Monday, November 7, 2011

Boom times are back for high achievers in the consulting sector

The report on salaries in the consulting industry has just recently been published – and confirms what many in the industry have long suspected.

The industry is now polarised between the Haves and the Have Nots.

For those whose skills are in demand, earnings, promotion and bonus prospects have rebounded to the levels seen in the years when the industry was booming. Whilst pay rises have accelerated to 5.6% for those who received one, nearly 4 in 10 consulting professionals received no pay rise this last year. There’s a similar pattern to bonus payments too – with significant bonuses being paid to many, but a sizeable minority receiving no bonus payment at all.

Promotions are also back with a vengeance, the consulting industry having promoted nearly 1 in 3 of its staff this last year. That’s significantly up on 2009, when the fast-track promotions that our industry has come to see as the norm simply dried up.

“Faced with waves of consultants leaving their firms when the hiring market picked up, consultancies have been compelled to act this last year” comments Tony Restell, Director of “The reality has been that many who stayed put during the downturn were also frustrated by how their careers had stalled. As employers have turned the hiring taps back on, many consultants have been seriously assessing where best to progress their careers to the next level. The resurgence in pay rises, promotions and bonuses has been consulting firms’ primary means of addressing this situation; but it’s been paid for by those consultants whose sector skills are not in demand and whose remuneration has largely stagnated” concludes Restell.

The 23 page report is based on survey data from 1,000+ Top-Consultant readers and is freely available for download from the following URL:

Monday, September 12, 2011

Consulting career choices: Big firms vs. small firms

Pursuing a career in management consultancy can be a richly rewarding decision, from the perspective of both personal growth and financial reward. The following discussion of the pros and cons of big and small consultancies is part of a serialisation of more than 100 pages of career editorial from The Definitive Guide to UK Consulting Firms. Professionals seriously considering the option of furthering their career in consulting may download the full guide using this link.

Big firms vs. small firms

Given that I come into contact with dozens of consulting firms each week, one question candidates often ask me is: Where would it be best for me to pursue my consulting career? By which they are often looking for steer on whether a career with a large global consulting brand or a small niche practice is going to be the right choice.

In truth, for no two people will my answer be the same.

There are undoubtedly significant differences between a career pursued with one of the majors versus one pursued in a niche consultancy. Some of the differences are firm-specific, so comment can­ not be made without knowing the exact firms (and offices) under consideration. But many of the reasons to choose one over the other relate to consistent organisational traits of large and small consulting businesses—and the career characteristics inherent in working for each. Which of the two is right for you will very much depend on the importance you attach to various components of the consulting career proposition.

I present below five key considerations for readers weighing up the pros and cons of working for a large vs. a small consulting firm. Only you can judge which of these factors is the most important to you:

1. Work/life balance

2. Earnings potential and remuneration flexibility

3. Career risk

4. Challenge/exposure, sales responsibilities and training

5. Becoming your own boss

Of course characterising what constitutes a small and a large firm is a challenge in itself. You may find yourself presented with the opportunity to work in a newly opened office of a large global firm. If this is the firm's first foray into that geography, then that particular office may display many of the traits of a smaller consulting business. Similarly one can find smaller firms who are extremely specialised but have a very global footprint—and so differ somewhat from the characterisations I present below.

In sharing these five key considerations, though, I provide the foundations for you to assess the options you have under consideration and to determine for yourself where your prospective employers fall in each of these five areas.

1. Work/life balance

Enhancing one's work/life balance is often a key reason why consultants leave a firm for pastures new. I've known plenty of consultants at both large and small consulting firms who've had reason to complain about the work/life compromises they've felt compelled to make. So I would start this piece by stressing that neither type of firm inherently shields you more from this career downside than the other.

Consulting firms predominantly serve clients who have time­critical issues that need addressing. One of the key reasons they pay consulting firms to tackle these issues—rather than dealing with them in house—is that they want to accelerate the timescales in which these issues will be addressed. The very nature of consulting is that staff will be working in time-pressured situations such that compromises will need to be made in order that pressing deadlines be met. These compromises often impinge upon a consultant's work/ life balance.

This is not to say there is a uniformity of work/life balance issues across the industry—indeed I would say quite the opposite. There are some firms where this is a far more demoralising issue than at others. But it's not the size of firm that influences whether work/life balance is a problem or not. Rather the scale of the problem is a function of the individual managers and partners you are working for and the culture that pervades the practice.

In small firms—even those with the best cultures—you'll find you have periods of work/life imbalance simply because in small firms everyone 'pulls together' when it's needed. This isn't peculiar to consulting; it's just the nature of working in a small business where at any point in time you're only a few months of client-order-book­value away from the firm going bankrupt.

This aspect of working for a smaller firm is offset by the fact that a closer-knit team will usually have a greater regard for one another's life outside of work and so managers will be more inclined to try and accommodate personal commitments in a smaller firm. But countering this is the fact that the biggest global consultancies have introduced policies to try and make flexible working more viable, to foster parental leave and to encourage mothers returning to work to find a work pattern that fits with their commitments.

So, in conclusion, on this first consideration I would say there is very little to choose generically between firms big and small—but rather this is something that needs looking at on a firm-by-firm (and even office-by-office) basis.

2. Earnings potential and remuneration flexibility

Smaller firms offer some advantages in the sphere of remuneration and career progression. As a general rule, below Partner grade, it is possible to earn more and see your career progress faster at a smaller firm. Firstly, larger firms are often able to attract hires thanks in part to the strength of their brand. A strong consulting brand enhances a consultant's CV and so candidates as a whole tend to be willing to work for the most established brands for less than they would demand to work for a lesser-known firm. To counter this, lesser-known firms often pay more.

Smaller firms often offer more sizeable bonus pools too- tied to the performance of the firm and the contributions of the individual. This is arguably because the firms are more reliant on exceptional endeavours from their staff (as opposed to the pull of their brand) to drive forward the business—and so are more willing to pay for such behaviour.

Lastly—and most notably—are the differences in promotion rates between big and small firms. Most large firms are bound by time in service 'promotion norms' that make it harder for them to make exceptions for exceptional performers. Stephan Butscher, Chief Talent Officer at Simon-Kucher & Partners, says that 'smaller firms tend to promote people primarily on their personal performance rather than some form of quota or the overall company performance.'

The above points paint the picture that two similarly gifted candidates are likely to see their careers and remuneration progress at different rates if one joins a major global firm and the other joins a small niche firm. I would hold that—as a generalisation—this is broadly correct. However four important caveats must be made.

Firstly—and covered below—is the fact that with this higher remuneration comes a higher degree of risk at smaller firms. Secondly, the packages offered by larger firms are likely to be more flexible in terms of benefits composition, with less variability in pay, which are factors that appeal to many. Thirdly, a candidate's ability to secure a role with a different employer is likely to be enhanced with a major brand on their CV. Lastly, it must also be said that the ultimate prize for those who do make it to Partner level is likely to be considerably greater at a larger firm—with scope for further career advancement that simply plateaus out in a smaller consultancy. Adds Stephan Butscher: 'In particular the speed at which top performers can achieve full Partner level is appealing at smaller firms; 7-10 years after joining as a graduate is realistic and a lot more attractive than having to wait until you are in your 40s.'

3. Career risk

The flip side of this rosier short-term remuneration picture is the greater risk one takes with a small firm, and being a strong per­ former doesn't necessarily insulate you from such risk. Whilst it's true that large firms do sometimes have to let people go if a particular practice sees its pipeline of work decimated by a change in the market environment, this is also relatively uncommon. By and large a strong performer is unlikely to find themselves made redundant if they join a large firm.

By contrast, small firms are usually overly-reliant on just a handful of key clients. If just a couple of them slam on the consulting expenditure brakes for any reason, this can cause major problems at the firm. I can think of one consultancy I know that went a full quarter without billing a single billable day during the recent downturn, at which point job losses for strong performers become inevitable.

So the risk side of the equation is undoubtedly higher with a small consulting practice - and if choosing to go down this route, you need to do more due diligence on the strength of your prospective employer's client portfolio, or how much they are focused on one industry or one country. Depending on your personal circumstances, this may or may not be a risk you're happy and able to take. However, even smaller firms can be diversified so things are not always as clear-cut as this. Stephan Butscher states that: 'For example, Simon­ Kucher focuses on smart profit growth and pricing as a niche. However we do this across all industries and in all regions in the world, so if one market or industry tanks, there are always others with strong growth.'

4. Challenge/exposure, sales responsibilities and training

Joining a smaller firm undeniably makes you a bigger fish in a smaller pond. At a small firm your involvement in lead generation, marketing, proposal writing, etc. is likely to come at a younger age and your exposure to issues facing the firm is also likely to be broader. There is likely to be greater staff contribution to decisions regarding company direction and more scope to be involved in helping to grow and shape the business. You may well feel more like you are 'part of something' in this type of environment.

However sales targets are likely to be foisted on you earlier in your career at a small firm, where a higher rank could potentially be attained at a larger firm before sales prowess needs to be demonstrated. This is clearly a consideration for those who feel they are strong as delivery consultants but weaker on the business development front. This is doubly relevant because the ease with which sales meetings can be secured is significantly hampered when calling from the offices of a less well known consulting business. For those fearful of selling, the weight of having a major brand name behind you may make the difference between your career stalling or progressing as sales competence features in the promotion equation.

Another aspect to consider is your personal development. Fundamental to this is the amount of practice leader/partner/client executive contact you'll have and the calibre of the key individuals you'll be learning from. I suspect a generalisation by size of firm would be misleading here, though it can certainly be said that larger firms will usually have well-structured mentoring programmes in place. It is also likely that a large firm will be able to give you exposure to a more balanced portfolio of consulting engagements—and possibly the engagements sold will also provide exposure to more senior figures within the client organisation. But countering this, general exposure to clients can often be greater in the earlier stages of one's consulting career when working with a small firm.

One downside you will find when working for smaller firms is that the scope to work on international engagements or projects outside your specialist sphere is likely to be more limited. The same is true of the scope for voluntary international relocation. Correspondingly, the risk of you being 'pigeon-holed' in a smaller firm is greater, as you'll probably specialise to a greater degree than with a large firm and the variety of work that the firm will win is likely to be that much narrower.

Training at large firms is almost universally good. These organisations like to deliver consistency of excellence and so employ consulting staff who undergo rigorous and ongoing professional development courses. Many such firms have affiliations with leading business schools for the delivery of aspects of their training. By contrast, the training provision at smaller firms is highly variable—some will have it as a high priority and invest accordingly; others have good intentions but in practice training suffers with the day-to-day demands of delivering on client engagements, whilst some see it as a cost to be avoided wherever possible.

5. Becoming your own boss

It is a well-trodden career path for consulting professionals at the major firms to leave and set up their own consulting practice. As consulting firms essentially sell their experience and their track record of delivering for clients, the route to self-employment is particularly fruitful for those who have worked at a major consulting firm (rather than a small niche practice).

For those unfamiliar with the consulting industry, this is perhaps counter-intuitive. One would expect that those working in a smaller firm and exposed to the day-to-day issues of running a small consulting practice would have the experience profile most suited to starting up for themselves. The reality, however, is that most smaller consulting firms I come into contact with have been founded by consulting professionals who have done a lengthy stint with one of the large consulting brands.

The explanation I would give for this is that such start-ups invariably have a USP that clients love. They are able to sell that they can provide the quality of consulting delivery of a major brand, but at far better value or lower risk. Either they are able to significantly undercut the larger firms in terms of fee rates (2/3 the fee rate is not uncommon), or they are able to commit to delivering the project with a far more experienced composition of team members, thus reducing the risk of project failure. Either way, the resulting sales proposition is far more compelling such that the ability to win work overwhelms any inexperience the consultant may have in running a small business.

Whilst not a factor for many candidates, this is one aspect of the career choice where large firms offer an undoubted advantage over their smaller competitors—albeit not something you will hear them proclaiming to the market for obvious reasons.

Of course, depending on the nature of the consulting firm you join, it may well be possible to 'be your own boss' without needing to branch out on your own. Stephan Butscher adds: 'Not exactly "being your own boss" but related to this is the question of the partnership model a particular consultancy has and if the Partners actually own the company. If this is your career goal then before joining a firm you need to fully understand what it means to become and be a Partner there. Do the founders still hold the vast majority of the shares or have they been able to "let go" for the benefit of the younger Partners who will drive growth? Do you get shares for free or do you have to buy them? Do you consequently get a dividend only or do you benefit from the increase in shareholder value as the firm grows, for example by selling shares you bought at a higher price once you retire as a Partner? Only the latter system is true entrepreneurial partnership.'

Concluding remarks

As I said at the outset, the answer as to what size of consulting employer is going to be best for you will very much come down to personal preferences. Depending on the career trajectory you are looking for—and what aspects of a career are most important to you—the factors I have outlined above will lead you to different conclusions. That there is no definitive answer will probably not surprise you, but hopefully by sharing the above thoughts, I'll have given you the factors you need to take into consideration to reach the right decision for you.


This piece is reproduced from The Definitive Guide to UK Consulting Firms, a 400+ page careers guide for candidates looking to pursue a career in management consultancy. A free resource, this guide contains over 100 pages of career editorials followed by a directory of consulting firms active in the UK market - with over 380 employers listed and 189 employers profiled.

The guide is free to download in PDF format, with hardback copies also available from October 2011 onwards. Access your copy of The Definitive Guide to UK Consulting Firms (2nd Edition).