Catalyzing Brilliant Talent in a Digitized World
A look at how Catalant is revolutionizing the talent management space by digitizing the role of a traditional consulting firm.
“The truth is, the best people aren’t choosing to go work at most large enterprises anymore. Most of the most talented people in the world today are choosing to work in a different way.”
– Pat Petitti (HBS ’14), Catalant co-founder and co-CEO[1]
Catalant, a Boston-based startup, is shaking up the consulting industry with its online platform that “enables the world’s best companies to work with top experts for on-demand needs.”[2] This company’s name – Catalant – is a combination of “catalyst,” “brilliant,” and “talent,” representing its value proposition to customers.
Catalant is a two-sided market that connects experienced consultants – or “experts” – with companies tackling business problems.[3] Through the Catalant platform, firms post projects that experts can bid on. During the bidding process, experts provide their qualifications and day rate. Based on a company’s needs and willingness to pay, it selects an expert to work on the project. There are currently over 30,000 experts and 650 firms on the platform.[4]
Catalant creates value for both experts and firms. According to Glassdoor, the average salary for a post-MBA consultant at McKinsey is $136,284, equating to a day rate of $524 exclusive of benefits and $681 inclusive of benefits.[5],[6] Consulting firms bill clients for post-MBA consultants at a significantly higher rate, ranging between $3,200 and $4,800 per day.[7] In contrast, Rob Snyder (HBS ’18), a consultant who uses Catalant, has charged clients $1,700 per day, a price higher than what he would earn at a consulting firm and lower than what a client 
would pay to engage McKinsey. Catalant takes 20% of revenues generated by the expert.[8]
In addition to monetary value, Snyder explained that Catalant improved his quality of life. Compared to his time at a large consulting firm, Snyder had greater flexibility over the hours he worked and worked fewer hours overall. With clients paying over $3,000 per day for a consultant, partners wanted to ensure utilization was high, typically over 100%, so the client would feel like they were getting their money’s worth. This created a principal-agent problem that resulted in decreased quality of life.[9]
Digital technology has created enormous opportunity for disruption in the consulting industry. Catalant has capitalized on digitization through a series of operational choices.
- Catalant is does not hire or train its own consultants. Instead, the company serves as an intermediary between experts looking for work and companies searching for talent.
- Catalant has a system that matches experts to projects. Catalant is able to search its database of 30,000+ experts to generate a list of experts who would be a good match for a project. Additionally, Catalant is able to match experts with each other and build robust consulting teams.
- Catalant has a rating system for experts following a project. Firms rate experts based on the quality of their work product; however, experts are not able to rate firms.
- Catalant facilitates a bidding process, which sets the price of a project. Companies want quality talent at a low price – but not too low as to drive away talent. Experts want to be compensated handsomely – but not too handsomely as to lose projects to other experts. Thus, firms and experts are incentivized to find some middle price that satisfies the needs of both parties.
Ultimately, these operational choices, coupled with large network effects, have enabled Catalant to deliver on its value proposition. According to a Fortune 100 Energy Company, “The ability to hand-pick our team with the exact experience we needed was a major reason we chose Catalant over a major consulting firm.”[10] This firm was able to draw on Catalant’s broad network and simple platform to hire a well-rounded team to tackle their problem.
Although Catalant has been quite successful, the company should take additional measures to ensure they remain competitive in the talent sourcing space.
In particular, Catalant should provide professional development opportunities for its consultants. To maintain continue to compete on talent, Catalant should leverage its large base of consultants – who have myriad skills and experiences – to create robust development opportunities. Two challenges arise with this recommendation. First, consultants may not want to train other consultants, either because it decreases their own competitive edge or because their training materials may be proprietary. Second, regardless of who implements the training – consultants or Catalant staff – there are costs associated with such a program.
In addition, Catalant should invest more resources into vetting experts on its platform. Catalant’s website touts accessibility to “elite business experts” but does not conduct much screening themselves. Instead, Catalant relies on prior experience and a short interview as a proxy for caliber.[11],[12] To remain a leader in the space, Catalant should invest more resources upfront to evaluate an expert’s skills and ensure that consultants meet firms’ expectations. This will be increasingly time-intensive and costly as their networks grow, but is essential to maintaining their reputation.
Ultimately, Catalant is revolutionizing the talent management space by digitizing the role of a traditional consulting firm. Through their vast networks, they are able to connect experts with firms faster and more efficiently than ever before.
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Sources:
[1] “HourlyNerd Becomes ‘Catalant’ as It Shifts Its Focus to Enterprise Clients,” BostInno, July 26, 2016, http://bostinno.streetwise.co/2016/07/26/hourlynerd-is-catalant-entreprise-freelance-consulting/, accessed November 2016.
[2] Catalant Homepage, https://gocatalant.com/, accessed November 2016.
[3] “A two-sided market is a market in which a firm sells two distinct products or services to two different groups of consumers (the two ‘sides’) and knows that selling more to one group affects the demand from the other group, and possibly vice versa…. A firm in a two-sided market is then said to act as a platform1 and to somehow connect distinct but interdependent customer groups (the so-called ‘sides’) in a way that generates value for at least one of the two customer groups.” Filistrucchi, L., Geradin, D. A. A. G., & van Damme, E. E. C. (2012). Identifying Two-Sided Markets. (TILEC Discussion Paper; Vol. 2012-008). Tilburg: TILEC, https://pure.uvt.nl/ws/files/1410181/2012-008.pdf, accessed November 2016.
[4] “Our Experts, Catalant, https://gocatalant.com/our-experts, accessed November 2016.
[5] “McKinsey & Company,” Glassdoor, https://www.glassdoor.com/Salary/McKinsey-and-Company-Salaries-E2893.htm, accessed November 2016.
[6] Day rate is calculated based on the assumption that employees are compensated for five days per week 52 weeks per year. According to the Bureau of Labor Statistics, benefits in private industry account for 30.3 percent of total employee compensation. “Employer Costs for Employee Compensation news release text,” Bureau of Labor Statistics, September 8, 2016, http://www.bls.gov/news.release/ecec.nr0.htm, accessed November 2016.
[7] “How much do management consulting firms charge clients?,” Consulting Junkie, May 28, 2015, http://consultingjunkie.com/how-much-do-management-consulting-firms-charge-clients/, accessed November 2016. Blog post is consistent with personal industry experience and those of my peers.
[8] Interview with Rob Snyder, Expert on Catalant platform, November 17, 2017.
[9] Black, John, Nigar Hashimzade, and Gareth Myles, “principal–agent problem,” In A Dictionary of Economics (4 ed.), Oxford University Press, 2012.
[10] “Our Experts, Catalant, https://gocatalant.com/our-experts, accessed November 2016.
[11] “Our Experts, Catalant, https://gocatalant.com/our-experts, accessed November 2016.
[12] Interview with Rob Snyder, Expert on Catalant platform, November 17, 2017.
Cover Image: http://www.rlmconsulting.be/consulting/.
Two things I worry about Catalant (thanks for the shout-outs, btw) are:
1. If Catalant successfully “disrupts” traditional consulting firms, increasing its market share substantially at their expense, where will its talent emerge from? These consulting firms spend a lot of $$ training consultants, and (in my biased opinion) they have skillsets that enable them to succeed in consulting projects that other non-consultant candidates might lack.
2. Is Catalant getting the *best* talent? Are people with top-tier consulting backgrounds or degrees from top business schools going to be drawn to the platform, where they can make good (but not great) money and have relatively limited opportunities to advance? Or is it going to be a waystation for people like me: People who do a project if/when they have free time, but are not committed to doing this type of work long-term?
Rob – I absolutely agree with your concerns and believe that if Catalant wants to continue to uphold its value proposition, it will need to invest money and resources into training its consultants. Given the dispersed nature of the Catalant workforce, I’m struggling to figure out *how* it would provide professional development opportunities. Perhaps one solution is creating something along the lines of “Deloitte University” and requiring or incentivizing consultants to attend at least once a year, with follow up training opportunities throughout the year.
Regarding attracting talent, I think the platform provides opportunity an opportunity for consultants to make more money than in traditional consulting, as we discussed. While you had mentioned that the platform hasn’t catered as much to parents wanting increased professional flexibility, I think this would be a really great avenue for Catalant to pursue. Given the changing expectations within the home (men and women are splitting work at home at an increasing rate), so this may present a unique opportunity for talent acquisition. One potential pitfall of this idea is that senior level consultants are already given flexibility through their firms, given the “inflexible time” they put in as a junior consultant. Thus, these folks may not need Catalant for additional flexibility.
As someone passionate about workforce and talent development, I really enjoyed chatting with you about this and appreciate your thoughtful comments on my post!
Great article, Rebecca! I think an important benefit of a platform like this is that it allows people who need more work life balance longer-term to continue leveraging their skill-sets and making good money. Rather than people in a similar stage of life to Rob, I see it appealing more to women (or men) who after having children realize that they don’t want to be full-time parents, but they also can’t justify being away from their family all the time as a full-time consultant. Catalant and platforms like it allow them to continue working, on their own schedule. In terms of opportunities for advancement, I’d imagine that one would be able to charge by years of experience, so that even if flexible consultants don’t get to become partners at a big consulting firm, they can still make a lot more money as they advance in their careers. By the way, another HBS startup doing something similar to Catalant is Canopy Advisory Group. It was founded by Brooke Borgen (HBS ’06), a former Bain consultant, and is based in Denver and Seattle: http://www.canopyadvisory.com/
Thanks for your comment! I think the idea of charging for years of experience is an interesting one. I struggle with this idea in an “on-demand” economy. How does one quantify years of experience for a consultant who isn’t working full time? Or a consultant from a firm (with extensive training opportunities) compared to a freelance consultant? I think your point that there should be some avenue for advancement and growth is a valid point, though. Perhaps Catalant could do assessments on its consultants and enable them to earn various credentials or “levels” through Catalant. This would definitely require Catalant to have additional resources and manpower, but could provide a solution to opportunities for upward mobility.
Rebecca,
The “gig” model for professional services is a well-worn path and you do a nice job of highlighting the approach that Catalant has taken in the management consulting space. One worry that I have for the business model is the challenge of quality. Given the fact that Catalant has chosen to favor scale over quality, their client results may be inconsistent and challenge long-term ambitions. On the spectrum from BTG (a highly curated gig business) to Upwork (a platform where buyers/sellers engage independent of Upwork’s management), I think the winners at the end of the day will fall more toward BTG’s end of things. Only with a sophisticated sales force that can rival those of the top management consulting firms can these lower-cost models hope to win the high value work that will energize their human capital and encourage them to stay.