Question

Mt Kinley is a strategy consulting firm that divides its consultants into three classes, associates, managers, and partners. The firm has been stable in size for the last 20 years, ignoring growth opportunities in the 90s, but also not suffering from a need to down-size in the recession. Specifically, there have been – and are expected to be – 200 associates, 60 managers, and 20 partners. The work environment at Mt Kinley is rather competitive. After 4 years of working as an associate, a consultant goes "either up or out", i.e. becomes a manager or is dismissed from the company. Similarly, after 6 years a manager either becomes a partner or is dismissed. The company recruits MBAs as associate consultants, no hires are made at the manager or partner level. A partner stays with the company for another 10 years (total of 20 years with the company). How many new MBA graduates does Mt Kinley have to hire every year? What is the probability that an incoming MBA graduate would make partner at Mt Kinley?

Answer 1

Answer:

1. 50 consultants per year

2. 4%

Explanation:

1. Calculation to determine How many new MBA graduates does Mt Kinley have to hire every year

Using this formula

Flow Rate of associates= Inventory / Flow Time

Let plug in the formula

Flow Rate of associates = 200 consultants / 4 years

Flow Rate of associates= 50 consultants per year

Therefore the numbers of MBA graduates that Mt Kinley have to hire every year is 50 consultants per year

2. Calculation to determine the probability that an incoming MBA graduate would make partner at Mt Kinley

First step is to calculate the Flow Rate of managers using this formula

Flow Rate of manager= Inventory / Flow Time

Let plug in the formula

Flow Rate of manager = 60 consultants / 6 years

Flow Rate of manager =10 consultants per year

Second step is to calculate the flow rate of partner using this formula

Flow rate of partner = Inventory/ Flow time

Let plug in the formula

Flow rate of partner = 20/10

Flow rate of partner = 2 partners per year

Third step is to calculate the probability of becoming a manager

Probability (Manager) = 10/50

Probability (Manager) = 20%

Fourth step is to calculate Probability of becoming a partner

Probability (Partner) = 2/10

Probability (Partner) = 20%

Now let calculate the probability that an incoming MBA graduate would make partner at Mt Kinley

Probability of MBA graduate becoming a partner = 20% x 20%

Probability of MBA graduate becoming a partner = 4%

Therefore the probability that an incoming MBA graduate would make partner at Mt Kinley is 4%