Salary Negotiation in Consulting Job Offers

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Question:

I'm happy to report that I received an offer from BCG this week, in no small part due to your program.  What a fantastic holiday gift for me and my family!

One quick question.  Is it considered poor form to try and negotiate salary as a lateral (experienced) hire?

The package I've been offered is certainly generous as a whole, but doesn't each level (I'm coming in as a second year consultant) have a salary band where there's some opportunity to adjust upward from the mean?

Or is it de classe to negotiate with an MBB [Victor's Note: I'm assuming this means McKinsey / Bain / BCG] firm even as a lateral hire?  Any insight would be appreciated, as I am eager to move forward, but I certainly don't want to leave money on the table if it's there.

 

My Reply:

For a Top 3 consulting firm coming out of a degree program, I've never heard of anyone attempting to negotiate salary. I'm not sure that they would if asked, but they certainly would notice if you did.

For a hire out of industry or a lateral hire, I think there is some room to negotiate -- but it doesn't really make that much difference in the end.

I can't speak to how Bain or BCG does, but at McKinsey when I was there, there were two parts to compensation -- salary and maximum performance-based bonus.  There was also a target "total compensation."

So if you were a top performer, there was a specific total compensation the firm wanted you to have. Then to calculate your end of year bonus, they took the total compensation assigned for your performance level minus your salary, and that determined your bonus.

So if you were a lateral hire with a very high salary, your bonus would be smaller so that your total compensation would match someone coming out of a degree program by end of year.

So basically all total compensation variances were pretty much eliminated by end of year.

The main reason for this was some industry hires in some cases had to take a salary cut to come to work for McKinsey.

Since nobody likes doing this, the way McKinsey addressed it was to give that particular new hire a higher salary (and correspondingly lower bonus) -- even though total compensation for the entire peer / performance level group was the same.

I don't know how it worked at BCG, but this was how it worked at McKinsey -- and in practice the impression I got was there was some flexibility if you were making more at your current employer, but generally not much negotiation room if you got a different financial offer from another consulting firm.

So if you showed McKinsey your BCG offer letter, I think their response would be -- that's a great offer from BCG, I think you should take it. (Read: If you can be bought by a $2,000 difference in compensation, we don't want you here.)

If you say, hey I would really like to come to Mckinsey (or in your case BCG), but I'd have to take a pay cut,  pull my kids out of private school, or downgrade my house to do it... then I think you'd get some temporary wiggle room.

By the way, the reason I suspect McKinsey moved to this approach is they have a firm full of people who know how to do math and do financial analysis!

So if anything was unfair, the consultants eventually figured it all out. So in my years at McKinsey, I never heard of a single person ever negotiating an offer, asking for a raise...it was all very standardized, considered very fair, and when one did well, he or she would get financially rewarded for it generally without ever asking for it.

I suspect BCG has a similar kind of process for all the same reasons. If there was some inequity in the process, the smart consultants at BCG can do the math and figure it out.

So bottom line, unless the offer is a big problem or represents a salary decrease, I probably would just leave it alone and trust the system.

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1 comment… add one
  • sri Aug 25, 2014, 3:17 am

    However, there are several companies going with variable pay concept. So, there’s no way negotiating the salary with the current CTC lolz.

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