Global consulting giant McKinsey & Company has reduced its workforce by more than 10% over the past 18 months, marking one of the most significant staff reductions in its nearly century-long history. The move comes as part of a sweeping effort to boost profitability following a period of overexpansion and slower industry-wide growth.
The firm, which had swelled its global headcount to over 45,000 by the end of 2023, now employs roughly 40,000 people, according to individuals familiar with the matter. The downsizing reverses the aggressive hiring spree McKinsey undertook during the COVID-19 pandemic, when booming demand for consulting services drove the firm to expand its offerings and enter new business areas, including digital transformation and implementation.
The cuts span across the organization, beginning with the dismissal of 1,400 back-office staff in 2023 and later extending to about 400 specialists in areas such as data science and software engineering. Additionally, the company ramped up internal pressure on underperforming consultants through a notably rigorous mid-year review process last year, insiders say.
The cost-cutting initiative coincides with broader challenges in the consulting sector, including cooling client demand, reduced attrition, and the disruptive rise of generative artificial intelligence (AI), which threatens to automate many tasks traditionally performed by junior staff.
“Generative AI enables new levels of productivity for our teams,” McKinsey said in a statement, echoing a growing sentiment across the professional services industry that technology could allow firms to do more with fewer people.
The firm’s financial pressures extend beyond shifting market dynamics. McKinsey has faced $1.6 billion in legal settlements stemming from its controversial work advising opioid manufacturers, further weighing on its bottom line.
Despite the cuts, McKinsey maintains that it is still investing in growth. “Our firm continues to grow and we’re doing more impactful work, in more ways, than ever. We continue to recruit robustly and will welcome thousands of new consultants to our firm this year,” the company said.
Nevertheless, McKinsey’s recent internal report omitted two key figures it typically discloses: the size of its workforce and its 2024 revenue. Its last reported annual revenue stood at $16 billion in 2023.
The company’s recalibration comes at a time when rival Boston Consulting Group (BCG) is charting a different course. BCG recently reported a 10% increase in revenue to $13.5 billion and expanded its workforce by 1,000 employees to a total of 33,000. The contrast highlights diverging fortunes within the consulting sector as firms respond to evolving economic conditions and technological disruption.
McKinsey’s global managing partner, Bob Sternfels, has told colleagues the firm intends to be “back in balance” by the end of 2024. The coming months will test whether that goal can be achieved amid mounting internal and external pressures in an increasingly competitive—and AI-disrupted—market.
