McKinsey considers thousands of job cuts as AI reshapes consultancy work

No final decision yet on the scale of the reductions or which countries could be affected

McKinsey & Company, one of the world's best-known management consultancies, is considering cutting thousands of jobs as it responds to rapid advances in AI technology.

Senior leaders at the firm have reportedly discussed plans to reduce headcount by about 10% across some non-client-facing departments, a move that could lead to a few thousand layoffs over the next 18 to 24 months.

The discussions are said to be at a preliminary stage, with no final decisions yet made on the scale of the reductions or which countries could be affected.

Bloomberg, which first reported the discussions, said the cuts would be staggered over the period rather than carried out in a single round.

A McKinsey spokesperson said the firm was reviewing its operations as it approached its centenary.

"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 spokesperson 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, which advises companies on cost reduction, was founded in 1926 by James McKinsey, a University of Chicago accounting professor.

The firm began by advising a local meatpacker and has since grown into a global powerhouse, counselling companies on everything from adopting new technologies to entering new markets and cutting costs.

Its clients include major corporations such as Coca-Cola and Goldman Sachs, as well as governments around the world.

Between 2012 and 2022, McKinsey embarked on an intense hiring spree, increasing its global headcount from about 17,000 to 45,000. That figure has since fallen to around 40,000 following a round of layoffs in 2023.

Roughly half of its workforce is employed in non-client-facing, or back-office, roles.

Bob Sternfels, McKinsey's global managing partner, previously signalled that further cuts were likely.

In a television interview in September, he said the firm would probably have fewer people in non-client-deployed areas in future, while continuing to recruit consultants who work directly with clients.

The firm has already reduced its workforce this year. It cut around 200 global technology jobs last month as it moved to automate some roles using AI.

The potential job losses come as AI prompts wider questions about the future of work.

Research on the impact of AI has produced conflicting conclusions, ranging from studies suggesting little or no effect on employment to forecasts warning that tens of millions of jobs could be lost.

A recent survey by BearingPoint found that around half of executives believed their organisations had between 10% and 19% excess capacity as AI-driven automation is rolled out.

Consulting firms are both advising on and adapting to these changes.

According to a September report by Harvard Business Review, McKinsey and rivals including KPMG, Bain, Boston Consulting Group and PricewaterhouseCoopers have introduced internal AI-powered assistants that are already seeing strong adoption.

McKinsey's layoff plans also come amid a slowdown in growth across the consulting industry.

McKinsey's annual revenue has remained broadly flat at between $15 billion and $16 billion over the past five years, while its Big Four rivals Deloitte, EY, KPMG and PwC have also trimmed staff after revenue growth stalled.

Despite this, Sternfels told partners at a meeting in Chicago in October that he was optimistic about the firm's future growth.