The Big Three in global consulting–McKinsey, Bain, and the Boston Consulting Group–have always paid among the highest starting salaries to newly minted MBA graduates. For this coming recruiting season, however, all three firms are going to up the ante, rolling out some of the biggest pay rises for new hires in more than two decades.
MBB, as the trio is generally known, will increase starting base salaries for MBA graduates in the U.S. to between $190,000 and $192,000, roughly a 10% jump from $175,000, according to a new report from the Financial Times. Along with the customary $35,000 sign-on bonus, that would bring offers to MBAs to $225,000, though with performance-related bonuses added, first-year MBA compensation could reach a quarter of a million dollars.
The increase is occurring as a tight labor market which has put pressure on the firms to up their game in competing for talent (see Consulting Pay: What MBAs Earned In 2021). Increasingly, private equity firms, hedge firms, and venture capital outfits are paying among the most lucrative starting compensation to MBAs. While base salaries for MBA hires tend to be lower in technology, tech firms are more likely to hand out stock to MBA grads that can more than make up for the salary differences. Banks have also been raising their pay levels, too.
‘A VERY HOT TALENT MARKET’
Keith Bevans, who heads up consultant recruiting at Bain, told the FT that despite warnings of a possible recession in the near term, companies are competing for MBAs in “a very hot talent market. The competition that we’re up against is broader than it’s ever been. We’re meeting people on campus that are interested in big tech, they’re interested in other consulting firms, they’re thinking of starting their own companies or a search fund or they’re looking at going right into private equity.”
“The last time the consulting industry had this level of salary inflation was around the dot.com boom in 1999-2000,” Fiona Czerniawska, chief executive of Source Global Research, a consulting sector analyst, told the FT. “Increasing salaries remain the most immediate and effective lever any professional service firm can pull if it wants to attract and retain high-caliber people.”
Her firm has found that one in five consulting firms have had to turn down work because they lacked staff with the right skills. That’s a big turnabout from 2020 when the pandemic caused a momentary slowdown in consulting. Since then, however, demand for consulting help has soared as corporate clients seek assistance with their digital transformations and efforts to adopt more sustainable business practices.
A MILLION APPLICATIONS FOR 10,000 JOBS
All of these top-tier firms, of course, actively recruit MBAs from a select group of elite schools. The Boston Consulting Group recently expanded its list of target MBA programs to 37 around the world (see BCG Expands Its Target List For MBA Recruits). McKinsey’s previously published list of MBA recruitment targets was limited to only 17 business schools while Bain has the most expansive list of 40 top MBA programs. Even before this latest round of pay increases, MBA pay has been rising steadily in recent years. MBAs who graduated from Stanford Graduate School of Business last year achieved a record starting compensation of $231,700 (see Stanford’s MBA employment report). Finance, which attracts the largest group of Stanford MBAs, outpaced all industries with the highest pay: a median salary of $175,000 and an average of $182,706, led by the as-usual astronomical sums earned by MBAs in private equity ($200,667 average) and venture capital ($197,143).
While not directly responding to the report, McKinsey & Co. released a statement to the British newspaper. “While compensation remains important, our research shows that to attract, retain and develop talented colleagues, considerations such as clear career growth opportunities, flexibility and purpose matter just as much,” according to the statement. In a typical year, McKinsey has said it receives roughly one million applications for 10,000 jobs. After Amazon.com, which reportedly hires an estimated 1,000 new MBA grads a year, McKinsey is the largest recruiter of top MBA talent.
Pay is not only rising for MBA hires; it is also going up for undergraduate hires who land analyst positions at MBB. According to the report, base salaries for undergraduate hires joining Bain and McKinsey in the U.S. will increase by 12% to $112,000 a year.
All three firms declined to comment on their pay offers. It’s also important to note that MBA pay in the U.S. tends to be among the highest in the world. When these firms hire MBAs and undergraduates in other regions of the world, starting pay can be significantly lower.
At INSEAD Business School, for example, MBAs hired into management consulting reported median salaries of only $65,200 in Brazil and $116,000 in Singapore, but $165,000 in the U.S. and $154,000 in Switzerland.