| Management consultants are increasingly discontented with their lot – and the source of this discontent is the size of their pay packets, says Tony Restell, director & co-founder, Top-Consultant.com |
| Show me the money! |
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| | fundamental to
explaining why
consultants are
increasingly unhappy
with their lot – and
also why this situation
is unlikely to change
anytime soon.
Let's take
utilisation rates first
of all. Some of the
majors have confided to
me in recent weeks that
they have offices
running at more than 90%
utilisation. Now those
of you in consulting
will know that a
utilisation rate of
75-80% is pretty
healthy. Anything above
this and you know the
market is really
growing. Above 90%,
consultants will have to
have their training
schedules cut back and
be taken off recruitment
/ interviewing duties –
simply to fulfil the
client projects to which
the firm is committed.
This, of course, isn't
sustainable as a growing
business needs to invest
time in recruiting new
staff and building up
its existing staff. Any
business with
utilisation levels like
this needs to hire
people and hire them
fast – and to stem the
flow of consultants
leaving the organisation
at the same time.
This, one would
think, is a strong
argument for firms to
raise their game in
terms of remuneration | |
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| | offered – both to new
hires and also to
existing staff. But
herein lies the problem.
Consulting fee rates
have not been recovering
nearly as fast as the
market has been growing.
So firms are working on
assignments that are
fundamentally less
profitable than those
they were working on
during the last
consulting boom. But if
the fat profit margins
aren't there, then the
coffers also aren't full
enough to pay for the
salary hikes that would
solve these recruitment
and retention problems.
Modest fee rates are
in turn a product of
several factors.
Firstly, consultancies
have tied themselves
into many long-term
outsourcing and public
sector assignments,
committed to at a time
when consulting work was
in short supply. Fee
rates on this work are
appalling and now the
firms find themselves
tied in to such work for
many years to come and
on similar terms. Then
there's the increasing
professionalism of
consultancy purchasers,
who have become much
more astute at
negotiating with
consultancies and much
better at playing firms
off one against the
other. And the primary
reason they can do this
– far greater | |
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| | competition between
consultancy providers.
Competition leads to
price wars leads to
remuneration squeezes.
It's the same in every
industry – and
consulting is no
exception.
Unfortunately, the
re-emergence of the "Big
4", the aggressive entry
of the Indian providers
and the plethora of new
start-up consultancies
mean that competition
for client $/£/€ is
likely to remain fierce
for many quarters to
come. So faced with
subdued fee rates,
consultancies are left
with some stark
choices:
i) Sustain
profitability by
restraining growth in
pay packages; or ii)
raise pay packages but
at the expense of
profits (tell me a
publicly traded
consultancy that's going
to espouse that as a
strategy!). Neither one
is appealing, which is
why those that are in a
position to do so have
started to offshore some
of the analytical work.
Changing the blend of
home-grown consulting
advice to imported
consulting advice is the
only other means of
addressing the problem.
Which I suspect is why
many of the larger
consultancies are
targeting pay rises at | |
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| | their highest performers
– and implementing pay
freezes among the
consultants that are
most easily replaced
/substituted. If you
can't offer a salary
carrot then the prospect
of your job being
offshored is quite a
stick. That's a markedly
different message from
the sexy fast-track
career option that
consulting will have
been sold as at the time
these consultants first
chose to enter the
industry.
What will the upshot
be for consulting firms
and for the consultants
they hire? My guess is
that the high staff
turnover we're
witnessing today is here
to stay for quite some
time. That means that
opportunities to change
consulting employer will
be widespread for many
quarters to come – and
hiring activity will
continue to be extremely
buoyant. But the
challenge for
consultants like you
will be to make it onto
the fast-track pay-rise
path once you've joined
a firm. This is now far
less of a dead certainty
than it was 10 years
ago, with far more
consultants likely to
find themselves stuck in
a career rut.
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| | By Tony Restell
I predicted at least
18 months ago that this
consulting upturn would
be markedly different
from the last one. I
also predicted that slow
growth in employee
remuneration might cause
staff attrition to
rocket and that
retention might prove to
be the downfall of many
a consultancy. And so it
has come to pass...
Consider the
following snippets of
information:
• Several major
consultancies have
offices experiencing
utilisation rates of
90%+;
• Consulting fee
rates are struggling to
recover despite the
rebound in consulting
demand levels;
• Competition within
consulting is arguably
at an all-time high with
the re-emergence of the
"Big 4", the entry of
the Indian providers and
the emergence of a raft
of start-up firms.
Let's just expand on
each of these points a
little, as they're | |
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