Trends and Challenges in Management Consulting in 2022

Insights by Vencon Research – Erwin Harbauer – April 2022 – Compensation, Consulting

The consulting industry has entered 2022 coming of a very strong year 2021. Although many firms predict continued robust growth, the industry is now faced with a number of significant challenges that may eventually threaten profitability, including being in serious competition for talent from outside the industry, an already very tight labour market, increasing consultant salaries, historically high industry exit rates and finding the right mix of work between “home office” vs. “in-office” vs. on “client” premises.

The key findings of this article can be summarised as follows:

  1. Consulting firms remain very busy and continued strong growth is expected …
  2. … Especially for hot skills, e.g. all things related to “Digital”
  3. Consulting is in serious competition for talent, e.g. with the new “cool” industries
  4. The market for skilled labour is getting even tighter
  5. Consultant salaries continue to grow, again
  6. Within firms, the spread in the salaries being offered is getting wider
  7. Internationally, salaries continue to be driven by local markets
  8. More “city-based” data is being requested
  9. The consulting industry’s exit rates have reached all-time highs
  10. Although salary remains important, it is far from everything
  11. “Work-Life-Balance” is defined differently by staff in junior and senior roles
  12. Firms have thus started to offer increased PTO
  13. Firms are offering more, e.g. enhanced their training programmes
  14. Finding the right mix of “home office” vs. “in-office” vs. on “client” premises
  15. Excellent candidates can still be found; but they expect more from their employers
  16. Alternative thoughts are being made on off-shoring
  17. Consulting profit margins may be at risk
  18. M&A activity continues to be significant, with four points of focus

1. Consulting firms remain very busy and continued strong growth is expected

The very strong demand for consulting in 2021 resulted in double-digit industry growth, which has led many firms to record revenues. For example:

  • In 2021 over 30% of our clients recorded the best year of their existence (10% the worst!),
  • This was the exact opposite of 2020, where only 10% had a fantastic year (and 30% recorded a very poor result).

Our client firms expect the year 2022 to again be a “big year” for consulting.

2. Continued strong growth is expected especially for hot skills, e.g. all things related to “Digital”

Almost all of our client firms have developed and/or continue to develop their knowledge and services offerings, for example relating to the hot topic of “digitalisation”. As is the case with all hot-skills, finding staff with the right qualifications and in the numbers required to be able to successfully deliver such projects remains a key challenge facing all of our clients. 

3. Consulting is in serious competition for talent, e.g. with the new “cool” industries

Furthermore, some incumbent consultants are choosing other industries to work (e.g. FANGs, Fintech, E-Commerce, SAAS, etc.), as is the case with some of the other potential consulting candidates. Interestingly, when exiting the industry, many consultants find that they receive an increase in their pay. This is often paired with a better work-life balance. However, these advantages often come at the expense of reduced and slower career progression opportunities, and a lower salary at the more senior career levels. 

In summary, we continue to find that consulting firms still pay more than what is offered in most other industries, especially when comparing starting salaries and/or starting post-graduate salaries. Additional advantages offered by the consulting industry are the rapid career advancement opportunities, along with which comes strong and continued increases in salaries.

4. The market for skilled labour is getting even tighter

Consulting’s continued growth has created a very tight market for skilled labour, which in consequence is augmented by:

  • The strong growth in consulting across most industries and services lines;
  • The strong growth of IT and Digital;
  • A lack of experienced staff, along with the requirement for additional skills;
  • In-industry poaching;
  • Cross-industry alternatives being offered (especially by the FANGs); and
  • Changes in the demands being made by consultants, e.g. better work-life balance at the Senior levels and/or fewer people wanting to work 60+ hours per week;
  • Remote or home office work, which has made consulting less attractive to entry-level and more junior positions.

In the short term we believe the market for skilled labour is getting even tighter, a situation that is best described by a client’s quote: “We are in a serious war for talent”.

5. Consultant salaries continue to grow, again

In the past 15 years, salaries have risen more or less consistently in all but two years. Historically, salaries climbed between 2% and 5% in mature markets (this was in part significantly higher in developing markets and/or for specific lines of business and/or “hot-skills”).

Given the pressures mentioned, the increases being signalled into 2022 were closer to +10%.

6. Within firms, the spread in salaries being offered is getting wider

Unfortunately, we have seen another trend, namely that firms have started to increase the spreads in pay being offered to people in the same position and doing the same work. In the purest of cases, a firm would pay the exact same to all of their people in the same position and sub-levels mandated to do the same work. This uniform approach is becoming less of the norm. As firms struggle to recruit enough of the best people, firms feel they are being forced to adjust salaries to meet the demands of the most recent hires. I would like to quote the example of a client firm recruiting Digital Consultants from three talent pools:

“We recruit from IT firms (and pay them the lowest), from other consulting firms (and pay them using our normal scale), as well as from advertising firms (and pay them whatever they want). Eventually, we will be faced with fixing this mess; but today, however, we can’t even hire enough people.”

7. Internationally, salaries continue to be driven by local markets

Although we often see similarities in the remuneration of Partners across the globe, we continue to see large variations in the salaries of consultants in different country markets.

We have been able to calculate an “R-Factor” of over 97% when relating consulting starting salaries to GDP per capital and the maturity of the local consulting market.

As might be expected the highest salaries are to be found in countries like the USA, which in itself represents over 45% of the world’s consulting business. Conversely, the lowest salaries are found in developing countries, which often have much smaller local consulting markets.

The consulting industry is characterised by very rapid promotions, and firms typically offer salary increases of 15% to 25% to staff being promoted from one career grade to the next, e.g. from Associate to Manager in the mature countries (and potentially higher in the more developing countries). The amount of the increase could even be significantly higher when it comes to the pure strategy consulting firms, when being promoted from Analyst to Associate, for example, these firms often double the base salary of the incumbent.

8. More “city-based” data is being requested

With respect to our benchmarking reports more and more clients are requesting even further delineation, asking for data based on cities (i.e. city-based data cuts) as opposed to country-based cuts of the data. The background here focuses on the regional distribution of the cost of labour.

This may be a good investment in the major and mature markets, however, seems to be less helpful for developing markets, where we find clients have to “take what they can get at the cost demanded”. Furthermore, we have found that although cost of living is an important reference point when comparing salaries, this is largely an influencing factor for low-end salaries. For higher salaries, the strongest influencing factor is instead what we call the cost of labour. 

9. The consulting industry’s exit rates have reached all-time highs

With high demand for services yet travel to client sites increasingly difficult, consultant utilisation rates have risen to historical highs. Taken alongside the fact that many consulting firms are understaffed already, we have witnessed an unprecedented rate of exits from the industry in 2021. This has made a tough situation worse, increasing pressure on the consultants that remain in their jobs as well as their employing firms as they try to deliver the projects already sold and/or try to staff projects they fully expect to sell.

This new pressure can now be added to the list of classical complaints when referring to life in consulting: work-life balance, career path, compensation, ‘sales pressure’, etc.

10. Although salary remains important, it is far from everything

Recruitment remains difficult and our client firms have told us that new recruits often seem to take a “good” salary for granted. Consultancies have thus given increased attention to the non-cash side of compensation, including for example “Work-Life-Balance”, PTO, and training.

11. “Work-Life-Balance” is defined differently by staff in junior and senior roles

Consulting has historically offered a poor work-life balance. Betterments are difficult to implement when consultants are expected to work between 60 to 80 hours per week and when many of these hours are on-site with the client, who may be located far from the home office.

However, as a result of the COVID Pandemic we have found that the definition of “life-work-balance” is seen very differently by consultants depending on their level of seniority:

  • Staff in the more senior roles, tend to have families and have worked the “60 to 80 hours per week” for 6 or more years. They do see that the work-life balance in consulting is very taxing.
  • However, staff in the more junior positions, often single or without families, find the fast-paced lifestyle to be very exciting and actually desired. Some may even consider leaving consulting as with the COVID instilled travel constraints they are not getting what they believe to have purchased when entering the industry. 

 12. Firms have thus started to offer increased PTO

Firms have thus started to offer increased PTO. In the past, this was often purely notional because due to work constraints the consultants often could not find the time to go on vacation anyway. Now, many firms offer increased PTO, often starting with 20 or more days in the USA (25 or more in Europe), with some firms literally “forcing” their consultants to take these days off.

13. Firms are offering more, e.g. enhanced training programmes

Our client firms seem to be hiring aggressively. However, even those firms that have enough staff, seem to be faced with a shortage of staff with specific skills and/or expertise. Instead of fighting with competitors over a small or limited pool of skilled talented potential candidates, firms are considering how to up-skill their existing employees and offering enhanced training programmes.

14. Finding the right mix of “home office” vs. “in-office” vs. on “client” premises

Between 2020 and 2021, our client firms’ reactions to the COVID pandemic have shown that consultants can continue to very successfully provide their services virtually. In the meantime, as of March 2022, many countries have started to ease lockdowns and firms have started to reduce COVID related restrictions. A major question facing our client firms is what is considered to be the new working “normal”? Furthermore, how should firms retransition to the new “normal.” For example, many clients are trying to find the “right mix” for the future between work being completed from home, from the office or on the premises of the client.

15. Excellent candidates can still be found, but they expect more from their employers

However, consulting jobs remain prestigious and good candidates are to be found.

To help offset this increase in demand, firms have started to interview and hire candidates from non-target schools.

One trend we have seen has been the requirement for additional and/or more specialist skills, especially in digital and the integration of IT with classical management consulting.

The traditional career path starting from “Analyst” and eventually growing into Partnership over the various stages of development had already been upheaved, but now more and more firms are looking to hire experienced consultants across all levels including the most senior ones. 

16. Alternative thoughts are being made on “off-shoring”

A number of clients have mentioned strengthening their product offering by creating and/or building hubs (e.g. technology centres), which are founded and located in markets where the recruitment of staff with the respective skills are more easily found, very often off-shore.

Interestingly, since the war in Ukraine, we have heard from clients wanting to reverse this trend to rather “always ensure enough” on- or near-shore consulting, administrative and production capacity.

This seems particularly relevant for IT firms, which have made a heavy investment in offshore highly trained IT personnel (and or services centres). But, also generally, the political (and economical) instability we see around the globe may lead to such considerations not only with regard to Ukraine.

17. Consulting profit margins may be at risk

We expect to eventually see pressures on project billing rates and profit margins may be at risk, as the market for consulting starts to see alternatives to the accepted, traditional model of consulting:

  • Foremost to mention are the changes in client behaviour when purchasing consulting services, e.g. demanding greater cost transparency, while increasing expectations with respect to faster response, tighter timelines and more deliverables and in some cases expecting performance / results-based billing versus traditional time and material model of pricing.
  • Also, we have seen a continued strong trend to an expansion of the services offering through increased specialisation. Almost all firm types (Accounting-based, IT Operations, and SCF companies) continue to build specialist operations to allow them to more efficiently offer services both down (IT code writing), up (Digital Strategy) and across (Agency work) the value chain. Interestingly, this means firms that would normally not meet in the market, are increasingly becoming direct competitors.
  • Additionally, we have seen strong growth in the number of “In-House” consulting organisations, which typically also reduce the cost of consulting to clients.
  • Furthermore, as the different firm types (financial services, IT, operations, strategy) continue their focus on the same clients while offering similar products and services, we have seen serious growth in the number of firms our clients considered to be “competitors”.

18. M&A activity continues to be significant. without four points of focus

The consulting industry has again seen significant M&A activity focussed on the following four points:

  • Large firms purchasing smaller and/or boutique firms to access markets and/or qualified staff, e.g. Business Integration Partner’s take-over of Chaucer (UK) and Monticello Consulting (USA), BTS and Bates Communications.
  • Larger firms acquire firms in specialist markets to augment their service offering, e.g. AlixPartners and Galt, Wipro and Capco.
  • Strategy firms purchase specialist players as the strategy firms continue to move further downstream, e.g. Oliver Wyman’s purchase of Huron’s Life Sciences practice.
  • Out of industry firms moving into or strengthening their positioning in the consulting industry, e.g. Vertex, Wood Mackenzie, or WSP.

Should you have any further questions or would like to receive more detailed information on this topic, please reach out to us at

The information and insights presented in this document were gathered by the entire Vencon Research Team based on our market research and discussions with clients: it was summarised by Erwin Harbauer.

Erwin Harbauer is a Partner at and co-founder of Vencon Research International.

Vencon Research International is a leading provider of compensation benchmarking and research as well as of compensation and performance-related consulting services for professional service firms, especially for audit and tax, management consulting, and IT services firms. Vencon Research International provides services to a full range of clients in more than 75 countries worldwide and is proud to name more than 85% of the world’s major consulting and/or professional services firms its clients.