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Vencon Research’s 2022 Pulse Survey provides an insight into the effects of currency devaluation and inflationary pressures in Turkey. The survey results highlight the challenges faced by firms in Turkey in retaining their employees, and the measures they are taking to address the financial hardship faced by their employees.

1.  CHALLENGES IN RETAINING EMPLOYEES

The study revealed that firms in Turkey are facing challenges in retaining employees, with a significant increase in voluntary attrition. As a result, 67% of firms surveyed have increased their hiring efforts. Despite this, half of the firms reported that their employees are experiencing financial hardship.

2.  RESPONSES FROM CONSULTING FIRMS

To address the issue, all firms reported adjusting their compensation structure in the last 12 months, with 67% of them attributing this to both inflation and currency devaluation.

The adjustments were made for all types of employment contracts, with two-thirds of firms adjusting based on job role, function, and/or career level.

Measures taken to combat inflation and currency devaluation included increasing base salary, offering one-off or multiple payments, and increasing bonus/variable pay. Interestingly, only 17% of firms used "pegging" of compensation to a foreign currency.

3.  DRIVERS OF COMPENSATION DECISIONS

The most critical factors driving compensation were the cost of labour and inflation, with other contributing factors including cost of living expenses, fluctuations in exchange rates, and attrition rates.

About 50%of the firms were unable to make predictions about the anticipated situation in the next 12 months in Turkey. However, most firms are planning to make changes to their compensation model in the coming year.

Half of the firms plan to raise the base salary by over 20%, one-fourth plans to boost the bonus by 20%, and another quarter plans to raise the bonus by 11% to 20%.

4.  INDUSTRY REMAINS PROACTIVE

In conclusion, the survey shows that businesses in Turkey are taking proactive measures to retain employees and address their financial hardship in light of inflation and currency devaluation. It also highlights the need for firms to review their compensation structure more frequently than the typical once-per-year review, and plan changes to address the challenges of inflation and currency devaluation.

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Should you have any further questions or would like to receive more detailed information on this topic, please reach out to us at info@venconresearch.com

By Andy Klose - Associate Partner

Designing and defining partner compensation within consulting companies can be challenging, but the Trinity Model proposed here offers a clear solution.

By following this model, companies can confidently institute effective partner compensation to achieve the best outcome for all stakeholders. This model emphasizes the interconnectedness of profit, goals, and pay in shaping partner compensation, ensuring alignment with organizational objectives.

Understanding the Trinity Model

Vencon Research’s Trinity Model for Partner Compensation design is based on three fundamental pillars: profit, goals, and pay (Exhibit 1):

These elements are not discrete elements but are interwoven, shaping the trajectory of partner compensation within consulting firms.

1. Profit: Profitability, in its broadest sense, serves as the cornerstone of the Trinity Model. It encompasses various factors such as geographical location, business segment, industry dynamics, and operational models, delineating the profit potential of a company, service line, or consulting project.
2. Goals: Central to the Trinity Model are the objectives or Key Performance Indicators (KPIs) set for partners. These encompass tangible metrics like sales targets, revenue goals, contribution margins, and profitability thresholds, defining the expected outcomes from individual or team contributions.
3. Pay: The compensation offered to partners is the tangible expression of their contributions and achievements within the organization. While market competitiveness is essential, equitable compensation that aligns with individual contributions is equally crucial for fostering a culture of fairness and performance.

Harmonizing the Trinity

The Trinity Model demonstrates structural cohesion by linking profit, goals, and pay within defined frameworks such as partner levels or career groups. Unlike traditional career progression paradigms, partner levels in this model are based on competency and performance rather than a linear upward trajectory.

In practice, changing one element of the Trinity requires corresponding adjustments to maintain balance. For instance, modifying compensation without aligning goals can cause conflict within the system. Therefore, it is crucial to synchronize all three elements to avoid any potential issues.

The following example should highlight these interrelations: Consider a scenario where a consulting company is striving to achieve ambitious growth goals by increasing revenue. This can be implemented by setting higher revenue goals for the firm’s partners. Profitability is typically defined by the types of clients served or the type of advisory work offered and is often less flexible. In this example, it is a fixed element. So, increasing partners’ revenue goals without adjusting their pay (potential) will eventually lead to an imbalance. Partners can increase their income by achieving higher revenue or profit goals and making other contributions. However, for career levels below partner, pay may also be significantly influenced by inflation and other factors.

In essence, the example highlights the imperative of harmonizing profit, goals, and pay to maintain balance within the compensation structure. By aligning compensation with organizational objectives, companies can ensure that incentives are calibrated to drive desired outcomes, fostering a culture of accountability and performance at all levels of the organization.

Moving Beyond Benchmarking

Regular benchmarking of pay against relevant peers provides valuable market insights when reviewing pay practices and market positioning. However, some consulting companies, such as those with a more meritocratic pay approach (“pay for performance”) may need to add a second step to the benchmarking exercise, particularly when reviewing Partner pay in relation to performance metrics. Such companies may wish to consider additional factors beyond pay benchmarking to ensure coherence within the Trinity Model and achieve a more holistic alignment across all elements.

Incorporating ESG Considerations

In an era marked by heightened awareness of environmental, social, and governance issues, consulting companies should be encouraged to incorporate ESG considerations into Partner performance assessments and incentives. By doing so, companies can promote a culture that values responsible management, and strive for sustainable value creation over the long term. This holistic approach not only aligns with societal expectations but also enhances the company's reputation and competitive advantage in an increasingly ESG-conscious business environment. This expansion of the Trinity Model to include ESG elements will be covered in a follow-up piece to this article.

Balance & Interdependence for Success

Achieving balance in partner compensation is important for creating a culture of performance, fairness, and sustainability in consulting companies. By acknowledging the interdependence of profit, goals, and pay, and incorporating emerging ESG considerations, firms can implement partner compensation strategies with confidence and foresight.

We would be pleased to assist you with any additional inquiries you may have and offer recommendations on how to enhance partner compensation for your organisation.

Andy Klose is an Associate Partner at Vencon Research International and heads the firm’s consulting unit.

Vencon Research International is a leading provider of compensation benchmarking and research as well as of compensation and performance-related consulting services for professional service firms, especially for audit and tax, management consulting, and IT services firms. Vencon Research International provides services to a full range of clients in more than 75 countries worldwide and is proud to name more than 85% of the world’s major consulting and/or professional services firm its clients.

Compensation and Pay Mix: Part 4

By Andy Klose - Associate Partner

In this series of articles, we highlight an aspect of remuneration strategy that is often overlooked: the ratio of fixed and variable pay to total cash compensation (also known as "pay mix").

Pay mix determines what types of employees are attracted by a particular compensation model, which in turn impacts a company's performance and results. Setting the right pay mix, especially for client-facing and sales roles in professional services firms is critical for success.

As a rule of thumb: The higher the influence of a job holder on clients’ purchasing decisions, the higher the variable portion in the pay mix. Lastly, the type of employees being attracted to a particular compensation model will also shape a firm’s culture in the long run.

Pay Mix: A Defining Differentiator in Compensation

In Part 1 of this series, we explained why the pay mix can be the defining differentiator, particularly from an employee’s perspective, when many of the other key elements of compensation across competing organisations are considered to be broadly similar. In Part 2 we discussed how pay mix affects the financials of firms, especially with regards to personnel costs. Part 3 examined how pay mix should be adjusted in relation to the total cash compensation offered and how benchmarked market percentiles are the most effective indicator of competitive positioning. And, in this final Part 4 we will assess how pay mix may influence firms’ culture and performance.

This is the last part (Part 4) of our series on compensation strategy, where we focus on the critical importance of pay mix - the balance between fixed and variable compensation - in shaping employee attraction, firm culture, and long-term performance. In this article, we provide deeper insights into how pay mix influences organizational culture and overall performance.

Challenging Conventional Wisdom

In the midst of debates over the effectiveness of increased remuneration in motivating employees, it is crucial to challenge conventional wisdom. While monetary incentives undoubtedly play a role, our research suggests that sustainable performance depends more on creating a high-performance environment than simply increasing pay.

We propose a paradigm shift captured in our “Performance Mindset Framework” (Exhibit 1), which highlights the link between mindset, behaviour, and performance. Our model suggests hiring individuals who are motivated by intrinsic factors, such as a sense of ownership and commitment, rather than relying solely on external rewards.

Attracting and Retaining Top Talent

To attract and retain high-potential candidates, firms must adopt rigorous recruitment processes and leverage advanced personality assessments to identify individuals with the right mindset and soft skills. Additionally, offering well-balanced total rewards packages, including compensation, benefits, and personal development opportunities, enhances the value proposition for prospective employees.

Strategic Pay Mix in Professional Services Firms

In industries like consulting and IT services, where achieving “hard KPIs” such as, e.g., sales targets and margin goals is paramount, offering a competitive pay package is imperative. Consulting companies not in the top quartile of their niche can leverage a slightly higher total cash package with a “riskier” pay mix to attract individuals motivated by performance-driven incentives.

Expected Long-term Effects of Compensation Strategies

Based on the following example, we present the expected long-term effects assuming that the compensation strategy and pay mix are implemented consistently over several years. In simplified terms, the expected results are shown in Exhibit 2:

Firm 1 will attract more 'hunter'-type employees who are drawn to the compensation model, which includes a relatively high variable, performance-related portion with the potential for the highest total cash. This will result in a competitive and dynamic corporate culture. The main challenge for the company will be fostering cooperation between employees rather than motivating them.

Firm 3 is the ideal choice for employees who value a higher fixed base income over a higher total remuneration. Individuals who are less performance-driven or less self-assured may find this option more attractive compared to Firm 1. This situation may result in performance issues for the company in the long term. There is the danger that employees who consistently outperform their colleagues will leave due to the relatively low variable bonus component, which prevents them from expecting a significantly higher salary than their peers. Additionally, these employees may be enticed to work for one of the other two rival types of companies, where they can earn significantly more for the same level of performance.

In the long term, Firm 2 will see long-term results between the two scenarios outlined. Identifying 'over-performers' and motivating them may be a key challenge, but one that can be overcome with the right approach.

Long-Term Implications

Different pay mixes yield distinct long-term effects on a company's economic situation and culture. Companies with a higher variable portion in their pay mix tend to attract dynamic, performance-oriented individuals, fostering a competitive corporate culture. Conversely, companies with a lower variable portion may face challenges retaining top performers and maintaining a high-performance environment.

Tailoring Pay Mix to Market Dynamics

Designing the right pay mix necessitates a nuanced understanding of market comparatives and cultural preferences. Pay mix varies by region and country, with some cultures more receptive to aggressive pay mixes than others. Therefore, companies must align their compensation strategies with local norms while remaining competitive in talent acquisition and retention.

Conclusion

Pay mix is a strategic tool that significantly impacts employee attraction, firm culture, and overall performance. A comprehensive approach to compensation and aligning pay structures with organizational objectives can position companies for sustained success in a competitive marketplace. Optimizing pay mix and remuneration systems to suit individual company needs and objectives is essential for achieving this success.

We are at your disposal for further questions and suggestions regarding how you optimally design pay mix (and/or remuneration systems) for your company.

Andy Klose is an Associate Partner at Vencon Research International and heads the firm’s consulting unit.

Vencon Research International is a leading provider of compensation benchmarking and research as well as of compensation and performance-related consulting services for professional service firms, especially for audit and tax, management consulting, and IT services firms. Vencon Research International provides services to a full range of clients in more than 75 countries worldwide and is proud to name more than 85% of the world’s major consulting and/or professional services firm its clients.

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Accurate job matching is a critical step in salary benchmarking and setting pay ranges. It goes beyond simply comparing job titles; it involves a thorough examination of the tasks, responsibilities, skills and qualifications required for each role to ensure that the positions being compared are truly aligned. Without this precision, compensation structures can become inconsistent, leading to issues such as overpaying or underpaying employees, internal dissatisfaction, and difficulties in attracting and retaining top talent.

Why Accurate Job Matching Matters

Getting roles aligned when salary benchmarking is especially important in the consulting sector due to the complex and varied nature of consulting roles. Consultants often work across different client industries, each with unique demands, and their responsibilities may shift depending on the project, client, or region. This makes it critical to go beyond surface-level job titles and ensure a deep understanding of the specific tasks & responsibilities as well as experience and expertise required for each position. Accurately aligning the roles to be compared in a benchmarking exercise (i.e. job matching) also:

1. Ensures fair compensation: When roles are accurately matched, organizations can set salaries that reflect the actual work being done. This prevents disparities that could arise from comparing roles that aren’t equivalent in scope or responsibility.
2. Reduces pay inequities: Proper job matching helps maintain equity by ensuring that employees with particular responsibilities and skills are compensated at similar rates across markets. This fosters a sense of fairness and reduces the risk of pay-related grievances.
3. Enhances talent retention: Competitive and fair compensation is key to retaining top talent. When job matching is done accurately, organizations can better align their pay scales with the market, not just across broader levels, but also at more granular sub-levels. This ensures that existing incumbents are paid exactly what they deserve, while attracting the right candidates to the role.
4. Supports strategic decision-making: Accurate job matching provides reliable data that can be used to make informed decisions about salary adjustments, promotions, and workforce planning.

Key Principles for Accurate Job Matching

At Vencon Research, we don’t see job matching as an extra; it's at the heart of how we benchmark salaries. By prioritizing this process and working closely with our clients, we help ensure that compensation structures are fair, competitive, and aligned with the realities of the market. This level of detail is what sets us apart and helps our clients stay ahead in attracting and retaining talent. Key principle in our methodology are:

1. Focus on tasks & responsibilities, not titles: Job titles can be misleading, as the same title might encompass different responsibilities across companies. The focus should be on what the job actually entails—its core duties, the level of decision-making required, and the tasks, responsibilities and skills necessary to perform the role.
2. Consider experience and skills: Beyond responsibilities, the experience and skills needed for a role should be closely examined. This ensures that comparisons are made between roles that require similar levels of expertise.
3. Use a tiered approach: Grouping roles into tiers based on their level of responsibility and impact within the organization can help standardize the job matching process. This makes it easier to compare similar roles across different industries and companies.
4. Engage in collaborative analysis: Job matching shouldn’t be a one-sided process. Engaging multiple stakeholders—such as HR professionals, hiring managers, and industry experts—can provide a more comprehensive view of the role and ensure that all relevant factors are considered.
5. Keep market trends in mind: The job market is dynamic, and roles evolve over time. Regularly updating job matching criteria to reflect current trends in responsibilities and required skills is essential for maintaining accuracy.

Defining Career Progression and Levels

Our career progression structure reflects a transparent roadmap from entry-level Analysts to Partners. Matching participant firms’ own job levels to this structure serves as the foundation for accurate salary benchmarks. Mis-leveling a role can lead to significant discrepancies in pay so ensuring that roles are placed at the correct level is crucial. When incorporating a participant firm for our benchmarking surveys, we analyse the firm’s roles and find the appropriate match across 15 individual sublevels in order to structure in line with a standard 5 level / 15 sublevel output. Alternatively, we adjust to an output that reflects their own level matching. In both cases, we work closely with the firm to ensure the exercise is accurate and reflects the realities of the roles.

Task and Responsibility-Driven Matching

Vencon Research’s methodology focuses on task and responsibility-driven matching to ensure roles are assigned to the correct level. Unlike time-based metrics, this approach aligns job matching responsibilities, ensuring that tasks, responsibilities, skills and competencies directly correspond to the actual requirements of each role. This leads to a more accurate and nuanced understanding of an individual’s contribution.

Our criteria for each level are extensive, and build on a distinct understanding of differing tasks and responsibilities as a consultant progresses in their career from an Analyst via Principal (Consultant Salary Surveys) to a Primary Partner and further to a Senior Partner (Partner Salary Survey). At the entry level, Analysts focus on data gathering and analysis under supervision. As professionals advance to the Associate level, they engage more with clients and manage projects, requiring advanced analytical tools and leadership skills. Managers take on the first level of personal responsibility as well as full accountability for project deliverables and deepen their industry-specific expertise. Senior Managers oversee multiple assignments, guiding junior colleagues while managing profit and loss responsibilities. the final level within the Consultant Salary Surveys is the Principal level, those taken out of the “day to day” business and responsible for implementing the strategy decisions decided upon by the partners (Partner Survey).

A Commitment to Accuracy

Accurate job matching is more than just a technical exercise; it is the essential entry point to fair and effective compensation structures. When done right, it ensures that salaries align, first and foremost with actual job responsibilities, while also aligning with market standards, fostering a sense of fairness within the organization and beyond. This, in turn, helps retain top talent and positions the company as an attractive place to work.

For organizations, the benefits of accurate job matching are clear—ensuring competitive pay, maintaining internal equity, and supporting informed decision-making. By following principles such as focusing on tasks and responsibilities over titles, engaging in collaborative analysis with experts and keeping an eye on market trends, companies can create compensation structures that are not only fair but also competitive.

At Vencon Research, we place job matching at the heart of our benchmarking process because we believe that precision in this area sets the stage for everything else. By working closely with our clients and using a task and responsibility-driven approach, we help ensure that their compensation strategies are built on a solid foundation, enabling them to attract, retain, and motivate the talent they need to succeed.

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An Invaluable Tool for Compensation Management

Salary survey reports are invaluable tools for compensation management. By understanding key indicators and leveraging data-driven insights, businesses can develop competitive compensation strategies that attract, retain, and motivate top talent effectively.

Find out more about Vencon Research's Consultant Salary Survey here.

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As a trusted HR partner for the consulting industry, Vencon Research is here to help you unlock the full potential of your team. Contact us to learn more about how we can support your HR needs and drive success for your business.

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By: Andy Klose and Jalol Khodjaev

In the competitive landscape of consulting firms, attracting and retaining top talent is crucial. Vencon Research has recognized the need for strategic guidance in compensation management and has introduced Pay Recommendations, an innovative enhancement to our compensation benchmark reports for the consulting industry. This solution is designed for both consultants and partners and has the potential to revolutionise how consulting companies approach their compensation strategies.

Tailored Solutions for Consulting Firms

At the heart of our Pay Recommendations lies a deep understanding of the unique needs of consulting firms, particularly for client-facing career levels below Partners and above. These recommendations are not one-size-fits-all; rather, they are bespoke reports crafted based on the Consultant Salary Reports or Partner Compensation Reports delivered to clients. Taking into account the specific local and service line dynamics of each client’s company, our reports provide a comprehensive evaluation of various compensation elements, including Total Cash Compensation, Basic Salary, Target Bonus, and Allowances.

Strategic Insights for Optimal Compensation Strategies

Vencon Research provides strategic insights into career progression and budget implications, in addition to numerical analysis. We align compensation elements with the client's desired market positioning to ensure adherence to the firm's pay philosophy while maintaining market competitiveness. Our aim is to facilitate gradual increases aligned with market percentiles, fostering employee rewards and career development in tandem.

Actionable Recommendations for Sustainable Growth

The true value of our Pay Recommendations lies in their actionable nature. With detailed suggestions for appropriate changes in each relevant compensation element, tailored to the client's positioning target, pay philosophy, and other metrics, our reports empower consulting firms to make informed decisions. By providing insights into the expected budget impact and assessing staff distribution across career levels, we enable strategic workforce planning and optimization of resources.

Illustrative Graphics and Comparative Analysis

Illustrative graphics within our reports vividly demonstrate the gap between current pay structures and market percentiles, highlighting areas for improvement. Through comparative analysis, we offer a holistic view of the client’s situation, enabling them to benchmark their compensation practices against industry standards. Moreover, our unique feature comparing career progression provides a time-based perspective on firm attractiveness for career development opportunities.

Guidance and Insights

Our Pay Recommendations provide clear and concise guidance on compensation elements, ensuring ease of implementation. We offer simulations of expected budget impacts and comparisons of staff distribution across levels, providing valuable insights into competitive positioning. Vencon Research provides data-driven recommendations and strategic guidance to empower consulting companies to optimize their compensation strategies for sustainable growth.

Empowering Consulting Firms for Success

In conclusion, Vencon Research's Pay Recommendations signify a significant change in how consulting firms approach compensation management. Our Pay Recommendations provide actionable insights, specific pay suggestions, and strategic guidance, empowering our clients to attract and retain top talent while maintaining competitiveness in the market. As the consulting landscape continues to evolve, our commitment to unlocking strategic insights remains unwavering. With Vencon Research as your partner, you can embark on a journey towards success, driven by informed decision-making and strategic vision.

A video overview of the Pay Recommendations report is available here.

We are at your disposal for further questions and suggestions regarding how you optimally design pay ranges and/or remuneration systems for your company.

Book your introduction meeting online here.

Andy Klose is an Associate Partner at Vencon Research International and heads the firm’s consulting unit.

Jalol Khodjaev is a Senior Consultant at Vencon Research International’s consulting unit.

Vencon Research International is a leading provider of compensation benchmarking and research as well as of compensation and performance-related consulting services for professional service firms, especially for audit and tax, management consulting, and IT services firms. Vencon Research International provides services to a full range of clients in more than 75 countries worldwide and is proud to name more than 85% of the world’s major consulting and/or professional services firm its clients.

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By:
‍Hilmar Albers – Partner
Erwin Harbauer - Managing Partner

In parallel to the positive momentum witnessed in the country’s economic growth, forecasts indicate that Japan is expected to experience a long-awaited boost in wages. However, Japanese consultants can only look forward to a marginal offsetting of the cost of living pressures experienced in the country.

Domestic demand is a major driver of the Japanese economy. Unfortunately, consumer demand had subdued after a decade of ‘Abenomics’ with only disappointing growth in workers’ earnings, compounded by record inflation during QIV of 2022 and culminating in a 41-year-high rate of inflation of 4.3%¹ in January 2023.

While Japanese inflation remains relatively modest compared to the US or the Eurozone, these levels represent a radical shift for an economy that has experienced decades of ultra-low inflation.

Now, despite famously stagnant salaries, Japanese industry has reacted and wage increases are finally on the cards across all sectors. Open source market analyses predict an average hike in salaries of 2.8% (with estimates ranging from 2.5% to 3.4%)².

When also taking the re-opening of the country's borders to foreign visitors since October 2022 into account, we expect such wage increases to spur domestic demand and further stimulate economic activity. We therefore believe that the outlook for the remainder of 2023 is relatively positive for the Japanese economy.

Furthermore, Vencon Research’s survey data shows that the consulting industry is not excluded here and many of our clients have signalled growing order books. However, although consulting firms are also increasing salaries, the expected increases are far from those being offered by the country’s other industries, and average only 1.4%³ across career levels.

Many firms have also planned different levels of increases across their career grades, with a greater concentration on the lower career levels and less relative growth being offered to the more senior Management and Principal levels.

Since consultants already count as high-earners in Japan (as well as in most other countries worldwide), the lower expected salary growth percentages may be less surprising.

On the whole, while the consulting sector itself can hope to profit from a general uptick in economic conditions, Japanese consultants can only look forward to a marginal offsetting of the cost of living pressures experienced by the country.

For more information on this topic or on how you may successfully respond to the issues raised in this article, please contact Vencon Research – as always, we are happy to assist you.

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_{[1] https://tradingeconomics.com/japan/inflation-cpi;}

_{[2] Various inflation forecasting and research firms, incl. Japan Economic Research Center, Kienbaum, Korn Ferry Hay Group, Willis Towers Watson}

_{[3] Vencon Research analysis; Client feedback}

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