Because 2020 was a disruptive year for business around the world, we expected to see disruption in consulting salaries. We were not disappointed.
At both the pre-MBA and post-MBA entry levels, 2021 consulting salaries remained steady on average, and in many cases, unchanged from 2020.
This is remarkable for 2 reasons:
- The decade-long winning streak of consulting salary increases abruptly ground to a halt in 2020.
- While some salaries cratered, those decreases were rare as most other firms maintained 2020 levels and massive layoffs did not materialize.
Over the past decade, consulting firms consistently upped starting compensation every recruiting cycle. As the events of 2020 brought a temporary ceasefire in the war for talent between consulting, Wall Street, and Silicon Valley and firms sought to hedge fixed-cost salary risk, salary growth for entry level hires slowed in each sector – in fact, dipping to negative for some firms.
Ancillary Benefits In Lieu of Salary Increases
While many firms and practice areas implemented (temporary) job cuts and hiring freezes last year, most maintained and a handful reduced their starting salary offers. To make up for lackluster salary gains, firms began offering additional perks such as unlimited PTO (E&Y), profit sharing (L.E.K.), and one-time work-from-home bonuses. In general, firms are either offering increased variable compensation (higher performance bonus caps, increased profit sharing), or more attractive lifestyle perks (unlimited PTO). This reveals an interesting insight into the type of candidate different consultancies hope to attract, as well as their own market positions.
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What Does The Future Hold For Consulting Salaries?
As we look towards the future (2022 and beyond), our anticipation is that compensation growth will first take place at the post-MBA level in the U.S., while slowly trickling down to the pre-MBA level and international markets a year or two later. Salary growth has traditionally been on a flatter curve in non-U.S. markets, and the eventual rebound should follow this same pattern.
The overall health of the management consulting industry is strong. Despite a global economic slowdown, the industry continued to post strong growth, driven largely by increased public sector, S&O, and supply chain work to deal with crisis-initiated emergencies. Look beyond the surface, though, and things get more interesting. Much of this growth was driven by established players, as many new and niche market players suffered losses. In addition, the number of market entrants declined in 2020 for the first time in a decade.
The Reality of the Management Consulting Industry
Overall, management consulting remains an “essential” service for big business, even in an economic downturn. Consulting firms were called upon to help companies protect cash flow, reduce cash burn, reorient supply chains, digitize operations, and more. In addition, governments around the world relied on consulting firms to develop COVID mitigation and economic reopening plans. Due to these factors and more, we remain bullish on the industry at large, and expect strong growth in 2021 as well.
Even still, economic headwinds remain. Specific practice areas, including Human Capital and Digital, experienced the brunt of hiring freezes and job cuts. Unexpected events could once again prompt similar moves in 2021.
2021 Consulting Salaries Summary
Because our data shows that staff compensation and project rates have stayed relatively flat, we draw 4 main conclusions about 2021 compensation.
- Firms took advantage of broader market disruption to lure top talent with zero increase in starting comp packages from the prior year. This was due partly to the fact that Fortune 1000 internal strategy practices – who had been poaching top recruits from consulting in previous years – were hit hard in 2020. The exception were the Big Tech kids on the block, including Google and Amazon, which continued hiring unabated.
- Consulting firms are looking to uniquely differentiate using comp packages as a tool. L.E.K. upped its profit-sharing plan and EY announced unlimited PTO. Unlike in past years, when KPMG dropped its starting MBA salary by $15K this year, other Big 4 firms did not follow suit.
- Firms miscalculated the effect the pandemic would have on their businesses. Increased demand for services, coupled with a limited supply due to early hiring freezes, should have led to price increases for services rendered. But instead, consulting firms did not increase project rates (and in some cases, even cut prices for government clients). In addition, firms like Deloitte made sizable cuts in specific practice areas to hedge risk and are now looking to quickly staff those same practice areas back up.
- Because MBB has a distinctive networking, training, and branding value proposition for talent, boutique firms that compete for similarly priced client work are actually paying higher for talent than MBB rates.
All of this points to a competitive labor market, where the winners are consulting firms who can add value beyond pure compensation – and the talent who can navigate competitive recruiting processes.
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