Management consulting is a cash business. Now salaries and bonuses within the consulting industry are certainly not at the stratospheric levels enjoyed by their kindred brethren in investment banking. But consultants generally do realize much-better-than-average wages relative to their counterparts in the corporate world.
This maxim becomes clear when one analyzes compensation trends for varying staff levels within the industry.
Kennedy has been benchmarking compensation rates for the better part of the last two decades. What generally holds true is that when times are good, consultants do well. And when times are bad, consultants do … not so bad.
Contrary to the phenomenon that occurs at many of the companies they advise, during down times, consulting firms tend to tighten belts among its more senior ranks while protecting earnings for its junior members.
Now before getting misty-eyed and believing partners share a secret benevolence to assist the proletariat, there's a method to their madness. Sharing the wealth is a cultural underpinning to virtually every successful consultancy.
To be clear, partners own a firm and typically split a healthy portion of the profits amongst themselves. But it behooves them to assure that those who form the foundation of the pyramid feel a sense of assuredness to their own position, lest the structure weaken through mass defections.
Our just-released compensation report on 2014 compensation—Compensation Metrics in US Consulting 2014—(Additional information about the report is available at www.kennedyinfo.com/
consulting under the "Operating Metrics" drop down) reinforces this phenomenon.
Junior-level staffing levels have enjoyed a modest uptick in year-on-year compensation relative to the higher staff positions. The analysis also reveals that stability in this notoriously unstable business reflects a maturity that bodes well for large global firms as well as boutiques.
Consultants are more apt to stay put these days, rather than seek pastures lined with more green. The industry has rebounded significantly over the last few years. Fees have rebounded from the previous recession.
The amount of money consulting firms spend on staff training and development continues to hold steady as greater emphasis is being placed on training and development of staff in order to capture and share knowledge.
"Protecting the core" is an oft-used phrase that describes efforts aimed at protecting the most vulnerable—and valuable—consulting ranks. (Hint: it's not the partners.)
Utilization rates are rising at consultant and senior consultant levels. Clients are placing greater value on team composition and individual consultants. This means consultants are working harder than ever. But the rewards have never been greater.
Tom Rodenhauser is Managing Director, Advisory Services Kennedy Consulting Research & Advisory (KCRA). For more information on KCRA, visit www.kennedyinfo.com/consulting.
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