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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.

By Andy Klose - Associate Partner

The rise of remote work after the COVID-19 pandemic has led to discussions among consulting firms about how to adjust pay for remote employees. This article explores the complexities of compensation strategies for remote work, including different pay models, remote work policies, and long-term perspectives within the consulting industry.

Exploring Pay Strategies

The question of whether consulting companies employ different pay strategies for their remote employees is a common one. To address this, we must first consider the various pay strategies employed by consulting firms (there are other as well as hybrid strategies in place):

1. Employee location-based pay: In this approach, companies adjust salaries based on the cost of living in the employee’s location (which often applies also to remote employees). This ensures equitable compensation, with higher salaries in high-cost areas such as San Francisco.
2. Office location-based pay: Some companies base employee salaries on the location of their offices, considering the local cost of labour which is not only driven by cost of living but also by talent supply and demand.
3. Country-based Pay: Another strategy is to set salaries based on a national average or maintain consistent pay across all locations in the country. While straightforward to implement and to maintain consistency across the organization, this approach may not account for regional cost-of-living differences.

Given these pay strategies, companies with employee location-based pay strategies are less likely to differentiate pay for remote employees. Conversely, those with office location-based or country-based pay strategies may be more inclined to do so.

Remote Work Policies

Furthermore, the diversity of remote work policies further complicates the issue (there are other as well as hybrid policies in place):

1. Fully remote: Some companies allow employees to work entirely remotely.
2. Hybrid remote: Many companies offer a blend, where employees work remotely part-time and attend office meetings or collaborations as needed.
3. Remote-friendly: Others permit remote work on an as-needed basis or with managerial approval.

Therefore, companies that have fully remote or hybrid remote work policies are less likely to differentiate pay for remote employees. This means that companies with remote-friendly policies seem to be more likely to consider different pay to their remote employees.

Long-Term View on Remote Work Policies

Additionally, consulting companies’ long-term view on remote work policies vary:

1. For remote work: Advocating for remote work indefinitely, some firms commit to embracing its advantages.
2. Against remote work: Conversely, other companies aim to return to pre-pandemic office norms, underscoring e.g. the value of in-person interactions.
3. Undecided: Certain companies are struggling with the decision of whether to continue remote work or return to the office. They recognize the challenges of reversing current remote work trends or are unsure about the potential benefits, such as increased efficiency.

Only firms in the first category, which are for remote work, are likely to consider pay differences for their remote employees. The other two groups are less likely to do so due to a possible transition.

Conclusion

All in all, most consulting companies remain hesitant to implement different pay strategies for their remote employees due to strategic and ethical considerations:

1. Strategic considerations: Companies typically choose office locations strategically, independent of individual employee locations, to achieve business metrics like revenue and margin. Thus, business outcomes remain unaffected by remote work. For example: A consulting company will charge the same billing rate to a bank in Manhattan regardless whether the consultant will be working in the New York office or remotely.
2. Misusing financial leverage: Paying remote employees less could be seen as an attempt to force them to return to the office. Transparent communication about the reasons for this request would be more effective.
3. Efficiency evidence: There is little or conflicting evidence (depending on the sources) that a full return to the office improves long-term employee efficiency.

In summary, creating suitable payment strategies for remote work requires thoughtful consideration and customised solutions. If you and your team require assistance, we are ready to provide support and expertise. Our aim is to ensure that your compensation approach aligns with your organisational goals while promoting fairness, engagement, employee satisfaction, and productivity.

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.

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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 Philip Thomas - Advisory

The answer could very well depend on who you ask.

With a number of major and mid-size consulting firms recently electing to evolve from traditional partnerships into corporations, debates on the pros and cons of such a move abound. The switch to corporate structure is seen as controversial, if not ill-advised, by many, yet touted as a path to significant growth and shared success by others.

Firms which continue to employ the partnership model will undoubtedly have keen eyes on how firms undertaking the transition develop, while some may even be persuaded into rethinking their own structures.

Below, we take a look at some of the major pros and cons for consulting firms considering the switch to corporation from a traditional partnership.

What are the potential benefits of changing from a traditional partnership to a corporation?

A change to a corporation could stand to benefit a firm, existing partners, entire workforces and future employees in a variety of ways including:

For the firm:

• Tax advantages.
• Possibility of additional capital for investments in growth and other investments, e.g. in Know-How.
• Additional financial flexibility.
• Efficient governance, e.g. allowing leaders to make difficult proactive decisions that otherwise may previously have been held off by the partner collective.
• Attractive means of enticing elite talent to join.
• A chance to realign retirement funding.

For the existing partners:

• Cashing in now, i.e. by selling portions of shares (especially advantageous for the more senior partners).
• Retaining influence.
• Reduction in legal requirements and administration.
• Preservation of limited legal liability.

For the entire workforce including future employees:

• Everyone has the chance to benefit from the firm’s success.
• The best talent will be in a position to benefit early.
• Working together under a ‘one company’ philosophy.

What are the potential drawbacks of changing from a traditional partnership to a corporation?

The prospect of changing from a traditional partnership to a corporation introduces of number of potential drawbacks, including:

• The risks of changing an already advantageous situation. Proven performance, continued growth and the longevity of the traditional partnerships should not be undervalued.
• Losing one of the key drivers of success, that being the enviable partner pay that results from equity-owned or profit-sharing.
• Adding new complexities and fear into the mix. Significant change itself is understandably daunting and often goes hand in hand with doubt and infighting. Not all people and groups deal with change well.
• Dropping a culture and mindset that may be desired by the current workforce. Many of those at the traditional partnerships chose to be there with reasonable knowledge of the existing structure. They may well not wish to work under an alternative structure.
• If the firm goes public, there will be a subsequent increase in administration.

There are also legitimate concerns around the opportunities for additional capital

Additional borrowing or private equity investment are not strictly speaking necessary in order to change to a corporation, however more often than not the opportunity to do so is a driving factor in the move. While the benefits of extra capital are easily deduced, the process can also bring detrimental effects. The concerns here are as follows:

For the taking on of debt:

• Taking on debt is, by its nature, almost always a controversial and divisive topic that may lead to fierce debate among stakeholders.
• Owed money must be paid by the firm (and therefore effectively by employees) at some point.
• Perceptions that existing partners, especially the most senior, are set to cash while other staff are left out.
• May create some level of suspicion and distrust within the firm.
• The firm’s next leadership teams could well feel hard done by leading to high attrition.

For a private equity investment:

• Relinquishing full control of the firm’s strategic direction.
• A period of difficult transition that may lead to dissatisfaction among employees.
• Uncertainty over whether the investors are the right group for the firm in the long-term.
• Financial implications of the new model for the existing workforce.

Time will tell

The change to a corporation could be the catalyst that some firms need in order to step-up and begin to significantly disrupt the status quo in their respective markets. The move is forward thinking, proactive rather than reactive, and bold. It could also find itself aligning neatly with the motivations, ethics and culture of the new generations of workforce.

However, there are clearly legitimate concerns and potential drawbacks that need to be appreciated and taken into consideration. These worries are only heightened when the burden of significant debt is part of the package.

With the pioneers of this transition still at the beginning of their new journey, a final verdict on the overall benefits of a change from a traditional partnership to a corporation will take time to reach. In the meantime, competitors will be keenly watching to see whether recent examples light the way or serve as a warning.

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 Jalol Khodjaev - Senior Consultant
and Osas Ohenhen - Associate Business Development

Key highlights

The global mergers and acquisitions (M&A) market slowed in 2022 with a 35% drop in transaction values. In this context a significant number of management consulting firms providing M&A services as well as pure M&A advisory firms (hereafter together referred to as "M&A consulting firms") experienced negative financial impacts.

Despite declining revenues, M&A consulting firms were cautious in making immediate adjustments to employee compensation. The surveyed firms made minimal to moderate changes to base pay, with variable pay adjustments fluctuating among firms, mostly due to differences in bonus structures. Adjustments to additional benefits (i.e. equity-related pay, allowances, pension plan, non-cash benefits) were minimal.

In 2023, M&A consulting firms may encounter difficulties in attaining well-balanced compensation for their workforce, as the market remains uncertain due to global recession fears and rising interest rates.

Less than half of the M&A consulting firms surveyed plan to raise base pay for employees, while the remaining firms have no intention to implement changes here.

Most firms will keep performance-based bonuses (Bonus 1) unchanged in 2023. About one-third of firms have no plans to change firm-based bonuses (Bonus 2), while the remaining firms appear uncertain about future actions regarding this bonus. Only few firms intend to increase Bonus 3, which derives from the M&A team’s bonus pool.

A majority of firms (over 70%) maintained existing allowances and pension plans, while a small percentage introduced equity-pay (less than 10%) and non-cash benefits (less than 20%) to their compensation plans.

Introduction

Global M&A activity declined in late 2022 due to economic and financing hurdles, such as inflation, higher interest rates, reduced leveraged finance, bond-market concerns, and the potential for a recession.

Vencon Research reached out to M&A consulting firms operating in Western and Central Europe to understand the impact of the economic and financial downturn on their businesses and, potentially, on their workforce and compensation.

In this article, we will explore the survey’s findings, gaining insights into the approaches M&A consulting firms employed to mitigate the repercussions of challenging market conditions on the workforce. 

Global M&A activities slowed substantially in the second half of 2022

The total value of M&A transactions globally fell 35% in 2022 from 2021’s record high, to USD 3,390 billion (refer to Graph 1.). That is the biggest year-over-year percentage drop since 2001, a year when the U.S. economy slid into a recession and the value of global transactions plunged approximately 50%, to USD 1, 866 billion.

The outlook for 2023 still remains clouded for global M&A business due to global recession fears and rising interest rates as national central banks try to curb the inflation in many regions. The estimated year-end transaction volume for 2023 is USD 2,153 billion, which would be 37% lower than the 2022 values.

Market conditions had varying impact on M&A

Vencon Research’s survey results showed that market conditions have had varying impact on the M&A business of M&A consulting firms. A significant number of firms (> 60%) experienced a slightly negative impact, while a small portion (<10%) reported a very negative impact. Interestingly, the firms involved in transactions ranging between €5 to €25 million and €25 to €100 million were the ones that experienced the highest proportion of negative impacts. Roughly a quarter of the firms reported experiencing insignificant impact.

The majority of participants witnessed a decline in the demand for their M&A services. Furthermore, nearly half of the firms reported a decrease in the number of M&A deals and transactions, while approximately one-third of the firms experienced a decline in their overall M&A revenue. None of the firms reported an increase in their M&A revenue.

Graph 1. Value and number of global M&A transactions [1]

M&A consulting firms cautious in adjusting workforce compensation

Retaining top-performers, ensuring financial well-being of employees, as well as maintaining attractiveness for young talent during such economic and financial turmoil was a pressing challenge for M&A consulting firms, as they were forced to make significant cuts in expenses to minimize the negative impact on the overall health of their businesses. Potentially this included adjustments to employee compensation. As such cuts could lead to growing resentment among employees and a high turnover rate, many M&A consulting firms were rather cautious and selective when making compensation adjustments. 

Adjustments to base pay (fixed salary)

Less than half of the M&A consulting firms surveyed implemented a moderate increase in base pay for their entry to mid-level employees[2], with only a small percentage (<10%) opting for significant raises at this level. At approximately one-third of the firms, senior employees[3] experienced a moderate rise in their base pay. None of the surveyed firms opted to reduce base pay.

However, a considerable number of M&A consulting firms (around 70%) chose not to make any changes to base pay for senior employees, whereas nearly half of the firms applied a similar approach with respect to base pay for entry to mid-level employees. It can be inferred that these firms viewed unstable financial and market conditions as a temporary phenomenon. Consequently, they approached base pay adjustments with caution, recognizing that once implemented, these changes may be challenging to reverse when the situation stabilizes and returns to its previous levels.

Adjustments to variable pay (bonuses)

The survey findings revealed that M&A consulting firms had diverse variable pay/bonus structures. Therefore the adjustments made to this compensation component varied.

For the purpose of this research and for effective comparison, we have defined three types of variable pay/bonus:

Bonus 1 (also known as personal or individual bonus): This refers to a financial reward granted to an individual employee based on personal performance or contribution to the firm. It is typically independent of a bonus pool and is not directly linked to the overall performance of the firm or a specific business area. Such bonuses are awarded based on the achievement of personal KPIs.

Bonus 2 (also known as firm-performance or firm-based bonus): This type of bonus is awarded to an individual employee based on the financial success of the firm. It may be determined by factors such as profitability, revenue growth, or the attainment of other firm-wide metrics. The award can be a portion of a bonus pool allocated to employees or a percentage of the firm’s EBIT or similar financial indicators. The distribution of this bonus category may consider factors such as job role, career level, and other relevant considerations.

Bonus 3: This bonus category involves a share of the overall bonus pool or a separate/dedicated bonus pool specifically allocated to the M&A team. The size of the bonus pool, allocation, or similar factors is typically determined by various criteria, including the successful completion of M&A transactions, meeting or exceeding performance metrics of the M&A team, achieving targets or KPIs, and other relevant indicators.

Note: In pure M&A advisory firms Bonus 2 (firm-based bonus) and Bonus 3 (bonus allocated from bonus pool) are not considered as separate, but rather refer to the same concept.

Among the M&A consulting firms surveyed, Bonus 1 was frequently granted to entry to mid-level employees, while Bonus 3 was more commonly provided to senior employees. A majority of the firms offered a combination of bonuses to their M&A teams. Approximately 40% of the firms provided all three bonus components (Bonus 1, Bonus 2, and Bonus 3) to their senior employees, whereas only a quarter of the firms afforded the same offerings to entry to mid-level employees. Around 40% of the firms offered a combination of two bonuses (Bonus 1+Bonus 2, Bonus 1+Bonus 3, Bonus 2+Bonus 3) to employees in both groups. The remaining surveyed firms offered either Bonus 1 (over 15% - exclusively for entry to mid-level employees), or Bonus 2 (less than 10% - exclusively for senior employees), or Bonus 3 (less than 10% - offered to both groups).

In terms of adjustments to Bonus 1, most M&A consulting firms (above 70%) made no changes, despite the challenging economic and financial conditions. Only some firms (20%) moderately decreased Bonus 1 for senior-level employees. The remaining few firms either made moderate increases to Bonus 1 or implemented significant reductions to it.

As for Bonus 2, approximately half of the M&A consulting firms implemented a moderate decrease for entry to mid-level employees, while around 40% of the firms did the same for senior-level employees. One-third of the firms chose not to make any changes to Bonus 2 for entry to mid-level employees, while around 50% of the firms took a similar approach for senior employees. Less than one-fifth of the firms opted for a moderate increase in Bonus 2 for both groups. A significant portion of the surveyed firms made no changes to Bonus 2.

Finally, for Bonus 3, over half of the M&A consulting firms opted for a moderate decrease for entry to mid-level employees, while the remaining firms maintained the bonus at the same level. On the other hand, approximately 40% of the firms implemented moderate and/or significant decreases in Bonus 3 for senior employees, while the remaining firms made no changes to the bonus for the same level.

Adjustment to additional benefits (i.e. equity-related pay, allowances, pension plans)

Roughly half of the surveyed firms provide additional benefits, either separately or in combination, primarily for their senior employees. Across all surveyed M&A consulting firms, the adjustments made to equity and additional benefits were minimal in magnitude. This can be attributed, to some extent, to the fact that only a small number of companies included these additional benefits in their offerings to the workforce.

Outlook for 2023: expectations and future changes in compensation

The global M&A business outlook for 2023 remains uncertain due to fears of a global recession and rising interest rates introduced by central banks to curb inflation in many regions. This gloomy perspective is unfortunately maintained when looking at statistical data on 2023 M&A activity so far. A report from the GlobalData Insurance Intelligence Center reveals a significant decline of M&A deals by 44% to USD 413 billion in Q1 2023, down from $744 billion in Q1 2022. The year-end deal volume projected for 2023 is anticipated to reach USD 2,153 billion - a significant decrease of 37% compared to the figure recorded in 2022. This indicated that ensuring well-balanced compensation for the workforce may remain a pressing challenge for M&A consulting firms.

Vencon Research’s survey revealed that just under half of the M&A consulting firms intended to raise base pay for entry, mid-level and senior employees, while the remainder had no plans to adjust base pay at any level.

Despite the financial uncertainty, the majority of firms (over 60%) intended to keep performance-based bonuses (Bonus 1) unchanged in 2023.

As far as firm-based bonuses (Bonus 2), many M&A consulting firms (over 60%) did not provide a response. It appears challenging for them to accurately anticipate their firms’ performance in 2023. Nevertheless, about one-third of firms indicated no intention to make any changes to Bonus 2.

In terms of Bonus 3, which is allocated from an M&A team's bonus pool, few firms (<20%) reported an intention to increase it. However, the rest of the firms intended no changes or found it difficult to provide a definitive answer due to the prevailing uncertainties.

Regarding additional benefits, the majority of firms (over 70%) intended not to make any changes to allowances and pension plans, while the rest faced difficulties in providing a definitive answer. However, a small number of firms (less than 10%) introduced equity-pay, and non-cash benefits (less than 20%) as a new component in their compensation plans, while others either didn't offer these components, mentioned no changes, or didn't respond.

Vencon Research Advisory

Should you or your team seek further guidance on how your firm can adjust, or your competitors have adjusted, compensation strategies amid challenging market conditions, please reach out to us here at Vencon Research. We are, as always, eager to assist you and provide valuable insights.

Disclaimer

Please note that the survey insights are based on the analysis of a carefully chosen group of survey participants. Therefore, while the report may provide valuable insights, it is important to acknowledge that it may not offer a comprehensive representation of all M&A consulting firms. However, the information regarding compensation structures, including the bonus pool, remains highly relevant and can still provide valuable insights for a wide range of M&A consulting firms. 

Sources:

1.       The Institute for Mergers, Acquisitions and Alliances (IMAA), https://imaa-institute.org/mergers-and-acquisitions-statistics/

2.       GlobalData Insurance Intelligence Center, https://imaa-institute.org/mergers-and-acquisitions-statistics/

Notes:

[1] Data for 2023 is estimated

[2] Entry to mid-level employees (from Analyst to Manager levels)

[3] Senior employees (from Senior Manager to Partner/Managing Director)

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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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