looking at the recent Accenture thread and also my own experience in large Big4-type consultancies, there's a clear downward drift in rates - prompted in my opinion not just by economic conditions but also a perception that most consulting services are industrialised commodities that don't warrant extravagant pricing. The speculation on the Accenture thread is that base salaries are being recalibrated downwards in order to preserve the margin. Are other seeing these trends, and is there a 'floor' to hit on rates and salaries?

I don't think it is any more commoditised today than historically. Job market is still weak and supply of candidates per job is higher than normal. Hence the pressure on market rates for salaries is down. Companies will not lower salaries for existing staff. But consulting rates are much more closely aligned with the real market price of labour; and given the turnover of staff in consulting base salaries can be recalibrated much faster than many businesses.

Good rates are still there at the top end of the market, but the 'bulk' of the consulting world has experienced a reduction in daily rates. The reduction in daily rates, as I see it, has been caused by:1. Arrogance - On the part of middle-management clients (these people being the ones who historically would need to do the bulk of the consultancy hiring) who think they know better than to use a professional advisor.2. Envy - On the part of the same middle-management clients who think that us Management Consultants are all millionaires, because they have read too many articles in the Sunday Times. As such, they'll do anything to make sure we don't get a good rate.3. Bad reputation of consultancy - See above, also suppressing daily rates.4. People increasingly thinking "whoa, £1000 a day for a consultant, oh man can they really buy a luxury holiday for doing just 1 days worth of work!!!!" and comparing our fee rates to their own personal living expenses. This can be a killer for consultants. People just don't seem to 'get it' anymore - they view consultants as being extremely expensive, even for tiny engagements, even though they'll quite happily pay their own staff a fortune in pension contributions etc. And they don't seem to understand the concept of overheads and marketing time either.

interesting that you pick up on the sum of £1000 a day, as I think there's also a psyhological barrier that's emerged around that arbitrary but somehow significant-looking number; at my last big shop, there were many large corporates who set it as their ceiling (forcing all sorts of imaginative team construction and cross-subsidisation to get the pyramid in). Much of what we call consulting isn't really; it's just provision of resource to get some difficult or one-off work done - and any number of people can do that generic work. I wonder whether that middle ground 'mass advisory' space could eventually migrate, under pressure to reduce the cost base in order to deliver competitive rates at acceptable margin. to a retained associate model, whereby if you're not billing, you don't get paid...

Billum - in reality the downward pressure on fee rates has been underway for several years. The MCA's data on average fees generated per consultant (collecting data from ~70% of the industry) has shown a downward drift in rates that started way back in the boom years.The reasons for this are severalfold I would say:1. There has been a massive rise in the importance of procurement departments in the engaging of consultancy firms. The upshot is an almost unavoidable focus on hammering down costs rather than choosing the consulting firm most able to deliver on the assignment. This essentially results in commoditisation of a lot of consulting work.2. Clients of consulting firms are increasingly populated by ex-consultants and MBAs, who also bring pressure to bear on average fee rates by challenging the make-up of consulting project teams and carving off portions of assignments to be undertaken by in-house resources. They are also more likely to tighten up on the T&Cs of engagements such that project over-runs and scope creep do not result in higher fees, even where the consultancies may have a justifiable argument that they should do.3. The increasing credibility of smaller consultancies to offer similar services at a lower cost. As more and more consultants have progressed up the career ladder with the major branded firms, the scope for start-ups to emerge where the founders can claim "McKinsey credentials" or a "Deloitte heritage" has dramatically increased. These firms don't carry the same overheads as the major brands and so fee rates are again correspondingly lower.There have been a number of knock-on effects of this downward pressure on fee rates, none of which are really desirable in terms of the consulting industry delivering the highest possible quality of output. But this is the route along which clients are forcing the industry unfortunately.Ultimately the quality of consulting output is suffering as a result of the collective actions of clients. Lower fee rates have put a squeeze on profits and firms have responded by finding ways of reducing their costs of resourcing projects. Increasing proportions of project work are being carried out offshore and the average calibre of hires coming into the consulting industry is being progressively lowered. However there is only so far this can go and at a certain point - which I believe we are now reaching - the consulting industry can no longer afford to retain the calibre of staff it has on its books and a gradual erosion of consulting talent through attrition will take place, as the best simply choose to exit the industry for other sectors better able to reward their talents.The single biggest step I can see the industry could take to address this issue would be to increase the proportion of projects where payment is linked to results or some portion of the client upside delivered. Only then will the incessant downwards pressure on fee rates be reversed - and we can then return to being an industry that can truly attract and retain the brightest minds once again. Until then, I think the modest pay gains being discussed on this forum of late are very much going to be the norm and only by moving firms can consultants aspire to any serious overnight gains in remuneration.Tony RestellTop-Consultant.com

Payment linked to results is a nice idea Tony, but there are a number of reasons it is difficult to achieve.1) Clients usually chicken out! I’ve offered this a lot in the past and usually they prefer the certainty of an agreed price rather than a cost that could spiral (even if the benefits are also improved). 2) It would require that the consultancy be given much more control over all aspects of the project than any client would normally agree to. This could be a problem particularly in regulated industries where risk appetite needs to be in context.3) It would require that a single consultancy be responsible for the change from strategy through to implementation – this would mean small firms would struggle to provide services, yet we all know that many smaller consultancy firms are more cost effective than the larger ones. Consultancies woudl also struggle to wor together on the same project (or same business area).4) I’ve never managed to get a client to agree to a reasonable formula for calculating the benefits.5) Many consultancies struggle with cashflow when payments are linked to delivery. This would be ten times worse if it was linked to benefits realisations.For all of the above, the only area where I see payments by results being feasible is in outsourcing (or similar) where the client pays £1 for something that was costing them £1.20 to deliver and it is then up to the service provider to deliver for a cost of 80p.The thing you need to remember is that a high proportion of change projects, mergers and integrations do not create great financial benefits. The involvement (or not) of consultants in this is a red herring.

I totally agree Mr Cool. Consultancies have found it very difficult to push through results-oriented deals for all the reasons you mention, but unless there is some headway made here in the coming years I can't see how the consulting industry will reverse its commoditisation...Tony RestellTop-Consultant.com

As someone planning a move into consulting from industry I am particularly interested in your final two points:[1] “project work are being carried out offshore”In my industry all the consulting work we have engaged has been delivered onshore. This has been necessary owing to the nature of work involved – interviewing SMEs, visiting sites, presenting reports, etc. Offshore delivery has largely been the preserve of the major systems integrators (SI) and is used mostly for IT delivery. Are consultancies increasing moving into the SI space?[2] “the average calibre of hires coming into the consulting industry is being progressively lowered”There is currently significant recruitment activity from at least two major consultancies who are (from what I can glean from other posts) maintaining their recruitment standards. Is the standard being lowered across the board or are just specific consultancies? Obviously, you can only reply in general terms but it would be helpful for potential new hire to be aware of companies that have lowered their standards and will ultimately lose their reputation.

I would disagree with the sweepeing statement that standards in recruitment are slipping. There's more dross out there and we have to be more dilligent to weed it out, but the same quality standards apply.Having said that, more and more PM's and BA's are being given fancy Consultant titles and they sit in delivery roles so that does muddy the water, but overall, I would defend the standards of recruiting.

I left Andersen Consulting around 15 years ago and am currently working with some junior Accenture resources. They have equally good technical skills but do not have the professionalism, rigour and presentational skills (ability to spell, attention to detail) that was expected back then. Not by a mile.

aahhh the golden days of summer...everything was better back then...Thats right, in the halcyon days of yore...everyone could spell, everyone was jolly-what-oh.You forget, back then only the lucky few got to go to University and the size and demands of Andersen meant they could concentrate on the top few per cent OF the top few per cent from the top schools.Now they have competition and everyone can go to University so they don't get the pick of the bunch. And with our ever-widening culturual base, English is the ever-decreasing first language so spelling and grammar isn't going to be as sharp as it once was.But don't confuse that with watering down hiring at our level. These young kids are bright and they will invent and innovate in ways that will blow your dusty old mindl; they ARE the future.I don't think they deserve your snobbery.no wot i mn blud?

As you say, they don't get the pick of the bunch - so statistically the overall quality has decreased. Glad we agree. Also, I'd never realised the future belongs in the hands of the youngest - thanks for the insight.

feel better?

I would say…1. Academic hiring standards at the top firms are as high as ever and their recruits are academically as good as they were 20 years ago when I joined the industry.2. Presentation polish is NOT as high as it used to be. This is because of an increase in IT folks who rely on knowledge more than presentation (not necessarily a bad thing), and secondly reflects (rightly or wrongly) a more casual, less formal (and yes, badly spelled) approach to communication in society in general.3. The use of the term “consultant” has expanded to include off-shoring, outsourcing, software development, etc and in these areas the academic standards do not NEED to be as high and therefore are not. Presentation polish is also lower in these areas, as senior client direct contact is limited.Generalisations of course, but true.

good points Mr Cool - the last point underlies a lot of the disagreements that arise on this forum too as people are often talking about different things when they opine about 'consultants'. Another trend I've noticed over time is a gradual grade devaluation, with consultants (in the Big4 type space) taking longer to get to positions of significant project responsibility. The first project I ever worked on, back in the mists of time, had 6 first and second year analysts working overseas under a 3-year-in Consultant as lead. A Manager visited once a fortnight and the Partner was nothing more than a rumour. These days that project would have been largely staffed by Consultants led by a Senior Manager, and probably had a Partner billing a day a week. This seems partly to be driven by decreasing margins forcing higher utilisation targets for senior grades, but possibly also a sign that the recruitment+training process isn't delivering the same kind of resource.

Find myself once again agreeing with Mr Cool and Billum. At the top strategy firms there's been little if any change in hiring standards; and similarly fee rates have been sustained. So if you're amongst the elite able to get into this type of consulting then things aren't that different to how they were a few years ago.The significant change is in the rest of the consulting industry - which let's be clear, from both a revenue perspective and from the "number of consultants employed" perspective represents the type of consulting that most readers of this forum will find themselves engaged with.This type of consulting has ballooned over the last 10-15 years, has become commoditised in the process and the comparative financial returns that can be offered to staff have gradually diminished.When I became a strategy consultant in 1996, the number of UK graduate entry positions within strategy consulting numbered a few hundred. I would venture to suggest that the number isn't that different today. So these firms can be very picky about who they choose to hire and standards remain very exacting.Yet today the overall UK consulting industry employs in excess of 40,000 consultants - up nearly 10,000 in the last 5 years (official MCA figures). All other things being equal, you can only hire en masse like this if you are able to offer significant hikes in remuneration or if you are prepared to increasingly make compromises about the standards of those you employ. I can say categorically that over the last boom cycle there was a consensus amongst recruiters that consulting firms were having to accept a gradual erosion of the calibre of those they employed - because fee rates weren't keeping pace to allow a consistently high quality of employee to be attracted.I see nothing about this pattern that is changing and hence my earlier assertion about standards slipping across the industry - albeit with the caveat that the elite strategy firms can be largely excluded from this assessment.Tony RestellTop-Consultant.com