Finding the Right Job

Salaries in Management Consulting

BLT’s latest survey of management consultants (no self-employed consultants are included) shows that the demand for new consultants has weakened after five years of steady growth. No prizes for guessing why.

Much of consultancy is a ‘discretionary spend’ for organisations. And when times are tough, expenditure on consultancy advice gets cut, with the inevitable knock-on to hiring. Staff turnover is low – around 5% – and graduate hire numbers have been cut. Salaries are flat as a result. Whether the much talked-about signs of recovery in the wider economy will lead to an improvement in remuneration remains to be seen.

With organisations less concerned about planning for the next five years, and more concerned about surviving the next six months, the top tier strategy houses and strategy boutiques are feeling the squeeze. This is reflected in the number of new hires.
However, this may prove to be a little short sighted. After the 2001–2003 recession, firms found that by cutting back on new hires at that time, they created problems for themselves three or four years later when there were not enough experienced consultants to manage assignments.

So what does this mean for salaries?
With inflation running at less than 2%, and the demand/supply balance firmly in favour of employers, salaries will not increase. Indeed, already we are seeing some pressure to reduce packages.

For candidates new to consultancy, firms will not pay any more than the current salary to secure that candidate. Experienced consultants find themselves slightly more in demand, but increases available to switch firms are slight in comparison with the earlier years of the decade.

The main message from our salary survey is that consulting firms of all sizes are not inclined to adjust last year’s salaries upwards.

Salary structures and benefits
Below we list the grades, salary mid-points and our comments. Please bear in mind that the figures are drawn from employed consultants (no self-employed consultants are surveyed) who work in firms of all sizes, sectors and functional areas. The only common thread is that they are working in or around London. Salaries in the rest of the UK are 12–15% lower.

Analyst: £26,000
These are roles for raw graduates or those with up to two years’ postgraduate work experience. As recruiters we are rarely asked to find candidates at this level, so the figures come from the consulting firms themselves.

Consultant: £40,000
Consultants at this grade typically have around three years’ experience in consulting, or are fresh recruits into consulting but with a recently obtained professional qualification or comparable level of competence, e.g. ACA, CIPD, NHS training programme graduate.

Senior Consultant: £58,000
At this level the backgrounds of consultants start to diverge. Examples include: mid-tier strategy house/boutique-experienced consultants with two to three years’ experience; average performers with four to six years’ experience at a systems integrator or a full-service consultancy and some field management responsibility; newly-minted MBAs entering consulting for the first time.

Manager: £69,000
Here consultants could be: more experienced (five to seven years) delivery consultants; fast-track industry candidates; and top business school MBAs joining mid/top-tier strategy houses. At manager level and with sales/business development responsibilities, the range extends to £90,000.

Principal: £84,000
These tend to be consultants with eight plus years’ experience in the full-service consultancies, or engagement managers/project leaders in boutiques. Sales involvement was claimed by about 60% of the consultants we surveyed at this level.

Director: £120,000
Again, this salary band includes consultants as different as strategy consultants with three to five years’ experience and old hands with 10–15 years’ at a more traditional consultancy, or those with senior project management/programme management responsibilities.

Equity Director/Salaried Partner: £180,000
These experienced consultants ranged from those with seven plus years at a boutique to 15 plus years in general consulting.

All firms surveyed review salaries annually: most at a fixed date in the second quarter of the year. Some employers undertake the exercise biannually. The majority of firms still provide a car once an employee reaches the ‘up and running’ consultant grades. All offer a cash alternative to a vehicle, typically worth £5,000–£8,000 per annum. However, a number of firms have withdrawn the car/cash option for lower consulting grades. The bigger consultancies offer comprehensive benefits packages, with ‘cafeteria’ or ‘pick ‘n’ mix’ benefits policies (choosing between a higher salary or a longer list of benefits) becoming more common. Smaller independents do not tend to offer extras such as private health schemes and gym memberships, but we are seeing more ‘home-working’ amongst their consultants.

The closure of final salary pension schemes and some firms’ reliance on stakeholder pensions is starting to cause concern. The value of a pension scheme is being scrutinised much more carefully by those considering a move. Consultancies trying to attract public sector talent are losing out in this area particularly.

At the large operational consultancies bonuses and profit shares tend to be less generous (7–15%) than those offered by the strategy and boutique firms (25–40%). Signing-on bonuses are still rare. The large partnerships are secretive about partner earnings but press reports indicate that senior partners enjoy packages in excess of £1 million.

Partner/director packages in niche firms vary enormously, with some earning the equivalent of a journeyman footballer in the Premier League, and others who would be better off as senior managers in larger firms. These niche firms traditionally find it hardest to retain their experienced consultants and so bonuses can be as high as 50% of salary.

Salary differences explained
Salaries are banded and the bands overlap to take account of the level of remuneration necessary to attract and retain the high fliers on their way up and experienced specialists who are approaching the summit of their careers. The ‘up or out’ promotion policy of earlier years is now less rigidly applied outside the strategy houses. Consultancies are recognising that experienced consultants who do not aspire to the highest levels are worth retaining. Whereas consultancies still claim to recruit only potential partner/director material, there is still a high turnover of consultants who see a three to five year spell as a means to widening their business exposure. It is these consultants who straddle the mid-range of the salary bands at all levels up to manager.

The industry sector background of consultants, or their functional specialisation, also has a bearing on salary. This is commonly seen at the large operational firms and independents, rather less so at strategy firms or niche operations. Industry sectors that offer high levels of remuneration – pharmaceuticals, financial services, telecoms – are serviced by consultants who have themselves usually worked in those sectors. Consequently, consultants hired from these industries can command a premium over their consultant peer group. Those at the lower end of the salary bands tend to have come from the public sector, manufacturing, or retail – still the lower-paid activity areas.

Salaries are also influenced by billings. Consultants are expected to bill fees of around three to four times their annual salaries. Therefore, consultants who work in sectors where high profits can support high fees fare rather better than their colleagues who work in areas where fees reflect the lower profits of their sector.

The relationship between salary and billings becomes increasingly important the further up the ladder consultants rise. At manager level and above, the ability to win work is crucial. More and more time (typically 25–40%) is spent cultivating clients, writing proposals and participating in beauty parades (where a client chooses a consulting firm after seeing a number of presentations). It is very difficult to rise beyond this level if such business skills are lacking.

No one should be attracted to consultancy purely for the financial rewards. Although remuneration at partner/director level is comparable with the very best in other professions, there are many downsides. Job security has become poorer in recent years. Despite more attention being paid to the work/life balance, consultants still work long hours and not just Monday to Friday. As much of the work is carried out at client sites, frequent travel is common and a willingness to stay away from home for at least half the year essential. Some firms are asking new joiners to commit to 100% travel. Yet consultants who choose this lifestyle do so because they enjoy the variety of work on offer, the opportunities to continue personal and professional development and the range of career openings available when they wish to leave. Those who hold a post with a well-established consulting organisation and those who choose to enter the profession over the next few years, can still look forward to a well-remunerated future.

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