McKinsey plots thousands of job cuts in slowdown for consulting industry

[NEW YORK] As McKinsey partners gathered in the consulting giant’s birthplace in late October, Bob Sternfels delivered a rallying cry. “We will kick some ass as we start our second century,” the firm’s top executive told the thousands of attendees.

But away from the 100-year festivities in Chicago, McKinsey bosses have been conveying a more pragmatic message: It’s time to get leaner.

The firm’s leadership has discussed with managers in non-client-facing departments the need to cut about 10 per cent of headcount across their business, according to sources with knowledge of the matter. That could amount to a few thousand job cuts that McKinsey would stagger over the next 18 to 24 months, the sources said, asking not to be identified because the details are private.

For McKinsey, the go-to adviser for companies and countries, it’s the type of cost-cutting approach that its consultants often prescribe to clients. The firm’s revenue growth has flatlined in the last five years, leading to a reset after rapid hiring over the prior decade.

“As our firm marks its 100th year, we are operating in a moment shaped by rapid advances in AI (artificial intelligence) that are transforming business and society,” a McKinsey spokesperson said. “Just as we are partnering with clients to strengthen their organisations, we are on our own journey to improve the effectiveness and efficiency of our support functions.”

It’s early to gauge the net impact on headcount, the spokesperson said. From 2012 to 2022, the firm’s employee count climbed from 17,000 to as high as 45,000. Since then, it has slid to around 40,000.

Firmwide revenue has hovered around US$15 billion to US$16 billion in the last five years, though Sternfels told partners that the company is seeing improving growth.

The company still plans to hire more consultants as it cuts back on support functions, the sources said. McKinsey has not designated a code name for the plan this time around. Its push to ax about 1,400 jobs in 2023 under the internal label Project Magnolia had unnerved many of its staff, one of the sources said.

Challenging period

It’s an inflection point for the flag bearer of the consulting industry, whose roots go back to a University of Chicago accounting professor. James McKinsey started the company in 1926, doling out advice to a local meatpacker. The firm has since racked up an enviable roster of clients, from blue-chip companies such as Coca-Cola and Goldman Sachs to governments that span the globe.

SEE ALSO

McKinsey cuts about 200 tech jobs, shifts more roles to AI

Elon Musk spells danger for Accenture, McKinsey and their rivals

McKinsey warns banks of ‘fleeting’ profit rebound as declining rates set to bite

McKinsey weighs asking staff to come to office more often

McKinsey begins hundreds of job cuts with client demand muted: sources

More

That vast network of influence was on full display at the annual partner confab in October that doubled as a kickoff to McKinsey’s centennial celebration. Rio Tinto chairman Dominic Barton, Visa chief Ryan McInerney and former US Secretary of State Condoleezza Rice were in attendance, according to sources with knowledge of the event. Hometown talk show legend Oprah Winfrey added surprise star power.

Sternfels took centre stage and told his peers that the firm was finally ready to escape years of lacklustre growth. “I’d like to ask you, are you excited about our mission? Do you feel we have a good shot?” he exhorted to the crowd, before telling them the good times were on their way for those who say yes. Sternfels is in the middle of his second three-year term as McKinsey’s global managing partner, the de facto leader.

Even with its outsized influence, McKinsey is navigating a challenging period for the industry as clients turn more cost-conscious, forcing the company to contend with a slowdown in demand for its traditional services.

McKinsey, EY and PwC have been cutting jobs over the past few years to weather the slump. Just last month, McKinsey cut about 200 global tech jobs as it joins rivals in using AI to automate some positions.

In recent months, Accenture has cautioned that US President Donald Trump’s push to cut government spending on consulting would hinder its growth. Other markets are bringing their own headwinds. In China, Beijing has discouraged the use of the international consulting market in favour of its own homegrown firms.

McKinsey has also been hampered by moves in Saudi Arabia, where the government is paring its payments to consulting firms for various projects across the kingdom. In the 10 years up to 2024, McKinsey was earning at least US$500 million in fees annually from the country, one source familiar with the matter said, making it one of the company’s biggest clients.

Sternfels, however, has belted out a more optimistic tone, reiterating the message that the firm was ready to move past setbacks and a suite of bruising scandals that dented its image.

McKinsey has had to confront backlash in the US over its engagement with China and Saudi Arabia, and is still reeling from its past engagements with some of the world’s biggest opioid makers. The firm had to pay out hundreds of millions of US dollars in civil penalties and legal settlements to resolve allegations that it helped fuel the deadly US drug epidemic.

“I feel we have collectively righted our ship,” Sternfels told his fellow partners in Chicago. BLOOMBERG