Accenture is joining McKinsey at the downsizing party. On an analyst call this week, the firm announced what would be one of the biggest headcount reductions in its history – the elimination of 19,000 jobs in non-billable roles. That’s a staggering 2.5% of the behemoth consultancy’s ~740,000-strong workforce.
This decision comes as no surprise to those who have been following macroeconomic trends, as digital & IT spending has decreased across industries (not just technology) and these services are at the heart of Accenture’s business model.
Overall, the firm downgraded its revenue outlook for the remainder of the year – it expects 8-10% growth compared to a prior forecast of 8-11%.
Still, the firm has publicly stated it is still hiring in other parts of the business (read: consulting and client-facing roles), so if you’re planning to apply for a role at Accenture this cycle, keep your plans intact.
However, big picture, the era of belt-tightening is upon is in the management consulting world. Accenture also plans to consolidate its significant office space commitments around the world (more on what the broader pullback in commercial real estate means for regional banks and other players at another time).
Overall, the firm expects to spend $1.5B this year on what the Wall Street Journal is terming Accenture’s “business optimization” plan – with a majority of that expense concentrated in employee severance.
Let’s dive into what these Accenture job cuts mean for you – the aspiring Accenture consultant.
Accenture Job Cuts – Who’s Affected?
Despite a 5% increase in quarterly revenue (to $15.8B), the firm is moving ahead with eliminating bloat at the administrative level. None of these cuts affect consultants or those in direct revenue-generating roles, and the firm continues to move forward with regular hiring plans this recruiting cycle.
Specifically, those in back-office technical support, research roles, recruiting, and HR are most affected by these job cuts.
After a decade of rapid growth spurred on by the explosive growth in tech, as well as the need for digital transformation across industries, the chickens have come home to roost. Investors are demanding a new focus on profitability, and despite better than expected earnings, these job cuts seem to be a direct result of a lack of disciplined growth over the last decade.
Post-COVID ways of working also play a role in this decision, as hybrid working models lessen the need for physical office space.
This news isn’t surprising – in this year’s Consultant Salary Report, we again shared our view that “Future margins are at risk as firms continue to raise salaries without a commensurate rise in project rates. So far, margins have been protected by a decrease in operational costs (i.e., smaller office space, less travel). Still, there is only so much that firms can cut, and salaries keep rising…”
As growth retreats from pandemic-era highs, the resulting decrease in operational costs at Accenture wasn’t enough to put off cuts in its biggest expense bucket – labor.
What Does This Mean for Accenture?
Simply put, Accenture is making an about face after announcing 90K promotions and 50K new hires just last March. After a period of rapid growth, it’s right-sizing by taking the standard cost-cutting recommendations it makes to clients and applying them internally.
In the short-term, folks at the firm may see some disruption as support teams are consolidated and long-time points of contact move on. However, just like in the aftermath of the recent McKinsey job cuts, we don’t expect there to be any effect on the firm’s recruiting function or its 2023 hiring plans for client-facing roles.
Longer-term, the firm is positioning itself for more sustainable earnings and market cap growth.
What Does This Mean for You?
If you’re a prospective candidate looking to apply to Accenture this cycle, nothing changes. Your timelines are the same, and the firm’s hiring plans for consultants have not changed.
However, a word of warning – the firm has clearly communicated that it is prioritizing increased profitability after a decade of rapid growth. It wouldn’t surprise us to see Accenture become even more judicious about its hiring decisions.
Translation: Roles at Accenture may be even more competitive this cycle as the number of open roles plateaus and applications soar due to the more severe layoffs in competitor industries like banking and tech.
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