McKinsey could axe 2,000 jobs despite 'record year'

After reporting an excellent year in terms of revenue, McKinsey & Company has surprised industry experts by announcing plans to cut up to 2,000 staff. This could see the strategy giant shed thousands of its back-office staff – in one of its largest ever rounds of layoffs.

First established in 1926, McKinsey & Company has since become one of the world’s three largest strategy consultancies, alongside Bain & Company and Boston Consulting Group (BCG). As one of the go-to advisors for some of the world’s largest corporate and government players, McKinsey’s name has become synonymous with a number of business practices. Deservedly or not, one of those practices is large-scale layoffs – as the firm’s advisors help clients raise their profit margins by eliminating labour they can operate without.

Now, though, the firms is turning the axe on its own employees, according to business news platform Bloomberg. As the firm looks to respond to competition for new advisory talent, while balancing its books ahead of a global economic slowdown, it has reportedly unfurled a new plan named ‘Project Magnolia’, which will eliminate some 2,000 support roles in order to free up funds for new consultant hires.

McKinsey was already said to have slowed hiring of back-office staff, according to one source close to the story – and they added it is looking to shed a number of positions from internal that may include human resources, technology, and communications functions. While the precise number of redundancies has yet to be finalised, if it were to get close to the figure currently circulating then it would be one of the largest round of cuts in the firm’s history.

The consultancy has since confirmed that it is “redesigning” how its non-client-serving teams operate “for the first time in more than a decade,” – with the goal of how those teams could “effectively support and scale with our firm”. However, the McKinsey comment did not provide further details on the matter.

One aspect of McKinsey’s back office looks to have been conspicuously shielded from the coming cuts, though. In the wake of corruption scandals in South Africa involving the firm, the company paying hefty settlements in the US thanks to its role in the country’s opioid crisis, and a number of other debacles in recent years, its recently-enhanced legal team will not face headcount reductions.    

The news comes at a surprising moment for McKinsey – as the firm claims to have surpassed its record revenue in the last year. Sources close to the company claim that it topped the all-time high of 2021’s $15 billion haul, though a precise number for McKinsey’s 2022 results has not been released. At the same time, the firm has added 17,000 staff in the last five years, taking its global headcount to 45,000 – with more than half of that taking up ‘client-facing’ roles. McKinsey has stressed that its demand is still strong – and that it will “continue to hire client-serving professionals” to meet the needs of its clients.

Senior executives from other leading consultancies are also reportedly weighing up similar options. Big Four professional services firm KPMG is understood to be cutting close to 2% of its US staff — around 700 people — as it saw its consulting line struggle through 2022. In particular, KPMG was hit by the collapse in merger and acquisition activity – which hit its deal advisory business – following a record breaking 2021.