Category: AI

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McKinsey to make thousands of layoffs as AI advances
Global consultancy firm takes its own advice and sets out to cut one in ten roles in some teams in response to improvements in artificial intelligence

McKinsey, the consultancy that regularly advises companies on cutting costs, is taking its own advice and drawing up plans that could result in it shedding thousands more jobs over the next couple of years in response to “rapid advances in artificial intelligence”.

Senior partners at the global management consulting firm, which has been steadily cutting its worldwide workforce over the past few years, are understood to have held initial talks with the heads of non-client-facing departments about shrinking their teams by as much as 10 per cent.

A McKinsey spokesman would not confirm how many roles were at risk, but Bloomberg, which first reported the plans, estimated that there could be “a few thousand” layoffs staggered over the next 18 to 24 months.

“As our firm marks its 100th year, we’re operating in a moment shaped by rapid advances in AI that are transforming business and society,” the spokesman said. “Just as we’re partnering with clients to strengthen their organisations, we’re on our own journey to improve the effectiveness and efficiency of our support functions.”

McKinsey is one of the world’s foremost consulting firms, advising companies on everything from implementing new technologies to entering new markets and cutting costs. It counts among them blue-chip companies including Coca-Cola, Microsoft, Goldman Sachs and numerous governments.

Getting rid of jobs is often the go-to method McKinsey and its consulting rivals use when trying to “trim the fat” from clients’ cost bases. McKinsey went on an intense hiring spree between 2012 and 2022, during which time its worldwide headcount increased from 17,000 to 45,000. It has since fallen back to about 40,000 after an earlier round of layoffs in 2023. About half of its staff are in non-client-facing, or back-office, roles.

Bob Sternfels, the firm’s global managing partner, laid the groundwork for further job cuts in a television interview in September, when he acknowledged that McKinsey would “probably have fewer folks in the non-client-deployed areas” of the business in the future.

“We’re continuing to add folks who are client-deployed and we see an ever-increasing need for that and we’re aggressively in the market right now trying to expand that,” Sternfels, 55, said. “But we are rethinking our centre-based operations by leveraging all of this new technology.”

Others have come to the same conclusion about how new technologies change the need for human workers, particularly in back-office roles. Marc Benioff, the boss of Salesforce, the software maker, said in August it had cut 4,000 of its customer support roles because “I need less heads”, while Klarna, the buy-now, pay-later company, effectively halved its workforce and replaced them with AI.

At McKinsey, it is understood that discussions around shrinking its support teams are still at an early stage and no final decisions have been made about the size of the cull or which countries will be most affected. McKinsey employs 2,000 people in the UK, some of whom will be considered “non-client-facing”.

The need to streamline operations reflects improvements in technology but is also partly in response to an industry-wide slowdown in client demand for advice over the past couple of years. Companies, wary of the geopolitical and economic uncertainty, have reined in their spending on consultants, having invested heavily immediately after the pandemic.

McKinsey is planning to cut thousands of roles over the next two years as advances in artificial intelligence reduce the need for back-office staff, reports suggest.