2022 was positioned as the year of the comeback with optimism for a return to normality and outlook of regeneration of financial prospects and deal activity, boosting many industries that had suffered from the two-year slowdown. This promise of economic revival encouraged an increase in employee demands, from better work-life balance to improved compensation and benefits; these factors have pushed companies to work harder to secure the top-class talent. In turn, this now amplified competition for talent led to a general increase in total compensation levels.
By the latter half of 2022, market conditions had fluctuated once again. Economic uncertainty once again loomed as a cause of macro-economic factors such as tighter debt markets, increasing interest rates and inflation, as well as geo-political hesitation as result of the invasion of Ukraine and the uncertain political state of the UK. This rising ambiguity lowered financial confidence, most notably in corporates and investment banks, with many postponing deal activity, instigating hiring freezes and/or cutting their workforce.
When comparing compensation levels in strategy consulting from 2022 to 2023, interesting patterns have materialised across different firms. Within the sector we broadly categorise by the type of firm as:
- Top 3 consultancy: McKinsey, Bain, and BCG (MBB)
- Top 10 boutique consultancy: OC&C, LEK, Oliver Wyman, etc.
- Big 4 consultancy: EY-Parthenon, Strategy&, Monitor Deloitte and KPMG’s Global Strategy Group
Base vs bonus?
For MBB, we have seen an increase in base compensation for the Associate level with the average base salary increasing by 6.6%. Simultaneously, at this level there has been a drop in average bonus by -8%.
Other levels have also experienced a fall in bonus, with the exception to this trend being at Principal/Director level where their average total compensation increased by 3%. This increase is heavily reliant on bonuses which jumped by 20% whilst base salaries depleted by 6%.
Despite this drop in average bonus, the increased base compensation has supported a rise in the total average compensation. MBB are known to be the highest paying consultancies, and continued rise has secured their spot for yet another year.
Closing the gap on MBB Second to the MBB firms are the top boutiques and interestingly findings from our recent Strategy and Corporate Development Compensation Guide indicate that the gap between compensation for MBB versus boutique has begun to close, with the distinction becoming less apparent. As example, in 2022 MBB Consultants were paid on average almost £20,000 more than boutique Consultants in base pay. Yet in 2023 this has now dropped to just under £7,000.
Life at Big 4
On average, compensation at the Big 4 consultancies tends to sit below boutiques but this can be attributed to wider business politics and uncertain market conditions. Corporate Financiers and Consultants at PwC were told to expect smaller pay rises and bonuses this year due to challenging market conditions¹.
In 2022, they granted at least 70% of their UK workforce a 7% increase in wages to combat the impact of inflation. This year, employees were informed that these “exceptional pay rises” would not be repeated², and is reflected in the data collected for Big 4 consultancies in our 2023 Compensation Guide which showed each level, bar Associate, experiencing a drop in total average compensation. It can be speculated that Associate compensation is the exception, as Big 4 consultancies aim to secure the best talent at junior level, with the hope that this will then carry through the business as they progress. Overall, the gap between total average compensation for boutiques and Big 4 consultancies has increased with significance from 16% in 2022 to 24% in 2023.
Though we are starting to see a softening in the market, we don’t foresee a decrease in candidate demand. As candidates continue looking to move into industry following a learning period in consulting, the uncertain market conditions are reflected in how candidate’s approach this move with heightened caution versus prior years. This point is amplified when considering startups – well-publicised global redundancy programmes sharpen the level of diligence candidates having before making career decisions.
For corporates wanting to add top talent to their teams, having flexibility towards expected compensation levels is key to succeeding, alongside incorporating other important factors such as clearly mapping out career progression, demonstrating an inclusive company culture and the option for hybrid working.
Our 2023 Strategy and Corporate Development Compensation Guide is full of useful insights and key data to influence your approach to team hiring, as well as being informative for those considering their next career move. Request your copy today or reach out to us directly by emailing strategy@dartmouthpartners.com and we can support you in making the best decisions for your plans.