A consulting market - Realities, myths and analysis (IV)
This feature is a continuation of an earlier publication on realities, myths and analysis of the consulting market. Discussions in the previous write-up ended on market analysis of firms in the consulting industry.
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Fees and rates
Due to competitive reasons, fees charged by consultants are often not disclosed; the fees are often shrouded in secrecy. This notwithstanding, fees charged by consultants vary from one client to another, and from one geographic region to another.
For instance, in the United Kingdom, an interim operational level consultant may charge £50 per hour while a consultant working with a leading strategy consulting firm may charge £300 or more per hour.
However, in Ghana, the rates may differ; in Ghana, consultants may not charge clients on an hourly basis; fees to be paid by a client may be determined as a percentage (usually between one per cent and five per cent) of the total amount to be earned by the client.
Where the project has no direct monetary involvement, the consultant’s fee may be determined by the volume of work presented by the client.
An outline of fees charged by various firms in the consulting industry is presented in Figure 4. As depicted in Figure 4 below, firms in the consulting industry can be grouped into global strategy consulting firms, strategy boutiques, global functional specialists, the Big Four, national or regional functional specialists, small and mid-sized technology players, mid-sized global accountants, global technology firms and independent contractors (Consultancy.uk, n.d.).
Global strategy consulting firms: This category includes firms such as Boston Consulting Group, Bain and Company, Roland Berger, A.T. Kearney, and McKinsey and Company, among others. Firms in this category charge the highest consulting rates. McKinsey and Company is the largest firm with an estimated number of 17,000 employees.
High-end consulting firms
Strategy boutiques: Firms in this category charge the second highest consulting rates. They include high-end consulting firms with a national or regional focus or both.
Global functional specialists: Examples of consulting firms in this category include Navigant, FTI Consulting, Hay Group, Willis Towers Watson and Mercer.
Hay Group, Willis Towers Watson and Mercer specialise in the area of human resource. Navigant and FTI Consulting provide expertise advice in the area of finance. It is believed each consulting firm rakes in between $300,000 and $400,000 per year in terms of revenue.
The Big Four: Firms in this category include Pricewaterhouse Coopers, KPMG, Ernst and Young, and Deloitte and Touche.
These firms charge competitive fees for their consulting services. Their fees are usually within the same range. Generally, higher fees are charged for strategic management advisory services while lower fees are charged for operation-related advisory services.
National or regional functional specialists: Key factors such as track record, service portfolio, reputation and functional focus, among others, influence the determination of fee structure for firms in this category.
Fees charged by consulting firms in this category are not distinct from those charged by their larger global counterparts and the Big Four consulting firms mentioned earlier.
Small and mid-sized technology players: Although firms in this bracket vary in size, they charge comparable fees in the industry.
Firms in this category range from small companies that employ about 10 employees to mid-sized companies that employ thousands of employees.
Mid-sized global accountants: Firms in this group provide accounting and tax services as well as corporate finance and other consulting services. The term is used to describe the top 20 global professional services providers.
Rates charged by firms in this category are higher than those charged by technology experts. The fee disparity could be attributed to the provision of additional services by the former.
Global technology firms: Companies in this category provide technology-related services to their clients. Some notable firms in this category include Atos, Accenture, Capgemini and CGI.
Like the other categories, management advisory services performed by companies in this category are costly.
Fees charged by firms in this group are comparable to those charged by the Big Four and functional specialists.
Independent contractors: This is arguably the largest category in the consulting industry. It comprises active, self-employed consultants in the consulting industry. Annual earnings in this category range from $50,000 for operation consultants to $400,000 and more for executive consultants.
With the exception of the public sector, there is no ceiling on how much a consultant could charge for a rendered service. The consultant could use prevailing economic conditions to determine the fee to be charged.
The consultant could assess the financial strength of a client and use that as a basis for determining fees to be charged. This approach may very helpful when the client is not financially sound enough to afford higher fees.
Ebenezer M. Ashley (PhD)
Lead Consultant/CEO
Eben Consultancy
Fellow & Council
Member, ICEG
Email: [email protected]
Website: www.ebenezerashley.com
