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#684: How Has Consultant Compensation Changed in the Recession?

Posted By Mark Haas CMC FIMC, Thursday, October 27, 2011
Updated: Thursday, October 27, 2011
A lot of consultant left the profession, even large firms trimmed staff, and rates took a significant hit during the recent economic downturn. What are the prospects for rates returning to former levels any time soon?

Remember that consulting lags the general market by about six months. However, this economy is not a typical recession; it is a credit crisis, with a significantly different profile. However, it does appear that consulting employment and fees are strengthening. Large consulting firms are hiring again in response to deferred work at their longer term clients. Also, many of those consultants laid off during the downturn are either being rehired or starting their own firms.

Logic might indicate that consulting fees would remain low with growing supply of consultants and still soft financial health of business in the US and Europe. Top-Consultant, in its Salary Benchmarking Report 2011/12, reports that compensation in 2011 is still lower than in 2009 for most people in most consulting specialties. However, this is in part due to hiring of many junior consultants who are more than offsetting departure of senior employees. In Australia, Europe and the US, the number of consultants receiving no pay raise in 2011 was about 45% and for those who did receive a raise, it was about 6%. (The data vary by specialty, geography, and seniority so see the report for greater insight).

Tip: We are not out of the downturn yet. Although strategy and business transformation specialties command the highest compensation, one conclusion is interesting. Compensation for the highest performers, particularly from bonuses, is strong. For those who are at the bottom of the performance scale, raises and bonuses remain either missing or small.

© 2011 Institute of Management Consultants USA

Tags:  competition  consulting  fees  trends 

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