McKinsey, the renowned management consultancy firm, is set to enact significant layoffs in response to diminishing demand for its services, marking one of the most substantial staff reductions in its 98-year history.
The firm is preparing to make approximately 360 redundancies primarily across its design, data engineering, cloud, and software divisions.
These cuts are expected to affect roughly 3 percent of McKinsey’s 12,000 global workforce, predominantly those designated as specialists or possessing technical expertise, according to initial reports from Bloomberg.
Notably, the layoffs will spare McKinsey’s traditional consultant roles, ensuring continuity in its core advisory functions.
In a statement addressing the impending job cuts, a McKinsey spokesman emphasised the company’s commitment to aligning capabilities with client needs, a sentiment echoed by their strategic decision-making. The spokesman affirmed the provision of comprehensive support for affected employees throughout and after their transition out of the firm.
An uncertain climate
This move comes amidst mounting pressure for McKinsey to sustain profitability amid a landscape where clients, grappling with financial constraints, are scaling back on consultancy expenditures. The resultant oversupply of consulting services has compounded the challenge, with voluntary departures dwindling significantly.
In an effort to mitigate these challenges, McKinsey has undertaken various initiatives, including a voluntary notice period scheme targeting consultants in its UK and US offices. This scheme allows employees to explore alternative career opportunities over a nine-month period while still receiving full pay.
These layoffs are part of a broader restructuring initiative, dubbed Project Magnolia, announced last year. Under this initiative, McKinsey eliminated 1,400 positions in back-office and support functions such as human resources, communications, and IT.
Criticism over the layoffs
However, the handling of these layoffs has not been without criticism. Some of the firm’s senior partners, numbering 750, have reportedly accused Bob Sternfels, global managing partner, of mishandling the process.
McKinsey, which reported $16 billion in revenue last year, remains a go-to consultancy for companies and governments grappling with complex challenges. Nevertheless, the firm has issued warnings to 3,000 consultants regarding unsatisfactory performance, signaling a need for improvement.
In response to the slowdown, McKinsey has also curtailed promotions to its partnership and deferred partner bonuses, reflecting the broader adjustments necessitated by shifting market dynamics.
As McKinsey navigates these challenges, the consultancy industry at large is closely watching how it adapts to the evolving demands of its clientele and the broader economic landscape.
Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.
