They used to be the rockstars of the business world, parachuting in to crack the toughest problems for companies and governments.
Now, as layoffs hit staff in London and New York, management consultants have become the butt of the joke.
“Here at McKinsey, we’re an elite group of strategists, thinkers, analysts, innovators, guys named Braden, and Delta Platinum Skymiles reward members,” says a besuited man in a recent sketch on US comedy show Last Week Tonight with John Oliver.
“If you’re an ambitious college senior or MBA graduate who needs to be told you’re special or you will die, we would like you to consider a career at McKinsey.”
The mockery comes after a succession of scandals within the industry and as the consultant classes – including not just management consultants but also accountants, lawyers and PR spinners – endure a tough year.
PwC – a Big Four goliath that offers everything from accountancy and legal services to consulting – was the latest to announce job cuts on Tuesday: 600 roles are being axed in the UK.
The decision follows similar bloodlettings at rivals: Deloitte has already confirmed it is laying off 800 staff, while both EY and KPMG are letting go of around 100 employees each.
On the other side of the Atlantic, McKinsey has announced plans to slash more than 1,000 jobs.
John Oliver’s US comedy show Last Week Tonight took aim at McKinsey amid a tough year for consulting firms
Credit: Richard Shotwell/Invision via AP
Meanwhile, law firms including Trowers & Hamlins, CMS and Dechert are all cutting roles as deal-making and property sales dry up.
A wave of consolidation has also swept through the world of financial PR. UK-based Tulchan was sold to Teneo, WPP is selling a stake in Finsbury to KKR, APCO Worldwide has snapped up Camarco and Powerscourt’s founder is lining up a sale to Morrow Sodali.
“Frankly, no one is going around thinking that things are amazing right now,” says one senior figure at a City PR firm.
Insiders blame all this on a subdued deal market, in particular a “very quiet” private equity sector.
Mergers and acquisitions are the bread and butter of professional services, with strategy houses, accountants, consultants and lawyers all brought in to hammer out the details.
In many cases, businesses also treat these firms like brains-for-hire, calling on them to think creatively and come up with novel solutions to knotty problems.
During the giddy years of cheap money, all these services were in strong demand, as a wave of technology companies rushed to float on frothy stock markets and boardrooms commissioned a plethora of reviews and projects related to trendy ESG topics.
Now the economic tide has gone out, however, and the deals have dried up. Worse still, clients have been pummelled by inflation and rising interest rates. They are cutting back on “non-essential” expenditure, taking a red pen to projects that can be put off for another day.
Carlyle, the US private equity giant that owns Addison Lee among others, on Tuesday became the latest to warn of job and cost cutting after raising a new fund that was 20pc smaller than its last. That is more bad news for companies vying to sell it advice.
“I think it’s fair to say that growth has slowed somewhat given the UK and global economic climate that we’re facing at the moment,” admits Tamzen Isacsson, chief executive of the Management Consultancies Association.
“What you’re seeing is some readjustments to the workforce and the balances of skills within firms, which is to be expected and to be honest is a continuous process.”
This “readjustment” represents a dramatic handbrake turn for the industry.
Business boomed during the pandemic, with consultants and accounts left scrambling to bring on new staff to handle mountains of work flowing in from panicked governments. Deloitte alone was at one stage earning £1m per day in fees from Whitehall during the pandemic.
At that time, companies were struggling to hold on to people as white-collar workers dreaming of early retirement joined the “great resignation”.
Now, with economic conditions looking choppier, workers value job security again. Attrition rates (the number of people leaving) have collapsed.
It has led to a glut of workers, with PwC specifically blaming the lack of resignations for the need to cut staff.
“As a business we have to respond and look for the opportunities,” says Kevin Ellis, a senior partner at PwC UK. “Decisions affecting jobs are never easy, but we have to do the right thing for the business and our people.”
Some critics argue that a shrinking of the consultant world is well overdue.
Rosie Collington, a research fellow at University College London (UCL) and co-author of The Big Con, a book about the proliferation of management consulting, says many of the jobs Deloitte was asked to do during the pandemic, such as running the Test and Trace programme and procuring PPE, could have been done by the NHS.
Along with Mariana Mazzucato, director of UCL’s Institute for Innovation and Public Purpose, Collington argues that an over-reliance on management consultants and other outsourcing has infantilised governments and, to a lesser extent, businesses. Senior leaders can no longer make a decision on their own, she argues.
Some of the examples defy parody. In November 2020, leaked emails revealed by The Telegraph showed ministers had asked management consultants to provide advice on how the Government could rely less on management consultants.
Meanwhile, businesses often bring consultants in to rubber-stamp controversial decisions such as layoffs – effectively outsourcing some of the responsibility.
“If you talk to consultants, they will often say they feel they are brought in by companies to create a legitimacy for a decision that has already been taken by executives,” says Collington.
This simply stores up problems in the long run, Mazzucato has argued.
“To learn, you need to do,” she said at a book launch in March. “And if you’re so fearful of making a mistake, and constantly saying someone else has to take the risk – and yet they don’t really take the risk, because when things go wrong they’re actually not held accountable – you’re in trouble.”
Scandals have also taken the shine of the professional services industry.
McKinsey agreed a $573m settlement with a coalition of US states in 2021 over its role in the opioid crisis after it provided advice to Purdue Pharma on how to drive sales of OxyContin painkiller.
Bain was banned from bidding for UK government contracts for more than half a year for its role in a South African corruption scandal, for which it had apologised and repaid fees from the work.
And Big Four accountants have been hit with a procession of fines for poor audit work. KPMG was handed a record £21m fine last month by the UK accounting watchdog for its failures related to the collapse of Carillion.
The big question for the consultant classes is how long the downturn will last and what will the recovery look like.
Many within the industry are fearful about what will happen if the downturn lasts beyond the start of next year. If it does, the industry may be headed for more consolidation.
There is also trepidation around artificial intelligence and how it threatens to reshape white-collar work.
While the technology is still unreliable, it is evolving fast and is already being leaned on for ideas. OpenAI this week launched a corporate version of ChatGPT, which can ingest business intelligence. Soon, it could be competing with the Big Four for contracts.
Right now, consultants don’t feel like rock stars.