McKinsey cuts 2,000 jobs

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Last Updated on February 21, 2024

McKinsey & Co., the world’s most prestigious consulting firm, is reportedly planning to eliminate around 2,000 jobs, marking one of its biggest rounds of cuts ever. According to Bloomberg, the move is expected to focus on support staff in roles that don’t have direct contact with clients, as McKinsey looks to restructure how it organizes its support teams and centralizes some of the roles. The plan, called Project Magnolia, is expected to be finalized in the coming weeks, and the final number of roles to be eliminated from its 45,000 workforce could still change.

Consulting in the post-pandemic world

While the consulting industry as a whole grew quickly during the COVID-19 pandemic, with businesses seeking expert advice on how to navigate the economic uncertainty, McKinsey’s move to cut jobs is an indication that the industry is not immune to the economic slowdown. Most consulting firms have overhired during the previous years.

As companies across industries battle to preserve profits, job cuts at a scale not seen in more than a decade have become a common occurrence.

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The rationale for lay-offs

The firm’s decision to cut jobs is reportedly aimed at preserving the compensation pool for its partners. McKinsey posted a record $15 billion in revenue in 2021 and surpassed that figure in 2022, according to one of the people familiar with the matter. However, the firm has seen rapid growth in its headcount during the past decade, with its workforce growing from 28,000 five years ago to 45,000 today. McKinsey’s move to cut jobs is a clear indication that it is looking to streamline its operations and cut costs to remain competitive in an increasingly challenging business environment.

In an emailed statement, DJ Carella, a company representative, said: “We are redesigning the way our non-client-serving teams operate for the first time in more than a decade so that these teams can effectively support and scale with our firm.” Carella added that the firm is still hiring professionals who deal directly with clients. The move is expected to focus on support staff in roles that don’t have direct contact with clients, such as administrative, IT, and operations roles.

It remains to be seen whether this move is a one-off or if more layoffs are to follow. While consultant roles do not seem to be affected, it is unclear what the impact will be on their work. With fewer support staff, it might negatively impact their work-life balance as more mundane tasks can no longer be outsourced. The move could also affect the morale of the remaining staff, who may be concerned about their job security.

It’s not just McKinsey

McKinsey’s move to cut jobs is not unique in the consulting industry. Other consulting firms have also been cutting jobs in recent months as they look to adjust to changing market conditions. KPMG said last week that it will lay off 2% of its U.S. employees, making it the first of the Big Four accounting firms to announce job cuts, with 700 jobs on the line.

In the technology industry, companies such as Twitter, Amazon, and Microsoft have also announced plans for deep cuts, while top banks such as Goldman Sachs and Morgan Stanley have been eliminating thousands of positions. The wave of job cuts across industries is a reflection of the uncertain economic environment in which businesses are operating. With the current economic uncertainty, businesses are looking to cut costs and streamline their operations to remain competitive.

Consulting market outlook

The cuts at McKinsey and other consulting firms come as demand for their services is shifting. As the pandemic recedes, companies are shifting their focus to growth, digital transformation, and sustainability, which could drive demand for consulting services. However, the pandemic has also accelerated trends such as remote work and automation, which could reduce the need for certain types of consulting services.

It remains to be seen whether McKinsey’s move is a one-off or if more layoffs are to follow. The firm’s competitors will no doubt be watching closely to see how the market reacts, and whether they need to make similar moves to preserve profitability.

In the short term, the move is likely to be painful for the affected workers and their families. McKinsey has a reputation for being a desirable employer, and its support staff plays a crucial role in keeping the firm running smoothly. The firm has pledged to provide support for affected workers, including severance pay, outplacement services, and career counseling. However, for many workers, finding a new job in a challenging job market may be difficult.

For the wider consulting industry, the move raises questions about the future of the industry and the role of support staff. As McKinsey and other firms focus on growth and digital transformation, it’s likely that their support needs will evolve, potentially reducing the need for certain types of support staff. At the same time, the pandemic has forced many companies to rethink their approach to remote work and virtual collaboration, which could also have an impact on the need for support staff.

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