McKinsey job cuts are few and far between. In what would be one of the biggest headcount reductions in its history, Bloomberg News first reported that McKinsey & Company is planning to eliminate 2,000 jobs from non-client-facing teams. The cuts at the prestigious consultancy, which boasts over 45,000 global employees, represent ~4% of its rapidly growing overall workforce. For reference, McKinsey’s headcount was just 28,000 in 2018.
Let’s take a deeper dive into the nature of these potential McKinsey job cuts, what they mean for the firm moving forward, and most importantly, what they mean for you – the aspiring McKinsey consultant.
McKinsey Job Cuts – Who’s Affected?
Dubbed Project Magnolia internally, this headcount reduction planning has been in the works for a while as Managing Partner Bob Sternfels continues to leave his mark on the firm. Right off the bat, it is important to note that none of these cuts affect consultants or those in client-facing roles. Instead, after a decade of rapid growth, McKinsey is tightening its belt by consolidating and restructuring its support functions – no doubt to adjust to the firm’s post-COVID ways of working, but also to put money back in the pockets of the firm’s main shareholders – its partners.
“We are redesigning the way our non-client-serving teams operate for the first time in more than a decade, so that these teams can effectively support and scale with our firm,” company representative DJ Carella told Bloomberg in an emailed statement.
This 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 decreased operational costs McKinsey has realized over the last three years were no longer enough to put off headcount reduction any longer.
What Does This Mean for McKinsey?
Simply put, McKinsey is right-sizing for the post-pandemic future by applying the rigorous analytics and cost-cutting recommendations internally that it usually delivers to clients.
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, 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 growth (and a fatter profit share for partners).
What Does This Mean for You?
If you’re a prospective candidate looking to apply to McKinsey 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 McKinsey become even more judicious about its hiring decisions. It’s just a natural response to the McKinsey job cuts.
Translation: Roles at McKinsey 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.