Consulting firms across the globe regularly come under scrutiny for the fees they charge their clients. In particular the high hourly rates billed by the most prestigious consultants in the marketplace tend to lead to debate. The key question is: what fees do consultants charge?
Consulting firms – especially those active in the higher segments of the market – do not unveil their fee structure. Consultancies regard their rates as one of their key competitive assets and therefore manage their fee structure as a ‘trade secret’, similar to salaries, which are also shrouded in secrecy. In addition, fees commonly vary per region/client/service offering, so firms keep tight control over their fee structure to minimise the threat of reputation risk, public debate or having to renegotiate their fees with clients.
As a result, there is relatively little publicly available information on the fees and rates charged by consultants. What is known, though, is that rates can widely differ, from an hourly rate of £50 per hour for an interim consultant working on an operational level to £300 or more per hour for a consultant from a leading strategy consulting firm. Based on available data in the market* Consultancy.uk presents a simplified and indicative view of fees in the consulting market:
The figure uses the revenues per consultant per annum as a proxy for average rates and the number of consultants as a proxy for firm size.
The highest rates in consulting are charged by the Global Strategy Consulting Firms, such as McKinsey & Company (with roughly 17,000 employees the largest firm), Boston Consulting Group, Bain & Company, Strategy&, Roland Berger and A.T. Kearney. Strategy Boutiques, high-end firms that have a national/regional focus, follow in terms of rates.
The mid-market fee range is populated with three large types of consulting firms. Global Functional Specialists – such as Hay Group, Mercer and Willis Towers Watson (focus on HR) or FTI Consulting and Navigant (focus on financial advisory) – typically have a revenue per consultant between $300,000 and $400,000 per year. The Big Four – Deloitte, PwC, EY and KPMG – compete in the same range yet in some services areas also offer lower fees. Typically, the strategy and management consulting practices of the Big Four’s sit at the top-end of their fee model, while lower hourly rates are billed by lower value-adding services offered by other business units (e.g. Accountancy, Audit) or operational disciplines within IT Consulting.
National / Regional Functional Specialists position themselves, in terms of rates, similar to the Big Four and their larger global counterparts, although their exact fee structure will depend on among others their reputation and track record, functional focus and service portfolio.
Three types of firms find themselves in the consultant revenue range between $150,000 and $220,000 per year. The Small and Mid-size Technology Players tend to have comparable rates yet vary in size, ranging from small local players to large mid-sized firms with thousands of employees. The category Mid-size Global Accountants refers to the top 20 global professional services providers, excluding the Big 4, such as BDO, Baker Tilly, Grant Thornton, RSM and PKF. The slightly larger difference in their rates compared to technology players is explained by the full suite of service they offer, varying from Accounting and Tax to Consulting and Corporate Finance, as well as from price differentiation used for SME services.
Global Technology Firms are players that centre their business model around IT Consulting services and includes players such as Atos, Accenture (with nearly 370,000 employees one of the largest), Capgemini and CGI. Note that average fees of purely the management consulting practices (e.g. Accenture Consulting or Capgemini Consulting) are significantly higher, generally comparable to the range for Functional Specialists and the Big Four.
It is important to keep in mind that the above analysis from Consultancy.uk presents a simplified and indicative view of rates. Differences in for instance firms, market segments and service offerings across regions and countries will inevitably lead to exceptions to the typology.
Lastly, Independent Contactors contains the large group of self-employed consultants active in the industry. Their annual fee income can range from anywhere below $50,000 a year (for operational support) to above $400,000 (for executive consultancy/interim). In essence, there is no ceiling to the hourly rates consultants can charge (with some exceptions in the public sector), they are therefore entitled to charge whatever they feel they are worth and what the market bears.
* Market information from representative bodies in the consulting industry, reports from analyst firms, management and consulting books and desk research from Consultancy.uk, based mainly on data publicly available from government contracts and interviews with (senior) consultants.