COMPENSATION IN CONSULTINGConsulting is the business of providing advice to organizations in trouble; organizations on the move and organizations which are trying to do what they do better, faster, and more cheaply. A good consultant can add tremendous value to an organization be it a business, government or non-profit agency by using superior knowledge, training and experience. Consultants allow organizations to access the specific expertise needed to quickly solve a current problem. It isn't surprising that consultants are among the most highly paid professionals in the United States. Companies and organizations typically hire consultants because they are worth it.
What are the Facts About Pay in Consulting?
Consider the following facts about consulting pay in the United States:
Starting salaries in management consulting are among the highest available to MBA students. A typical MBA is about 28 years old and has one to four years of prior work experience and two years of business education. A typical MBA would enter a consulting firm at a mid-level with the title of associate and would earn considerably below peak earnings potential.
School: MIT Consulting Salary: $85,000 Corporate Salary: $69,000
School: Carnegie-Mellon GSIA Consulting Salary: $81,000 Corporate Salary: $64,000
School: Duke University Consulting Salary: $78,000 Corporate Salary: $61,000
School: Wharton Consulting Salary: $83,000 Corporate Salary: $68,000 Source: Placement Center Reports. Consulting salaries chosen for category closest to management or strategic consulting. Corporate salary chosen for category closest to general management or manufacturing.
These salaries show both that consultants (even at a near entry-level) are relatively well paid and that they earn a considerable premium over their counterparts in the corporate and management sectors. It is widely believed that entry level salaries among the top five or six firms are quite close to each other. One person we talked to mentioned that his firm would automatically give out raises to entry level consultants when it was learned that another rival firm had raised salaries. Salaries in consulting should not be compared to those in business and corporate management because the work is very different. Corporate managers have broader experience and administrate and implement. The work of management consulting, in contrast, is information collection and analysis. A skilled consultant will be able to use their expertise to analyze and integrate information to formulate courses of action to solve critical problems.
US News and World Report (10/31/94) reported the following median salaries in consulting for 1993:
Position Median Pay Research Associate: $30,400 Entry Level Consultant: $41,800 Management Consultant: $89,200 Senior Consultant: $120,100 Junior Partner: $120,100 Senior Partner: $194,000 Fortune, June 26, 1995 reports the following numbers.
Position Average Starting Pay Typical Pay Top Pay Strategic consultant $ 47,677 $ 120,660 $ 307,667 Human resources consultant $ 38,633 $ 64,218 $ 139,099 MIS consultant $ 39,120 $ 81,569 $ 130,156 While there is substantial growth in expected compensation among consultants as they become more senior, starting wage rates are well above the national average for college students (obviously these data include more than college students though).
Is Consulting Pay Related to the Size of the Firm?
In many businesses, pay is lower in smaller firms. For example, Robert Half International reports that in smaller accounting firms, partners earn significantly less than partners make in larger firms. An accounting partner (and for that matter a corporate administrator) is compensated for their management skills. Managers in bigger firms typically have larger responsibilities which translates to increased salaries. Interestingly, the consulting business does not work that way. The reason is that the best people may prefer the autonomy and impact that they can have in a smaller firm. The responsibilities of a consultant are significant, regardless of the size of the practice. Its much more like being an attorney; an attorney in a small firm can have a very large case. The largest firm in management consulting is Andersen Consulting. They do not offer the highest entry-level salaries in the industry. It is readily apparent from the literature that there isn't necessarily a relation between consultant pay and the size of consulting firms.
Why Do Consultants Get Paid What they Do?
The product consultants produce is ideas, advice and suggestions. Problem-solving and new ideas are essential to creating a successful, well-led and functional organization. Consultants add value by helping organizations do what they do better, faster, and cheaper. That's why most successful consulting firms rely on a small cadre of highly skilled, thoughtful professionals. A few really bright people can create much more value than a larger group. Consulting is a cerebral business where understanding, expertise analytical skills are highly valued. Increasingly, consulting is done in the context of relationships which involve working with an organization over many years to ensure continued monitoring, discussion and implementation of new ideas. Because consultants are hired to produce results and because they have a high profile in a client organization, consulting firms typically hire the "best and the brightest." Most firms in consulting are relatively small, but use persons with superlative experience. Some of the brightest minds working for government and business (ranging from Henry Kissinger to Tom Peters) are from small consulting firms.