The View from 30,000 Feet: Tough Times Ahead for Consulting
Firms are scaling back hiring
Growth has been slowing down at consulting firms over the last year after a surge in post-pandemic hiring. Current headcounts of management consultants in large firms are down 6% from 2019 and 7% from 2021.
Consultants are also facing a tougher job market: Job postings, offer rates, and new hires all decreased in 2022 and 2023.
Employee sentiment follows a similar trend: Business Outlook ratings by employees in consulting roles at these firms dropped sharply in 2023.
Previously, in collaboration with the Wall Street Journal, we showed how outflows from consulting firms have declined since Covid, possibly due to employees willing to stay for increased salaries or flexibility for remote work. However, as clients have canceled projects and reduced their spending on professional services, consulting firms now may face overstaffing issues. This week, Revelio Labs examines how the consulting slowdown affects incoming employees and the job market for consultants.
We use workforce data on management consultants at large financial services firms in the US. First, we find that despite fewer outflows, headcounts for consultants in these companies have fallen by around 7% since the post-pandemic surge in 2021 and early 2022. New hires have also fallen by around 50% since mid-2021, consistent with reports of delayed start dates for undergraduates and MBAs.
In addition to delaying onboarding for those with existing offers, we find that firms have also slowed their search for candidates: The number of job postings for management consulting roles has decreased by 50% since its peak in early 2022. This decrease in demand is also reflected in lower offer rates as reported from interview reviews in 2022: Relative to 2017, the share of consulting interviews that resulted in a job offer dropped by 27%.
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As large consulting firms aim to trim their ranks, which companies have experienced the greatest changes in headcounts? Revelio Labs workforce data shows that BCG leads the pack, with a decrease in the number of management consultants of nearly 19% relative to 2021. Bain and Cognizant are not far behind, with decreases of around 17% and 16%, respectively. These significant declines in headcount may reflect a combination of layoffs, delayed hiring and onboarding, and voluntary attrition.
Finally, employees' perception at these companies reflects the current slowdown in the industry. While business outlook ratings increased post-Covid as hiring soared, they are now undergoing a striking decrease. This indicates a less-than-optimistic outlook on the state of the industry.