One of the world’s most elite management consulting firms, “McKinsey & Company, is poised to cut its staff by approximately 10% over the coming 18 to 24 months. This is expected to happen through the end of 2027.
The layoffs are set to occur in non-client-facing positions, impacting thousands, as Artificial Intelligence alters the way the firm functions.”
This is the biggest change for McKinsey since the consulting giant has been taking years to develop the reputation of having a superior analytics skillset and support infrastructure.
Currently, the work done by the support staff in McKinsey for activities such as data analysis, financial modeling, and the compilation of reports will soon be unnecessary due to the use of artificial intelligence technology. This will soon see the deployment of thousands of Artificial Intelligence “agents” by the consulting giant.
This, however, is not the first layoff McKinsey has conducted in the past years. McKinsey has been reducing the number of employees in the firm ever since the introduction of Project Magnolia to cut 2,000 back-office workers in 2023. This was an effort to optimize and emphasize customer-facing roles over back-office ones.
The layoffs are set to continue in 2024 when McKinsey lays off between 360 and 400 technology experts employed in design, data engineering, cloud computing, and software development.
How AI and Economic Shifts are Reshaping McKinsey?
Just a few weeks ago, another 200 technology-related jobs were eliminated as the company’s use of AI technology gathers momentum. The message is loud and clear: the more the machines do the technical work, the more the humans doing the technical work are being let go.
The magnitude of these layoffs could be better appreciated when considering the overall growth of McKinsey in the last ten years. The consulting giant grew from a total of 17,000 people in 2012 to 45,000 in 2022.
However, this period of expansion has turned out to be a short-lived episode, with McKinsey already reducing its total number of employees to less than 40,000, with further layoffs expected.
Though AI is the major reason, AI is not alone in causing these layoffs. The consulting sector as a whole is experiencing tough times. There is overall economic uncertainty and geopolitical tension, and as such, companies are very pragmatic in their spending. Consulting is one sector that faces cuts in expenditures in difficult times.
McKinsey is also struggling with flat revenue, indicating that their traditional way of doing business is under stress. Companies are faced with increased competition from AI-based consulting companies, which offer comparable services at a reduced price, threatening traditional consulting businesses like McKinsey.
An analysis by a industry indicates that about 65% of business entities regard conventional consulting business models as low value.
Trimming the Back Office to Fuel Consultant Growth
Bob Sternfels, McKinsey’s global managing partner, has admitted that “we frankly need fewer people in certain non-client functions.” The simple math is this: if a machine can do the job of several people, it doesn’t make business sense to keep staff levels stable.
The company is attempting to frame these layoffs in the context of evolution. “As our firm celebrates its 100th anniversary, we are living through a time that is characterized by the acceleration of AI, which is transforming the business and societal landscape,” said a spokesperson for McKinsey.
“In much the same way that we are partnering with clients to enhance their enterprises, we are working on our own efforts to enhance the productivity of support functions.”
Thus, this statement points to an irony that has not escaped notice: “McKinsey & Co. is known for advising its clients on how to change the structure of their business and adopt new technologies, but now it’s taking its own advice to make changes.”
However, in spite of cutting back the number of support staff, McKinsey stated that it would continue to hire more client-facing consultants. This is because, even at that time, the company still valued the aspect of human networking and strategic thinking that the consultants offer whenever they interact with clients. This is the invisible work that is being made irrelevant by AI.
McKinsey’s Restructuring and the Future of Consulting Support
For the thousands of McKinsey employees who work in support roles, such announcements offer an uncertain future. These individuals had anticipated finding secure, long-term employment at a prestigious organization.
However, they’re finding instead that even such prestigious consulting companies as McKinsey and BCG are not protected from the shake-ups caused by AI, which affect all sectors.
McKinsey’s actions are also of interest to the consulting industry as a whole. Being one of the major players in the industry, the consultancy’s decisions tend to be a precursor to what is to follow. If McKinsey is to be able to continue to function effectively while maintaining a vastly reduced support staff, many firms are likely to follow suit.
