Douglas Lambias Salary guide

Providing a review of competitive salaries in the consultancy marketplace is no easy task. Some of the larger firms apply standard salaries across the board. But salaries are also affected by the quality, qualifications and rate of progress of the individual. Thus salaries can vary dramatically within firms, depending on size, group, functional or industry specialisms or region.

The figures used in this survey are based on Douglas Llambias’ many dealings with consultancies and applicants, together with the feedback from the questionnaire published in Management Consultancy last year.

Nearly all new consultants, at whatever level, go through a very steep learning curve. This affects their “billability” to clients, and thus their salary. Despite the rigorous recruitment processes adopted by most consultancies, there is still an element of risk on both sides. This is also reflected in joining salary levels.

As a result, there is no true rate for the job, which always causes frustration amongst candidates. Firms tend to base the package on a person’s existing salary “plus a bit”. That “bit” is determined by the scarcity of the individual’s expertise in the market and their perceived potential as consultants within that particular firm. The firm also looks at what it can reasonably expect to charge for the individual’s work. Consultancies rarely move from the first offer made and never indulge in “horse-trading”.

But, at the first meaningful review, salaries are usually adjusted to reflect the recruit’s newly-found competency.

Another area of confusion in the market is job title, which offers no scope for comparison at all between firms. The most confusing term is “associate”, which can mean the most junior consultant grade or the most senior level below partner, or even a freelancer.

It is also true that firms have very different ideas of what makes a suitable candidate. Salary levels therefore really do vary quite considerably between firms. Some firms are markedly less successful than others, and as a result the fees generated per partner can be out of alignment with the norm. This means fewer top-end promotions and a squeeze on salary bands lower down. It is preferable to join a firm with a bulk of people at the bottom end of banding but moving up quickly, than a firm where the bulk of people are caught up at the top end of bandings waiting for someone to die or move on.

The majority of firms now review their staff twice a year. Salary increases can be particularly rapid and significant, and within the larger consultancies, once you have found your true level, things tend to settle down to a 15-20 per cent compound growth for high flyers, 8-12 per cent compound growth as an average, with 10-15 per cent of consultants receiving little or no increase at all. It is probably worth pointing out here that after two poor reviews most people are encouraged to leave a consultancy, as many firms still have an “up or out” policy.

Most consultancies now offer a car or increasingly the more tax/pension efficient, cash alternative. Most offer pensions (contributory), private healthcare and life assurance cover (free). Bonuses are becoming more common, varying in value from a discretionary few hundred pounds at Christmas to very substantial bonuses for high performance which can add up to 50-60 per cent to basic salary. The average, however, seems to be a discretionary 10 per cent based on the consultancy’s overall performance and the individual’s performance. Holidays are a controversial area. Our survey responses averaged four weeks but most large firms offer five (if staff can find time to take them).

In essence, consultancy is a vast pool of bright, commercially creative talent, considerably under-appreciated, and indeed maligned, by many sections of the industry, the press and the public at large. Many companies still tend to see consultancy as simply an overhead rather than an investment in their future.

The main challenge for the consulting industry is to the keep skill-bases honed, ideas flowing and technologies and methodologies at the leading edge. At the same time they must become more profitable. Because their assets are people, these two are not always compatible. Unless they offer the best opportunities around for job satisfaction, personal and career progression and earnings, consultancies will not attract the new ideas, new energy and new approaches that the brighter, better motivated, creative talent can offer. While money is not everything, it is a very strong attractor and motivator of good candidates. Consultancies must realise that there is a real shortage of talent. Time and time again, it has been proven that in consultancy good people attract work. A key element therefore of attracting and hanging on to the best people is to offer compensation packages that motivate them to join their firm in the first place and to do continually top quality work.

In order to produce this salary overview, we have used the “Big Six” as the base point, because as the largest employers, and hirers, of consultants they tend to set the standards for the rest of the market. Also, their salary scales are more readily identifiable and, generally, vary little within the mid-ranges.

By focusing on salary bands, we have tried to keep this overview fairly straightforward and uncluttered. Generally, then, those consultants earning towards the lower end of these bands are those probably performing less well or are new entrants from a lower band. Conversely, those performing well, and those unlikely to achieve promotion (evidenced by the length of time at that level) will be closer to the top-end of the scale. High performers will move quickly through the grades probably every 12/24 months, demonstrating the career and therefore earnings potential available in consulting.

So let us now look at a common salary structure within the Big Six, accountancy-based consulting firms (see table 1).

You will note that the salary bands overlap considerably. Typically, adverts will use salaries of u50,000 as a convenient figure to attract consultants or senior consultants, u70,000 to attract either senior consultants or managing consultants, or u80,000 as a general come-on to attract applications without putting the nose of too many existing staff out of joint!

Therefore, contrary to the impression given, the majority of people are rarely actually offered these figures – which are fairly arbitrarily chosen as attractive round amounts. However, the bandings tend to hide one important factor: while salaries between the major firms appear similar and the starting salaries look similar (as they are based on previous earnings), the reality is that the individual consultant’s progress, and therefore earnings, thereafter vary enormously.

Moving on to consider other important factors affecting consulting salary levels, we need to cut the market in two different ways: consulting firms (other that Big Six); and functional specialisms. The consulting marketplace can be categorised into strategy house, strategy boutique, Big Six firms, other accounting-based firms and niche players focusing on a specific functional area and/or industry sector. There are quite clear salary differentials between the different categories and those are maintained across the different grades (see Table 2).

Cutting the consulting market by function shows a very interesting picture, reflecting often the same salary differential generally prevalent in industry and commerce. Table 3 shows the function split: strategy; IT/IS; marketing; human resources; change management/BPR/business transformation; manufacturing; logistics/supply chain; technology; financial management/finance/treasury; organisation development; training; economics and profit/performance improvement.

A further cut splits the market by specific industry (see Table 4) where clearly salary packages vary enormously: compare the City and the public sector, for example. But in order to avoid too much complication, we have shown a percentage uplift for salaries paid in many consultancies and/or practice groups within consultancies focusing their services on specific sectors of industry. Trying to attract bright talent from the City, where overall packages can break all consulting salary structures wide open, causes most heartache to consultancies who offer a broad range of services. Clearly niche consultancies focusing on the City are used to these high salaries and have adjusted their fee rates accordingly, but the larger ones in reality tend to be less flexible.