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Robert

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10

Lay-offs at MBB?

Hi all,

Hope you're keeping safe wherever you may be! The covid 19 crisis is going to and already is having a catastastrophic effect on businesses and it is likely that they will not be able to afford consulting services. I've heard anectodally that firms have been losing business and are struggling to sell more projects. Further, new hires are having their start dates pushed back.

Given all of the above, how likely is it that consulting firms resort to laying off some of their staff?

Thanks

Hi all,

Hope you're keeping safe wherever you may be! The covid 19 crisis is going to and already is having a catastastrophic effect on businesses and it is likely that they will not be able to afford consulting services. I've heard anectodally that firms have been losing business and are struggling to sell more projects. Further, new hires are having their start dates pushed back.

Given all of the above, how likely is it that consulting firms resort to laying off some of their staff?

Thanks

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Hi Anonymous,

Consulting firms are profitability-driven companies as well - and the highest fixed cost is payroll. If we will have a severe middle- to long-term reduction of consulting demand, partners can no longer endorse keeping fixed cost high and lay-offs are indeed possible (forced or unforced, both..)

Is such a severe middle-term reduction of consulting likely? No, I don't see that for now. Consulting industry in general works well in clear upward and downward phases; just in highly unsecure phased with limited visibility they don't perform well.

Hope that helps - if so, please give it a thumbs-up with the green upvote button below!

Robert

Hi Anonymous,

Consulting firms are profitability-driven companies as well - and the highest fixed cost is payroll. If we will have a severe middle- to long-term reduction of consulting demand, partners can no longer endorse keeping fixed cost high and lay-offs are indeed possible (forced or unforced, both..)

Is such a severe middle-term reduction of consulting likely? No, I don't see that for now. Consulting industry in general works well in clear upward and downward phases; just in highly unsecure phased with limited visibility they don't perform well.

Hope that helps - if so, please give it a thumbs-up with the green upvote button below!

Robert

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Hello!

Totally agree with you: the COVID19 is truly harming economy, and in the next weeks we will see whether we are heading to a global economic recession.

If this is the case, and we indeed face a global recession -even if not as hard as the previous one-, this will have an impact in consulting. Why? Simply because there would be less clients, less engagements with the usual clients, and an overall freeze in spending.

This, for sure, will impact recruiting, reducing the classes of BAs and Associates for a couple of years.

What about lay-offs? Is too soon to assess this yet. Furthermore, MBB are still working, we are not in the point in which they stop their business. What is for sure is that promotions and MBAs sponsoship will freeze, as well as hiring. If this continues like this, the utilization of some consultants will be very low and they will be "advise to leave"

Hope it helps!

Cheers,

Clara

Hello!

Totally agree with you: the COVID19 is truly harming economy, and in the next weeks we will see whether we are heading to a global economic recession.

If this is the case, and we indeed face a global recession -even if not as hard as the previous one-, this will have an impact in consulting. Why? Simply because there would be less clients, less engagements with the usual clients, and an overall freeze in spending.

This, for sure, will impact recruiting, reducing the classes of BAs and Associates for a couple of years.

What about lay-offs? Is too soon to assess this yet. Furthermore, MBB are still working, we are not in the point in which they stop their business. What is for sure is that promotions and MBAs sponsoship will freeze, as well as hiring. If this continues like this, the utilization of some consultants will be very low and they will be "advise to leave"

Hope it helps!

Cheers,

Clara

Hey A,

you are not alone - this is one of the FAQ of my mentees these days.

Given the current situation, however, I don't see the need to lay-off people as it was the case for some companies in 2008.

What will probably happen, is the hiring freeze until end of the year. Due to natural fluctuation in the companies the number of employees will be reduced on their own. Some of the consultants might be also incentified to take unpaid leave. But then the consulting business will resume as usual after uncertainty will be over. The crisis is also a good business period for consulting enabling it to sell many performance improvement and turnaround engagements.

To sum up - no massive lay-offs foreseen in the coming months.

Good luck!

André

Don't worry, your offer will not be rescinded, but most probably, you will be asked to start in Fall 2020 instead of summer, when the business activity is usually higher.

Good luck,

André

Hey A,

you are not alone - this is one of the FAQ of my mentees these days.

Given the current situation, however, I don't see the need to lay-off people as it was the case for some companies in 2008.

What will probably happen, is the hiring freeze until end of the year. Due to natural fluctuation in the companies the number of employees will be reduced on their own. Some of the consultants might be also incentified to take unpaid leave. But then the consulting business will resume as usual after uncertainty will be over. The crisis is also a good business period for consulting enabling it to sell many performance improvement and turnaround engagements.

To sum up - no massive lay-offs foreseen in the coming months.

Good luck!

André

Don't worry, your offer will not be rescinded, but most probably, you will be asked to start in Fall 2020 instead of summer, when the business activity is usually higher.

Good luck,

André

It would all be hearsay at this point.

What I will say is that during the 2008 Financial Crisis, several consulting firms (I know Bain and OW for sure) rather than letting people go, offered them basically an extended sabbatical where they received a small part of their salary for 12 months while the situation recovered). I know Bain partners also took significant pay cuts for a year or two.

In consulting people are the product, so lay offs are a bigger decision than for most other companies.

Personally I would stay pretty positive that there are unlikely to be a lot of lay offs, although hiring will undoubtedly slow down for a while.

It would all be hearsay at this point.

What I will say is that during the 2008 Financial Crisis, several consulting firms (I know Bain and OW for sure) rather than letting people go, offered them basically an extended sabbatical where they received a small part of their salary for 12 months while the situation recovered). I know Bain partners also took significant pay cuts for a year or two.

In consulting people are the product, so lay offs are a bigger decision than for most other companies.

Personally I would stay pretty positive that there are unlikely to be a lot of lay offs, although hiring will undoubtedly slow down for a while.

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Hello,

No one can really know about the new staffing targets until we won't see which will be the impact of the corona virus on the economy. So far consulting companies are still trying to move forward with the hiring process using video-interview, hence the layoff opportunity seems to be far.

Anyway, even if a global crysis doesn't mean that you don't have projects (think about cost cutting or restructuring process and about all business plans that have to be reviewd) it's likely that they will first of all slow down or freeze the recruitments until they won't understand what is the real impact of the corona virus. Only if the crysis will continue for many months and stopping new hiring won't be enough, it will be necessary to consider the lay off possibility.

Best,
Luca

Hello,

No one can really know about the new staffing targets until we won't see which will be the impact of the corona virus on the economy. So far consulting companies are still trying to move forward with the hiring process using video-interview, hence the layoff opportunity seems to be far.

Anyway, even if a global crysis doesn't mean that you don't have projects (think about cost cutting or restructuring process and about all business plans that have to be reviewd) it's likely that they will first of all slow down or freeze the recruitments until they won't understand what is the real impact of the corona virus. Only if the crysis will continue for many months and stopping new hiring won't be enough, it will be necessary to consider the lay off possibility.

Best,
Luca

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Hi there,

I understand your concerns and for sure the virus is and will affect the economy. The degree it will affect business activities though is still unclear. The truth is, financial analysts are revising their estimates every week and there is huge uncertainty in future development.

Could consulting firms decide the lay-off staff? Only if they assess the crisis to have long-term effects (which right now is still debated). Given the costs of a consulting firm to hire talents, and given that the “product” of consulting is the people they hire, it could be a boomerang for a consulting company to lay off people to get short-term gains.

Moreover, consulting companies sell their services also for restructuring, which now will be necessary for several firms.

I would expect short-term measures related to the following:

  • Reduce/freeze hiring
  • Postpone starting date
  • Block promotions

Layoffs will be the last resort and only if countries worldwide show they are unable to recover relatively smoothly in a two-month period, as done by China and Korea.

Best,

Francesco

Hi there,

I understand your concerns and for sure the virus is and will affect the economy. The degree it will affect business activities though is still unclear. The truth is, financial analysts are revising their estimates every week and there is huge uncertainty in future development.

Could consulting firms decide the lay-off staff? Only if they assess the crisis to have long-term effects (which right now is still debated). Given the costs of a consulting firm to hire talents, and given that the “product” of consulting is the people they hire, it could be a boomerang for a consulting company to lay off people to get short-term gains.

Moreover, consulting companies sell their services also for restructuring, which now will be necessary for several firms.

I would expect short-term measures related to the following:

  • Reduce/freeze hiring
  • Postpone starting date
  • Block promotions

Layoffs will be the last resort and only if countries worldwide show they are unable to recover relatively smoothly in a two-month period, as done by China and Korea.

Best,

Francesco

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Hi Anonymous,

I agree with Clara. The effects of COVID-19 on the consulting industry will most likely be:

  1. Short-term: Hiring freeze, start dates for new hires pushed back to January 2021 (you can currently already observe this in the market)
  2. Long-term: Re-calculation of hiring targets, potentially low utilization of consultants and respective limitations on promotions (all based on overall effect on the economy and firms' consulting budgets)

As employee turnover in consulting is generally high, I would not expect massive layoffs but rather the implications mentioned above. However, this obviously depends on the severity of a economic break down (and it is far to early to anticipate the consequences) and the corresponding decline in consulting mandates.

Hope this helps.

Best
Dorothea

Hi Anonymous,

I agree with Clara. The effects of COVID-19 on the consulting industry will most likely be:

  1. Short-term: Hiring freeze, start dates for new hires pushed back to January 2021 (you can currently already observe this in the market)
  2. Long-term: Re-calculation of hiring targets, potentially low utilization of consultants and respective limitations on promotions (all based on overall effect on the economy and firms' consulting budgets)

As employee turnover in consulting is generally high, I would not expect massive layoffs but rather the implications mentioned above. However, this obviously depends on the severity of a economic break down (and it is far to early to anticipate the consequences) and the corresponding decline in consulting mandates.

Hope this helps.

Best
Dorothea

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unfortunately, nobody now is able to predict the precise effects on each business. The 2 true facts today are that interviews are taking place regularly but online instead than face to face, and that many new consulting projects are being paused. Therefore if this lockdown continues for long it can cause a shrinking in new hires.

Best,
​Antonello

unfortunately, nobody now is able to predict the precise effects on each business. The 2 true facts today are that interviews are taking place regularly but online instead than face to face, and that many new consulting projects are being paused. Therefore if this lockdown continues for long it can cause a shrinking in new hires.

Best,
​Antonello

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As far as I know layoffs are not being currently discussed – what's more likely is a hiring stop.

As far as I know layoffs are not being currently discussed – what's more likely is a hiring stop.

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Hi,

It highly depends on your location, company preferences, position. I can explain it in the following way:

Firms:

  • MBB: less affected, interviews are still conducted, offers are issued for Q3 and Q4 2020 and Q1 2021; companies still have business and enough liquidity to survive; some offices expect to grow in terms of revenue for 2020
  • Tier 2: highly affected, the general trend is that interviews are postponed, the majority of firms do not issue offers, some firms experience liquidity gaps and cut FTE or ask employees to take an unpaid leave
  • BIG 4: less affected, advisory business experiences problems, but recurring revenue from Tax and Audit allows to manage through temporary uncertainty

Geographic coverage:

  • USA: the strongest market for consulting, interviews are conducted, offers are issued, consulting revenues might even grow
  • Europe: consulting is affected, but is expected to recover in Q3 and Q4
  • CIS: consulting is affected, MBB and BIG 4 will survive, as well as Accenture, but boutiques have liquidity problems
  • Asia: consulting revenues begin to recover, but Hong Kong political crisis still creates uncertainty around Financial sector and transportation (that affects consulting revenues from these industries)
  • Middle East: MBB firms still conduct interviews, consulting business starts to recover slowly, low oil prices still slow down the economy
  • Latin America: no info
  • Australia: no info

Positions:

  • Interns: affected, interns is a long term game for consulting firms (as well as a way to handle “monkey” tasks) and consulting firms at the moment are not super focuses on long term investments
  • Junior and middle management: less affected, hiring is in progress across MBB and Big 4
  • Principals & partners: less affected, consulting firms still look for experienced leaders

Programs:

  • Summer programs: the majority of programs are cancelled, bad news
  • Full time: highly depends on other factors

Career tracks:

  • Generalists: generally affected as consulting firms currently have more demand towards digital and data driven projects
  • Industry focused experts: depends on the industry, but oil and gas industry is affected
  • Digital experts: almost not affected, high demand for digital projects and the supply of experts is weak
  • Data scientists: not affected at all, consulting firms are heavily hiring data scientists

Hope this helps!

Anton

Hi,

It highly depends on your location, company preferences, position. I can explain it in the following way:

Firms:

  • MBB: less affected, interviews are still conducted, offers are issued for Q3 and Q4 2020 and Q1 2021; companies still have business and enough liquidity to survive; some offices expect to grow in terms of revenue for 2020
  • Tier 2: highly affected, the general trend is that interviews are postponed, the majority of firms do not issue offers, some firms experience liquidity gaps and cut FTE or ask employees to take an unpaid leave
  • BIG 4: less affected, advisory business experiences problems, but recurring revenue from Tax and Audit allows to manage through temporary uncertainty

Geographic coverage:

  • USA: the strongest market for consulting, interviews are conducted, offers are issued, consulting revenues might even grow
  • Europe: consulting is affected, but is expected to recover in Q3 and Q4
  • CIS: consulting is affected, MBB and BIG 4 will survive, as well as Accenture, but boutiques have liquidity problems
  • Asia: consulting revenues begin to recover, but Hong Kong political crisis still creates uncertainty around Financial sector and transportation (that affects consulting revenues from these industries)
  • Middle East: MBB firms still conduct interviews, consulting business starts to recover slowly, low oil prices still slow down the economy
  • Latin America: no info
  • Australia: no info

Positions:

  • Interns: affected, interns is a long term game for consulting firms (as well as a way to handle “monkey” tasks) and consulting firms at the moment are not super focuses on long term investments
  • Junior and middle management: less affected, hiring is in progress across MBB and Big 4
  • Principals & partners: less affected, consulting firms still look for experienced leaders

Programs:

  • Summer programs: the majority of programs are cancelled, bad news
  • Full time: highly depends on other factors

Career tracks:

  • Generalists: generally affected as consulting firms currently have more demand towards digital and data driven projects
  • Industry focused experts: depends on the industry, but oil and gas industry is affected
  • Digital experts: almost not affected, high demand for digital projects and the supply of experts is weak
  • Data scientists: not affected at all, consulting firms are heavily hiring data scientists

Hope this helps!

Anton

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