old one in 2008, and no staff was fired. So the fixed costs remain the same.”

Costs

Cost of goods sold (COGS)

Meats

Vegetables

Marketing costs

Advertising

Promotions

Other costs

Salaries

Real estate

Cost structure Buffy Bear’s

Structuring your storyline:

The Piramid Principle

The Piramid Principle tells you to work top-down and structure your argument

Source: The Piramid Principle by Barbara Minto

Answer

because of X

because of X1

because of X2

because of Y

because of Y1

Situation Complication Question

Illustration of issue tree

The SCQ framework helps you understand the question and scope the assignment

Situation What are we talking about?

Complication

Why are we talking about it?

Question Which question follows from the above?

Answer The hypothesis you’ll be working with (optional)

The SCQ model

Source: The Piramid Principle by Barbara Minto

You divide the key question in an issue tree, building an inductive argument

Question

Issue X

Issue X1 Issue X2

Issue Y

Issue Y2

X and Y have to be MECE Mutually Exclusive and Collectively Exhaustive

Illustration of issue tree

Intermezzo: MECE brings us to SEAL

Any list of issues should not only be MECE, but also SEAL

– Similar: same sort of issues

– Exhaustive: all issues are covered (like in MECE)

– Apt: relevant to the topic

– Linear: same level of abstraction or magnitude

SEAL is a test for any list of issues

Example of correct list • Cars • Bikes • Trains • Plains

Example of incorrect list • Cars • Transportation • Public • Speed

The basic performance gap model is an example of a MECE issue tree

Why are profits down

by 20%

Revenues declined?

Volume declined?

Market share declined?

Market size declined?

Price declined?

Costs increased?

COGS increased?

Marketing cost increased?

Other cost increasde?

Issue tree Buffy Bear’s

But MECE issue trees can be build for anything

Why is Geert Wilders gaining

influence?

Do people like him?

Do people support his ideas?

Do people like his presentation?

Do people not like the alternative?

Do people not like the alternative

ideas?

Do people not like the alternative presentation?

Is there another reason to vote for

GW?

Is a vote for GW a protest vote as

such?

Issue tree Geert Wilders

Issue trees are based on inductive reasoning

Illustration inductive reasoning

Poland is about to be invaded

by tanks

French tanks are at the

Polish border

German tanks are at the

Polish border

Russian tanks are at the

Polish border

Source: The Piramid Principle by Barbara Minto

When you make slides to convey your thoughts, use the consulting style

Wrong style Consulting style

Effects of crisis

• More unemployment • Less vacancies available

• 50.000 less vacancies compared to 2008 • Currently 152.000 open vacancies

The economic crisis has led to a 25% decline in open vacancies in only three months time

Q1 2009

152.000

Q4 2008

202.000

-25%

Source: CPB

1. Key message as action title 2. Graphs preferred over text 3. Subtitle describes content 4. Name your source

Slide format for final round case presentations

Open vacancies in Dutch labour market

Frameworks:

When and which

Do not overestimate the value of frameworks

Using frameworks is not easy

There are many frameworks, and an engineer will know less than an MBA.

[Yet, more engineers are hired than MBAs]

Mapping frameworks to cases is not easy and requires a lot of

experience

Frameworks are not always necessary

A framework itself doesn’t hold the answer. You do

The primary goal of frameworks is to

structure you presentation. You

might not get to this

Logical reasoning is more important than

using frameworks

A framework itself is not intelligent. You

are

When: novice consultants and candidates usually overestimate the value of frameworks, only use it when you can

An argument you shouldn’t overestimate the value of frameworks

Which: mapping frameworks comes from training, but a guideline can help you get started

A generic guideline for mapping frameworks to cases [never exhaustive]

Type of case Examples Relevant frameworks

Industry analysis Start an internet provider in Africa? Porter’s five forces

Competitive power of product/service De Volkskrant looses subscribers Four Cs: customers, competition, cost, capabilities

Power of product/service, less focus on competition

Profile sells les tires with winter profile Four Ps: product, place, price, promotion

Performance gap analysis McDonalds’ profits are falling • Revenue/cost analysis • Value chain analysis

Process cases Transform KPN from a infrastructure to a services provider

GSTIC: Goal-Strategy-Tactics-Implementation-Control

Exhaustiveness test Interviewers frequently test if you can think of more issues. And more.

• Being there • Inverse • Abstract association

Portfolio analysis What products or services should be (dis)continued?

• Four Cs or Ps • BCG matrix (use this only at BCG)

Public policy issues Should we IPO Schiphol? Stakeholder analysis

M&A cases Should a acquire company X? Does it have a promising future?

• SWOT analysis • Value driver analysis • BCG matrix

A lot of mistakes are made with using the word profit

• Sales revenue (net turnover) = price (of product) * quantity sold Bruto omzet = prijs (van product) * hoeveelheid verkocht

• Gross profit (gross margin) = sales revenue – cost of sales Brutowinst = bruto omzet – verkoopkosten

• Operating profit (EBITDA) (net margin) = gross profit – overheads and direct costs Operationale winst = brutowinst – overhead en directe kosten

• Net profit = operating profit – depreciation – amortization – interest Nettowinst = operationale winst – afschrijvingen - rente

• Profit after tax = net profit – tax Winst na belasting = nettowinst - belasting

Definitions of profit related terminology

Case 2

Shell Express

Shell considers increasing the number of unmanned petrol stations

Case assignment: Shell Express - 2009

You’re at a seated benefit dinner for WarChild. Your heart misses a beat when you find out Jeroen van der Veer is sitting next to you! Your consulting firm has been trying for ages to get a project with Shell, so this is your chance. He tells you that one of his worries in the current handover to his successor Peter Voser is losing market share in the retail activities. The economic crisis has put extra pressure on prices and unmanned petrol stations of competitors are eating at Shell’s market share.

Shell has some 60 unmanned petrol stations itself, introduced as an experiment some years ago, branded ‘Shell Express’. This is now 10% of the total base of 600 petrol stations, and Shell is wondering whether they should convert all of the remaining stations to the unmanned variant as well so lower prices can be offered.

Let’s get this straight: you’re asking me if converting to unmanned will restore your profit level to last year’s, right?

STQ to clarify the key question

Situation 10% of Shell’s retail outlets are unmanned ‘Shell Express’, all in urban locations

Complication

Triggered by the economic crisis, Shell has lost 2% of it’s retail market share in urban locations in the last twelve months, resulting in a decrease of 4% of total profits

Question Can we restore the profit level (i.e. +4%) by converting more petrol stations to the Shell Express formula?

Since this is a ‘product versus competitors’ case, we can use either the four Cs for an initial analysis

Four Cs mapped to the Shell Express case

Customers (segmentation, purchase criteria)

1. Shell Express attracts price aware consumers. This excludes employees with a company car.

2. Because of the recession, the segment of price-aware customers has grown rapidly.

3. The Express formula should be limited to urban areas, since high way customers choose their petrol station out of geographical motivation and have a stronger need for shopping.

Competition (market share, position, USPs)

1. Competition is two-fold, both big chains with their own express formula and local independents.

2. The market share of unmanned stations is expected to keep growing, as clients increasingly accept it.

3. Shell has a more premium brand than others.

Cost (production costs, economies of scale, experience)

1. Unmanned petrol stations have a lower running costs, creating the opportunity to lower prices.

2. In retail, economies of scale are always leading in profit issues, since most costs are fixed so all extra turn-over strongly contributes to the profitability.

3. Removing shops from petrol station reduces not only costs, but also turn-over. We have to calculate the net effect.

Capabilities (product-company fit, resources)

1. Shell’s premium brand doesn’t have be an obstacle. There are successful examples in other industries: KLM’s take-off fares, KPN’s Hi, take-out food

2. The conversion to unmanned requires no significant changes to the company’s structure, and lay-offs can be gradual.

3. There is already experience with 60 stations, making a swift conversion operation feasible.

After the initial analysis we can create a very sharp and focused issue tree

By converting to Express formula, Shell

can restore profits

Lower costs enable discounts, attracting

more customers

Discount to be offered is x cents

The discount of x cents is enough to regain the lost 2% market share

Profits increase by cutting shops, churn is

minimal

Profits actually increase because most shops have a negative net

effect on profit

Only shops in urban areas are closed, not

the ones on high ways

Shops in isolated areas with no store-

competition are maintained (20%)

The number of clients preferring a shop that

will turn to a competitor is minimal

Issue tree Shell Express case

Key assumption is that most shops have a negative net contribution to profit

Estimation of net effect on profits of losing the shop

Loss by no more sales

in shop

Benefit

y

x-y

Saving by no more staff

x

Neglected effects

• The costs involved in installing automatic terminals (-)

• The savings of running costs on shops (electricity, cleaning) (+)

• The savings of no more stock in the stores (+)

Key effects

To make the necessary calculations we have to make some assumptions, or the data is provided by the interviewer

Assumptions

• 80% of shops have the ‘average format’: 4 outlets for cars + 1 for motor cycles

• petrol station is open from 8:00 to 22:00, manned continuously by two employees in two shifts

• Two peaks of two hours during rush hour, operating at 80% capacity. Rest of the day at 40% capacity. Average duration of visit is 5 minutes

• Average non-petrol purchase per customer in shop is € 2 with a 50% margin (cigarettes are excluded because of extremely low margin)

• 20% of clients are non-petrol clients and only shop in store

Lay-out petrol outlets

car 1

car 2

car 3

car 4

bike

Utilization of capacity during the day

8-10 10-12 12-14

80%

40% 40%

14-16

40%

16-18

80%

18-20

40%

20-22 hrs

40%

Assumed or given data for calculation

First we calculate the margin decrease that comes from no more non-petrol sales

Calculating margin decrease

Margin decrease = number of shopping clients per day * average spent * margin * 365 days = 1.2 * (22-8 hrs) * 5 *(80%*2 + 40% * 5)/7 * 60/5 * € 2 * 50% * 365 days = 1.2 * 14 * 5 *± 50% * 12 * € 2 * ± 180 = 1.2 * 14 * 30 * € 2 * 180 = 1.2 * 14 * 60 * 180 = 1.2 * 840 * 180 = 1.2 * 1.680 * 90 ≈ 1.2 * 1.500 * 100 = 1.2 * € 150.000 = € 180.000 per annum (€ 189.216 exact, 5% off)

Then we calculate the savings of having no more staff

• Open from 8:00 – 22:00 = 14 hours

• 2 shifts of 7 hours = 4 man per day

• People work 2/3 of the year, meaning we actually need to employ 6

• Average salary = minimum wage + 30% = € 1.500 per month1 + 30% ≈ € 2.000 per month

• 22:00 – 18:00 = 4 hours out of 14 = 2/7 are after six so pay +50%

• 1/7 of hours is on Saturdays paying +50%

• 1/7 of hours is on Sundays paying +100%

• Average salary corrected for overtime = 100% * 1/7*150% + 1/7*50% + 1/7* 100% = 100% + 4/7 * 50% = 100% * 200%/7 ≈ 130%

• Additional costs for pensions, health insurance and other benefits +50%

• Total corrected salary = 180% * 12 months per year * € 2.000 per month = 180% * € 24.000 = 90% * € 48.000 = € 43.000 per annum

6 staff members costing each € 43.000 per annum = € 258.000 per annum

Calculating savings of no more staff

1] Holiday allowance already discounted

The saving of 78.000 euro per annum means a discount of 1 cents per liter, which is not enough. So the answer is NO.

Saving Benefit Loss

€ 258.000

€ 78.000

€ 180.000

Conversion to unmanned saves 108.000 euro per annum per petrol station

Which means a discount of 1 cent per liter

• Number of clients per day = 14 * 30 = 420

• 78.000 euro per annum = 78.000/ 360 ≈ € 210 per day

• 210/420 = 50 cents per customer

• 50 liter per visit

• 1 cent per tank discount

It’s unlikely that a discount of 1 cent per liter is enough to attract significantly more customers.

So converting to unmanned stations will not restore the profits to the level of last year’s.

Unmanned is € 78.000 per annum cheaper

Interviews

Prepare yourself for questions on five important competences

The five most important competences (specifically for a junior consultant)

Problem solving

Impact

Teamwork Communication

Drive

The STAR framework for formulating examples

Situation • Describe the situation

Task

• Explain the task at hand and goal you pursued

Action

• Briefly summarize what you did, on an abstract level. Explain when the ‘how’ question is asked.

Result

• Describe the result and more specifically, how you contributed to the result

Classic brainteaser are not often used, but it never hurts to know some answers

• What is the prime number closest to 100?

• You fly with a rocket to the moon at twice the speed of light. What do you see when you get out (neglecting the time that it costs to do so) and look back?

• Two switches connect to two lamps in an other room. The door is closed. Both lamps are out. You can flip a switch twice. Which switch is connect to which light?

• Why are manhole covers round?

• A bat and a ball cost € 1.10 in total. The bat costs € 1 more than the ball. How much for a ball?

• You’re in a boat on a lake and you throw a big rock overboard. Does the water level of the lake rise or fall?

Some classic brainteasers

Codes of conduct

Do’s and don’ts at a job interview in consulting

Arrive 5 minutes before

Bring squared paper

Wear a watch

Strong handshake with a wiped dry hand

Make (eye) contact

Prepare three questions for the end, ask one

Create a conversation instead of just answering questions, by embedding ‘why’ moments in your answers

Do’s

Don’t arrive 30 minutes in advance

Don’t overvalue your uniqueness or authenticity

Don’t repeat the interviewer’s name

Don’t smoke just before interview

Don’t mirror seating behavior

Don’t use stupid phrases like ‘een stukje’ or ‘je ding doen’

Don’t ask what’s there on the website

Don’ts

Dressing correctly will stress that you fit in

Incorrect Correct

• Dark (but not black) suit

• Minimal pattern

• No belt or modest belt

• Shirt without stripes

• Tie with non-obtrusive or

no pattern

• No tucks in trousers

• Smooth black shoes with

laces

• Normal buttons, no

cufflinks

Wrong in this picture:

• Tie is one inch to short,

should tip the trousers

• Facial hair!

• Brown suit

• 3 pieces

• Button-down shirt

• Narrow angle collar on

shirt

• No collar stiffeners

• Yellow shirt

• Signal red tie

• Top button not closed

Consultant dress-code for men

Women have more room for creativity, but here is a suggestion

Incorrect Correct

• Dark blue suit

• White or light blue shirt

• Enough room for a hint of

décolleté, but only a hint

• Light make up on eyes and

lips

• Shirt sleeves are longer

than suit sleeves

• No earrings or bracelets

•Shirt with high closed neck

looks defensive

•What’s this tie-like thing

around her neck?

•Suit is black

•Suit is too long

•Too heavy make up on eyes

•Hair is not professional

Consultant dress-code for women

Wrap-up

A case-buddy is by far the most effective preparation

Contact us if you want personal advice on your consulting career or the life after

Your contact: Auke Bijnsdorp, Partner T +31 20 7600 776 aukebijnsdorp@topofminds.com

Top of Minds Executive Search Prins Hendriklaan 56 1075 BE Amsterdam www.topofminds.com