Let’s be honest: no one really likes competition. It’s easier to coast, to dispense the same solutions and collect the same checks. Competitors disrupt all that. Who wants to reflect? It’s time-consuming. Change? Too exhausting…until someone is hell-bent on bankrupting you. That’s when companies embrace the uncomfortable and uncertain. Competition forces them to listen, rethink, and invest, to root out the waste and respond more quickly.
Of course, competition also increases costs. That’s what the consulting industry faces today. A decade ago, firms fought among themselves for talent. The industry even enjoyed an influx of talent from bankers and quants seeking more secure livelihoods. Now, consulting firms are fending off more than just each other for talent. Candidates are increasingly drawn to the independence and impact of entrepreneurship. At the while, Big Tech companies are shelling out big dollars and making big promises. Both pose serious threats to the industry’s dramatic growth. From 2010-2018, the American management consulting market grew by nearly $80 billion dollars. In real terms, revenue rose from $171.4 to $251.3 billion over that period according to IBIS World, a business intelligence publisher. IBS also projects that number to balloon to $261.8 billion this year.
A LOOK AT PAY IN TOTALITY
How are firms looking to capitalize on this growth? Simple: They are hiring – and they are paying a premium for it. That was the main finding from this year’s Management Consulting Salary survey from Management Consulted (January 15th). How big is the difference? In just the past two years, McKinsey has boosted MBA base pay from $152,500 to $165,000 – along with signing bonuses by $5,000. BCG base has climbed by $18,000, with Bain following suit with a $17,000 increase. It isn’t just MBAs who are reaping the benefits of competition. BCG and Bain Undergraduate hires have nabbed base pay increases of $6,500 and $6,000 respectively.
A leading resource for consulting-related research, Management Consulted offers the most up-to-date data on entry-level consulting pay and benefits from over 50 consulting firms. The data is collected from their interview and resume preparation clients who received job offers – along with feedback from site readers and firm representatives. The data is broken into two buckets: MBAs and Ph.Ds on one side and undergraduate and master’s degree holders on the other. They are clustered this way, Management Consulted notes, since MBAs and Ph.D.s receive the same pay packages (no different than the compensation offered to undergraduate and master’s hires).
The salary survey examines pay beyond pay and signing bonus, however. It also delves into performance bonuses, retirement and 401K, housing allowances, relocation expenses, stock options, profit-sharing, and tuition reimbursement. It even breaks down intern pay. In short, the data provides prospective consultants with an exhaustive view of pay to better compare packages over the long-term.
BIGGEST BUCKS GO TO MBAs
The biggest takeaway? It isn’t just MBB hires whose pay is on the upswing. In the past two years, for example, MBA pay in Deloitte’s Strategy and Operations division surged by $15,000. The same is true for firms as different as A.T. Kearney (+$11,000), PwC (+$10,000), Strategy& (+$21,000), and Accenture Strategy (+$9,500). Signing bonuses also increased at firms like Accenture Strategy (+$10,000), Strategy& (+$5,000), and PwC (+$5,000). It isn’t an across-the-board bump here, however. BCG signing bonus actually dropped by $5,000.
This ‘rising tide lifts all boats’ trend also applies to undergrad bases. These also rose among the main players (for the most part). Notably, PwC bases rocketed from $72,000 to $90,000 over the past two years. For the most part, undergrads enjoyed respectable increases at the likes of KPMG (+$7,000) and A.T. Kearney (+$5,000). That said, Deloitte bucks the trend. Here, undergrad pay has actually decreased by $3,000 since 2017. At the same time, Deloitte restricts performance bonus for undergrad consultants to those who have two or more years of experience at the firm. In other words, the firm operates at a disadvantage against the MBB, let alone EY-Parthenon, Accenture Strategy, and Strategy&.
Not surprisingly consulting pay is decidedly higher for MBAs favor based on Management Consulted data. In the MBB, for example, MBAs earn $75,000-$78,000 more than their undergrad counterparts in base pay, with Bain ($165,000 vs. $90,000) embodying that gap. There are similar gaps at Accenture Strategy ($155,000 vs. $87,000) and PwC ($150,000 vs. $90,000). The smallest gap between MBAs and undergrads among top firms? That’d go to Booz Allen Hamilton ($130,000 vs. $75,000). The biggest gap: Ernst & Young ($155,000 vs. $75,000).
PAY MORE TO GET THE RIGHT PEOPLE
Make no mistake: base pay is critical because of the annual increases tacked onto it. Take MBA compensation, for example. A standard 10% increase on $165,000 is $16,500 compared to $13,000 on $130,000. Using that formula, base pay for the first consultant would rise to $199,650 compared to $157,300. The gap is even more striking when three years of earnings are combined: $546,150 vs. $430,300. It pays handsomely to take a higher base.
Overall, the MBB is treated as the gauge for MBA pay. Among undergrads, the bar is set at $90,000 at Bain and BCG, with McKinsey coming in slightly lower at $87,500 according to Management Consulted data. McKinsey also lagged in performance bonus with a $15,000 ceiling. Compare that to Bain and BCG, where first-year consultants can earn up to an additional $22,500 and $18,000 on the high end respectively. While all three furnish a standard $5,000 starting bonus, they differentiate themselves with perks. At Bain, retirement is 4.5% of base without any contribution required to a 401K. BCG incorporates profit-sharing up to $4,400, which is deposited into the consultants’ 401K. However, McKinsey’s retirement contribution can reach $7,500. At the same time, McKinsey’s relocation can go as high as $10,000 compared to $5,000 at Bain and BCG.
Not surprisingly, many firms exceed these numbers to attract talent. Take Accenture Strategy, where the $87,000 base sits slightly below the MBB. That said, first-year undergrads can collect up to $26,100 in performance bonus, not counting a $12,500 signing bonus that nearly doubles its MBB competitors. Still, it helps to read the fine print here, as Management Consulted research found that a 6% match in the 401K doesn’t start until after the first year at Accenture Strategy. Overall, EY-Parthenon offers the best base a $92,000, which is supplemented by a $10,000 signing bonus and a performance bonus up to $9,200 to start – all measures that exceed the MBB.
PICK YOUR PERK
Among MBAs, the compensation packages are even loftier…and diverse. Starting again with the MBB, each firm starts its MBA grads at $165,000, with Bain and BCG setting their performance bonus ceiling at $41,250 (compared to McKinsey’s $35,000). However, McKinsey makes up the difference with signing bonuses of $30,000 against the $25,000 tendered by Bain and BCG. Another differentiator is 401K. Here, McKinsey chips in 7.5% of the 401K – or $12,375 for first-year MBA consultants. BCG contributes $10,312, followed by Bain with an $8,000 ceiling. Bain also trails in relocation, going up to $5,000 in reimbursement compared to BCG ($8,000) or McKinsey ($9,000).
Like the undergraduate market, non-MBB firms use higher pay and perks to entice prospective MBA talent. A.T. Kearney, for one, nearly matches the MBB dollar-for-dollar, with $158,000 base pay, $25,000 signing bonus and up to $44,100 in performance bonus. Deloitte raises the stakes even higher. Along with a $160,000 base and $30,000 max signing bonus, Deloitte’s Strategy and Operations practice includes a performance bonus that goes as high as $40,100 – which is reinforced by full second-year tuition reimbursement for returning interns according to Management Consulted findings. EY-Parthenon pays a $170,000 base and a $35,000 signing bonus, numbers comparable to Strategy&’s $168,000 base and $30,000 bonus. Still, Strategy& may end up a better deal when performance bonus is factored into the equation. Here, Strategy& goes as high as $55,400 compared to $10,000 at EY-Parthenon.
Think that’s eye-opening? Accenture Strategy will plunk down a $35,000 signing bonus for an MBA grad…with an additional $17,500 for “early sign-on for returning interns.” KPMG and Oliver Wyman will each pay $45,000 in signing bonus, with Alix Partners going as high as $60,000 in performance bonus. Add to that, LEK Consulting offers up to $27,000 in profit sharing for first-year MBAs.