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By Gonzalo Lavín Alfaro - Business Development

Evaluating the "new normal"

Factors such as the COVID-19 pandemic, technological advancements, and evolving work dynamics have ushered in a new era of flexibility, leading to a rapid surge in remote work. This paradigm shift has not only redefined our work practices but has also presented several advantages for both employees and employers. However, it is crucial to retain a reserved approach to evaluating remote work while identifying the trends that have emerged since its widespread adoption and implications for human resources managers worldwide.

What was once considered unimaginable a few years ago is now commonly referred to as the "new normal", especially in sectors where office work predominates. And by now, we are all familiar with the benefits commonly associated with remote work, including:

1. Enhanced employee well-being: Reduced commute times translate into decreased stress levels, improved mental well-being, and lower transportation costs.

2. Optimal utilization of office space: Remote work diminishes the need for extensive office space, leading to cost savings for organizations.

3. Promoting sustainability: With no commuting involved, there is a reduction in vehicle usage and subsequent pollution.

Challenges and debates around remote work

Despite the well-publicized advantages, remote work also poses certain challenges. Potential drawbacks include isolation and reduced social interaction, which can impact mental health. Moreover, while arguments extolling the productivity gains of remote work abound, there are also serious voices that claim the exact opposite. While these are often dismissed as reactionary management positions, they deserve equal consideration.

The rise of remote work has also given rise to other challenges, particularly in relation to location flexibility. Some individuals now work remotely from different cities, regions, or even countries. In such cases, questions arise regarding fair compensation for those residing in lower-cost areas, as well as concerns related to insurance and taxation.

An evolving landscape: keeping abreast of developments is crucial

Over time, work-from-home policies have undergone further evolution. During and directly after the pandemic, the proportion of companies offering full-time remote work exceeded 90% in applicable sectors. However, more recently, some companies have begun reverting to traditional in-office work to address the aforementioned issues. According to Vencon Research surveys, it is common to see consulting companies offering employees 1 to 3 days of remote work, representing the majority of responses. While some firms in certain industries like IT and technology continue to offer 100% remote work, the overall trend has shifted towards a hybrid work model.

As firms worldwide continue to consider the efficiency and balance offered by different work models, remote work will remain an evolving and important aspect of human resources management. To further discuss our findings on trends in your industry or to seek our assistance in benchmarking your remote work policies, please don't hesitate to get in touch.

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by Andy Klose, Associate Partner and Advisory Team Lead

In the dynamic consulting industry, performance metrics and compensation packages for C-Suite executives are invariably a central topic of discussion. Recent debate has raised concerns about the potential short-term focus of these metrics, which may hinder the long-term development of consulting firms.

This article provides an overview of current practices surrounding C-Suite Key Performance Indicators (KPIs) and compensation in the consulting industry, while also exploring the evolving notion of stakeholder engagement and the need for a balanced approach. The insights presented here are based on an anonymous survey conducted by Vencon Research International among leading consulting firms.

Aligning Goals for Long-Term Success

Consulting firms adopt diverse approaches to structuring their C-Suite positions. In our survey, fewer than expected firms reported a fully dedicated C-Suite, while many firms implemented structures where their C-Suite members are at least partially involved in project related or client-facing work. Most firms offer between 4 and 5 C-Suite positions, often following a functional breakdown that includes CEO, CFO, COO, CHRO, CTO, and CLO. This breakdown aligns with the traditional focus on key stakeholders such as clients, firms, owners/partners, and employees.

Balancing Short-Term and Long-Term Goals

A key concern highlighted by the survey is the potential short-term orientation of C-Suite performance metrics. While most firms maintain a focus on traditional stakeholder groups, only a few have formally incorporated broader societal and environmental goals. It is essential for consulting companies to strike a balance between short-term quantitative goals and long-term qualitative objectives. By doing so, they can achieve sustainable growth and promote the well-being of their stakeholders.

Setting Long-Term Goals

The majority of consulting firms have embraced longer-term goals for their C-Suite, typically spanning a 3-5 years horizon with annual milestones. These goals primarily revolve around achieving growth and improving profit margins. The use of compounding multi-year averages has been suggested as a means to encourage consistent performance and mitigate the impact of short-term fluctuations.

Tailoring Goals for Success

While aligning goals across the C-Suite is common practice at most firms, some firms intentionally differentiate goals for individual members. This approach fosters lively discussions and progress, allowing each function to be managed using the most appropriate and impactful metrics. However, effective cross-management by the CEO is vital in implementing this strategy.

Linking Performance to Compensation

In the consulting industry, the link between goal achievement and C-Suite compensation is strong, with a majority of firms implementing models that correlate the two. Also, most firms apply minimum thresholds that impact compensation, ensuring that executives meet certain performance criteria. However, the quite regular use of caps on variable pay has been debated, with alternative methods suggested to manage performance peaks.

Navigating Challenges

While most firms reported being well or fully aligned with their company's strategic goals, more than half acknowledged challenges in defining a long-term orientation and evaluating progress. To address these issues, Vencon recommends setting clear, measurable, and comparable goals that consider both past performance and future aspirations. Transparency and control in the evaluation process are critical in ensuring fair compensation and encouraging continued growth.

Conclusion

The consulting industry recognizes the importance of balancing short-term performance with long-term development. By implementing effective performance metrics and aligning goals with strategic plans, consulting firms can drive sustainable growth while promoting the well-being of their stakeholders. The deliberate differentiation of goals for C-Suite members and the use of compounding multi-year averages contribute to enhanced performance and discussions. As the industry evolves, a comprehensive and balanced approach to setting KPIs and compensating C-Suite executives will be crucial for long-term success.

We would be happy to assist your company in defining the compensation components for your company’s C-suite, as well as the dimensions and correlations that determine pay-out of compensation (e.g., bonus) based on target achievement. Please contact our Advisory Team for more information.

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By Gonzalo Lavín Alfaro - Business Development Team

Belgium’s consulting industry is facing severe challenges as a result of the government's policy of annually adjusting wages based on the inflation index.

The Belgian government enacts a wage adjustment policy each January based on an index of inflation for a specific group of employees to ensure they maintain their purchasing power. However, this cost is passed on to firms, resulting in reduced profitability.

Up to now, consulting firms have been able to offset this cost increase with increased productivity. According to one client in the consulting industry, "when salary costs increase by less than 5%, a similar increase in productivity was normally achievable."

However, the required wage adjustment in January 2023 of 11.08% poses a steep challenge. While some firms have attempted to increase their rates and pass on the cost to clients, many clients are unwilling to accept higher rates and are instead requesting discounts or fewer charged days due to the current economic climate.

In response, firms are considering other measures to address these challenges. One idea is to adjust target bonuses, particularly for workers in higher seniority levels. This would help firms manage costs while maintaining competitiveness but still rewarding lower level employees for their performance.  Another more radical idea, albeit not uncommon in the Belgian market already, is to expand the usage of external contractors as consultants, allowing firms to avoid certain types of taxes and giving them more flexibility in managing their workforce. While this approach may have benefits for firms, it could also have implications for workers, such as reduced job security and fewer benefits.

Should you want to discuss the ideas being considered by your competitors or how you may successfully respond to these challenges, please contact Vencon Research – as always, we are happy to assist you.

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