Our annual salary benchmark report looks at what is happening with Management Consulting salary and bonuses.
The Financial Services Consultancy market has been one of the few subsectors to find a silver lining in the banking crisis.
The banking sector is being nothing less than transformed by regulatory change as well as mergers, and more recently by divestments. This, and the need to reengineer banks to make them profitable at lower levels of turnover have heaped work onto the order books of management consultancy firms.
This workload led to a rise in pay and bonuses across the FS consultancy world in 2010. However, 2011 was far more downbeat as the Eurozone crisis stopped banks signing off new change programmes. As a result, many tier one advisory firms implemented headcount freezes and, in some cases, redundancies.
The year ahead
Where now? 2012 seems to be a year for quiet confidence amongst consulting firms - momentum has been building since February.
Headcount reductions in 2011 mean that some consultancies are understaffed and more aggressive hiring by smaller consultancies in areas such as operational change has helped to support and in some cases, increase wages.
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Whilst candidates within operational change should be able to attract more offers this year, particularly for regulatory change work, we don’t expect that to dramatically increase pay from its current levels.
Within operational change the base salary of Senior Managers with an investment bank background ranges from £95,000 to £140,000 with a bonus ranging up to £56,000.
One area where competition for staff has been fiercest, even during the doldrums of 2011 is within risk. A number of management consultancies have all been trying to increase their market share in this area creating strong demand for candidates with experience in stress testing and counterparty credit risk. Both areas will remain hot in 2012 as risk consultants are currently very high billers.
Within risk we have seen the most widespread use of retention bonuses and of the aggressive use of buy-backs to retain consultants that were looking to change firm or bank.
A Director in Quantitative Risk is now earning from £125,000 to £200,000 with a bonus of up to £90,000 on top of that.
(iii) Strategy Consulting
The tier one Strategy houses have made a conscious effort to take business from the Big 4 consulting firms over the last year by delivering on the execution side. However, with strategy mandates thin on the ground, however, these growth ambitions have yet to bear fruit with anticipated workflows not coming through.
However, the M&A market is stabilising and activity levels are on the up which may deliver the much needed boost to order books.
Associate Directors at Strategy Consultancies are looking at wages averaging between £90,000 and £150,000 with bonuses of between £18,000 and £35,000.
(iv) Other bright spots - human capital and technology
Demand for HR transformation experience has been subdued over the last few years, but we are starting to see hiring edge closer to 2006/07 levels. Global mobility and HR analytics skills are in particular demand, with most consultancies looking to increase their skills base in these areas.
Whilst 2012 got off to a slow start for technology, there is evidence that banks and insurers are now providing extra work to tier two technology consulting businesses. With a number of high profile contracts out to tender, demand for IT advisory skills should continue to edge up into the third quarter.
Directors in technology consulting firms are looking at base salaries in excess of £120,000 this year.
After a bumper year in 2010 and disappointment in 2011 we are hoping that 2012 will provide a much more stable environment. Whilst hiring amongst consultancies and amongst the banks will remain cautious there is scope for wages to start moving ahead again and for pay freezes to be relaxed.