Based on two different surveys conducted by Consulting in the latter half of 2009, consultants' salary expectations for 2010 appear to be much higher than firms realistically can afford to pay. Will this disconnect threaten retention efforts? Consulting recently sat down with Tom Burke, director of Buck Consulting's compensation advisory practice.
Consulting: Are you seeing a disconnect between employer's communication around compensation
and employee's expectations?
Burke: Regardless of industry, when employees hear that their firm's merit budget will be, say, a three percent increase, many take that mean that that's the average. They think, 'clearly I'm above average and will therefore earn more.' That's a fairly common reaction. And especially among consultants, you've got a group of people that are very driven and will strive to beat that number. I think firm leaders want to be optimistic and employees are trying to find good messages. But when it comes to communication, consultants are perhaps more likely to perceive the glass is half full.
Consulting: What's the downside to allowing your employees to be overly optimistic about compensation?
Burke: The fear is a perfect storm, in which the expectations gap spurs the departure of consultants who were already considering leaving their firm. This is a trend we're seeing across industries. I saw a survey recently of more than 900 workers across North America. And 60 percent said they plan to pursue a new job. What you're finding in the consulting industry is the same as general industry. While this issue needs to be addressed, the high unemployment rate may slow this trend some. Where are they all going to go?
Consulting: Beyond more candid and transparent compensation discussions, what else can firms do?
Burke: Consultants need to realize that as frustrated as they might be, they have more control over their compensation at consulting firms then they would in general industry. Based on our own compensation survey data, we're seeing a lot more consulting firms use a pay for performance program, which means that the higher the individual performance, the higher the pay.
While within consulting firms, higher performers are getting higher increases and lower performers are receiving a lower increase, that's not necessarily the case in other industries. One of the challenges in general industry is that it's much harder to measure individual output. One thing that's worth noting is that we found that top performing consultants are continuing to be rewarded with higher than average raises. Will that cause them to stay? It will help, but people leave for all kinds of reasons.
Consulting: Based on your own compensation survey data, were there any numbers that surprised you?
Burke: The biggest surprise, for me, was the speed at which average annual increases dropped in 2009. Across all industries, the average increase was less than two percent. Most companies either froze salaries are limited raises to three percent … but there were a lot zeros out there.
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