One of the more common discussions Prism Executive Recruitment has with candidates and management consultancy employers is around salaries.
What is the going rate for a management consultant’s salary? How much have salaries gone up? By how much do we need to increase salaries in 2023? How can we attract staff with our salary offer? What can be done to stop employees leaving for better paid roles?
This is a complex topic and hard data with any real validity is difficult to come by. For example even when some of the high profile advisory and consulting firms announce increases one has to ask:
a) whether they are being wholly transparent about all aspects of the “increase”.
b) what the motivations are for the raises and for the publicity.
That said, the Office for National Statistics (ONS) data shows that employees in the Professional and Scientific industry are benefitting as it is the only area where pay continues to match rising prices and has done so since 2018.
Prism’s observations are:
1. Salary is rarely the main reason for a job move….
Candidates rarely cite salary as the main reason for considering a job move or for contacting an agency. This may be partly cultural i.e. in the “professions” e.g. management consultancy, salary is a very personal and potentially emotive topic. So few would want to state to a stranger (e.g. the recruiter or employer) that this was the primary motivation.
2. ….but more candidates are now raising it.
Our own surveys show time and again that other factors are invariably the catalyst for a job move. Even now in a time of peak price inflation. However during 2022 and into 2023 a salary increase has been more frequently cited as an important objective for the next move. Also the increase mentioned is higher, typically in the 10-20% bracket rather than the 5-10% uplift in the past. This is party to claw back salary lost to inflation but also, more recently, to recompense for the perceived risk of a job move with recessionary fears. However employers and their staff are very sensitive to the potential for disparity between the salary paid to existing staff and the amount being offered to attract new joiners. From the employers’ perspective fears of a downturn may subdue salary pressures and abate attrition worries.
3. Employers use of ‘grade inflation’
Employers (and candidates) are attempting to address the challenge by “grade/rank” inflation e.g. promotions, or grade uplifts on moving employer. This has the advantage to an employer of enabling a salary increase for key staff without the knock-on effects of a) having to offer the same to everyone at that grade b) not having to significantly increase charge-out rates at the grade. For example where a “Manager” might in the past have required 6-8 years’ experience they might now gain a promotion in as few as 4-5 years. When consultants are considering a move, a step up (a promotion) is often on their “wish list”, where in the past it was less frequently mentioned.
4. Salary competition for management consulting talent
Management consultant salaries are clearly an important factor for candidates at offer stage. Shortages of “premium profile” consulting staff, especially at Consultant and Manager ranks, have led to occasional “bidding wars” and aggressive attempts by their current employers to change minds i.e. persuade staff not to accept external job offers. Even where a prospective new employer is not overtly counter offering to “beat” another firm there is no doubt that they are very aware of the competition when pitching their salary offer.
5. Bonuses in lieu of inflation rate increases
Management consultancy firms are understandably reluctant to commit to 10.7% (CPI) or 13.7% (RPI) salary uplifts. Our information is that the Major Firms have been offering increases in the range 5-8% and/or offering uniform “cost of living” bonuses of £2,000-£4,000 as a one off. The bonuses have the twin benefits of disproportionately assisting the less well-paid staff and not increasing the underlying salary bill.
6. Mid-term salary reviews and bonus
While most increments were being offered as part of the yearly salary review in 2022 some of the larger employers announced firm wide uprating and bonuses separate from this annual cycle.
7. No real consensus on salary increases, especially in SME consulting firms
An unpublished survey of SME consulting firms from early 2023 suggests that there are wide disparities and limited consensus with a significant proportion planning under 5% or, conversely, over 10%! A related comment was that staff shortages and continued demand has emboldened some firms to be more bullish with clients about rate increases. Inevitably some, depending upon their circumstances and especially their markets, will feel more confident in doing so than others, so this may partly explain the wide range of responses.
8. Other package aspects rarely feature
Base management consulting salaries are only part of the picture. There is some evidence of increments in other areas of the employee remuneration package especially improved bonuses, (mainly because of firms’ improved financial position) as well as the “one-off” payments mentioned above. There has been little change however with other benefits, or “work life balance” features e.g. working from home and flexible working. The latter are already part of many employees’ roles and job expectations. Attrition/attraction concerns have delayed or cancelled any thought of a return to the long hours and high mobility that previously characterised the management consultancy job (although changing client expectations have played a role in this).
The good news is that the Bank of England is still predicting inflation will “fall quickly” in 2023 and it may be that employers can ride out the storm by careful and targetted measures. However it seems clear that neither consulting firms nor their staff are out of the woods yet.