- On September 22, 2017
Members of the Sheffield Barry team have worked in executive compensation consulting practices for diversified HR consulting firms as well as independent executive compensation consulting firms. Collectively, we have spent over 10 years in the executive compensation practices of diversified HR consulting firms, and more than 30 years at independent firms. Many of our friends and former colleagues still work at these companies, so we consider ourselves familiar with the strengths and weaknesses of these firms.
We firmly believe Sheffield Barry is among the top Executive Compensation Consulting Firms, and if you are considering hiring an executive compensation consultant, we would love to share our unique approach, depth of experience and qualifications. We offer custom compensation solutions at an off-the-shelf price that is ideal for middle-market and smaller companies.
Since we think so highly of ourselves, we expanded this Top 10 list to the Top 11, including Sheffield Barry in a blatant act of self-promotion!
Top 4 Diversified HR Consulting Firms
Due to significant M&A activity in the 2000s, and more activity in the past five years, there are now four “tier one” diversified HR consulting firms. Most are part of larger insurance brokers, arguably due to the synergy between brokering P&C insurance and health & welfare insurance products. They all have deep and broad HR consulting practice areas covering compensation, benefits (both health and welfare benefits, and DB and DC retirement benefits), and talent management (careers, culture, performance management, etc.). These firms are:
Mercer is an operating company of insurance broker Marsh & McLennan Companies. Towers Watson is itself a merger of Towers Perrin and Watson Wyatt, with Tower Watson acquired recently by insurance broker Willis. Hay Group was acquired recently by executive search firm Korn/Ferry. Hewitt was acquired several years ago by insurance broker Aon.
There are a few additional firms beyond these four that are worth noting: Big 4 accounting firm Deloitte also has an executive compensation consulting practice within their HR consulting business, as do accounting firms KPMG and PwC. Deloitte’s executive compensation practice is reasonably well-regarded, though smaller than the four HR consulting firms. KPMG and PwC‘s executive compensation practices are a bit more focused on executive global mobility. There are other HR consulting firms in the next tier, including Conduent (formerly Xerox, which acquired Buck Consultants), Hays Group, and many other regional brokers. For all these firms, HR consulting revenue overall is generally less than 50% of the parent firm’s overall revenue, and executive compensation consulting revenue is generally less than 5% of each HR consulting business revenue. So, executive compensation consulting revenue tends to represent a small fraction of the parent company’s overall business.
The breadth and depth of HR advisory resources available at the four Tier 1 firms is considerable and valued by many companies — particularly the ability to pair compensation advice with similar advice on benefits. Also, these four firms have global resources, so firms with executives in Singapore, South Africa, or Mongolia often find signficant value from the resources these firms can deploy.
However, hiring your executive compensation consultant from one of these firms may subject your company to the perception of a potential conflict of interest, considering that these firms may also be doing business, or pursuing other opportunities: HR consulting projects, brokering other lines of insurance or executive search requests (or at the very least, cultivating relationships for these other lines of business). That said, our team has direct experience working in diversified HR consulting firms, and we experienced zero actual conflicts of interest. Each firm has very strong conflict of interest guidelines in place to manage the relationships with their clients with minimum risk and maximum integrity.
Moreover, if your company is (a) not publicly-traded, (b) a smaller publicly-traded company with less scrutiny from outside advisors, or (c) your management team is looking for a second perspective that might be different from the Committee’s advisor, then the potential perceived conflict of interest is unlikely to be a significant issue.
Top 7 Independent Executive Compensation Consulting Firms
- Compensation Advisory Partners
- Frederic W. Cook
- Pay Governance
- Pearl Meyer & Partners
- Semler Brossy
- Sheffield Barry
Compensation Advisory Partners (CAP) is the executive compensation consulting practice spun out of Mercer. Fred Cook and Semler Brossy have always been independent – both have hired several of their senior consultants from the executive compensation practices of the diversified HR consulting firms. Pay Governance is the executive compensation practice spun from Towers Watson. Meridian is the executive compensation practice spun from Hewitt, and Pearl Meyer was separated from Clark Consulting several years ago. (Note: we do not believe that the pedigree of any firm necessarily influences the consulting advice they provide.)
These independent firms all have reasonably significant consulting teams spread across various offices, with a depth of technical resources (tax, accounting, legal, and regulatory specialists) to be able to provide full-service consulting support to a wide variety of clients. Fred Cook and Pearl Meyer have the largest teams, with the most extensive technical resources.
These independent executive compensation consulting firms focus primarily or exclusively on compensation or executive compensation, and can advise on all issues related to executive compensation and related governance issues.
So how does a company choose a good consulting firm?
The name of the firm matters somewhat, but the individual consultant and their team matter more. Look for an individual lead consultant who is willing to look beyond the external market data and provide advice based upon your company’s unique internal business needs, not simply what everyone else in your peer group is doing.
For more detail on the typical process for selecting an Executive Compensation consultant, please read 6 Steps to Hire an Effective Executive Compensation Consultant.
Other resources that may be valuable include our one-page interview guide for compensation consultant interviews, and our example RFP template that you can use and edit as needed. If either or both of these tools would be valuable, please add your email address below and we’ll send you a link you can use to download either or both.
Stay tuned! Next month we will be discussing the typical approach companies use to hire their executive compensation consultant. If you join our mailing list by entering your email into the panel on the top left of this screen you will receive our monthly updates.
Any of these top 10 firms will be able to provide sufficient data to understand the external competitive market for talent and reasonable market reference points.
However, data is a commodity – it is essentially free. You should not have to pay $30,000 or $100,000 for free data that can be analyzed automatically. The real value a compensation consultant brings to the table is in the insights derived from the analysis, and the advice of when to deviate from the external market data and practice, as your business circumstances dictate. The value of insights and advice will differ from firm to firm and from individual consultant to individual consultant.
We have some free resources that may be valuable in your consultant selection process: (1) an example executive compensation consulting RFP template, ready for you to edit or from which you can copy and paste, and (2) a one-page interview guide for your Compensation Committee or HR selection team. If either of these items would be helpful in your process, please submit your email below and we’ll email you a link from which you can download either or both documents.
Sheffield Barry is an Executive Compensation and HR Consulting firm, providing customized advice to clients at an affordable price. We leverage technology to deliver data and analysis as efficiently as possible, so we can invest more time understanding our clients’ unique business issues to develop custom solutions and advice. For more information, please visit us at SheffieldBarry.com or email us at info@SheffieldBarry.com.