Recession

Question

Hello community! Having in mind upcoming recession, what are your views on the hiring / firing rounds from past experiences and sense of what may be coming this and next year?

How quick MBBs are to let people go and would the decision be simpler based on the job level e.g. first cleaning up EMs and APs as they are more expensive and not yet generate the revenue flows, before looking at analysts, associates as they are a cheaper workforce?

What is the typical lag before firms realise they are getting less $$$ inflow and start trimming the FTEs (1-2 quarters)?

How big can this be in % terms? E.g. if revenue is down 20% would you expect to reduce the workforce by 10% to keep some buffer for recovery?

Answer 1

Hi there!

To some extent, hiring and firing depends on how many projects MBB has, which is not directly related to the economic climate. For example, a recession can also mean an increase in turnaround work.

In case they really face issues with their business, first, they will reduce new hires, which is preferable to let people go, as it impacts company more. Also, promotions may be harder to get, and this means people will automatically leave in an up or out system.

Second, how much people will be fired also depends on how fast the company expects business to pick back up, as the hiring and training of new people is expensive and takes time.

While EMs and APs, cost more, these grades already hold more valuable client relationships and expertise, and are harder to replace, so I doubt they will let go first.

So in summary, hiring/firing is not in a 1:1 relationship with business prospects, but with a stiffer economic climate, a career at MBB certainly won't become easier. In the end it depends on your situation: if you perform and bring in business, you won't be let go.

Best,
Adrian

Answer 2

Hi there,

As Winston Churchill famously said: Never let a good crisis go to waste!"

In practice, this merely means a shift in MBB project portfolio from sexy strategy and growth projects to turnaround and cost saving projects.

Either way, there will be continuity of business and therefore demand for consultants!

Hope this helps. Best of luck!

Answer 3

Hello!

Honestly, I don´t think this will affect consulting companies to the extent of firing, as you could see during the 1st wave of COVID, when many companies did and they didn´t.

Cheers,

Clara

Answer 4

Hi there,

Remember that strategy consulting companies are traditionally non-cyclical! So, even in a recession, they normally do just fine.

Covid was different as it was massive uncertainty.

Also, remember that churn at these firms is around 25%. So, even if they're not actively growing, they still have to hire a good amount just to stay the same size!