Recession Recession

Recessions
New answer on Nov 19, 2022
9 Answers
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Anonymous A asked on Nov 16, 2022

Hello all, 

I received a full time offer (and signed a contract) with a tier 2 consulting firm in Toronto and with June 2023 start date. Could the offer be rescinded due to uncertain economic environment? it appears as tho top consulting firms are still recruiting for internships. Any insights on how consulting firms are coping with the inevitable economic downturn? 

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Pedro
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replied on Nov 19, 2022
Bain | EY-Parthenon | Roland Berger |Former Head Recruiter | Market Sizing

It's highly unlikely that your offer will be retracted:

  1. Retracting an offer causes serious reputation damages to a consulting firm. They will only do this as a last resort
  2. You are not recruited to a “one-man” role, but to a pool of consultants. This pool is always rotating, with people getting out (voluntarily or involuntarily) and people getting in (recruiting). If the consulting firm believes they have too many people, they can stop recruiting for a while and wait for a few people to leave. So retracting an offer is not really necessary. Better to not recruit the person who was supposed to get in a few months later. 
  3. They can also have a more strict up or out. This makes sense because it keeps a healthy hierarchical structure. They get rid of the more expensive people (and that can be their advocates once they get corporate jovs) and create more room for the people below to move up their careers later on. And this way they can still hire in larger numbers in order to identify the great talent they need (i.e. “firing” an average performer for a chance of hiring a great performer).
  4. Consulting firms can do global staffing. If a specific office hires too many people, they can staff them in other offices. Of course, it is possible for a firm to over-hire at a global scale, but then again, check #2 and #3, they can just pause on their recruiting efforts or be more strict on their up-or-out, don't need to retract offers
  5. This recession was not unexpected (at all) and is being prepared well in advance, and is also not expected to be of a high magnitude. Given the points above, you can see that retracting offers will really be an exception, which would only happen in an exceptional scenario, which is not the case.
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Emily
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replied on Nov 17, 2022
Ex McKinsey EM & interviewer (5 yrs) USA & UK| Coached / interviewed 200 +|Free 15 min intro| Stanford MBA|Non-trad

So in general I’ve heard that firms are contracting hiring. However, experience in the 2008 recession taught many the hard lesson that if you completely contract hiring you will lose your experienced employees through natural attrition and then not have a pipeline to replace them with. I can’t tell you, obviously, what your particular firm will do, but it is a lot to retract an offer that’s already been made. I’d recommend reaching out to HR to ask them what, if any, plans are in the pipeline and just make it clear that you want to stay in touch. 

Good luck! 

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Rushabh
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replied on Nov 18, 2022
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Hello!

In my opinion, they shouldn't rescind the offer. Here's why:

Firstly, consulting firms get projects even during recession. From my prior work experience, my firm and many others got a massive boost in business during Covid. The nature of the projects changes but companies still need your help - instead of expansion, companies hire consulting firms for process and cost optimisations. 

Secondly, even if their project pipeline starts drying up, the first place that they stop is future hiring. They will stop or minimise the number of hires for the upcoming batch of students, but not rescind the offers for existing students. This will have an irrecoverable negative brand impact on their business as incoming students will no longer trust this company to not repeat the same for them and thus would avoid signing offers with them. The school might also break ties with them if this happens.

All the best!

Rushabh

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Benjamin
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replied on Nov 18, 2022
Ex-BCG Principal | 8+ years consulting experience in SEA | BCG top interviewer with ~5 years of interviewing experience

Emily makes a very great point regarding 2008 and the GFC. At that time, many firms halted hiring and this had led to a big issue in staffing once recovery came back. If you look at what happened recently during COVID, hiring and retention was a key concern and strategic focus of MBB, and very shortly after the initial first ~6-9 months, hiring accelerated (and to a level way higher than other industries)

I do not know of any rescinded offer in my 8 years in T2 + MBB. It is more likely either:

  1. Delay of start date
  2. Or firms will try and solve for the issue further up the pipeline - i.e. interview less and make less offers
  3. In the event of really too much capacity, I have heard anecdotally that some firms may be stricter on the ‘up or out’ vs during non-recession times

 

 

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Francesco
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replied on Nov 17, 2022
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Hi there,

Q: I received a full time offer (and signed a contract) with a tier 2 consulting firm in Toronto and with June 2023 start date. Could the offer be rescinded due to uncertain economic environment? 

Personally I never heard of MBB or Tier 2 (Strategy&, RB, OW, Kearney) rescinding an offer due to a lack of need for consultants (while I heard that for other consulting firms during COVID - although before the offer was signed). 

Rescinding a signed offer would create a major reputation issue and I see this as extremely unlikely (it could also have legal consequences for the firm if the offer was signed, depending on the country). If they have staffing issues, it makes a lot more sense for them to ask you to join later than canceling the offer as eventually they will need consultants. If that happens, it would be up to you to accept the later starting date or withdraw.

In the extreme case that they have structural issues (ie not expect to grow anymore for a while) and are unable to postpone the starting date (which is very unlikely for a top consulting firm), I believe they would rather adopt the strategy to hire and layoff people after the probation period, to avoid the reputation and possible legal issue.

Best,

Francesco

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Dennis
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replied on Nov 17, 2022
Seasoned project leader with 7+ years of consulting and recruiting experience in USA and Europe

It happened during the 2020 Covid impact that some consulting firms rescinded offers and/or pushed the start dates to the following year. So there is no guarantee of course depending on how severe a recession gets. However, other companies across industries will have similar issues then. 

You have a signed contract so that is good. The nice thing about consulting is that there is demand during both economic booms (e.g. growth strategy, M&A) as well as during downturns (e.g. performance improvement, restructuring). 

Trying to secure another signed contract with another firm as a mitigation measure for the potential of a rescinded offer sounds like overkill to me at this point though. 

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Florian
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replied on Nov 17, 2022
#1 rated McKinsey Coach | Top MBB Coach | 5 years @ McKinsey | Author of the 1% | 120+ McK offers in 18 months

Hey there,

Personal experience

Some of my clients' interviews were already rescheduled for next year.

Impact on hiring

While for all firms fewer people make it through resume screening, only some firms adjust the bar for the interviews. The latter are happy to find enough people to make it through the selection process. In that case, they would extend offers, potentially with starting dates further in the future.

We might even see a full hiring stop, depending on how bad the situation becomes.

Impact on engagements and job security

External advisor spending is usually one of the first expenses to be cut during an economic crisis.

Yes, recovery and transformation projects increase, but every other consulting vertical decreases by much more. I have been told stories from 2008/09, where new hires were not staffed for 6 months and then let go without ever having worked on an actual engagement. 

It all depends on how bad the global economic situation is going to get. My hunch is we see a partial to full-hiring stop by early next year for a couple of months up to 1 year. Let's hope I am wrong :-)

On top of that, keep in mind that tech firms and other industries already started their lay-offs, which means that the potential supply of job seekers increases even more compared to now lower demand for them.

At this point, it makes sense to have valid backup options available, potentially for industries that are less affected by external events (e.g., pharmaceuticals)

Cheers,

Florian

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Ian
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replied on Nov 16, 2022
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Hi there,

Yes it could be. That is the honest answer. This is the real world and anything can happen.

However, it is also unlikely to be. A more likely scenario is that the start date would be delayed.

If you can start earlier do so. If you can't, then make sure all other firms/companies' doors are still left open (i.e. maintain your network + resume)

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Maikol
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replied on Nov 17, 2022
BCG Project Leader | Former Bain, AlixPartner, and PE | INSEAD MBA | GMAT 780

Potentially it may happen that MBB or Tier-2 rescind an offer, but I would say it is not likely (I don't know of one single case of a rescinded contract but I know of one candidate whose's starting date has been postponed by another 2 months).

The macroeconomic situation is difficult, with some firms effectively in a hiring freeze in some offices. It is still unclear the hiring budget for 2023 at many firms and offices. 

That said, my suggestion is to continue to have interviews while keeping cool on your current offer.

 

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Pedro gave the best answer

Pedro

Bain | EY-Parthenon | Roland Berger |Former Head Recruiter | Market Sizing
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