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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

By: Irina Kvirikadze – Senior Manager Data Integrity

The gender pay gap, i.e. the disparity in pay between people of different genders, rightly counts among the leading topics in today’s business world, even more so in Western European countries. In this context, the consulting industry is usually expected to be at the forefront of efforts to ensure greater equality. But what does the data actually say?

In this article we take a closer look at the consulting industry in Western Europe, and explore the issues with and implications of gender-based pay in more detail.

What the data says

According to Eurostat[1], gender pay equity in European countries varies significantly. When examining some of the major Western European countries, the unadjusted pay gap level in France is over 15%, in Germany almost 18%, and in Italy only 5%. According to the government’s 2022 Equality Act publication[2], in the United Kingdom the median pay gap is close to 10%. According to the same report, the gap is much higher in the private sector (which would include the consulting industry).

Overall, the consulting industry is notable for its high salaries and competitive work environment. Moreover, consulting firms working in North American and in Western European countries are often regarded as leading advocates for gender equality and greater diversity. Most of these firms have already implemented numerous initiatives in favour of equal pay across the industry[3].

Nevertheless, according to Vencon Research survey data, which includes both the largest full-service firms across Europe, as well as Europe’s significant boutique firms, women with the same level of education, experience or responsibilities, continue to face salary pay gaps when compared to their male counterparts. Furthermore, there are notable differences between countries in terms of the prevalence of a gender-based pay gap. For instance (as shown in table 1 below) France shows a pay-gap of 18%, the UK of 23% and Germany of 27%. Italy shows the smallest gap of the four countries but remains significant at 9%.

Furthermore, pay gap inequalities appear to be even more significant when comparing the managerial levels and less prominent at non-managerial positions, meaning, as one moves up the consulting career path, the pay gap begins to widen.

In France, for example (as shown in table 2 below), the pay gap at non-managerial levels is 5%, whereas at higher rank positions it is 30%. A similar situation can be found in other countries too, with the UK showing a pay-gap of 12% at non-managerial levels and 33% at higher rank positions, and Germany having the highest pay gap discrepancy at non-managerial as well as at senior consulting levels, 14% and 39% respectively.

Italy again has the lowest pay gap out of the four countries, in managerial positions men earn more than women by 23%. In non-managerial positions however, it seems women earn more than their male counterparts. This ‘negative’ pay gap may be driven by the fact that we have found that women in consulting in Italy tend to have a longer tenure in non-senior roles than their male counterparts.

What are some of the drivers of this issue?

There have been a number of studies that examine underlying factors that contribute to the gender pay gap. As previously mentioned, one reason may be that despite the introduction of antidiscrimination policies, gender biases may still be ‘unconsciously’ applied, meaning women may be overlooked for leadership roles, remaining relegated to lower ranking positions and thus do not have the same access to the more lucrative senior roles with better advancement opportunities.  

Male versus female representation at senior career levels

Vencon Research’s survey data seems to support the notion that women may be staying longer in certain positions. In fact, male consultants typically reach partner level faster than their female counterparts, who tend to take more time off due to family related reasons and may return to work as part-time employees[4]. This, on the other hand, decelerates their promotion to management levels and may also negatively impact their earning capability.

As shown in table 3 below, the number of female professionals in all four countries in this comparison starts to decrease as one moves to the more senior or managerial levels. This on the other hand, highlights the fact that a significant gender imbalance at the higher-ranking positions remains and that female consultants at senior levels are still underrepresented.

Addressing this issue is also essential as studies show that diverse teams achieve greater success[5].  Moreover, in comparison to their male colleagues at the same level, female leaders seem to achieve a greater level of “employee well-being”, which in turn increases retention rates and employee satisfaction[6].

What can consulting firms do to address the gender pay gap?

There are several steps consulting firms can implement in order to narrow or ideally close the gender pay gap in particular at managerial levels.

The first step is to regularly audit and identify within the firm any pay disparities between male and female colleagues. This will help to ensure fair pay as well as increase transparency around salaries.

In order to support women to balance work and family responsibilities, companies can implement more flexible work arrangements such as flexible schedules, instead of a clock-in-clock-out system and offer remote work options[7]. This can help retain talented female employees and on the other hand, ensure that they are not penalised for taking time off for family related reasons.

Furthermore, it is clear that this complex issue requires a multifaceted approach not only from businesses, but society as a whole. However, firms can and should do more to address gender-based unconscious biases in the workplace, through training and educational programmes, raise awareness and promote a more inclusive work culture. Being pro-active in this matter will help managers recognise and correct their own biases and allow them to make promotion or hiring decisions that do not overlook women for leadership positions. It will also help to increase the number of female consultants at managerial positions and thus reduce the gender-based representation disbalance.

Concluding thoughts

Management consulting firms in Western European countries are at the forefront of efforts to promote gender equality measures, however, they still face significant problems in closing the gender pay gap. There are notable differences among countries, but the general trend is the same, at the non-managerial positions pay disparity between men and women is narrower (or even negative) and female consultants are more represented, while at managerial positions the salary gap is significantly wider and women remain underrepresented.

In conclusion, much work remains to be done to ensure that women are paid fairly and equitably and that they are not only relegated to lower ranking positions. By continuing to implement equal-pay initiatives, such as pay audits, flexible or remote work arrangements and unconscious bias training, consulting companies can help close gender pay disparities, balance gender representation at managerial levels and create a more inclusive work place for all employees.  

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Sources:

[1]https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Gender_pay_gap_statistics#Gender_pay_gap_levels_vary_significantly_across_EU

[2]https://www.gov.uk/government/publications/dit-gender-pay-gap-report-and-data-2021-to-2022

[3]https://www.ft.com/content/c8118e14-143e-11e9-a168-d45595ad076d

[4]https://managementconsulted.com/gender-pay-gap-consulting/

[5]https://www.cipd.co.uk/knowledge/fundamentals/relations/diversity/managing-multicultural-teams

[6]https://www.mckinsey.com/featured-insights/diversity-and-inclusion/women-in-the-workplace

[7]https://consultport.com/for-consultants/how-do-we-get-more-women-into-consulting/

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By:
‍Hilmar Albers – Partner
Erwin Harbauer - Managing Partner

In parallel to the positive momentum witnessed in the country’s economic growth, forecasts indicate that Japan is expected to experience a long-awaited boost in wages. However, Japanese consultants can only look forward to a marginal offsetting of the cost of living pressures experienced in the country.

Domestic demand is a major driver of the Japanese economy. Unfortunately, consumer demand had subdued after a decade of ‘Abenomics’ with only disappointing growth in workers’ earnings, compounded by record inflation during QIV of 2022 and culminating in a 41-year-high rate of inflation of 4.3%¹ in January 2023.

While Japanese inflation remains relatively modest compared to the US or the Eurozone, these levels represent a radical shift for an economy that has experienced decades of ultra-low inflation.

Now, despite famously stagnant salaries, Japanese industry has reacted and wage increases are finally on the cards across all sectors. Open source market analyses predict an average hike in salaries of 2.8% (with estimates ranging from 2.5% to 3.4%)².

When also taking the re-opening of the country's borders to foreign visitors since October 2022 into account, we expect such wage increases to spur domestic demand and further stimulate economic activity. We therefore believe that the outlook for the remainder of 2023 is relatively positive for the Japanese economy.

Furthermore, Vencon Research’s survey data shows that the consulting industry is not excluded here and many of our clients have signalled growing order books. However, although consulting firms are also increasing salaries, the expected increases are far from those being offered by the country’s other industries, and average only 1.4%³ across career levels.

Many firms have also planned different levels of increases across their career grades, with a greater concentration on the lower career levels and less relative growth being offered to the more senior Management and Principal levels.

Since consultants already count as high-earners in Japan (as well as in most other countries worldwide), the lower expected salary growth percentages may be less surprising.

On the whole, while the consulting sector itself can hope to profit from a general uptick in economic conditions, Japanese consultants can only look forward to a marginal offsetting of the cost of living pressures experienced by the country.

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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_{[1] https://tradingeconomics.com/japan/inflation-cpi;}

_{[2] Various inflation forecasting and research firms, incl. Japan Economic Research Center, Kienbaum, Korn Ferry Hay Group, Willis Towers Watson}

_{[3] Vencon Research analysis; Client feedback}

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