Interim Executives vs. Management Consultants – What’s the Difference & Costs?
What is the difference between an Interim Executive and Management Consultant?
The term Interim Executive is most commonly used when an executive is brought in to fill a gap between the departure of one executive and the start date of the new executive. However, interim executives can also be used to carry out high-level projects or initiatives; such as M&A work, rebranding, increasing revenues or profits, new product development and international expansion, to name of few. The difference here between an interim executive and a management consultant is that the consultant usually just provides strategy and a plan where the interim executive will do both of these things and then execute the plan. They are more hands on. Not all management consultants are executive level and do not have the background to be able to step into an Interim Executive role should the need or opportunity arise. Cerius Executives only works with Interim Executives and Management Consultants with a verified history at the executive and c-suite level.
How much does a management consultant cost?
The typical response to this question is, “It depends,” and it does. We will review in detail what it depends on and the typical ranges a company can expect to see, and why. For the simplicity of comparison, we will discuss all rates in terms of hourly since that is the most common for management consultants.
What company are you sourcing the management consultant through?
There is a pretty big range if you are hiring one of the Big 4 consulting firms (McKinsey, Booze Allen, Accenture, Deloitte) compared to a small boutique firm or an independent management consultant. You can expect the hourly rate to start at $350 and go as high as $1,000 depending on whether the entry-level consultants are working on the project or one of the partners. Generally, there will be a blend of resources varying in rates. For a smaller boutique firm, the rates come down quite a bit and will typically range from $250-400/hour. Working directly with an independent consultant the rates will come down slightly from there starting at $100-350/hour.
Yes, there is a vast difference in both the ranges and between the types of sources. Which is right for your situation can depend on the size of your company, the critical or high profile nature of the project (ie. strategic plan to the Board of Directors), range of resources needed for a single project, your budget and the type of output needed (ie. do you need an assessment, a plan or someone to also implement the plan).
At Cerius, the rates fall into the independent consultant category. The rate range an individual management consultant will take is determined by them. The consultant pays Cerius a referral fee for the service we provide in connecting them with the client and managing the process from beginning to end. Since they spend less time on obtaining and administrating the project, they are able to allocate more time to revenue generating activities for themselves.
The experience level of the management consultant is generally the starting basis for the rate. If the consultant on a full-time basis would generally make $350,000/year, their rate will be quite a bit higher than a consultant who would likely make $175,000/year in the job market. In the simplest of terms, take the annual salary and divide by 1040. Why 1040? Assuming a 5 day/week, 52 week work year, there are 2080 work hours. We apply only half of the 2080 work hours (1040) since studies show most management consultants spend about half of their time on business development and administrative activities and the remainder on assignment. Again, this is the starting point with the individual consultant’s workload, activities and the below then factoring into things.
Size of your company and the situation
We have discussed that potential salary level plays a factor in management consulting rates. Since salaries range based on the size of the company and the situation, so do consulting rates. The types of situations can include both the situation the company is in as well as the consultants. For example, a company turnaround situation will garner a higher rate than a project involving assessing a sales team. Some consultants also factor in their own situation combined with the company’s and may be willing to take less because they see it as a fun challenge and are financially able to.
Length of project/assignment
This can have an impact depending on the expectation for the length of a project. A project involving an assessment that will take 2-3 weeks will be quoted at a higher rate than one that will last 3-6 months. One thing to beware of is thinking that an assignment that is full time for 3 months will have a lower rate than one that is part time for 3 months. In reality, they will likely be about the same. Though there is more short term income for the full-time 3-month project and keeps them from accepting another 3-5 days per week assignment.
Types of Arrangements:
As you have seen from the above, not all projects are created equal as is the case for how to quote the project. We have seen a variety of projects quoted on hourly, daily, retainer, flat fee/project based as well as the prior combined with a success fee. Which is right for your situation will also depend on all of the above. Typically types of projects such as assessments and strategic planning can be done on a flat fee basis. When there is a potential for a significant cost savings or revenue increase and the company has a small budget, adding a success fee combined with a lower than usual rate is something to be considered.
The right management consultant combined with an arrangement that fits the situation and your budget can often make a big impact on the success of a company. Having that impartial outside resource that can not only provide a new perspective but also offer needed additional hands-on assistance is invaluable.
How much does an Interim Executive cost?
Interim Executives are generally quoted on a daily or monthly rate rather than hourly or fixed project fee. No matter whether it’s 8 hours a day or 12 hours a day, you pay only the daily rate. Same thing for the monthly rate, no matter whether there are 28 days (4 weeks) in a month or 31 days (5 weeks) per month you only pay the agreed upon monthly rate. Since an Interim Executive role is tasked with specific objectives and timelines, they are far less likely to get involved in the day-to-day politics and minutiae; thus accomplishing in 3-4 days what a full-time executive will accomplish in 5 days. You can then compare the cost of an Interim Executive working three to four days per week to that of what you would be paying a full-time executive employee (salary, taxes, benefits, bonus, etc). The cost will be close to the same but the interim executive will get the work done faster.