Kearney gives managers equity stake in bid for retention

03 November 2022 2 min. read
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Management consultancy Kearney has decided to give staff with two to three years of experience (manager level or equivalent) equity grants in its global profits in a bid to boost retention.

The catch, however, is that shares can’t be cashed out until the employees reach partner level. In essence, it sweetens the pot of staying at the firm and making partner – at which point they would typically get their first taste of the equity bonanza.

“We give them an equity grant that will grow in value as the firm’s equity value grows, that will vest when they become partner,” Alex Liu, global managing partner and chairman of Kearney, told The Australian Financial Review (AFR). “There’s a financial benefit, and an ‘if, then’ element, which is very good for retention and motivation, and it’s also embedding the ownership mindset in earlier.”

Alex Liu, Global Managing Partner, Kearney

According to website CaseCoach, only an estimated 5% of consultants who join tier-one firms make partner. The majority aren’t interested – or can’t handle – slogging out 80+ hour weeks and heavy travel for 10+ years, instead opting to sweat for 2-3 years to gain valuable and bankable experience and then go elsewhere.

Turnover is a big cost for consultancies that don’t necessarily want to train MBA grads for a couple years and then see them immediately move on. According to Liu, the manager level is the point at which there is the highest turnover of staff.

Cutting turnover is especially important for consultancies seeing heavy demand for strategy advice and a concurrent shortage of talent. Liu told AFR that Kearney has seen double-digit growth everywhere and 30-40% growth in certain practices and geographies. He expects strategy consulting to be a growth sector for “quite some time.”

Although extending equity to juniors cuts partner profits down the track, boosting retention would presumably help grow revenues.

“The main restraint [to growth] is resources...and the biggest reduction in value of the firm is losing the people you want to keep,” Liu said. “The business case is you excite the next generation, they will be better and more committed partners, so there will be even more brought in and that will make the pie bigger.”