There is no doubt that management consultants are well paid. Consulting salaries at top firms are some of the highest in any sector, with generous bonus schemes to boot.
Certainly, it’s a key reason why consulting is chosen as a career in the first instance.
That being said, management consulting, especially at the top end, is an incredibly gruelling profession, with staggeringly long hours and frequently taking individuals away from their families on far-flung projects.
With these downsides, it is only natural and human that a consultant will want to be compensated as well as possible for these very difficult working conditions.
However, even within the same firm in the same country, the salary paid for precisely the same role can vary significantly. On top of this, a number of factors can vary which affect how much real-terms wealth that salary actually translates into. That is, the same amount of money will go further in certain areas than in others.
As such, if you find yourself having to choose between the office at which you are based (and thus paid from), there are some important factors which you should be considering.
Even if you make the decision based on other considerations, you wouldn’t be a good consultant if you didn’t at least take notice of all the relevant variables in play.
Let’s take a closer look…
Salary vs Cost of Living
Salaries will vary with location and you should consider this when you are deciding where to work. Crucially, this is particularly important as differentials in salary will not always track with local living costs.
In particular, London has especially low salaries as compared to that city’s very high cost of living.
If you are happy to live in a less major city, you will often enjoy a much more favourable ratio of salary to living costs, resulting in a notably higher standard of life. You can trade in the one bed apartment in London for a five-bed house in Ohio!
Of course, especially if you are younger, you might judge that the costs of living in the big city are a price worth paying for a great social life etc. However, for older consultants with spouses and families, this calculation can obviously change entirely.
Tax rates can vary significantly both within and between countries. For example, a consultant in the Dubai office will be paying a great deal less tax than in the Munich office.
However, this then also needs to be balanced against both the salary and the cost of living in both locations.
Our Dubai consultant will thus earn more and pay less tax than a colleague doing the same job in the Munich office – but will very likely have significantly higher costs of living that their German peer.
With multiple variables in play, it can be hard to establish which option is optimal.
Office Choice Conditions Exit Opportunities
The gruesome nature of management consulting makes it one of the leading jobs where there is mass exodus. But due to lack of any other opportunities, many people join in to enhance their chances of securing good jobs with better working conditions.
When choosing a company to join, there are some significant differences in exit opportunities between the MBB firms that you should look at, considering your chances of breaking into other industries.
If you want to use consulting as a stepping stone to finance or management, you need to look into the consulting firm’s strength in terms of network in these industries. Also, the geographical influence of these companies varies. So, you should do a Linkedin check of alumni of the sectors and geographical areas you aim to work in. Also, check office sizes in your desired cities before making any decision.
While many exit opportunities exist, they are not manna. You can only earn them. And so, exit should be planned in advance, by leveraging on consulting experience to move into a certain sector. That’s why you need to prioritise some consulting firm and/or office locations when submitting your applications.
Nonetheless, not all exits are voluntary. Most consulting firms operate an “up-or-out” policy. So, if your efforts are not good enough to warrant a promotion, instead of remaining at the same level, the firm will let you loose.
The annual salary raise in the consulting world is fairly big to help retain experienced high-level managers. Still, most of them leave due to the high demand from other industries.
Bonus Tip: Bonuses
Some applicants let their choice of firm or office be swung by the promise of one-time signing or relocation bonuses. This is especially the case with recent graduates who have been living on a shoestring for years and jump at the novel chance of having money in their pockets.
However, making decisions based purely on these very short term payoffs is totally sub-optimal in terms of your total, longer-term earnings. Signing bonuses and the like are nice perks, but they should be ignored in decisions unless you are genuinely broke and need the money to relocate etc.
The factors we have identified above will have a much larger effect on your absolute and real-terms take-home pay. More importantly still, so too will the details of annual bonuses, which will both likely be worth more than a signing bonus in year one, and then also continue to recur in every subsequent year (assuming you perform well!).
Of course, nobody should be taking any job based purely on the remuneration.
Management consulting, in particular, is sufficiently harsh that those without a genuine enjoyment of the work will soon find themselves leaving the profession, unable to cope with their day-to-day.
That being said, if you are committed to consulting but flexible on where you are based, your personal finances will benefit significantly from considering the factors we have discussed here.