High Turnover Rate: The curse that cannot be broken in the consulting industry?

Dans le cadre de leur spécialisation dans le secteur du conseil, les étudiants d’Audencia participent à un concours d’articles portant sur les enjeux liés à l’organisation des cabinets de conseil et aux carrières dans ce domaine. Chaque semestre, le sujet est différent, les étudiants sont invités à développer un point de vue réflexif sur les tendances du secteur, en lien avec les apports du cours. Les étudiants sont appelés à trouver un angle intéressant et original sur le thème qui leur est imposé, à interviewer un ou plusieurs professionnels du conseil sur ce sujet et à en tirer des conclusions argumentées pour y porter un regard nouveau.

“Staff turnover is a consequence of how a company works” - PwC’s HR Consulting team

The high turnover rate in the consulting industry has always been on the list. According to surveys, the average turnover rate among European consulting companies from April 2020 to March 2021 was 13.25%[1]. This number continues to increase as the COVID-19 pandemic impacts the economy. More than a third of its staff, or 2,700 employees, resigned from consulting giant Ernst & Young (EY) in the year to March 2022, a turnover rate that far exceeded the firm's top four rivals and the overall business average (over the same period) . A quarter of employees quit) period[2]. Overall, employee turnover in the consulting industry ranges from 15% to 20% per year, with people staying on average for five to six years[3].

Behind the high turnover rate is both the choice of the consulting industry and the choice of consultants. On the one hand, it comes from involuntary churn, "Up or out", which is usually considered to be a sign of the pragmatic business style of the consulting industry, that is, employees either compete for promotion or are eliminated [3] [4], and employees cannot stay for a long time at one level. On the other hand, it comes from organic churn, which includes both high-intensity work demands and the imbalance of physiological or psychological costs that lead to consultants voluntarily quitting, and consultants using the company's resources to choose other attractive exit opportunities [4]. Among them, the imbalance problem is the main reason. Dissatisfaction with the manager, feeling not valued, low salary, lack of adequate benefits, and desire for work-life balance are the main reasons [5].

“When I joined Bain & Co after my MBA, I noticed a lot of people of my age group joined the firm at the same time, but they all vanished within a year or two”, says Prachi Bhardwaj, a senior consultant at Mastercard.

Of course, the changes of the times have also deeply affected people's behavior and concepts. Today, most people below the senior manager level in consulting firms are Millennials. While there are many stereotypes surrounding Millennials, research does show that they are more likely to stick with an employer for a few years rather than decades. There are many factors at play. For example, younger generations have fewer financial obligations than before. There are fewer millennial homeowners, and people are having kids later in their careers. Older generations were often happy to work at a consulting firm for decades, but that's not the case for today's junior employees. Most people plan to stay with one company for only a few years [7].

Prachi continues, “And you know what now I use to see their Linkedin posts that some of them have joined some business school abroad after working in the firm for only 1-2 years or either they have joined some other big consulting firm”.
Generally speaking, a certain amount of employee turnover is inevitable, natural, and should not be viewed as a negative phenomenon. Its level is affected by various factors, such as company size and environment, the industry and region in which the company operates, and macroeconomic indicators such as the unemployment rate. Under normal circumstances, an employee turnover rate of less than 10%-12% is completely acceptable to the company [6]. However, an excessively high turnover rate in the consulting industry can bring many negative problems to the company. For example, the loss of customer relationships, the reduction of team cohesion, the loss of training costs, etc. [5].The curse of high turnover in consulting firms not only disrupts operations but also undermines efforts to build trust and credibility with clients.

In order to reduce the turnover rate and retain talents, the main solutions currently given by most consulting companies are promotion, training and monetary rewards [4].
Promotion is broader here. Since not everyone gets promoted, recognizing employee achievements is not only a primary form of motivation and retention strategy, but also the only way for consultants to keep their jobs.

Prachi said, “When I was in Bain & Co, I was a part of an apprenticeship model, so I got the opportunity to learn directly from my senior leaders. That training is designed by our own learning and development team which specializes in the most innovative tools and methods. I guess this was the biggest reason I went for one more year at Bain & Co. and still I admire that training phase is my biggest learning or a takeaway at Bain & Co.”

The training is mainly focused on leadership. Giving young people ample opportunities for development, the “Big Four” realized the value of early leadership training when looking for ways to reduce the turnover rate of junior employees, and began to hold regular seminars to give junior employees time to formulate career plans and provide coaching or Mentoring Program (Counseling). For example, PwC launched the Discover program, a leadership retreat for junior employees who have just been promoted to their first manager role, where they learn key leadership skills and reflect on their Career goals, strengths and further opportunities.
Monetary incentives are mainly reflected in more rewards for more work. Most consulting firms offer different entry-level salaries for each stage of the promotion model. Above base salary is performance-based pay, which is dependent on performance levels, which are determined by the ratings each employee receives following the promotion process. Therefore, high-performing employees receive higher salaries to retain and encourage high-performing employees. In addition to this, some companies have implemented additional reward programs or provided other monetary incentives for their “at-risk” workforce. Ernst & Young and Deloitte offer discount systems for products and services related to day-to-day needs, and KPMG offers a similar scheme called Work Allowance.

In addition to traditional retention strategies, some consulting companies have begun to develop more advanced methods [4].
First, retain employees through better work-life balance and reskilling. The approach originates from British management consultancy Baringa Partners, which is consistently ranked as one of the best places to work in the UK. Its employee satisfaction rate is as high as 92%, and its turnover rate in 2017 was only 8%. The company uses every opportunity to maximize the potential of its employees and one of its strategies is to give each employee a budget of £300 to spend on anything that promotes their well-being. Employees spent money on music tuition, language courses and sailing qualifications - to name a few. This approach is related to the broader "deal" that many of the younger generation seek. Because they don’t just want a job that pays the bills at the end of the month, they want a lifestyle [7]. Other large consulting firms have introduced similar policies. For example, to improve flexibility and work-life balance, PwC has developed a flexible working plan that allows all employees to fit work with other commitments, such as the ability to travel or further study. Deloitte has taken a similar approach, offering a similar program for entry-level employees called the Work Agile Program, where employees can choose to take extended time off to travel.

Additionally, maintain relationships and tap into the networks of former employees who were not promoted by establishing partnership and alumni programs. EY said, “This is a mutually beneficial relationship that allows alumni to continue to build on the legacy they have created at EY”.

Finally, retain dissatisfied employees by helping them discover themselves to meet their needs. For example, Deloitte has launched a "DCC program" to help employees identify interests and skills that may be better suited elsewhere in the organization. The program features a website with self-assessment tools and one-on-one coaching.
Binding it up, the curse of “High turnover rate” for the consulting industry needs a solution of holistic strategy that depends on the firm’s mission and values. Prioritizing promotion paths, investing in training and providing incentives to consultants are vital approaches to remove or we can say decrease this curse from this industry.

Article by Xiaoyu He, Ayush VARSHNEY

References:
[1]Consulting Point. (2023).The turnover rate change in European consulting firms from 2019 to 2021. https://www.consultingpoint.com/market-information/2021/3/29/regional-attrition-and-tenur
[2]Edmund T. (2024, April 4). Financial Review: EY disputes data showing more than one in three staff quit in a year. Afr.com. https://www.afr.com/companies/professional-services/ey-disputes-data-showing-more-than-one-in-three-staff-quit-in-a-year-20230331-p5cx41
[3]Charles B. (2011, April 20). Financial Times: ‘Up or out’ is part of industry culture. ft.com. https://www.ft.com/content/d42434b2-6b69-11e0-a53e-00144feab49a
[4]Kaiser, J. (2021). Human Resource Management in the Big Four. Turnover in the Consulting Industry.
[5]Chelsea W. (2022, May 20). Why High Talent Turnover Is the Greatest Threat to Your Consulting Firm — And What You Can Do About It. accelo.com. https://www.accelo.com/resources/blog/why-high-talent-turnover-is-the-greatest-threat-to-your-consulting-firm-and-what-you-can-do-about-it/
[6]PwC’s HR Consulting team (2021).Staff turnover is a consequence of how a company works. pwc.com. https://www.pwc.com/sk/en/expert-articles/staff-turnover.html
[7]Consultancy. (2018, December 04).How consulting leaders can tackle the retention problem of juniors. https://www.consultancy.uk/news/19569/how-consulting-leaders-can-tackle-the-retention-problem-of-juniors