Cash is not the only weapon in the war for talent

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The Independent Online

Dot coms are "in", management consultancies are "out". This, at least, was in danger of becoming the case at the start of the millennium.

Dot coms are "in", management consultancies are "out". This, at least, was in danger of becoming the case at the start of the millennium.

For years, MBAs and other high-flying graduates hadn't been able to resist the allure and mystique of signing up to the likes of McKinsey, Bain and Andersen Consulting.

Suddenly, however, there were alarming tales of graduates from top-ranked business institutions joining venture capitalists and internet start-ups instead.

Initially, the effects were felt only in the US. But, conscious that what happens across the Atlantic tends to wash up in Britain, UK firms set out to pre-empt the problem by firing the opening salvoes in what has come to be termed the "war for talent". So what exactly does today's management consultant wannabe have to gain from the panic?

For a start, some of the leading consultancies have been handing out snap 25 per cent pay increases. With graduates from highly rated schools - such as the London Business School, Insead and IMD - already starting out at leading strategy firms on salaries of about £65,000, this is no sniff of an increase.

Added to the typical bonuses of 20 per cent of salary and the £15,000 to £20,000 signing-on fee, it takes the total package to comfortably above £100,000.

However, multiply that figure by the scores of people these firms take on each year and add to it the fact that dot-com fever has died down over the past few months, and you'll understand why many firms are now beginning to regret their rash generosity.

In fact, even if the dot-com boom had continued, some are not sure whether "throwing money at the problem" would have proved effective for either the employers or employees in the long run.

David Warren is a director with ADD Resources, an executive search firm which specialises in recruiting for the big European consulting firms. He says that since consultancies find it hard to offset their larger salary bills by raising prices, the main effect is to reduce profits for partners and virtually encourage staff to leave the company.

A far more constructive approach is what Mr Warren calls "spreading the benefits of partnership" around the organisation - for example, in the form of extra bonuses or share options (where consultancies are part of larger corporates). Arthur Andersen, for instance, has just introduced a scheme that gives employees the chance to earn up to 50 per cent of their pay from "sharing in the organisation's success".

In a still more radical move, senior partners at some firms have sought to motivate and reward staff in new ways. In May about 900 people at Ernst & Young, including more than 70 partners, joined the information technology company Cap Gemini as part of a new entity, Cap Gemini Ernst & Young.

Changing the structure of a firm is not the only way to alter its modus operandi. Arthur Andersen has generated much publicity with its decision to shed suits in favour of dot-com-style casual dress. But Colin Kerr, Andersen's managing partner of business consulting for Europe and the Middle East, says the new approach goes further than this. There is, he says, "a new-economy type of look and feel" to the firm's offices which carries over into the collaborative way in which people work.

Management consultancies have always been good training grounds for other jobs. William Hague and the newly-knighted Howard Davies, head of the Financial Services Authority, are just two former McKinsey employees in prominent public roles. But, as the war for talent intensifies, greater emphasis is being put on staff development. According to Mr Warren of ADD, instead of seeing staff as "just bodies to be put on assignments", many strategy firms are going to greater lengths to make people feel they "are part of a team and have value".

Mike Okninski, the partner responsible for human resources in the management consulting arm of PricewaterhouseCoopers, says his organisation is making a conscious effort to get people to stay by helping them develop as individuals and as assets to the firm.

There is also a widespread acknowledgement that what keeps staff is being part of a successful organisation and having the sense that the type of work they do is important.

Figures from the Management Consultancies Association showing a 10 per cent growth in business in the first quarter of this year deal with the first of these criteria for job satisfaction. And being at the forefront of developments in the new economy goes a long way to meeting the second.

As PwC's Mr Okninski explains, half the firm's work is related to this area and "people are gaining e-business experience within the organisation". Such experience may well be wider than that available in a narrowly focused dot-com start-up struggling to find its niche.

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