Consulting Firms Freeze Salaries & Delay Bringing In 2023 MBAs

2022 was a good year for MBAs and undergraduates seeking work in the consulting industry.

2023 has been even better — on paper.

Employment reports published so far this fall by the major business schools in the United States have shown a marked increase in the placement and payment for consulting-bound MBAs. But as The Financial Times reported Sunday (November 5), two of the MBB firms — McKinsey and Boston Consulting Group — are among those holding pay at last year’s levels as growth in the sector slows.

The post-pandemic consulting gold rush is over, FT reports, citing analysts who say stiff competition for positions is a shift from the “war for talent” of the years immediately following the crash of coronavirus. The result, as Poets&Quants has reported (see here and here): Some top firms have frozen starting salaries at 2022 levels, and several have asked their 2023 hires to push back their start dates to next year.

FLIGHT FROM TECH INDUSTRY ONE CAUSE OF TIGHTER CONSULTING MARKET

FT attributes the data in its story to Management Consulted, which has covered pay for consulting hires for more than 15 years, reporting that McKinsey and Bain pay starting base salaries of $192,000 for MBAs and $112,000 for bachelor’s degree holders, while BCG pays slightly less. However, pay for the more fortunate new employees of those elite firms can balloon past $250K or more for MBAs and $140K for undergrads through signing and performance bonuses.

Namaan Mian, chief operating officer of Management Consulted, tells FT that he has seen no firm raising base salaries. “It’s the toughest, most competitive market I have seen in 10 years. You’ve got fewer open spots this year and more people applying for those spots because of the flight to safety from investment banking and tech.”

FT also quotes Fiona Czerniawska, chief executive of Source Global Research, a consulting sector analyst, saying that persistent inflationary pressures are driving down the value of whatever positions new consultants secure for 2024. She says firms, “faced with declining customer demand in some areas of their business,” as well as pricing pressures, “are trying to shore up profits by curtailing hiring and holding down pay.”

“There’s a worry that a market that got considerably softer over the last 18 to 24 months will get softer again before it starts recovering,” Czerniawska says. “Firms want to make sure that their partners are retained by having suitably high profits, and one way to do that is to put a brake on salary inflation and to stop starting salaries going up in a spiral like the last year or two.”

MBA CONSULTING PLACEMENT & SALARIES UP AT MULTIPLE B-SCHOOLS

The consulting salary numbers provided to FT comport with what the top U.S. B-schools have declared thus far in their 2023 employment reports. But the sector placement rates — in a few cases, at school-record levels — obscure the reported reality of mass deferments.

At Chicago Booth School of Business, consulting drew 38.6% of the 2023 MBA class, up from 35.5%, and industry starting salaries grew to a median of $192K from $175K. At Michigan Ross School of Business, consulting was up to a school-record 42% from 35%, and the median industry salary rose to $190K from $175K.

At Virginia Darden School of Business, consulting was once again the top industry in 2023, with nearly half the class (46.3%) going into the sector, up from 43.5% last year. Darden has yet to release its full employment report showing the level of 2023 salaries by industry. At Georgetown McDonough School of Business, consulting grew to 35% from 29%, and median consulting salaries climbed modestly to $175K from $170K.

‘COMMON FOR EMPLOYERS … TO HOLD STEADY ON STARTING SALARIES’

At NYU Stern School of Business, a consulting boom saw the sector draw an incredible 41.9% of the MBA Class of 2023, up more than 10 percentage points from 31.2% in 2022 and another school record. Median starting pay for Stern consultants rose to $188K from $175K.

The top five employers of Stern MBAs in 2023 were consulting firms, led by McKinsey with 24 hires —though like all schools Stern does not disclose information on deferred starts, even as it gets granular in other aspects of job offers and acceptances.

Brian Ruggiero, associate dean for careers at NYU Stern, says the freezing of salaries that Stern grads seem to have largely evaded would not, in itself, be cause for alarm.

“It’s common for employers in any industry to hold steady on starting salaries,” Ruggiero tells P&Q in response to the FT story. “Consulting firms continue to be competitively positioned at Stern, and student demand remains strong.”

At Duke Fuqua School of Business, consulting grew to an unprecedented 43% of the latest MBA class, up from 36%, while median salary for the industry climbed to $190K from $175K. Consulting has accounted for 30% or more of every graduating MBA class at Fuqua since at least 2015; this year, the MBB firms made 83 MBA hires, up from 70 last year: 32 at BCG, 30 at McKinsey, and 21 and Bain.

‘AN UNUSUAL & SOMETIMES BUMPY RIDE’

Even as her school set a new record for consulting jobs won, Sheryle Dirks, associate dean for career management, hinted at the tough landscape for consultants in her forward to the 2023 Fuqua employment report.

“In recent years, the global economy has been so unpredictable that it’s made for an unusual and sometimes bumpy ride,” she writes, adding that “economic headwinds” had “delayed some start dates.” In a blog announcing the report’s release, she added that the school had lower overall placement rates in 2023 than 2022, but noted that “this isn’t surprising as companies have been more conservative in recruiting and hiring, with later offers as the natural result. Another impact of the current market is that some graduates had the start dates of their accepted offers pushed back, an approach employers may sometimes find necessary to retain top talent while adapting to reduced work volume.”

Some with delayed start dates “are using their time and skills to support startups, nonprofits, and social enterprises,” Dirks added.

“I am proud of the Class of 2023 for pursuing roles that will fulfill their personal and professional goals, even when faced with a challenging job market which often means a longer and more difficult search” she wrote. “Amid such economic uncertainty, the outcomes are a testament not only to their talent but to their commitment and resilience as well.”

DON’T MISS WHAT THE CONSULTING HIRING DELAYS MEAN FOR THE MBA CLASS OF 2023 and ANOTHER MAJOR CONSULTING FIRM DELAYS START DATES FOR ITS MBA HIRES