How to ask clarifying questions on a profitability case?

clarifing questions profitability
New answer on Sep 07, 2021
8 Answers
1.6 k Views
Anonymous A asked on Sep 07, 2021

Hi everyone, 

I have two questions on clarifying questions to ask before setting up the structure.

  1. How do we ask if this is an industry or client-specific profitability issue?
  2. What question should we ask to understand if this is a Revenue or Cost problem?

The reason for my question is that the coach I am working with mentioned that I should not be asking these types of questions directly to the interviewer.

Appreciate any insights.

Overview of answers

Upvotes
  • Upvotes
  • Date ascending
  • Date descending
Best answer
Francesco
Expert
Content Creator
replied on Sep 07, 2021
#1 Coach for Sessions (4.000+) | 1.400+ 5-Star Reviews | Proven Success (➡ InterviewOffers.com) | Ex BCG | 9Y+ Coaching

Hi there,

  1. I would say “Before I move to the structure, do we have information whether this is an issue just our client has or something everyone is experiencing in the industry?
  2. You should lay down the analysis of whether this is a revenue or cost problem as part of the structure. I would not ask this as clarifying question. If you do, the interviewer may feel you are trying to have him/her solve the case for you

I agree with your coach that the analysis of whether the issue is on revenues or costs should be part of the structure. However, I can’t see issues in asking if we have information on whether the issue is client-based or not as clarifying question in the way presented above.

Best,

Francesco

Was this answer helpful?
Ian
Expert
Content Creator
updated an answer on Sep 07, 2021
MBB | 100% personal interview success rate (8/8) and 95% candidate success rate | Personalized interview prep

Hi there,

Francesco said it best. For #1 you can simply ask that very question! ("Do we have any information on" or “Do we already have a view as to whether”).

#2 is very much something to be solved within the framework/case BUT it could also already be given (or hinted at) in the prompt.

For example, In the Chinese Chess case below, the issue is clearly a revenue drop. However, the solution is to both bring revenues back up as much as possible AND cut excess costs. This is already pretty apparent just from the prompt.

https://www.preplounge.com/en/management-consulting-cases/candidate-led-usual-style/intermediate/chinese-chess-airline-business-during-covid-19-191

General Rules for Clarifying Questions

  1. They should help you define your box (context/scope)
  2. They should help make your box smaller (narrow the scope)
  3. They should help you develop your approach to solving the problem…not start solving the problem already

Make sense?

(edited)

Was this answer helpful?
Sidi
Expert
updated an answer on Sep 07, 2021
McKinsey Senior EM & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 350+ candidates secure MBB offers

Hi!

Your coach is absolutely correct! These questions are NOT clarifying questions! These are questions which already perform specific analyses.

 

The purpose of the clarifying questions is to enable you to create a structure. A structure is the LOGIC according to which the analysis will be conducted and which will invariably lead to the answer of the question. 

 

None of these two questions has ANY impact on this logic! At the start of a case, it is completely useless to ask for whether it is industry-wide or company specific, since you will have to find out the mathematical cause of the issue anyway. In other words - the answer to you question is irrelevant for the pricipal analysis logic. It will not change ANYTHING in your structure.

 

So what you need to understand are things like objective/focus metric, business model (so you can properly create a driver tree below the focus metric), secondary concerns of the client (if any). THIS is what you must understand to create a robust logic.

 

The two questions you outlined are typical for the weak advice you receive in many resources. They are only helpful if you don't know how to perform rigorous analysis. If you just guess around and think in buckets. Then these two questions might help you define where to start with your guessing. But this is not the kind of methodical thinking that will lead to a high success chance in MBB interviews.

 

Cheers, Sidi

(edited)

Was this answer helpful?
Sofia
Expert
replied on Sep 07, 2021
McKinsey San Francisco | Harvard graduate | 5+ years of coaching | DISCOUNTED SESSIONS Sep 2022 | Free 15 min intro call

Hello,

I agree with your coach and with Pedro - I would not ask these questions as clarifying questions, but incorporate them into your framework structure.

For clarifying questions, you can ask about the nature of the business, and any particular constraints or goals. For instance, profitability cases often have a profitability target - e.g. the company wants to increase profits by X% over Y years. Getting this information at the clarification stage could be helpful.

Your first point on whether this is an industry-wide issue or something specific to the client could be a bucket early on in the framework (e.g. you could ask for industry trends over time, or the performance of competitors). That way you get this information before diving too deep into your client's data.

Your second point on whether this is a revenue problem or a cost problem is the meat of a profitability case. A change in profitability is due to change in revenue or to change in costs, so set those up as two separate buckets, break them down further (e.g. revenue = price x quantity) and ask for data to understand what is going on.

Hope this helps!

Was this answer helpful?
Agrim
CoachingPlus Expert
Content Creator
replied on Sep 07, 2021
BCG Dubai Project Leader | I will transform your thinking about Consulting Interviews

The 2 questions you state are essentially your job to answer.

Depending on your case framework - you will be asking more specific and localised questions. Using the interviewer's answers to those questions you will have to determine the answer to these 2 questions you state.

Further, clarifying questions in a profitability case would be around historical levels v/s current levels, objectives of the client, % v/s absolute profit etc.. Then you build out the framework and start investigating branch-wise.

Was this answer helpful?
Antonello
Expert
Content Creator
replied on Sep 07, 2021
McKinsey | MBA professor for consulting interviews

Hi!

I agree with your coach and the others who replied to your question!

Listen carefully to the stem of the case. Sometimes the interviewer will nudge you in a specific direction and this will help you with setting up your structure and possibly ask clarifying questions.

Best,

Anto

Was this answer helpful?
Calvin
Expert
replied on Sep 07, 2021
Experienced interviewer | Roland Berger Project Manager| Cambridge University | Super intuitive approach

1. I would first ask how the profit levels and profit margins of the client compares to the industry/ competitors over the past few years. If you get this data, you may be able to deduce whether it is an industry wide issue or client specific issue

2. This should be analyzed by the interviewee. Your issue tree/ structure must allow for analysis to identify whether it is a revenue or cost problem (or both) 

Was this answer helpful?
0
Pedro
Expert
replied on Sep 07, 2021
Bain | EY-Parthenon | Roland Berger | FIT | Market Sizing | Former Head Recruiter

You should ask clarifying questions regarding the client's objective or described business problem (what is their business, what do they exactly want to achieve, when, where, and respecting which constraints_).

Your coach is correct. You are indeed already asking about the diagnostic, and that is your job (not the interviewer's) when solving the business problem. If you ask this to the interviewer he will not answer AND he will think you are trying to guess the answer (so you “lose some points”).

You have to realize that business situations are never that linear. You may be underperforming the market because you are strong in a market segment that is underperforming. Is this an industry or a client-specific problem? Well, it's both. If the interviewer explains this he will be solving the case for you, for the most part. That's why it has to be you to do the analysis…

But you are thinking well and your hypothesis are good, so you should definitely incorporate them in your structure.

Was this answer helpful?
Francesco gave the best answer

Francesco

Content Creator
#1 Coach for Sessions (4.000+) | 1.400+ 5-Star Reviews | Proven Success (➡ InterviewOffers.com) | Ex BCG | 9Y+ Coaching
4,067
Meetings
28,544
Q&A Upvotes
297
Awards
5.0
1494 Reviews