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2014 Kennedy Information, LLC 1

Performance Metrics in Consulting 2014: North America

(Released November 2014)

Research SummaryKennedys analysis of performance metrics in consulting for 2014 reveals a renewed ability to command higher rates, with clients becoming more sensitive to what they are paying for and the results they are promised.

There is also a change in how fixed-fee engagements are being sold and staffed, with clients inquiring more about the staffing linked with the fixed fee. This has caused firms to begin to position their fixed-fee engagements in a different light, moving toward a blended fixed-fee and time-and-materials offering.

When asked about their top concerns for 2014, firms identified growing business organically as their number one concern. To do that effectively, firms are increasingly competing for the top talent amid a talent shortage.

Kennedys exclusive research is an invaluable tool for firms looking to clearly see where they stand in the marketplace and how their own performance metrics stack up.

The new report includes year-over-year comparative data, plus detailed analyses of book and realized rates and utilization both professionwide and within four service lines: strategy & operations, human resources, information technology consulting, and financial consulting.

For details, please contact your Kennedy Client Service Leader at +1.603.357.8102 or e-mail research@kennedyinfo.com.

Notice: No part of this publication may be reproduced, stored in a retrieval system or transmitted by any means, electronic or mechanical, without the prior written permission of Kennedy Information, LLC, a Bloomberg BNA business, Keene, NH USA.

2014 Kennedy Information, LLC 2

Performance Metrics in Consulting 2014: North AmericaIntroductionPerformance Metrics in Consulting 2014: North America presents a detailed analysis of financial and operational benchmarks for consulting services. A direct survey methodology was used to produce this report, which involved an online survey with executives at consulting firms. From this, benchmark data was collected and supplemented with interviews with CEOs, CFOs, COOs, Managing Directors, and Financial professionals.

In this effort to benchmark consulting fees and utilization, the data is primarily representative of small and medium-sized firms that serve both mid-market and Fortune 500 companies.

The 2014 research analyzes 86 consulting firms/practices. The data has been standardized to show book and realized hourly rates based on 2,080 billable working hours.

The fee rates and utilization benchmarking is segmented by the four major consulting service lines, defined as follows:

Strategy & Operations Consulting

Human Resources Consulting

Information Technology Consulting

Financial Consulting

The results found in this report are segmented across all service lines for eight billable staff levels and by firm size, which is defined as follows:

Number of billable employees

Tier 1: >2,001

Tier 2: 501 2,000

Tier 3: 100 500

Tier 4:

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Performance Metrics in Consulting 2014: North America

Table of Figures

Figure 1. Number of Partners at a FirmFigure 2. 2013 Engagements by SizeFigure 3. 2013 Revenue from Existing ClientsFigure 4. Time Spent On-Site With ClientFigure 5. Engagement StructuresFigure 6. Total Billable Work Hours (Annually)Figure 7. 2013 Professionwide Utilization RatesFigure 8. 2014 Expected Professionwide Utilization

RatesFigure 9. 2013 Tier 1 and 2 Utilization RatesFigure 10. 2014 Expected Tier 1 and 2 Utilization

RatesFigure 11. 2013 Tier 3 Utilization RatesFigure 12. 2014 Expected Tier 3 Utilization RatesFigure 13. 2013 Tier 4 Utilization RatesFigure 14. 2014 Expected Utilization RatesFigure 15. 2013 Strategy & Operations Consulting

Utilization RatesFigure 16. 2014 Expected Strategy & Operations

Consulting Utilization RatesFigure 17. 2013 Human Resources Consulting

Utilization RatesFigure 18. 2014 Expected Human Resources

Consulting Utilization RatesFigure 19. 2013 Information Technology Consulting

Utilization Rates

Figure 20. 2014 Expected Information Technology Consulting Utilization Rates

Figure 21. 2013 Financial Consulting Utilization Rates

Figure 22. 2014 Expected Financial Consulting Utilization Rates

Figure 23. 2014 Book Rates Compared to Overall Professionwide Rates

Figure 24. 2014 Professionwide Book RatesFigure 25. 2014 Professionwide Realized RatesFigure 26. 2014 Tier 1 and 2 Book RatesFigure 27. 2014 Tier 1 and 2 Realized RatesFigure 28. 2014 Tier 3 Book RatesFigure 29. 2014 Tier 3 Realized RatesFigure 30. 2014 Tier Book RatesFigure 31. 2014 Tier 4 Realized RatesFigure 32. 2014 Mean Book Rates by Service LineFigure 33. 2014 Strategy & Operations Consulting

Book RatesFigure 34. 2014 Strategy & Operations Consulting

Realized RatesFigure 35. 2014 Human Resources Consulting Book

RatesFigure 36. 2014 Human Resources Consulting

Realized RatesFigure 37. 2014 Information Technology Consulting

Book Rates

Figure 38. 2014 Information Technology Consulting Realized Rates

Figure 39. 2014 Financial Consulting Book RatesFigure 40. 2014 Financial Consulting Realized

RatesFigure 41. 2013 vs. 2014 Expected Professionwide

Turnover RatesFigure 42. Firm Size (Billable Employees)Figure 43. Firm RevenueFigure 44. Geographic Concentration of Partners

vs. Overall Billable StaffFigure 45. Geographic Revenue Concentration by

Client EngagementFigure 46. Professionwide Service Line BreakdownFigure 47. Professionwide Industry BreakdownFigure I. Data TypesFigure II. Staffing Level DefinitionsFigure III. Definition of ConsultingFigure IV. Definition of Strategy & Operations

ConsultingFigure V. Definition of Human Resources ConsultingFigure VI. Definition of Financial ConsultingFigure VII. Definition of Information Technology

Consulting

For details, please contact your Kennedy Client Service Leader at +1.603.357.8102 or e-mail research@kennedyinfo.com.

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2014 Kennedy Information, LLC 4

Performance Metrics in Consulting 2014: North America

The primary source of data for this study was direct consulting firm input from CEOs, CFOs, COOs, Managing Directors, and Financial professionals at consultancies.

The key data points provided by these individuals reflect overall consulting book, realized, utilization, and turnover rates on behalf of their firm.

Kennedy followed the same data gathering procedures used in 2013 [Fees & Utilization Rates in Consulting 2013 and Financial & Operational Benchmarks in Consulting 2013] and conducted an online survey gathering firm information, including worksheets in which rate data was submitted. With guidance from participants from the previous survey, some data was updated and included in the data pool. A copy of the survey can be obtained by contacting research@kennedyinfo.com.

For the purpose of demonstrating this data for comparison, Kennedy provides mean and percentile analysis for overall profession book rates, realized rates, and utilization rates.

Many firms reported having capabilities associated with more than one service line. For the purpose of professionwide analysis, the data points were counted singularly. For each service line breakdown analysis, the data was leveraged for the appropriate service alignment as indicated.

Although the report includes data from larger firms, in this case it came from fewer sources. We compiled the results from Tier 1 and Tier 2 firms to obtain a broader view of the larger firms and provide the data with stronger statistical merit. Therefore, this category includes all firms with greater than 501 billable consultants.

In all, this research analyzes performance metrics data from 86 firms. The demographics portion is based on firm participation, which is taken from the online survey completed by 66 firms; twenty firms data was aged forward using growth rates provided from the respective firms.

For 2014, the changes made were driven by customer demand to develop a more comprehensive offering. Consultancies want to better understand differences in pay by staff level and service capability. The staff level definitions are new for 2014 and although still comprised of eight levels, the specific attributes including education, years of consulting experience, industry expertise, managerial responsibility, project management and account management or ownership have been revised from the previous year.

The corresponding service section of the report has expanded to include analysis on utilization rates by service line. In some cases, a paucity of data will be represented by a note of N/A, or Not Applicable. In some instances, the number of data points does not represent a diverse enough set (n=

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2014 Kennedy Information, LLC 5

Performance Metrics in Consulting 2014: North America

Staffing Level Definitions

Source: Performance Metrics in Consulting 2014: North America; Kennedy Consulting Research & Advisory

Staffing Levels

Staffing Level Work Experience Education Responsibility Comments

Senior Partner/ManagingDirector

Typically 20-25 years in consulting or combined with industry expertise

MBA or other advanced degree, exceptions for expertise

May have key accounts, P&Lresponsibilities at larger firms

Role is often limited to the largest firms with multiple industry and service practices, most geographic breadth. Position is billable but limited to key accounts. Non-billable activities include business management, thought leadership and closing new business.

Vice President/Partner Often more than 12-15 years in consulting or combined with industry expertise

MBA or other advanced degree, exceptions for expertise

Account ownership and some P&L responsibilities at smaller firms. Tenure at this position dependent on structure and opportunities for advancement within firm

Senior-most position for dedicated consulting professionals, often highest billable role except for the largest firms

Associate Partner/Principal Minimum of 10-12 years in consulting or well establishedindustry expertise or demonstrated relevantcapabilities

MBA or other advanced degree, exceptions forexpertise

Account leadership. Two to three years before advancing

A final transition to partner in larger firms, gains additional responsibilities of client account management and meeting revenue goals. The path to VP/Partner often requires a minimum of 3-4 years through Director/Associate Partner

Director/Project Leader 7-9 years in consulting or well established industry expertise

MBA or other advanced degree, exceptions forexpertise

Project management, leading larger more complex engagements, moderate account management. Two to four years in this rolebefore advancement

Aids in the selling process, establishing new business opportunities, advances to partner in smaller firms has established industry or service expertise by this level.

Senior Associate/Manager 5-7 years in consulting orestablished industry expertise

MBA or other advanced degree. May be entry point for top-tier MBAs with significant prior experience

Team leadership role on projects, may lead smaller projects or components of larger projects. Two-plus years before advancing.

Establishing industry or service expertise at this level. Aids in identifying, developing new business opportunities

Senior Consultant/Associate 2-4 years in consulting and/or other industry experience

MBA or other advanceddegree, may be starting role for top-tier MBAs

Limited supervisory role 1-2 years before advancing

Expanding capabilities and establishing expertise

Senior Analyst/Consultant Some work experience desired, perhaps internship, some industry experience

MBA preferred or other advanced degree

No managerial responsibility, typically in role for one to 3 years before advancing.

The starting consulting position, moderately supervised

Analyst Little or no prior related experience

Usually a Bachelors degree No managerial responsibility, typically advances in 3 years

This position is heavily supervised and client contact is uncommon

For details, please contact your Kennedy Client Service Leader at +1.603.357.8102 or e-mail research@kennedyinfo.com.

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2014 Kennedy Information, LLC 6

Performance Metrics in Consulting 2014: North America

Definition of Consulting

Source: Performance Metrics in Consulting 2014: North America; Kennedy Consulting Research & Advisory

Kennedy Consulting, Research & Advisory defines the global consulting marketplace as the space within professional services between the tactical ends of mandatory assurance and outsourcing. Consulting includes both advisory and execution work projects in which the client typically is looking for either objective insight to help address problems or execution of solutions to solve those problems.

The consulting market is segmented into four service lines: strategy & operations consulting, HR consulting, financial consulting and IT consulting. Each service line is divided further into segments and several levels of subsegments.

The service lines are mutually exclusive and collectively exhaustive. Each service line is adjacent to downstream, audit and outsourcing services, which are considered non-consulting.

Consulting Market

Definitions

For details, please contact your Kennedy Client Service Leader at +1.603.357.8102 or e-mail research@kennedyinfo.com.

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2014 Kennedy Information, LLC 7

Performance Metrics in Consulting 2014: North AmericaDefinitionsStrategy & Operations Consulting Human Resources ConsultingStrategy & operations consulting services aim to improve the growth prospects and existing value chain of a client. To that end, S&O projects focus on capability creation, management system enhancement, business process improvement, and change implementation.

Kennedy Consulting Research & Advisory splits S&O consulting into two categories: corporate development and corporate functions. Corporate development consists of enterprise strategy, organization & operating model strategy, finance, and mergers & acquisitions. Corporate functions consists of supply chain, sourcing & procurement, customer, and research & development.

HR consulting services are aimed at helping a client company manage its human capital and HR function. These services range from tactical guidance on HR policies and practices to overarching work on human capital strategy. HR consulting services are segmented into three core service areas: human capital management, HR benefits, and HR technology & transformation (HRT&T).

The HR benefits segment consists of three subsegments: retirement, investment, and health & group benefits.

Human capital management consists of three subsegments: human capital strategy, organizational change, and talent management.

HR technology & transformation is further divided into four subsegments: HR delivery strategy, HR process transformation, HR software selection, and HR sourcing advisory.

Not included in the HR consulting service definitions above are non-consulting HR services such as HR outsourcing.

Definition of Strategy & Operations Consulting

Definition of Human Resources Consulting

Source: Kennedy Consulting Research & Advisory

S&OConsulting

EnterpriseStrategy

Organization & Operating

Model Strategy

Finance

Supply Chain

Mergers &Acquisitions

Research &Development

Customer

Sourcing &Procurement

CEO &COO

Services

CFOServices

CPO &CSCO

Services

CMO &R&D

Services

For details, please contact your Kennedy Client Service Leader at +1.603.357.8102 or e-mail research@kennedyinfo.com.

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2014 Kennedy Information, LLC 8

Performance Metrics in Consulting 2014: North AmericaDefinitionsFinancial ConsultingFinancial consulting applies financial, accounting, and economic competency sets to improve related internal company processes. Services provide a solid technical, financial and economic base of justification for business decisions. Financial consulting services are segmented into six core service areas: crisis & recovery, transaction advisory services, financial risk & controls, forensics & dispute, reporting & accounting, and tax.

The deals area of financial consulting is made up of transaction advisory services and crisis & recovery services.

The financial risks & controls area consists of financial risk advisory and controls advisory.

The forensics & dispute area is divided between dispute analysis & advisory, and forensic & investigative services.

The tax & accounting area comprises the reporting & accounting, and tax segments.

Not included in the financial consulting services definition above are non-consulting financial services such as financial audit, financial outsourcing, and tax compliance.

Definition of Financial Consulting

IT Consulting vs. Other Services

Source: Kennedy Consulting Research & Advisory

Tax

FinancialConsulting

Tax &Accounting

Deals

Forensics &Dispute

Reporting& Accounting

Crisis &Recovery

Financial Risk& Controls

Transaction Advisory Services

IT Strategy

ITConsulting

IT GRC& Security

IT Architecture

Information Technology ConsultingIT consulting services are designed to enhance client productivity and/or business performance through the utilization of enabling technologies for strategic and operational decision-support, business process automation, digital risk management and IT enterprise & network security. IT consulting services are segmented into three core service areas: IT strategy, IT GRC & security, and IT architecture.

IT strategy consists of two subsegments: business performance and IT management.

IT GRC & security consists of two subsegments: IT governance, risk, and compliance; and IT security.

IT architecture consists of two subsegments: enterprise architecture, and systems architecture.

Not included in the IT consulting service definitions above are the non-consulting services IT downstream and IT outsourcing. IT downstream services include systems integration and software implementation. IT outsourcing services include managed services and networking services.

For details, please contact your Kennedy Client Service Leader at +1.603.357.8102 or e-mail research@kennedyinfo.com.

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2014 Kennedy Information, LLC 9

Consulting Capabilities and Trends Analysis ReportsKennedys competency-based research examines provider capabilities at the engagement level to inform buyers of consulting services of the strengths and limitations of specific providers. The research contains:

Emerging market trends and drivers

Market forecasts and segmentation by geographic region and industries

Qualitative assessments of providers

Ranking of providers by revenue and market share

Detailed profiles of the leading consultancies

Market Outlook ReportsKennedys market index research for consulting service providers deliver data and market intelligence with a quantitative overview of:

Market sizing and segmentation

Revenue rankings by service lines

Revenue rankings by geographic regions

www.KennedyInfo.com/Consulting

Trusted market sizing and forecasts on consulting services world-wide, with timely and insightful intelligence on the top consulting firms plus needs-analysis and vendor profiles for buyers of consulting services.

Financial Services

Healthcare

Public Sector

By Service Line

By Geographic Region

Consulting Firm Operating Metrics

Human Resources Consulting

Information Technology Consulting

Financial Consulting

Strategy & Operations Consulting

North America

Europe, Middle East and Africa (EMEA)

Latin America

Asia Pacific (APAC)

By Client Industry

Consulting Market Research

Advisory Services

Our exclusive research is organized as follows:

Providing strategic support to buyers and sellers of management consulting and IT services in the following areas:

Custom Market Sizing

Growth Planning

M&A Appraisal

Procurement Analysis

Custom Capability Assessments

www.KennedyInfo.com/Consulting/Advisory

www.KennedyInfo.com/Consulting/Research

Market analysis to support consulting decision-makers.

Offers critical decision-making tools for assessing and managing consultings determinants of revenue, profitablity, cost, and overall operational performance.

www.KennedyInfo.com/Consulting/Research/OperatingMetrics

For details, please contact your Kennedy Client Service Leader at +1.603.357.8102 or e-mail research@kennedyinfo.com.