| 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! |
| |
|
|
| | 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
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 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
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.
| |
|
| | 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
fundamental to explaining | |
|
|
Previous Page 
