Latest InSights

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 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 Philip Thomas – Senior Consultant, Advisory

Increasing demand for specialist knowledge across a range of industries means that generalist consulting firms are having to adapt in order to compete. The solution of choice is an increase in the hiring of specialist talent. This calls for evolution not revolution. Firms that evolve successfully and first will be well placed to be at the front of the race for such talent.

An increasing demand for specialisation

Across all major industries, businesses are hurting from a severe lack of internal specialist expertise. The open labour market is unable to satisfy their need for talent. As a result, they turn to consulting firms and demand ever-increasing levels of specialisation to ensure the quality of the tailor-made solutions required. For consulting firms, client impact increasingly requires deep knowledge in niche areas such as digital, blockchain, cybersecurity, climate and sustainability, data science, etc.

Specialist consulting firms, by their nature, may be well placed already. Generalist consulting firms, however, need to react if they have not already done so.

Tapping into the specialist talent pool

Not all personalities suit the traditional generalist consultant role. Requirements to resolve poorly defined problems, to be flexible enough to fill any resource gaps and to work towards leadership positions where people management and dealing with the unknown is a common theme is not only not suitable but also simply not desirable for some individuals. Many such individuals are actively searching for a different career path and they may well be looking to specialise.

Specialists (also sometimes referred to as experts or subject matter experts), with their deep subject knowledge, have strong problem-solving abilities with respect to their speciality. By nature of experience and proven, known solutions, their approach to work is streamlined and efficient. Given their subject matter passion, they actively seek specialist roles that suit their skills, interests and career goals best rather than force fitting themselves into alternative career scenarios they may consider less satisfying.

When given the opportunity to do so, specialists find places to excel. They find a home where their talents thrive and their subject matter passion can be nurtured and maximally leveraged.

Leading generalist firms are already evolving

A number of generalist consulting firms, ahead in the rapidly advancing game, have already partially evolved. They have recognised that no single career path suits all possible talent. Such firms are becoming more flexible and creative with respect to offering differing, alternative types of careers.

Specialist career tracks are now being offered by increasing numbers of generalist consulting firms, as well as many of the top-tier strategy-oriented firms, including Bain, BCG and McKinsey. These specialist tracks typically differ from generalist tracks in a number of ways, including:

Less client-facing time: Specialists are typically less client facing than generalists, often working across multiple project teams while focussing on the same topic.

Career path: The path to partnership is not yet common. In many cases Specialists will not have a path to partnership. In these cases, career levels before partnership are viewed as landing positions and this was historically accepted by the incumbents. However, with the large increase in the number of specialists working for consulting firms, more and more firms are developing specific tracks, which do provide specialists with a path to partnership.

Progression timeline: The timelines for progression on specialist tracks are less rigid. There is often no up-or-out policy. Actual timelines can vary considerably from very quick to relatively slow.

Performance evaluation: While performance expectations are broadly similar to generalists (i.e. utilisation), a specialist’s knowledge and expertise form a much more significant portion of their evaluation and therefore more heavily influence their ultimate success.

Pay: Many firms offer comparable pay. However, specialists carry high credibility due to their deep level of knowledge and experience. This may allow consulting firms to charge higher fee rates for specialist services, so in some cases specialists are able to demand higher salaries. Interestingly, at the most ‘senior’ career levels, specialists may currently lag behind their generalist peers.

Aside from dedicated specialist tracks, many firms are also hiring more specialist consultants but on generalist tracks while allowing for increased specialisation.

Challenges on the road to specialisation

Generalist consulting firms wanting to catch up with the trail blazers are faced with two key and immediate challenges. Those being the limited supply of specialist talent and the need to evolve in order to attract and retain such talent.

Key Challenge #1: The race for specialist talent is already well under way with some firms setting an early pace while others are yet to leave the starting blocks. The mad dash to the always moving finish line is yet to begin. When it does, the intensity of the race will rapidly increase as more and more firms attempt to attract talent from a decreasing supply of specialists.

The longer firms wait, the harder it will become for them to secure the talent they need to compete. To compound the problem, once the supply of specialists starts to run dry, it may take significant time before it is replenished considering the time and effort it takes to reach a certain level of specialisation.

Key Challenge #2: Generalist consulting firms need to become more attractive to specialists. Firms will need to evolve in order to attract the increasingly confident and vocal specialist labour force. Robust and competitive specialist career tracks, sufficiently attractive to specialists but not to the detriment of generalists, must be created and installed. Informed action by firms should be decisive and taken before too long or they may get left behind.

Some firms have a healthy head start with their evolution in this respect. However, with such a dynamic situation, even those that have paved the way so far would do well not to rest on their laurels. We also believe signals coming from the labour market show that candidates are demanding more bespoke career tracks beyond the existing generalist track.

In short, consulting firms should not be asking what specialists can do for them, but what they can do to become attractive to the specialists.

Evolution not revolution

The foundations built on generalist consultants are solid and the demand for the broad expertise of generalists will not disappear. Client demand for specialisation, however, does necessitate the evolution of generalist consulting firms. They will need to evolve by harnessing the power and deeper expertise of specialist consultants. Those firms that fully embrace the importance of specialists and those firms that make themselves more attractive to specialists by offering desirable and specific career tracks will have a major advantage in an increasingly competitive race.

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^{Note: We use the term specialists in this article for simplicity and to avoid inferring that generalists are not experts in their own way.}

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: 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 Miklos Bodnar - Business Development Senior Manager

Internal consulting practices (ICPs) have become a more common feature of the global consulting and professional services sector and present their own set of challenges and opportunities for Human Resources leaders at traditional consulting firms as they compete with ICPs for talent acquisition.

Internal Consulting Practices (ICPs)

An internal consulting practice is an in-house group established by an existing firm to provide support and assistance with making critical strategy and operational decisions. The primary impetus in creating such practices is to reduce the reliance on traditional, external consulting firms, such as McKinsey, Bain, BCG, Kearney, Big 4, Accenture, etc., as well as associated costs, while also hoping to increase the efficiency and availability of consulting services. The advantages of an in-house consulting group include a more comprehensive understanding of a firm's structure, greater availability and responsiveness for problem-solving, involvement in both strategy and implementation, and greater alignment with the client.

Some examples of major firms with internal consulting practices are: Airbus, AMEX, Disney, Google, Siemens, Ford, General Motors.

How should human resource leaders anticipate and prepare for competition with ICPs?

The most obvious challenge presented to HR leaders at traditional consulting firms is the competition for top level consulting talent, especially in a recruitment market that is already under external pressures from non-consulting industries.

While ICPs do expand the number of competitors for talent, traditional consulting companies still generally hold an advantage in many areas of employment attractiveness, and should play to these strengths. Some key factors to consider are:

ICPs may offer different/less advantageous career advancement: ICPs can be limited in their ability to expand their service offering and client base, thus capping the needed for increased staffing and partners. This inherently smaller structure could constrain career advancement and thus attractiveness.

Opportunity for travel (when desirable): As ICPs are most likely co-located with the parent firm and primarily work only for the single “client” on-site, no additional travel outside of the consultant’s primary home base is required. While some may appreciate not having to travel, there are also consultants who consider frequent travel opportunities to be an advantage associated with the sector.

ICPs may offer less exposure to different industries and projects: Consulting with an ICP may provide an extremely focused work environment, where the consultant-client interaction is far more comprehensive and the consultant has access to the parent company on a daily basis. However, this very focus can also lead to a lack of variety in the consulting work carried out. And while specialization may be a key driver in a consultant’s career, this in turn may be limited, as the consulting opportunities and problem solving will only be within the parent company’s specific industry and business focus.

Open market opportunities could be less “competitive” as a consultant has only worked for a specific client and industry: The potential limitations outlined above also play out for candidates who may consider how to maximise their future employability. A lack of exposure to different industries and types of consulting work could diminish their competitiveness vis-à-vis peers who have experience at traditional consulting firms.

The case for ICPs

As businesses become more complex and competitive, there is a growing need for customized and specialized consulting solutions that internal consulting teams are well-positioned to deliver. Working for an ICP can offer consultants greater job security, the opportunity to build long-term relationships with stakeholders, and the ability to make a more significant impact on the organization. Internal consulting practices may also be perceived to offer more work-life balance and a more predictable schedule compared to traditional consulting companies, making them an attractive option for consultants looking for a more stable career path.

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What can Vencon Research do for you?

Vencon Research has recognized the growing and impactful presence of Internal Consulting Practices in the larger consulting industry and has integrated these firms into our compensation benchmarking analysis and services. Should your firm require assistance identifying the appropriate strategies to ensure your own rewards and recruitment attraction fully takes this aspect of the consulting market into account, we are available to provide you with the solutions to succeed.

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

1.  CHALLENGES IN RETAINING EMPLOYEES

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

2.  RESPONSES FROM CONSULTING FIRMS

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

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

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

3.  DRIVERS OF COMPENSATION DECISIONS

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

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

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

4.  INDUSTRY REMAINS PROACTIVE

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

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