Consulting Firm Partners Not Doing Badly …

What is a reasonable level of income for a partner in a large professional services firm like PwC or Deloitte? According to the Times a couple of weeks ago, PwC partners must be “gnashing their teeth that their rivals at Deloitte were on £863,000 when they took home only £652,000 last year”. This follows publication of their annual reports. Actually, that was a small decline on last year at PwC, where profits increased but so did the number of partners.

The newspaper goes on to ask whether it is appropriate and good for society that so many people, who don’t really take much risk, make quite so much money. The writer also suggests such levels of pay “must feed the inclination of company executives to keep their own pay elevated”.

I’m sure it does, just as fund managers and the big investment firms don’t push too hard against corporate executive pay because they themselves earn huge amounts. There is basically a silent conspiracy that ensures those at the top of the salary tree in corporate life support each other’s high level of earnings.

The Times finishes with this comment. “But shareholders who own their clients are ultimately paying, so they should challenge these very generous arrangements”. In other words, procurement of professional services needs to be better, and if it were, then maybe we would see the earnings of partners coming down. The same applies to lawyers, we might argue, as well as auditors and consultants.

It’s not as simple as that of course; just to take one issue, we wrote here about the McKinsey alumni programme that leads to CEOs choosing their old firm and presumably not being too keen on the poor old professional services category manager trying to negotiate 25% off the quotation for the work.

In addition, these markets are also pretty global now, and the best consultants, auditors and lawyers are much in demand. (There just aren’t enough really clever people in the world to do all the work that requires them – that is something I have come to believe as I’ve got older). So if I won’t pay the rates they ask, plenty of other firms will and I might not have access to the best people who could help my organisation.

All very tricky then. We are seeing more auditing work in particular competed following government legislation, but it doesn’t seem to be having a big effect on partner earnings as yet. But next time you are faced with a negotiation in these spend areas, do make sure you have all the information about earnings – it might come in useful.

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  1. Jason Busch:

    That may sounds like a lot, but remember: A) they are buying into the partnership; B) That note may be a liability (it was for younger partners who signed before AA went down); C) The divorce rate for consulting partners is crazy; D) These guys kill themselves with travel; E) Bankers make more; F) You need to typically apprentice for 15-20 years before making it (or come in from a similar senior job in industry.

    Markets are generally efficient, including job markets!

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