Aktuelle InSights

By Andy Klose - Associate Partner

This article explores the complexities and challenges associated with benchmarking and aligning C-Suite compensation with market practices, addressing issues of data variability, company size influence, and discrepancies between public and private entities. It proposes a multi-step solution leveraging standardized data, market comparisons, and pay ratio definitions to create fair, balanced, and market-aligned C-Suite compensation structures.

Navigating the Complexity of C-Suite Compensation

The landscape of C-Suite compensation transcends a simplistic evaluation of roles and responsibilities. It’s a labyrinthine domain shaped by diverse metrics. Major factors, among others, are:

• legal structure
• revenue
• profitability
• operational scale

While no universal blueprint exists, patterns among similar-sized firms offer invaluable insights into shaping tailored compensation practices aligned with strategic goals and organizational cultures.

Challenges in Compensation Evaluation

Compiling compensation data for C-Suite roles or executive leadership positions, specifically within the consulting industry, poses challenges due to the scarcity of publicly available information. The complexity of this task is magnified by the varying compensation across different roles and companies.

Company size emerges as a critical factor, however, the correlations between different size criteria, such as:

• revenue
• employee count
• EBITDA
• Total Cash Compensation

exhibit significant variability. For instance, a corporation employing approximately 40,000 employees and generating a revenue of approximately $10 billion pays a total of $12 million to its CEO. Meanwhile, another corporation with around 120,000 employees and around $4 billion in revenue compensates its CEO with $4 million.

Addressing Variances and Inadequacies

1. Benchmarking exercises using a broad comparison range often yield flawed results due to the diverse sizes and operations of compared entities. The exercise should be as specific and targeted to relevant competitors as possible.
2. Variance among C-Suite positions and discrepancies between public and private entities further complicate fair evaluations. Make sure you are benchmarking either public or private, and only include entities from the other group with full awareness of the possible influence on results.
3. Limiting datasets to similar-sized companies and standardizing compensation data based on the most correlated size criterion emerge as crucial solutions. Even where similar firms are under comparison, failure to adequately match the C-Suite levels being benchmarked, or account for differences in compensation structure will result in misleading conclusions.

Solutions for Fair C-Suite Compensation Packages

A multi-step approach is advocated, involving:

1. defining pay ratios between C-Suite roles
2. standardizing data for market comparison
3. factoring in complexities associated with different company types

This approach aims to develop fair pay ranges, considering market ratios between roles and aligning compensation with organizational and industry-specific benchmarks.

In summary, developing compensation packages for C-Suite executives involves overcoming multifaceted challenges influenced by company size, data variability, and discrepancies between public and private entities. By utilizing a multi-step approach involving standardized data, market comparisons, and role-based pay ratios, organizations can craft fair, balanced, and market-aligned compensation structures that reflect the intricacies of their operations and strategic goals.

We are at your disposal for further questions and suggestions regarding how to optimally design your company’s C-Suite compensation package (and/or model).

Andy Klose is an Associate Partner at Vencon Research International and heads the company’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.

By Osas Ohenhen - Business Development

In compensation benchmarking, the choice of peer firms can make or break the quality of insights gained. Selecting firms that align closely with your company in industry, size, and business model ensures the data collected is relevant and actionable.

The Foundations of Benchmarking

A successful benchmarking process typically involves four key steps that build upon each other to deliver accurate, meaningful results:

1. Selecting the most appropriate competitors
2. Choosing the most applicable “Line of Business” (e.g., consulting functions)
3. Completing an accurate “Job/role matching”
4. Comparing the relevant components of remuneration

Each step requires careful consideration and expertise to ensure that benchmarking efforts translate into informed compensation strategies. In this article, we will examine the first step—selecting the most appropriate competitors—and why it is important for a meaningful comparison.

Consulting Industry Segmentation

The consulting industry is highly segmented, with each area bringing unique compensation dynamics. Strategy consulting firms, for example, often pay higher base salaries and offer substantial performance bonuses to match their high-level project demands. IT consulting, on the other hand, spans a range of roles, with compensation varying widely based on technical skills and certifications needed for rapidly changing tech requirements. Operations management consulting emphasizes efficiency and stability, with compensation reflecting deep industry knowledge. Meanwhile, accounting and full-service consulting firms often balance base pay with moderate performance incentives to suit their compliance-focused work.

Firm size and revenue add further complexity: large, multi-service firms may standardize base pay with practice-area bonuses, while smaller firms may emphasize profit-sharing or equity. These variations make selecting relevant competitors essential for reliable benchmarking across consulting segments.

Why Selecting the Right Competitors is Essential

Choosing the right competitors allows firms to create benchmarks that align with their unique demands and operational scope. This process involves four key considerations:

1. Ensuring Industry Relevance and Specificity: Given the segmentation within consulting, each firm may operate in a distinct practice area or sector, such as healthcare, technology, or sustainability consulting. Selecting competitors within the same niche ensures salary benchmarks reflect the unique demands and compensation patterns of that specific consulting area. For instance, a technology-focused firm should benchmark against other technology consultants rather than financial advisors.
2. Matching Client Scope and Project Complexity: Selecting competitors of similar scale and complexity allows for compensation comparisons that reflect the firm’s workload, client sophistication, and employee expertise. For example, comparing a boutique consulting firm to a large, global consultancy may skew results. Instead, a boutique firm might benchmark against other regionally focused or similarly scaled consulting firms.
3. Influences Employer Brand and Talent Attraction: Benchmarking against respected industry leaders or firms known for competitive pay can enhance a company’s reputation, making it more attractive to top talent. Peer selection directly impacts how prospective employees perceive a firm’s compensation practices.
4. Promotes Retention by Offering Competitive Packages: Benchmarking with relevant peers also aids in employee retention, ensuring that pay and benefits align with industry standards. Employees who feel fairly compensated relative to the market are less likely to leave, helping reduce turnover and its associated costs.

Vencon Research’s Approach to Selecting the Right Competitors

At Vencon Research, we recognize that effective salary benchmarking starts with carefully selecting the right competitor group. This goes beyond simply selecting firms within the same industry, rather this needs to be aligned with the firm’s position in the talent market, its hiring needs, and retention goals. To this end, we ask three important questions to guide the peer selection process.

1. Which firms are you competing with in the market?

This first question identifies the direct market competitors—firms operating in the same or similar lines of business, often targeting the same client base or market segment. Benchmarking against these firms provides insight into how competitors compensate roles that are crucial to maintaining a competitive edge in the industry.

2. Which firms are you / might you be losing people to?

Understanding where an organization’s employees are going when they leave can be highly revealing. By selecting competitors who frequently attract departing employees, we gain insight into what might be drawing talent away. This allows Vencon Research’s clients to adjust their compensation packages, benefits, or career progression opportunities to improve retention.

3. From which firms do you / might you hire people?

This question focuses on the talent pipeline. Knowing where new hires are likely to come from helps Vencon Research tailor peer selection to ensure salaries are attractive to candidates coming from specific backgrounds. Benchmarking against firms that are common sources of talent enables organizations to position themselves as an appealing next step for potential hires.

Aligned Compensation Strategies

Vencon Research’s approach to competitor selection through these three questions provides a 360-degree view of the talent landscape. By understanding not only who the immediate competitors are but also who attracts or supplies talent to the organization, Vencon Research enables clients to build compensation strategies that are highly aligned with their market position and talent needs.

This comprehensive approach to peer selection is central to Vencon Research’s commitment to providing clients with compensation benchmarks that are not only accurate but also strategically aligned with business and talent goals.

Consultant Salary Survey: 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.

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 Philip Thomas - Advisory

Benchmarking for partners in the consulting industry is crucial as it ensures that their compensation aligns with their unique leadership roles, individual contributions, and the overall strategic success of the firm, acknowledging the distinct and multifaceted nature of partner responsibilities; however, the inherent complexity often makes partner surveys less common compared to their more standardized consultant counterparts.

Unique requirements for benchmarking partners

Robust and meaningful partner compensation benchmarking surveys require significant amounts of work and inevitably entail a large number of complex variables, encompassing various forms of current and deferred income, while taking account of individual performance metrics, market dynamics, tenure, and specific contributions to the partnership.

Broadly speaking, accuracy in view of all these considerations rests on three key pillars:

• Job Matching
• Total Income
• Firm Selection

While each of these can be considered a separate discipline or area of expertise, similarities lie in a shared requirement for solid logical foundations, deep knowledge of and experience with the market, and defined and appropriate methodologies.

Should any one of the three pillars fail, the resultant compensation report would not be robust or meaningful.

Let’s take a look at the three key pillars in more detail:

Job Matching

Generally speaking, the more value that a partner adds to their firm the more income that they can expect in return.

It is therefore essential to understand the value added to a firm in order to job match appropriately.

Vencon Research’s approach utilises a generic framework to match client levels to other directly comparable levels in the market. Comparability is determined based on detailed consideration of a variety of relevant information (as applicable) including but not limited to:

• Job titles
• Job descriptions
• Defined roles and responsibilities
• Function, industry, service line and practice responsibility
• Geographical responsibility
• Sales revenue generation
• Deliver revenue responsibility
• Managed revenue responsibility
• Span of control
• Utilisation rates
• Strategic involvement

Total Income

Firms often take very different strategic approaches with respect to the types and sizes of remuneration components that they offer their partners. Firm structure dictates to an extent what is or is not possible, however, even between firms of comparable structure we often see bespoke and unique approaches.

It is therefore crucial to gain deep understanding of the ins and outs of each firm’s remuneration package in order to be able to determine the correct income data. Along with the raw income data, Vencon gathers extensive information about firm structure, remuneration packages and the individual components.

In simple terms, Vencon Research’s approach ensures:

• Inclusion of all income that should be included.
• Exclusion of any income that shouldn’t be included.
• That any included income is included in a like-for-like manner.

Firm Selection

Benchmarking surveys compare one data set (client data) to a market data set based on a selected list of relevant competitors. If the market data was based on an unspecified list, it would not be possible for the client to make sound judgements or decide upon the right corrective action.

Given the highly sensitive nature of partner data, Vencon Research’s Partner Compensation reports are anonymous, i.e. the market firms are not named. However, key criteria about each firm is provided so that clients are able to make suitably informed decisions and select appropriate competitors.

In brief, while ensuring each participating firm’s anonymity, Vencon Research indicates the following for each selectable market firm:

·         Firm Type (original firm focus, e.g. Operations-based or Pure Strategy)

·         Firm size in terms of firm revenue

·         Firm size in terms of number of Consultants

·         Revenue per Consultant

·         International presence (countries located in)

·         Scope of different industries served

·         Scope of services/functions offered

Vencon Research’s detailed and committed approach to data gathering, data analysis, data clarification and data management ensures that the three key pillars stay standing which in turn results in robust and meaningful Partner Compensation Benchmarking Surveys.

For further information on our Partner, or other benchmarking surveys, visit our website, or get in touch to arrange a consultation.

By: Gonzalo André Lavin Alfaro – Business Development Associate

The persistent issue of hyperinflation and currency devaluation in many countries has led consulting companies to adopt new strategies to retain their talent and remain competitive.

Here, we briefly cover various measures taken by leading management consulting firms to alleviate the pressures faced by their employees, including regular increases in base salaries and bonuses, one-off payments adjusted for inflation, and the option of pegging salaries to another currency.

Over the past year, Vencon Research has launched Pulse Surveys in heavily affected countries such as Argentina and Turkey to explore the actions taken by leading management consulting firms in response to the challenges of managing compensation in times of hyperinflation. Our analysis of the resulting data revealed that several responses were commonly considered by participating firms:

· The most common approach was to regularly (often quarterly or even monthly) review and increase Base Salary in order to align income with a depreciating currency.

· This was followed by regularly (again, often quarterly or even monthly) increasing bonuses and/or other variable income.

· Other firms opted to offer "one-off" payments adjusted for inflation. These seem to be offered semi-annually.

· It is noteworthy to mention that only a few firms considered pegging salaries to another currency with an equivalent value, such as the US dollar, to be an acceptable alternative. This option was most commonly considered by large, internationally-based, pure strategy firms. Nonetheless, given that there is little expectation of significant improvement in the short term in many of the countries mentioned, this may be an option that is considered more widely in the near future.

Summaries of our inflation-related surveys for Argentina and Turkey are available on our website here:

Argentina

‍Turkey

Should you want to us to present and further discuss our findings and/or want us to assist you with a review of your strategies to deal with hyperinflation, please do not hesitate to reach out to me at Vencon Research.

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By Yao Tang – Business Development

In the world of consulting, staying competitive means possessing the necessary skills to offer innovative and effective solutions to clients’ problems. These competencies, often referred to as “hot skills”, are continually evolving, with new skills consistently taking centre stage.

Hot skills can vary over time as technology and industry trends change, but they typically represent expertise in areas that are currently experiencing rapid growth, innovation, or a shortage of qualified professionals. Current examples include machine learning, cloud computing, blockchain, cybersecurity, and specific programming languages such as Python, Ruby, JavaScript and others. Hot skills can also extend beyond technical skills and include skills related to management consulting, strategy development, industry-specific knowledge, and more - depending on the specific focus of the consulting firm and the needs of their client base.

Consulting firms seek professionals with these skills because they are essential for delivering services to clients looking to adopt or optimize new technologies or approaches in their business operations.

Hot skill-based compensation

In order to attract and retain professionals with these in-demand skills, consulting firms often find they need to adjust their compensation and talent acquisition strategies. Doing so, they are seeking to address a number of issues:

1. Skill Shortages: Paying a premium for hot skills attracts professionals possessing these skills, combating skill shortages in particular areas.
2. Competition for Talent: Offering competitive compensation for hot skills sets the firm apart in the competitive talent market, making it more appealing to top candidates.
3. Client Demands: Hot skills enable consultants to meet clients' evolving needs efficiently and with expertise, enhancing client satisfaction and trust.
4. Retention and Motivation: Paying a premium motivates employees to acquire and maintain hot skills, reducing turnover and preserving institutional knowledge.
5. Market Rate Alignment: Aligning salaries with market rates ensures the firm can secure and retain skilled professionals, staying competitive in talent acquisition.
6. Efficiency and Effectiveness: Hot skills lead to more efficient project execution and higher-quality outcomes, enhancing the firm's effectiveness in delivering value to clients.
7. Strategic Business Goals: Investing in hot skills aligns the firm's workforce with its strategic objectives, enabling it to tackle specialized projects effectively.
8. Talent Pipeline: Attracting individuals with hot skills helps build a talent pipeline of skilled professionals ready to contribute to ongoing and future projects.
9. Client Trust: Demonstrating expertise in hot skills instils confidence in clients, fostering trust and long-term relationships based on the firm's ability to deliver on their needs.

While an increase in compensation is the obvious way to attract and retain candidates with particular hot skills, exactly how such adjustments are introduced and managed may vary from one firm to another.

Our market analysis reveals three main approaches to hot skill compensation among consulting and IT firms:

Group 1:

Firms offering broad salary bands that encompass higher pay for a particular hot skill.

This is the largest group among the firms we looked at or spoke to in our analysis. The adjustment is reflected in a wider, albeit existing, salary range for the position in question.

As such the adjusted hot skill-based salary does not necessitate a change in the salary ranges being offered by the firm because the hot skill premium is within the existing salary range; it only increases the average salaries being paid.

Interestingly, the majority of this group of firms offered their hot skills-based employees a fixed increase in salary. Should the skill go from hot to “vanilla”, i.e. no longer cutting edge or exceptional, or if the employee were not working on a project requiring this hot skill, their salary was not adjusted (i.e. downwards).

Group 2:

Firms paying or adjusting salaries only for the hot skill in question.

In this model, only employees with the respective hot skill are offered a higher salary – outside of the firm’s existing salary range.

Again, the majority of this group of firms offered their hot skills-based employees a fixed increase in salary. Should the skill go from hot to “vanilla”, or if the employee were not working on a project requiring this hot skill, their salary was not adjusted (i.e. downwards).

Group 3:

Firms that pay a hot skills bonus or additional component.

This group offers an additional bonus or salary component to employees who can demonstrate that they possess a desired skill (e.g. via a certificate or diploma or otherwise). This additional income functions in a similar way to a bonus and can be discounted should the hot skill become “vanilla”, or as in the case of some firms, when the employee is not working a case or project that requires the hot skill in question.

The cooling effect

As our clients have frequently noted, the hot skill of today may become vanilla tomorrow. This is why the strategy of Group 3 is often the most efficient from a firm perspective. It is clear that HR managers at consulting firms may not be able to hire the talent they require without offering the premium required by the market. However, with this approach the skill is paid for only when it is in use.

It is up to firms to decide which approach is best suited to their business and perform a balanced assessment of the effects of each approach on their goals, considering firm competitiveness, profitability, talent acquisition and retention.

In our forthcoming article, we will further explore the intriguing relationship between hot skills and their influence on consultant compensation, delving into the finer details of how these hot skills are factored into our benchmarking assessments here at Vencon Research.

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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By Yao Tang - Business Development

In the wake of the widely discussed "great resignation" phenomenon in the United States, a similar trend, albeit less dramatic, has been observed among our clients in Australia. In the course of discussions with HR professionals we’ve heard one theme repeat itself:

Despite not experiencing an extraordinary surge in resignations, there's a palpable sense of burnout, characterized by extreme fatigue and mental exhaustion, among workers, which has resulted in decreased productivity, increased absenteeism, and resistance towards returning to the office post-COVID-19.

To delve deeper into this concerning trend, researchers from The University of Melbourne conducted a comprehensive study in 2022. Surveying 1,400 employed Australians, the study aimed to assess their well-being and work experiences two years after the onset of the pandemic. Regrettably, the findings paint a less-than-ideal picture, emphasizing the widespread symptoms of burnout among workers.

The Burnout Landscape in Australia and Beyond

Burnout is not exclusive to Australia; it's a global concern with serious implications for individuals' health, well-being, and productivity. The consulting industry, a historically demanding sector worldwide, is not immune to this challenge. Several factors contribute to burnout in this industry:

• High Workload: Consultants often grapple with demanding client projects, tight deadlines, and extended working hours, creating an intense pressure to deliver results.
• Travel Requirements: Frequent travel, a common aspect of some consulting roles, leads to physical and emotional exhaustion, posing challenges for those spending extended periods away from home and family.
• Client Expectations: The industry places high expectations on consultants to meet client demands and deliver valuable insights. Balancing these expectations with personal well-being is an ongoing challenge.
• Variability in Workload: Consulting work is inherently cyclical, with periods of intense activity followed by relative calm. This variability can result in irregular working hours and heightened stress.
• Project-Based Nature: Constant adaptation to new teams and clients, a characteristic of project-based work, can be mentally taxing for consultants.
• Remote Work Challenges: The shift towards more remote work and virtual engagements due to the COVID-19 pandemic introduces new challenges related to work-life balance and feelings of isolation.

Addressing Burnout: Solutions for Individuals and Organizations

In the Australian context the issue has been recognised by government, which has implemented various mental health initiatives and programs to address burnout and improve access to mental health care. However, consulting firms, being on the frontline of this issue, shouldn’t wait for government solutions.

Tackling burnout requires a collective effort from both individuals and organizations. Individuals are encouraged to prioritize self-care, set boundaries, manage stress, and seek support when needed. Organizations, on the other hand, play a pivotal role in promoting a healthy work environment. This includes encouraging breaks, offering flexible work arrangements, and providing mental health resources and support.

Concrete steps include:

• Workload Management: Firms can assess and manage consultants' workloads to prevent overburdening. This might involve adjusting project assignments and schedules.
• Mentorship and Support: Provide mentorship and support systems for junior consultants, helping them navigate the challenges of the industry and manage stress.
• Flexible Work Arrangements: Offer flexible work arrangements, including remote work options, to help consultants achieve a better work-life balance.
• Training and Resources: Provide training on stress management, resilience, and mental health awareness. Offer access to mental health resources and counselling services.
• Regular Feedback: Encourage regular feedback between consultants and their managers to address concerns and identify early signs of burnout.
• Promote a Healthy Culture: Foster a culture that values work-life balance, self-care, and well-being. Lead by example from the top down.
• Diverse Project Assignments: Rotate consultants through different types of projects to keep work engaging and prevent monotony.
• Mental health awareness: This should be a priority for employers and society at large, with ongoing efforts to reduce stigma and encourage open conversations about burnout. Employee Assistance Programs (EAPs) can offer confidential counselling and support services to those experiencing stress and burnout.

It's worth noting that addressing burnout is not only the responsibility of consulting firms but also requires individual consultants to take proactive steps to manage their well-being and communicate their needs effectively.

Burnout in the consulting industry can be a complex issue, but with awareness and proactive measures, it is possible to mitigate its impact and promote a healthier work environment. Nevertheless, as we saw with our Australian contacts in the HR departments of consulting firms, it was their awareness, identification and concern to address the issue that lead to launching effective mitigation programmes and improvements for all concerned.

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Tailored Collaboration for Success

Vencon Research is your collaborative partner in navigating the complexities of HR management in the consulting industry. Our bespoke recommendations are crafted with your unique needs in mind, ensuring local relevance and global consistency. Contact Vencon Research today to discover HR solutions for your company's success in the global consulting arena.

References

Leah, R., Brendan, C., &David, B. (2023, March 19). The 'great resignation' didn't happen in Australia, but the 'great burnout' did. Find an Expert.unimelb.edu.au. https://findanexpert.unimelb.edu.au/news/63392-the-'great-resignation'-didn't-happen-in-australia--but-the-'great-burnout'-did

Sarah, S. (2023, April 14). The Great Burnout: Exhausted Aussie workers forced into ‘quiet quitting’ and resignations. News.com.au. https://www.news.com.au/finance/work/at-work/the-great-burnout-exhausted-aussie-workers-forced-into-quiet-quitting-and-resignations/news-story/21a83bd5cd14458306469423f10d4585

Steve, H, Tim, C., &Mackenzi, G. (2023, May 4). Seven strategies to avoid employee burnout Prioritizing employee well-being in the workplace. Deloitte. Com https://www2.deloitte.com/us/en/blog/human-capital-blog/2023/how-to-avoid-employee-burnout.html