I recently stumbled upon a report by Charles Aris (a strategy consulting executive search firm). Charles Aris apparently assists strategy consultants find jobs in industry, and thus has a fair amount of information about the skills of consultants, how much they’re compensated, and where they end up.
You can download a copy of their report here.
Before I get into the details of their report, a few caveats:
1. The Data is Likely Skewed.Charles Aris has every incentive to report high salaries for both what strategy consultants make at their firms and out in industry. The reason? It helps them attract candidates, and gives them their candidates better negotiating power with the companies they’re interviewing at.
2. The Data is Self Reported. It’s a well known fact that people exaggerate their salaries. Also, when they did these surveys bonuses had not been assigned yet, so people were asked to estimate what they thought they’d be receiving (and people are usually wildly optimistic).
3. The Candidates Are Self Selected. The people who use an executive search firm of this kind probably have the best credentials amongst the pool of consultants. As a result, their job offers when they switch out to industry will have compensated on the high end.
4. The Sample Size is Small. They only polled 366 consultants, and when you segment them by role it ends up being a very small number of people. As a result, any outlier could significantly skew the data.
5. The Data is Only for US Based Strategy Consultants. They focused on people from the top 9 firms, and only strategy consultants at that. Keep this in mind as we proceed through the rest of the report. Here’s a breakdown:
What Do Consultants Actually Do?
Ah yes, the age old question. According to the report, here’s what consultants actually do:
And here’s what those competencies are defined as:
Here are my takeaways:
1. The salaries are extremely high. Yeah, it seems obvious but I wanted to point it out. You would think that based on the large supply of potential candidates, salaries would go down over time. But, consulting firms business’ models shoot them in the foot on this one. Because the candidate pool they target is so limited (only the cream of the crop at a few target schools), because the lifestyle is so difficult, and because turnover is so high, they are forced to pay high salaries to retain talent.
2. The largest relative increase in salary comes from the jump between analyst and associate. If you look at it, the increase in base salary seem somewhere between 60-80%. I’m really curious as to why this is. I suspect its because consulting firms work so hard to attract the best and the brightest from business school, so they’re willing to pay a premium for them (even if it means upping the salaries for the people who started as analysts this much).
3. The job changes significantly as you move up. What makes you a successful analyst (being good at analyzing data and making nice PowerPoint slides), is not what makes you successful manager (project management), which is not what makes you a successful partner (selling work). I am curious how they take this into account in the recruiting process. Based on the high turnover, it doesn’t seem like they are all that successful at preparing people for their next role (note that this is a problem throughout every job and every industry, nothing exclusive to consulting firms).
What’s the Compensation Like?
1. Salaries have been going up. Apparently, salaries have been going up across the board (the report says its because consulting firms are hiring more to make up for reduced hiring during the financial crisis, and thus are offering higher salaries to attract candidates). Salaries are increasing fastest for analysts, as well.
2. These are likely overestimates. Remember what I said at the beginning of the article – the data is self reported, the contributors are self selected, the sample size is small, and the company has every incentive to report higher salaries.
3. Partner compensation is probably extremely high. They didn’t include partner compensation in this study because apparently it would skew the data significantly. Considering some of these senior managers are making over $300,000 annually, I’d assume that partner compensation is in the millions.
What Are the Exit Opportunities?
They’ve also provided some data about the exit opportunities of candidates who retained them (keep in mind that they probably chose the best of the lot):
They also provided another report, with more information about exit opportunities, available here.
I wanted to try to look at the difference in exit opportunities between people at the top 3 and other firms, but there wasn’t enough information to do so. What I did notice, however, that was interesting was that there were people 5-7 years post MBA (senior manager / principal at most consulting firms) going straight to industry as a VP or Director.
The only trend I’m seeing is that exit salaries seem to increase the more consulting experience one has, as you’d expect.
I wish I could conclude more but there just isn’t enough data.
The job of a consultant changes significantly as you move up the ranks. It starts as more of a data analysis job, moves into a management job, and terminates as a sales job.
The exit salaries go up as one has more experience. It seems like its possible to get into a Director / VP role at a F500 company 5-7 years out of MBA, which pays somewhat similar to the equivalent Senior Manager / Principal role at a consulting firm.