The world’s biggest and best consulting firms have always been first in line to snare top MBA graduates and are prepared to pay big bucks to ensure they are winning the talent war.
In recent decades, the salaries, sign-on bonuses, and other benefits they are prepared to pay top students have consistently gone up faster than inflation, pushing starting pay packets towards $US300,000, or $450,000 in local money.
But not this year.
For only the second time in 16 years that Management Consulted has collected data, consulting salaries are expected to stay flat compared to 2023. The result is even starker when you consider that the previous three years saw increases of about 10% YoY (compared to the usual 2-4% increases), as a result of the incredibly tight labour market.
“As we predicted last year, this year’s compensation inertia took place at both the pre-MBA and post-MBA entry levels and was most pronounced in the U.S. market,” the Management Consulted report said.
“We did see salary growth in markets outside of the U.S., as many markets (e.g., Europe) begin to catch up to U.S. salaries, which have far outpaced global peers in recent years.
“Still, while many firms aim to achieve parity in purchasing power for employees across geographies, this isn’t often achieved, and the purchasing power of U.S. consultants is still stronger in 2024.”
The highest-paying firms (in US dollars) in 2024 at the post-MBA/PhD level are Kearney ($288,800), Alvarez & Marsal ($287,500), AlixPartners ($285,000), Bain ($285,000), Accenture Strategy ($282,500), Analysis Group ($282,500), PwC Strategy& ($280,000), Oliver Wyman ($271,100), BCG ($270,000), and EY-Parthenon ($267,500).
Management Consulted is a US-based business that works with clients to help them find jobs with top consulting businesses. The salary data is generated from the company’s interview prep clients who received written job offers and firm representatives. The salary data is for those recruited straight from an undergraduate, master’s, MBA, or PhD program or those that were hired at the same level.
While firms kept base compensation flat, many went further – decreasing the total earning power of new consultants by decreasing the maximum performance bonuses they could earn. In addition, after recent updates to top-down compensation structures, raises this year were also lower.
“This tells us two things: first, many firms are using depressed raises as a tool to increase attrition, which has been lower than historical averages over the last year. Second, with slowdowns in traditional exit sectors (e.g., corporate strategy, PE), firms aren’t worried about too much talent leaving at once,” the report said.
The report said the salary stagnation was mainly due to the fact many consulting businesses were experiencing weaker market demand for their services and responding by conducting layoffs and eliminating starting salary increases.
“This was made possible by the commensurate slowdown in Big Tech and Finance, but also in Fortune 1000 internal strategy practices – who were also impacted by cost-cutting,” the report said.
However, while growth declined, margins did not, with project rates and salaries staying steady while firms conducted layoffs to insulate partners. Management Consultant said this bodes well for a rebound in hiring investment in 2024.
“Consultant utilisation decreased from a pandemic-era peak in 2023. Due to rebounding demand and smaller headcount, we expect utilization to increase in 2024. This should lead to decreased retention and a slight increase in hiring in 2025,” the report said
“Although global macroeconomic activity is projected to pick up in 2025, there are no signs that the labor market will return to a white-hot state. This will incentivize consulting firms to increase starting salaries only slightly in 2025.”
Overall consultant utilization declined in 2023, which is why many firms conducted hiring freezes and layoffs, as well as lowering available performance bonuses.
Due to rebounding demand and greater consultant attrition, we expect utilization to increase in 2024. This should lead to decreased retention and a slight increase in hiring in 2025.
