The consultancy industry has grown significantly since 2014 and as we enter a sustained period of economic growth this will continue. Management consultancies find themselves busier than at any time in recent years. The increased demand for consulting services means a corresponding increase in the number of consultants, particularly at entry level. Competition amongst the firms to recruit the best graduates is fierce, and this is reflected in the financial rewards offered by the industry.
The effect on salaries
Consultancies know that the main competition for attracting the best graduates has traditionally been the investment banking sector. But because that sector has scaled back campus recruiting, more graduates are choosing consultancy as their preferred career. The demand for places far outstrips the supply of openings. This translates into salaries which have improved from previous years.
At undergraduate level, the consulting arms of the Big Four (Deloitte, EY, KPMG and PwC) are all competing with each other and the top tier strategy houses (McKinsey, BCG, Bain) for top ranking students. Moreover, there has also been demand for new and recent graduates from fast growing medium sized consulting firms. If you are already in employment elsewhere, firms will usually pay a small premium over your current salary if they want to secure you.
Salary structures and benefits
We take a look at some of the salaries which can be achieved whilst working within management consultancy. These figures are drawn from employed consultants (no self-employed consultants are surveyed) who work in firms of all sizes, sectors and functional areas. The common thread is that they are working in or around London, the nexus of the consulting industry in the UK. Salaries in the rest of the country are 6–12% lower.
These are roles for new graduates, or those with up to two years’ postgraduate work experience. At larger firms, the competition to hire has led to ‘little extras’ such as: sign-on bonuses of £2,500 or interest-free loans of £7,500, iPhones and iPads, gym memberships and personal development study support.
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, blue-chip company training programme graduate.
Senior Consultant: £65,000
At this level the backgrounds of consultants start to diverge. These can include mid-tier strategy house/boutique 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 work stream responsibility; or newly-minted MBAs entering consulting for the first time.
Here consultants could be: more experienced (five to seven years’ experience) delivery consultants; fast-track, straight from industry candidates; and top business school MBAs joining strategy houses. At manager level and with sales/business development responsibilities, the range extends to £100,000.
These tend to be consultants with eight plus years’ experience in the full-service consultancies, or engagement managers/project leaders in boutiques. Sixty percent of consultants working at this level are involved in sales.
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: £250,000+
These experienced consultants range from those with seven plus years at a boutique to 15 plus years in general consulting.
Few firms provide a car below manager grades. All offer a cash alternative to a vehicle, typically worth £6,000–£10,000 per annum. 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) common. Most final salary pension schemes have been closed. Smaller independent firms do not tend to offer extras such as private health schemes and gym memberships, and some are only now starting to contribute to stakeholder pensions. The overall package offered should be scrutinised carefully, as comparisons based on salary alone can be misleading.
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 an average footballer in the lower reaches of the Championship, and others who would be better off as Senior Managers or Principals 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 the experienced specialists who are approaching the summit of their careers. ‘Up or out’ promotion policies which are common in strategy houses are less so in other firms, although clear-outs of less profitable directors and partners in these firms are not unusual during tougher economic times. Consultancies recognise that experienced consultants who do not aspire to the highest levels are worth retaining. Whereas firms 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 and media – 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.
Salaries are also influenced by billings. Consultants are expected to bill fees of around 3–5 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 is essential. Some firms ask 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.