Do McKinsey Layoffs Signal Trouble for Consulting Industry?

After careful review, McKinsey is suggesting broad cost-cutting measures that amount to layoffs of up to 10% of total staff … for its own business. 

Hey, at least the firm is consistent.

Amid flatlining growth, executives at the hundred-year-old consultancy firm are pushing back-office units to get leaner, according to a Bloomberg report on Monday. Is it the end of a consulting era as we know it?

Cost Control

McKinsey’s planned layoffs of a few thousand roles over the next 18 to 24 months, per Bloomberg sources, isn’t exactly surprising. It comes after the firm’s own relentless hiring spree — headcount increased from around 17,000 to as high as 45,000 from 2012 to 2022, a spokesperson told Bloomberg — and a gradual post-pandemic attrition that has already trimmed that figure to 40,000. Meanwhile, corporate America is on a cost-cutting mission of its own, embracing AI and automation while slashing expenses. That’s putting consulting contracts on the chopping block. Fellow professional services firms such as Deloitte, Ernst & Young and KPMG have already undergone significant layoffs in recent years.

Arguably worse for McKinsey and the consulting industry writ large, however, have been similar cost-cutting initiatives by governments across the globe:

• US government agencies were ordered by the Trump administration’s Department of Government Efficiency earlier this year to justify their consulting contracts, while consulting firms were asked to justify their work and suggest cost cuts (note: McKinsey had already experienced a drastic decrease in government contracts, losing key work with the Food and Drug Administration due to its prior work with opioid-maker Purdue Pharma).
• Leaders in Beijing, meanwhile, have pushed domestic companies to abandon international consulting firms. Sources also told Bloomberg that McKinsey is suffering from spending cutbacks by the Saudi Arabian government, which had paid the firm half a trillion dollars in fees in the decade leading up to 2024.

Data Dump: The McKinsey layoffs could signal a broader slowdown in the white-collar jobs market, following similar layoffs in Big Tech, finance and elsewhere. Today’s government shutdown-delayed “double jobs report” from the US Department of Labor will provide employment data for both October and November, possibly heightening Fed Chair Jerome Powell’s concerns about the job market.