The Big Four accounting firms are trimming their consulting ranks—sometimes months after a promotion—after forecasting slower growth as more businesses scale back on third-party help in certain areas.
The firms—Deloitte, Ernst & Young, KPMG, and PricewaterhouseCoopers—are facing the consequences of aggressive hiring over the past two years as the pandemic spurred higher demand for consulting in areas such as corporate strategy, coupled with lower attrition than they expected during the first half of the year.
The recent rounds of layoffs have been heavily focused on the advisory sides of the firms. KPMG laid off about 5% of its U.S. staff in June—including advisory, tax, and back-office people—four months after cutting some advisory personnel, nearly 2% of U.S. staff. In April in the U.S., Deloitte cut 1.5% of its staff and EY 5%. PwC said its U.S. unit hasn’t had layoffs and isn’t planning any. Outside the Big Four, Grant Thornton let go 3% of its U.S. staff in May.
While hiring soared in the wake of the pandemic, other data sets show exits were also rising. In the U.S. at the four firms, exits—both voluntary and not—have generally climbed each year since at least 2019, according to a review of online professional profiles by Revelio Labs, a provider of workplace data. In 2022, roughly 56,600 people collectively left the firms, up 8.3% from a year earlier in the Revelio data.
But that scenario flipped this year, even amid layoffs. Exits at the four big firms have dropped, falling 11.6% through June from the year-earlier period to about 21,400 in the U.S., according to Revelio.
“Life became more flexible and folks have found reasons to stay where they might have been ground to a fine powder prior years,” said Michael Shaub, an accounting professor at Texas A&M University, referring to remote work and salary increases that might have kept some from resigning this year. “Now the firms are saying we can’t keep all these people.”
EY and KPMG declined to comment for this article, and Deloitte didn’t respond to a request for comment.
PwC said it expects to report an increase this year in its global workforce from the nearly 328,000 it reported last year, adding individual staffing decisions are based on local circumstances.
Consulting work exposes firms to more fluctuation in revenues, which can be particularly damaging in a slower economy, compared with auditing, which is a mandatory expense for public companies.
Clients are still working with consultants to pour more investment into building out their tech capabilities, for example, further applying artificial intelligence throughout the business. But they also have slowed their mergers-and-acquisitions activity and need for related support such as due diligence.
“Client demand isn’t shrinking, but it’s certainly changing shape, so they need more experts in one field and need fewer in another,” said Fiona Czerniawska, chief executive of consulting-industry analyst Source Global Research.
U.S. and global consulting is expected to experience much lower growth through 2025 than in the boom times of 2021 and early 2022, Czerniawska said. The global consulting market is projected to expand by 6% to 10% this year, putting its size between $245 billion and $252 billion, building on a 10.7% increase in 2022, according to a Source report from February. In the U.S., consulting is expected to grow by 10.6% to $97.31 billion this year, rising at roughly the same 10.5% pace as last year but down from an 11.1% rate in 2021, Source said.
The Big Four firms’ global advisory revenue collectively has more than doubled since 2010, to $94 billion in 2022 from $39 billion a decade earlier, as the audit business comprised an increasingly smaller portion of total revenue, a review of annual reports show. The firms also square off with consulting giants such as Accenture and Bain & Co. Accenture reported $61.59 billion in revenue for the year ended in August 2022, up roughly 22% from the prior-year period, a filing showed.
Consulting in the U.S. has been generally more recession-resilient than in other countries, but there are signs that businesses are putting more projects on the back burner. Seventy-seven percent of U.S. consulting clients said they have canceled at least some existing projects, according to a Source survey released in June.
The loss of consulting revenue from key corporations is also raising concerns. Large companies across industries account for most of the falloff in global consulting demand because they are reallocating their spending as a way to boost efficiencies, according to a report released last week by Kennedy Research Reports, which tracks the consulting industry.
But Czerniawska said smaller, less strategic projects remain more likely to be cut back, suggesting that, on average, the large firms are doing better than small and midsize ones.
The uncertainty around future consulting demand is occasionally visible in the timing of dismissals and recruitment, for instance, the laying off workers in sporadic bursts, cutting people within six months of promoting them, or delaying the start dates of new hires. Balancing supply and demand in consulting firms is particularly difficult when clients’ needs are changing quickly and unpredictably, Czerniawska said.
But the firms, some of which focus on individual performance as the basis for cuts, risk losing stature if they slash a sizable chunk of jobs at once.
“If you promote and then you realize you need to make people redundant, that doesn’t sound like a great way of doing it, but some firms are clearly taking that approach,” Czerniawska said. “Everybody tries to manage this in a low-key way, because of the reputational damage of taking out too many people too publicly.”
Consulting is also particularly prone to layoffs because clients increasingly expect specialized skills and experience with certain tools and data, unlike 20 years ago when consultants more freely moved from one area to another, Czerniawska said. “Firms don’t have much choice except to lay people off from one area when they might be recruiting in another because the services they’re delivering are becoming more specialized,” she said.
Consulting firms’ net head count growth will likely be lower this year than it has been in recent years, though it varies widely by practice, said Andrew Nicholas, a research analyst at investment bank William Blair & Co. If demand hasn’t fallen off a cliff and attrition is lower, firms will have fewer open roles to fill, reducing the number of job postings, he said. “You would anticipate that to help bridge that gap,” he said.
U.S. job postings at KPMG, Deloitte, and EY across all business lines dropped 76% in July compared with a year earlier, said William Blair, which doesn’t track PwC due to an inability to determine the number of positions on its internal job postings board.