January 28, 2013

Will a consulting firm pay me what I’m worth?

Filed under: Making money, Q&A, Readers' Forum, Salary

In the January 29, 2013 Ask The Headhunter Newsletter, an underpaid consultant keeps trying to get more raises:

I am a computer consultant working at a company that assigns me to work at other companies. My salary is less than average in the region for people with comparable skills. I went to my boss and got an increase that’s still less than I’m worth. I think they just tossed me a bone to quiet me.

I like this company even though they’re underpaying me. What else can I do, apart from getting another offer and proving to them that the market values me more than they do?

Nick’s Reply

pay-me-moreFirst, if you’re relying on salay surveys, know when to fold them. Generalized surveys are okay to give you an idea of salaries in a particular field, but they are not a good place to start negotiating your own salary.

I would not dangle another company’s offer in front of your boss unless you’re absolutely ready to take that offer. I’ve seen many companies usher people straight out the door for doing that. (It’s not clear whether you did that anyway, or whether you just asked for a raise on your merits. I hope it was the latter.)

Your employer has already agreed to pay you what it thinks you’re worth, and that doesn’t seem to match what you (and the market) think you’re worth. I don’t think it would be wise to approach management again. My guess is that they don’t really care. Without knocking consulting companies in general, it’s my belief that many of these “meta employers” aren’t as motivated as regular employers to treat employees equitably. Unless they’re one of the exceptional firms out there, they may view employees as a commodity.

Perhaps more important than figuring out how to get more money out of this employer is deciding how you’ll handle the next one. Consider How to decide how much you want, and be ready to ask for it before you accept your next job.

Consulting firms are accustomed to pretty high levels of employee turnover, and they’ve got mechanisms for dealing with that. They may pay decently to bring you aboard, then keep your raises low while your market value goes up until you leave. In the interim, they enjoy higher billing rates and increased profits while you decide whether to get up and go. Then the cycle repeats with the next hire. Of course, some consulting firms demonstrate more integrity. I know this sounds cynical, but remember that the consulting business is incredibly competitive. You are the product, and you can be replaced easily because the firm’s projects and clients come and go in fast cycles. (Read Scott Henty’s excellent Consulting Jobs Primer in the Industry Insider section of my website.)

If you don’t know a better consulting firm to work for, my advice is to seek out a regular employer where the future might be a little more predictable and where the compensation program is more oriented toward holding on to good employees. You might find the culture more to your liking, too. The best companies are grappling with the issue of retention, or how to keep good people.

Needless to say, lots of regular employers don’t demonstrate much integrity, either — and don’t guarantee any more job security than consulting firms do.

If you can’t get satisfaction, move on.

Have you ever worked for a consulting firm that farms you out to other companies on assignment? What are the ins and outs you’ve experienced in that business? What should this reader do next?

: :

22 Comments on “Will a consulting firm pay me what I’m worth?”
By Oliver
January 29, 2013 at 3:15 am

Oh yes. I have worked quite a number of years for these consulting firms, and yes, I was the product they sell to other companies, often at a price much higher than I was paid.

However, before we all go indignant at the situation, at least first understand the value these company provides for their clients, and the value that you, as an employee, get from them.

These companies essentially act as a talent pool for their clients, and having read all about the ineffectiveness of the HR dept of most companies at hiring talent, this service is actually very valuable.

And for you, the employee, the value these company provide you is the wide exposure you get from working in many different projects and many different companies in a short time. Without the stigma of a job hopper attached, nor the stress of frequently changing jobs and employers.

Yes, they are underpaying you, but you are also gaining in terms of exposure and experience. It is for you to decide when the trade is no longer worth it, and if so, it is time to move on. They will NOT be paying you your market value EVER, or they will go out of business FAST, as this is the same as asking a retailer to sell its goods at wholesale price.

By Jim
January 29, 2013 at 5:40 am

This post is definitely pertinent to me and my situation. I left a consulting gig just about a year ago, after spending 3-1/2 years with the same firm and the same client. I will qualify my remarks somewhat. I live in the vast area between Chicago and Denver, and I suspect people (and companies) in this part of the country are different than those in the major cities and the coasts. It’s just something about the Midwest work ethic, self-reliance, etc. that seems so refreshing (I grew up in a major East Coast city and have lived in several places around the country – I can see the difference here). So take what I’m about to say in context.

I had no trouble at all with the firm I worked for. Yes, I did find out what they billed for my services (a mistake on the part of the client), and I was being paid more than 50% of what they were billing for me, and it was pretty close to market rate. In fact, since I left that consulting firm, I actually make a bit less money than I did with them. The firm treated me well, took me to lunch and stopped by the client site on occasion, performed regular reviews (every 6 months – I have yet to have a private employer do that), etc. I understand that the consulting firm had to pay taxes, benefits, overhead, etc. out of what they billed for me, so I have no problem knowing the difference between the billing rate and my pay rate. It’s just business.

My problem was with the client. Though I did a lot for them, and gave them 3-1/2 years of my life, over the last year I was there they went on an on-again/off-again, now we’ll hire you on/now we won’t, roller coaster. They extended my contract first 6 months, then 3 months (twice), then one month at a time. I got sick of not knowing if I was even going to be working one month to the next, so I left. But I’ll repeat – it wasn’t the consulting firm I had a beef with, it was the client.

I guess all I can really say is that if you’re not happy where you are, quit. If you really think you are worth more than they’re paying you, and especially if you can demonstrate that, then exactly why are you staying? There are good firms out there, it seems to me like you’re not involved with one of them.

By Ray
January 29, 2013 at 9:30 am

@Nick

After reading the above reply and listening to another fun podcast from NPR’s planet money team about LeBron James being underpaid (http://www.npr.org/blogs/money/2013/01/25/170176590/at-17-5-million-a-year-lebron-james-is-underpaid), I was wondering for someone new to a position in a company where any discussion of salaries is regarded as fire-able offense, how do I know if I’m “getting hosed?”

You mentioned the “market value” of an employee, but in a company where my Project Managers hid just how much the company is making off of each successful project I deliver, how do I gauge that market value in the first place?

Thanks for another informative response!

By EDR
January 29, 2013 at 10:00 am

Ray,
Have you gone to http://www.glassdoor.com to see if anyone has posted salaries from the company / position you work at?

By Dave
January 29, 2013 at 11:41 am

@Ray,

I agree with EDR. However, I would weary of working for someone/some company that kept this sort of thing tight to the vest. I really wish more places were open to showing their compensation packages and having meaningful metrics (and sticking too them).

By SoundAdvice
January 29, 2013 at 1:19 pm

My impression is that the person posting wants to do what their doing @ the same firm, but for more in return than what they just negotiated. In the simplest terms, you need to decide if the current compensation is a deal breaker for what you do at the firm. Don’t dangle another offer, it doesn’t work.

Don’t negotiate with yourself; point blank – is the compensation adequate or not? And by compensation consider things like, work environment, workload, skills acquired, ability to do more and grow with the firm, etc. You can drive yourself nuts trying to determine what you’re worth compared to surveys, peers, another firm down the street, etc. Numerous variables determine pay ranging from tangible skills, years experience, perception, all the way to being drinking buddies with Management, being his/her son in law, pics from a crazy night in Vegas, etc.

But seriously, if the answer is clear that this place is not suitable pursue other options and start thinking exit strategy. Start your own consultancy, work for a competing consultancy, pursue FTE.

One last thought, the Firm is now paying you more and they are expecting more in return. Yes, I know, in your mind this is just the “going-rate” and they trued-up to market conditions, but I wouldn’t assume that it’s “steady as she goes”, they’re looking to see how you perform. Net, if you do decide to stay show more value in what you do to make that next negotiation round work more to your favor!

By MJ Hazo
January 29, 2013 at 1:32 pm

Nick,

It is incredibly important for people to know how to distinguish between a consultant and an independent contrator. Most people and unfortunately too many who have taken jobs after career changes don’t know the difference or think that it sounds better to be a “consultant.”

Here is the difference, those of us who are professional consultants have professional or MBA educations; have an acknowledge body of work in solving corporate or smaller company problems in recognizing issues; devising strategies to overcome them; wrote incentive and compensation plans and well as corporate logistics to provide important improvements for the client. A professional consultant is not someone who is “obtained” via a consulting firm to do a specific piece of work that normally an employee of the client would have been doing.

Also please note that professional consultants charge $250 to $1000 per hour per week for their time and expertise. If a professional consultant brings in specialists to help solve a problem issue for a client, the consulting firm (or professional) has a binding contract with the client by which the consultant sets the fee for the specialist and then sees that the specialist is paid by billing the client for the services.

We consultants do care about this distinction because a lot of companies, recruiters, and associates are thoroughly confused by the overabundance of so called consultants. As a result even if there has been a contract with a client, too often the situation can deteriorate as the various people at the client assume you are a contractor rather than “management/corporate expert in your field.”

By Ty
January 29, 2013 at 2:19 pm

I’ve recruited for consulting firms, both body shops and management consulting and they basically have the same business model.

Agin:
Your boss may not have any more room to pay you. The business is highly competitive and they may have low balled the gig to get in the door.

The buy low sell high model works against you; you being the low of this equation.

If you have an easily replaceable skill like “html web dev” or “business analyst” you are going to be treated poorly. As the wiseguys say, “It’s not personal, it’s just business.”

For:
As mentioned above consulting resumes usually have much more “wow” in them than full-timers. More exposure to the technical side and more business brand names. Also the intensity of the work impresses potential hiring managers. They only worry that you may be a consulting drone with no personality.

Consulting gigs pay more than full-time, even with the “package” considered. If yours does not why are you consulting?

You have a chance to try new skills right out of the box. If your boss is confident you can do it they will take the chance for the simple reason they can bill more. The salespeople do all the finessing for you.

IF you have highly needed skills or combination of skills consulting is better than full-time. You can corp-to-corp on your own and keep the profits. You’ll know if you’re needed when you have to change your phone number.

====

Either full-time or consulting it is important to be aware that, unless your upbringing was highly dysfunctional, you are not in a “family.”
Also you are not in a “team.” Your co-workers are your competitors.

One final note is that Salary.com and the like are linear; good for pricing a bookkeeper or a plumber but not more complicated jobs. They don’t consider matrices of skills and brand recognition the way many fields work today. For example a developer out of Goldman Sachs may demand a premium (Proof of human frailty). A developer who also knows equity derivatives will demand more.

You need to talk with real people to get the true number. I would suggest putting on a funny nose and glasses and then call firms advertising positions. When they ask how much are you looking for give a high number. After a round of no’s lower it a bit and try again using a different disguise.

By Nick Corcodilos
January 29, 2013 at 2:24 pm

@Ray: I didn’t bring up “market value” – it was part of the question. I don’t believe in market value. I believe in what I am worth to one individual or company that wants me to do work that will help them make more profit. My worth varies among companies and clients. It’s up to me to demonstrate it each time.

I’d suggest a sit-down meeting with the CFO of the business. Ask, How does my job contribute to profitability? If he or she can’t or won’t answer, I’d leave when I can. I’m not saying the CFO should tell you how much profit you generate (he probably doesn’t know, but that’s another story), but that he should discuss how various aspects of your work (and job) relate to the company’s profitability. You can use this, and your own smart guesses, to figure out how you can boost those profits by doing your job more effectively. That “boost” becomes the basis for a discussion about how much you should be paid.

You’ll never get exact numbers on paper, but the discussion will reveal a lot about you, your job, and your employer. Compensation based on profitability becomes a reality when the employer and the employee can work together to boost both!

By Nick Corcodilos
January 29, 2013 at 2:24 pm

I agree with Dave — what’s the big secret about compensation? Why won’t companies discuss it openly?

By Nick Corcodilos
January 29, 2013 at 2:26 pm

@MJ Hazo: Thanks for adding a very important note to my column. Just as the term “headhunter” is thrown around very loosely, so is the term “consultant.” You did a great job disabusing us of erroneous impressions. We’re talking about “contractors” here, not really “consultants.”

By Hank
January 29, 2013 at 2:44 pm

Having been on both sides of the equation on this topic, I believe I can provide a perspective that others may not realize. The key fact frequently left out in the consultant / contractor debate is that from the outset, this individual is predestined to be TEMPORARY. The company has determined a need; this need has been evaluated and the solution is not a FTE hire but a shorter term solution – hence a contractor or consultant. In exchange for these concessions, the hourly rate is frequently HIGHER than a comparative employee in the same company. The logic is that there is no training necessary (frequently an incorrect assumption) and that no benefits are paid (true.) The contracting service may offer benefits in some fashion but that is extraneous to the argument. Thus the net pay to the contractor is significantly less than billed rates. Let’s ignore the overhead of the contracting company itself here.

Therefore, in literally a minute’s notice, a contractor may be terminated for no reason, but frequently due to company finances or that a project is due to end soon.

On the plus side, many contractors take home MORE pay than their full-time counterparts, if one ignores the value of benefits and retirement contributions.

So, to feel all bent out of shape due to a perceived “value” is counterproductive as it is literally the day to day productivity of the client that determines the value. If they are not profitable, contracts are renegotiated or cancelled.

I would offer in opinion that OP should be glad of a position at all – there are many suffering due to severe cutbacks in contractor budgets and policies at many companies from large to small.

By Nick Corcodilos
January 29, 2013 at 6:43 pm

@Hank: You make some very important points about the contracting business. Contracting (aka, “consulting”) firms are in business to make money. They bill for $X, then pay the contractor some % of X less than 100. Usually far less. Still, in some cases, the contractor earns more than he or she would on FT job.

Of course, a FT job usually provides better benefits than the contracting firm does. So the difference in pay washes out. In addition, the contracting job can vanish instantly, as you also point out. So there’s no free lunch.

It boils down to choice: What kind of job do you want, what benefits, what terms?

In this week’s Q&A, someone asserts he’s being paid less than market value, and says he was able to get a boost, though not a big enough one. W have no idea what his value is, and it’s further ocmplicated – as we’ve said – by the fact that he’s working through a consulting (contracting) firm.

My main point to him was, you asked for one boost and got it. You’re not going to get another one. Decide whether you want to stay.

But thanks for the good discussion about the contracting biz. I offered a link to a good article about the business that’s on my website.

By Oliver
January 29, 2013 at 8:54 pm

@Jim You said “They extended my contract first 6 months, then 3 months (twice), then one month at a time. I got sick of not knowing if I was even going to be working one month to the next, so I left.”

I really don’t understand, it should be your boss’s (the consulting firm’s) problem, not your problem. So you really have no need to sweat about it.

From my experience, the consulting firm handling all the trouble of finding clients and getting your time fully booked is the benefit of working for such firm vs being an independent contractor yourself.

I have been in the same boat before, and I really couldn’t care less where I would be working next after this month contract was over! (To the extend I remain confident my boss can find another client for me soon enough so he won’t have to fire me for lack of clients!)

I had one case where client extended the contract a few months at a time which eventually lasted over a couple years. Had another one that the contract ended after only a few months. In both cases, when it’s time to go, I wrapped up my work and handed over to their in-house staff (much to their disappointment), then went on to the next gig.

And of course there were cases where I knew I will be there only for a few weeks or months. No problem. I finished the work then moved on to the next.

Eventually, I only left that firm (with loads and loads of experience under my belt) when I got a much higher paying in-house job elsewhere.

In hindsight, it was a really great deal for someone fresh out of college. I would recommend it to anyone with the energy and initiative to learn whatever is needed to do a job. Not suitable for someone who just want to sit down, do the same thing 8 hours a day, then go home.

By Phil (San Diego)
January 29, 2013 at 9:44 pm

Nick, this situation sounds very familiar. Your advice was spot on.

Regarding the approach for a raise, Machiavelli advised doing all the dirty work in one fell swoop and distributing the blessings bit by bit over time. If a company has recently given a raise, the manager is only going to be annoyed by a second request.

A manager also may be limited by budget constraints. That may well be how the consultant got hired in the first place – their affordability was more relevant than their expertise. Some compensation programs reward managers and executives for keeping costs down, so they are effectively penalized for giving out great reviews that necessitate raises. No raises for you or the team mean a bonus for the manager.

So one might think, that makes me sound like a commodity. Jump on a search engine and look up the term “de-skilling”. When a consulting firm wins a contract they start out with a higher ratio of experienced talent to get the contract established. After that initial period those ratios are substantially ratcheted down.

Talent within a group and across groups is tiered. An experienced consultant is not employed to be a peer among a pool of formidable masters. The majority of workers are novices obtained on the cheap whose compensation comes in the form of OJT. The minority, the experienced talent, serves as the safety net to prevent the inevitable catastrophes that come from rookies loosed on the farm. Rather than enjoying having ascended to a greater expertise within their profession they find that to a large degree they function as remedial trainers and crisis paramedics.

The first year or two of the account is used to prepare the duration of the account. The experienced consultants, in addition to tending their primary goals, are tasked with defining and quantifying team procedures. This is asserted within the context of management being able to establish and measure accountability. Everything is reduced to documented step-by-step procedures which, in theory, a monkey could understand. Once these docs are in place the composition of each team is reorganized to replace experienced consultants with a greater percentage of cheap novices.

We hear quite a bit in the US press about the need for STEM graduates. For students planning careers it might be insightful to find what the numbers needed actually are for each tier of ability. It could be that some capabilities endure a serious shakeout mid-career, with former IT specialists tumbling into real estate, retail or the hospitality industry instead of proceeding up into the upper half of that pyramid. Rookie talent is America’s own “best shore”.

By Helen ODonnell
January 30, 2013 at 10:45 am

Just had a disastrous experience with a well known financial contracting agency.

I was placed in a very small office(30 people) of a global company to replace a Staff Accountant who I later found out had walked out with no notice. A previous temp had been there for 2 weeks, been billed at a much higher rate, and hadn’t worked out due to her low skill level.

There was absolutely nothing to go by to do the job – no procedural manual, no monthly schedule, no chart of accounts, etc. The remaining Senior Accountant who had been covering for the Staff Accountant, HR and two Office Managers for six months wouldn’t talk to me. She wouldn’t give me any paper or office supplies, so I brought my own. Three weeks into the job she gave her notice. One month later the VP of Finance (the only person left other than me) was let go.

I stretched myself every which way to catch things up, correct errors created by the prior temp, stay on top of the revenue and payables, and do the month-end close and reporting with little to go on.

A 40 hour/week job, which should have allowed me time to be on the job market, immediately went to 50 hours plus Saturdays.

A new team was brought on, who had apparently already been in the works. The new Finance Director wouldn’t give me any contact information. As soon as I trained and turned over to the new team as much as I knew, I was excluded from meetings, left off distribution lists, and emails. I was moved downstairs away from the finance group and was given copying and scanning to do with no accounting. I was treated as a second-class citizen in this tiny office.

The two Office Managers (who had been working with me for three months) were told not to talk to me. I was told not to talk to the VP of Finance who was still on board and my boss, and who was the only one who knew anything at all about the functioning of the finance department.

The recruiting company was aware of this for the whole four months I was there and did nothing to intervene. Their primary goal is to keep the money rolling in.

When I accepted the position it was for three months, so I could continue my job search. The new finance team wanted to keep me on indefinitely as a backup. This would have left me in a long-term unbenefited position, which now included no accounting. But if I left, I would have ‘quit’ and wouldn’t be able to resume collecting unemployment.

I proposed an agreement, which was supported by the recruiter, for how to go forward. It clarified my role and responsibilities, set an end date and offered and requested two weeks notice if I found a job. The manager supposedly agreed to this, but nothing changed.

Two days later, the day after Christmas, I asked to work from home during a snow/ice storm. The company had a very liberal policy about this. Other people were working from home that day, and his own team had left to work from home the day before Christmas.

The new manager said no. When the recruiter called him about it he ended the assignment, saying he had already answered that question.

So I was let go with no notice. The contract agency said I had quit (because I shouldn’t have asked the question and I should have known it would irritate him) and they would contest the unemployment. I had gotten no valuable experience there and now had no references.

The new manager never signed my final time card. I followed up for two weeks and finally told them that if they didn’t pay me the next day I was going to call the Department of Labor. The recruiter later told me that I had threatened them and this was unforgivable.

All this from a well-know big-name financial contract agency.

By Lucille
January 30, 2013 at 11:00 am

@Helen,
Next time quit! Don’t take this crap from anyone.

By Hank
January 30, 2013 at 5:24 pm

@Helen,

The contracting company’s behavior was petty, unprofessional and if indeed as you describe, bordering on illegal. I would also have given notice in the first round of abuse. However, different people have there reasons for sticking in there so I would advise you in these cases to liberally use what I call the “CYA email” – essentially documenting every discussion, every phone call, every email (you encounter) and every fact you discover. Basically it goes like this: “Per our recent (discussion/ phone call/ email receipt) please note that I understand your direction to be the following – 1. x 2. y and 3. z. Upon completion of these actions you agreed that you would a. , b. then c. I agree to your direction and wil perform these actions.”

NOW, send this to the individual involved, their boss, your contracting agency contact and the Chief Legal Counsel if you believe illegal actions may be taking place. They may get pissed, but if you have rock solid written documentation that they cannot refute, you won’t have to deal with the smirking “I never told / promised you that” from either your company or the agency.

Good luck for the future.

By marybeth
January 31, 2013 at 1:04 pm

@Helen,

I second Hank’s recommendation re doing the CYA email. I’d take one more step, though, and print out a paper copy for your own records. I know that email can be forever, but sometimes those who don’t want sent or received emails to be found can find ways to get rid of them, especially if a company’s IT dept. is good. And if you later claim that they did receive them and they deny it (after having had IT wipe the system clean), it will still be just your word against theirs.

The CYA email is useful not only for temp jobs and contract work but even if you’re for a full time permanent job. At my last job, one of my bosses would tell staff to do something (often illegal), then she’d write them up for not doing it (if they refused) and if they did it and it came back and bit the dept., then she’d claim she never told them to do and they’d get fired. A full time, permanent job doesn’t mean you’ll never get a sleazy, slimy boss, and the whole point is to protect yourself as best you can, although sometimes the best way is to quit if the boss or company or agency is that unethical.

By Nick Corcodilos
January 31, 2013 at 2:33 pm

@Helen: That’s two sicko environments in one. I don’t care how renowned the contracting agency is – they’re bums if they know what’s going on and leave you there.

In the end, it comes back to you. While you tried to behave with integrity, all the signals of “sicko” were present early on. I know it’s hard to quit any job if you haven’t got another lined up. But sometimes it’s the healthy thing to do. If you follow the money, your problem is with the contracting firm. I agree with Hank, but I’d send your documented story to the CEO (to heck with your boss), and I’d add the chairman of the board, and the in-house legal counsel.

Word about sicko environments has a way of getting around. They deserve it.

By Salary Surveys and Negotiating Your Salary (based on payscale, salary.com, etc.) | JibberJobber Blog
February 7, 2013 at 7:01 am

[…] This is from Nick Corcodilos’ newsletter: Will a consulting firm pay me what I’m worth? […]

By http://www.youtube.com/watch?v=69RvaVD3mLk
September 21, 2013 at 5:00 pm

Have you ever thought about writing an e-book or guest authoring on other websites?
I have a blog based upon on the same information you discuss and would love to have you share some stories/information.
I know my audience would value your work. If you are even remotely interested,
feel free to send me an e mail.

Post a comment