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COVID-19 currently influences all of our lives and its constraints will have continued effects on the consulting industry, especially with regards to communication within firms and with clients and on how work for clients is delivered. Our survey’s results show operational changes are expected, as, for example, “working from home” has become and will continue to be an alternative “modus operandi”. All this is also expected to have a positive impact on the attractiveness of consulting as a job, especially with regards to the work-life-balance of consultants with families. At the same time, none of our survey’s respondents indicated reducing or planning to reduce consultants’ pay.

Starting in early 2020, the COVID-19 crisis has become a drastic influence on our lives. In the light of the potential economic, financial, and other impacts of this world-wide crisis Vencon Research initiated a “Pulse Survey” in September 2020 to gather information on how the consulting industry has reacted to the crisis. We were particularly interested in finding out if the measures taken and implemented by firms also had an effect on job descriptions and on remuneration, especially for client-facing staff. We furthermore wanted to find out whether these changes represented temporary solutions or a “paradigm shift” in how the consulting industry operates.

The key findings of the survey can be summarised as follows:

• Three-quarters of respondents reported “travelling” to have been a “normal” part of the existing job profile of their consultants / client-facing staff.
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• Meanwhile, all responding firms have largely eliminated the day-to-day travel typically required of their client-facing staff, for example for project delivery.
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• Many firms have furthermore significantly reduced face-to-face time spent with their clients.
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• All respondents had invested to ensure their client-facing staff can work efficiently from home.
• -In this respect, client data confidentiality and data security have come to the forefront and may be a matter that requires additional review and improvement.
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• Most respondents signalled a significant change in how their business was being conducted and delivered. For example:
• -Communication with clients was previously often completed face-to-face and has now been forcedly changed to being conducted primarily via online tools.
• -The delivery of client work would normally be completed on client premises or from the contracted firm’s office. Today instead, consulting work is often organised and completed from the consultant’s “home office”.
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• Clients seem to accept these changes in how consulting work is delivered.
• -However, during the feedback of the survey results, some clients mentioned that “selling on” into existing projects has become more difficult as a direct result of the lack of “face-to-face” time (i.e. coffee, lunch and dinner time) with key client representatives.
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• Almost 2/3rds of respondents were additionally considering operational changes, such as a reduction in office space.
• -During feedback discussions with respondents, a potential move of office space to less prominent (and less expensive) areas of the city, due to limited in-house client meetings and the introduction and use of working from home alternatives, was also mentioned.
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• The measures mentioned above have a radical influence on the work-life-balance generally offered by and associated with the consulting industry, whereby:
• -Close to 60% of respondents expect to see a positive impact on the intrinsic “attractiveness” of the consulting job.
• -Furthermore, more than half of respondents expect to be able to offer a better work-life balance to their client-facing staff, especially due to reduced travel requirements, working from home, etc.
• -They also expect to be able to more successfully hire and retain female consultants and thus anticipate an improved gender-split, especially at the more senior levels.
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• Most respondents expect these changes to be longer term, i.e. to continue to strongly influence the job of consulting even after the COVID-19 crisis and well into the future.
• -Interestingly, while discussing these results with clients, we also heard another point of view, namely that although reduced travel was seen as an attractive benefit for staff with families (mostly more senior), junior staff (i.e. those without families) actually complained about the lack of travel during COVID times. These anecdotal responses seem to confirm what 15% of respondents stated in the survey: due to the aforementioned changes, the job of consulting will become less attractive, especially for those more junior employees who actually like and prefer the travel aspect of the job.
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• Although a number of firms experienced a significant reduction in business and have put at least some of their consultants on furlough, none of the participants reported actually reducing remuneration. Neither the base salaries nor targeted bonuses of their client-facing staff were reduced, even when considering a potential change in the consultant job profile (for example due to less travel, more time at home or the like).
• -This result however does not reflect any potential short-term reductions in remuneration e.g. due to an introduction of furlough.
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• This is partly confirmed by our 2020 salary surveys which continue to show increases in the remuneration offered to consulting staff in many countries. These increases may however result from the timing of salary reviews as most firms had completed and in part already implemented changes in remuneration before the COVID crisis hit their markets.
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• Although increases in target remuneration were seen, unfortunately most firms will not be in the position to pay out the targeted bonuses in full in 2020 (or at a similar level as for 2019).

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.

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

Erwin Harbauer is a Partner at and co-founder of Vencon Research International.

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 Andy Klose - Associate Partner, Head of Advisory

Traditional single-track career and salary models often employ wide salary bands, which can lead to pay compression and employee dissatisfaction. In contrast, multi-track career and salary models offer a clear path for advancement and compensation, fostering motivation and transparency. This article explores the drawbacks of wide salary bands and the benefits of adopting multiple career tracks with defined salary increments.

The Problem with Wide Salary Bands

Wide salary bands within a single-track career model can create significant challenges for organizations and their employees. These bands are typically characterized by overlapping salary ranges that are often wider than the market average.

These wide salary bands can lead to several issues:

1. Pay compression and low pay hygiene: Wide salary bands result in pay compression, when salary increases over time do not adequately reflect differences in responsibilities, role, experience, or performance. This compression can cause high-performing employees to feel underappreciated and undervalued, leading to decreased motivation and loyalty. Moreover, the lack of clear pay hygiene — meaning transparent and fair salary structures — can result in dissatisfaction and disengagement.
2. Confusion and false expectations: The lack of clarity regarding pay increases and promotions often leads to confusion and false expectations. Employees may expect significant pay increases upon promotion, only to be disappointed by minimal adjustments. This can result in frustration and a sense of stagnation, particularly for high-performers who feel their efforts are not adequately recognized.
3. Sense of unfairness and demotivation: Employees may perceive the wide salary bands as unfair, especially if they see colleagues at the same career level (even if roles and performance may be different) earning significantly different salaries. This perception of unfairness can demotivate employees, reducing their productivity and commitment to the organization.
4. Lack of transparency and meritocracy: The single-track model frequently lacks transparency, as the pay grid is not shared with employees. This opacity allows for pay increases to be subject to discretion, leading to end-of-year negotiations that can descend to the level of haggling. Such practices undermine meritocracy, affecting employee motivation and loyalty.

Examples of Single-Track Model Issues

Theoretical potential vs. reality (1): In theory, an employee could move from the bottom of one salary range to the top of the next, a potential increase of approximately 250%. However, in reality, the company may offer just an 8% raise.

Discretion vs. planned pay advancement (2): A high-performer may expect to receive a 15% increase based on experience from previous promotions, while the company may prefer to offer just an 10% raise.

Frustration with pay disparities (3): Employees can become frustrated when they learn that colleagues at the same level are earning significantly more, e.g., with Base Salaries several times higher, especially if there is not much more differentiation than career level (e.g. to understand how roles may differ).

The Benefits of Multiple Career Tracks

In contrast to the single-track model, multi-track career and salary models offer a more structured and transparent approach to compensation. The multi-track model defines specific roles and levels within the organization, each with a set Base Salary or “spot value” along various distinct tracks.

Key advantages of the multi-track career and salary models include:

1. Clear pay development: For each track and level, Base Salary is clearly defined, with increases to the next levels outlined as specific percentages. This clarity creates a straightforward path for employees, allowing them to understand exactly what they need to achieve to advance.
2. Transparency and clarity: The pay grid in a multi-track model is typically transparent, providing employees with a clear understanding of their pay potential. This transparency eliminates confusion and sets realistic expectations for salary development.
3. Reduced need for negotiation: Since the company adheres to a set pay grid, there is little need for negotiation. Variance in compensation is based on KPI achievements and variable bonus pay-outs, which reflect performance differences and motivate high-achievers.
4. Focus on meritocracy: The model based on "spot values" promotes a meritocratic environment, as seen in many leading strategy consulting firms. Employees know what Base Salary to expect at the next career level, shifting their focus to achieving promotions rather than negotiating salaries.

Optimising Career Tracks

The transition from a single-track career and salary model with wide salary bands to a multi-track model with defined salary increments offers numerous benefits for both organizations and employees. By providing clear pathways for advancement and compensation, companies can foster motivation, transparency, and a meritocratic culture that attracts and retains top talent.

The multi-track model addresses the challenges posed by wide salary bands, creating an environment where employees are motivated to excel and achieve their career goals.

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

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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.

Disclaimer: The example provided is simplified, and these are not suggestions but ideas. Any real-life application or implementation requires an in-depth analysis of the client’s circumstances, along with a custom-designed solution. Decisions regarding compensation models should be made with careful consideration of the organization’s specific needs and objectives.

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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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Discover the challenges facing the consulting industry in 2023, including competition for talent, a tight labor market and increasing salaries in response to rampant inflation. Download our summary report for a concise overview of all 19 points.

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