McKinsey’s Australian and New Zealand operation has moved quickly to reassure the firm’s consultants that they are not being targeted by a global review that plans to eliminate about 2000 jobs, or more than 4 per cent of the strategy consulting firm’s 45,000-strong global workforce.
The review will instead focus on cutting roles held by staff working in functions such as information technology, finance, communications and human resources. The plan is typical of a review that McKinsey would carry out for a client wanting to reduce costs and increase the efficiency of back-office functions.
McKinsey’s Australian leadership sent a firm-wide email on Wednesday that said the review was part of a regular examination of the firm’s “operating model”.
The planned staff cuts are another sign of economic troubles in the US and Australia. Last week, big four consulting firm KPMG announced it would cut 2 per cent of its US workforce, or about 700 roles, and a similar proportion of its Australian workforce, or about 200 local roles.
KPMG cited a slowdown in the firm’s management consulting business caused by increasingly cost-conscious clients, but a McKinsey global spokesman said client demand was increasing.
“With demand from our clients expanding, we continue to hire client-serving professionals and invest in our ability to serve clients,” global McKinsey spokesman DJ Carella said in a statement. “In parallel, 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.”
McKinsey’s Australian leadership sent a firm-wide email on Wednesday that said the review was part of a regular examination of the firm’s “operating model” and was focused on non-client-facing roles, as employees working in the functions are known.
Start dates deferred
The Australian Financial Review understands that the firm continues to hire consultants but some of these new starters have had their commencement date deferred to later in the year. McKinsey’s local leadership declined to comment.
The firm’s local arm has hired 90 new consultants so far this year, on par with its highest-ever local intake in 2022. The new hires include 35 undergraduates, along with a mix of Masters of Business Administration graduates and experienced hires.
An unspecified number of the new hires have agreed to stagger their start date between February and May.
McKinsey has about 620 Australian and New Zealand employees, of which about a quarter, or 150, work in non-consulting roles.
An executive recruiter who speaks regularly with potential candidates from McKinsey said the cuts followed a bumper year of hiring and salary increases in 2022.
“There are a lot of proposals about, but a lot of clients are stalling before they buy,” he said.
Local revenue down
McKinsey’s local annual revenue fell 8 per cent in calendar 2021 to $440 million, as a big boost to bonuses paid to partners and staff pushed the local operation into a loss for the year, according to corporate filings for McKinsey Pacific Rim.
Globally, the firm posted a record $US15 billion ($22 billion) in revenue in 2021.
The cost-cutting plan, known internally as Project Magnolia, was first reported by Bloomberg, and is expected to be completed in the coming weeks. Bloomberg reported that one motivation for the move was to preserve partner pay.
Separately, the Financial Times reported that the firm’s legal and compliance teams would not be cut. Those teams were built up after the firm faced scandals over its work for opioid manufacturers and in South Africa.
Local McKinsey consultants told they are not target of job cuts - The Australian Financial Review
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