Big Four Reshape Consulting Workforce, Strategy With Rare Layoffs

The Big Four accounting firms have leaned into their tech advisory work and data analytics services—areas ripe for revenue growth—as interest rates and the artificial intelligence boom reshaped demand for consulting services.

But the pivot hasn’t been without pain as demand for lucrative deals advisory work dried up last year. The firms collectively shed thousands of jobs in 2023—mostly consultants based in the US and UK—realigning their workforces to areas with higher demand.

“It’s a repositioning,” said Mark Masson, managing partner and head of professional services advisory at Lotis Blue Consulting, of the steady stream of layoff announcements. “Let’s pull back from the frontlines, let’s assess where things are going and let’s reapply our resources.”

Since last February, Deloitte, Ernst & Young, KPMG, and PwC shed more than 9,000 jobs through multiple rounds of layoffs across the firms’ largest markets in the US and UK, including reductions in Australia and Canada.

The deep layoffs, some landing mid-year, were rare for the four firms, which typically see higher turnover rates and often weed out any underperforming workers before their fiscal years end.

But consultants from marquis firms are an easy expense to eliminate as inflation squeezes corporate profits. With a workforce that spans the globe and a three-pronged service model, the firms can rely on their audit and tax compliance services to make up some of the difference when consulting work fades.

Consulting fees, however, are a significant driver of firm profits. Such fees brought in half of the Big Four firms’ combined revenue last year.

“Despite a challenging economy, our expertise continues to be sought out,” Lisa Fernihough, the incoming head of advisory at KPMG UK, said in a statement. “The focus is on where we can provide the most value and impact, as our clients prioritise what needs to be tackled first, which are often business critical transformation projects including technology adoption and ESG strategy,” she added, referring to environmental, social, and governance considerations.

From Hiring Frenzy to Layoffs

Big Four firms gobbled up workers beginning in 2021 as clients sought help navigating the pandemic and as the Great Resignation triggered a tsunami of resignations among staffers. They held on to those new workers through 2022 even as interest rates rose to combat soaring inflation.

The hope was that any downturn in business would be brief and they still would need those workers, Masson said.

“Almost everybody in the business was wrong,” Masson said. “It just was deeper and longer and continued to be a soft market particularly for advisory services than any of us really cared for or saw coming.”

Deloitte’s US practice announced that it would hand out pink slips to 1,200 workers in April, just days after EY had eliminated 3,000 jobs from its US affiliate. EY’s US firm also let go of a “limited number of people” and deferred start dates for some of its new hires in December.

KPMG cut 2,700 US jobs in 2023 through a pair of workforce reductions, citing low attrition and strong “economic headwinds.”

Big Four affiliates in the UK, Canada and Australia announced a series of layoffs in the second half of the year.

The softening market also hit the firms’ consulting industry competitors last year, with McKinsey trimming 1,400 jobs and Accenture eliminating 19,000 roles amid the economic uncertainty.

PwC’s UK affiliate and EY’s US and UK arms said that the cuts were made so the firms could focus on services with more growth opportunities. For EY UK, that means responding to client demands for technology consulting.

PwC has so far avoided layoffs among its US workforce, the firm said, citing “strong” business. Deloitte did not respond to requests for comment.

The tepid economy spurred the Big Four layoffs as clients looked to delay projects and as interest rates curbed the deals market, said Hrish Desai, assistant accounting professor at Arkansas State University. Firms also suffered from “unrealistic growth goals they couldn’t achieve,” he said.

The value of mergers and acquisitions shrank 17% globally last year to $2.9 trillion, according to LSEG Data & Analytics.

“There is typically just one formula for layoffs of this magnitude at the Big Four: How to save the most money by laying off as few people as possible,” Desai said.

A Brighter 2024

There are glimmers of a rebound. Turnover has begun to pick up at KPMG US and the affiliate plans to add to its staff in areas like data analytics and to invest in finance or risk and regulations, the firm said.

Ultra-low attrition has also hampered firms as more workers stayed in their jobs rather than leaving for new positions with other employers.

More layoffs are still possible, but likely would be on a smaller scale, said John McGowan, a former tax technology leader for Deloitte and KPMG. He’s now the CEO of HubSync, a tax automation platform.

After two years of rapid growth, firms are projecting fee revenue to rise more slowly in the coming year, McGowan said.

“I think they’re better prepared now walking into ‘24 than they were perhaps coming out of the pandemic having over-hired,” McGowan said. “They’ve got a more conservative plan this year than perhaps they had in prior years.”

KPMG offered a preview of that new revenue picture when it released its 2023 global results in December, showing slower 8% growth, in local currency. In comparison, its peers posted double digit results just a few months earlier.

Demand for generative AI tools like ChatGPT gives the firms fresh opportunities to sell services to their clients from tax to audit to consulting.

Amid the steady drip of workforce reductions, the four firms invested heavily in artificial intelligence, from rolling out AI tools to inking partnerships with technology giants like Microsoft.

But knowledge sectors like consulting face an “upheaval” from artificial intelligence requiring a “new generation” of workers, said Ben Bryant, a leadership professor at the International Institute for Management Development in Switzerland.

“I would imagine all consultancies have begun to rethink some parts of their business models,” Bryant said.

Under Pressure

In the short term, thinner ranks of consulting professionals could hamper a mainstay of Big Four revenue: audits, which make up more than quarter of firm earnings.

Auditors rely on specialists to help value assets on the balance sheet and to vet technology systems—work typically provided by colleagues from the firms’ consulting arms.

Fewer consulting professionals could slow down auditors, tempting them to cut corners to meet looming deadlines for year-end financial reports, said Emily Griffith, associate professor of accounting at the University of Wisconsin-Madison.

“These different specialists are already spread pretty thin when it comes to helping on audit,” Griffith said. “It might create a real crunch where there just simply aren’t enough specialists available internally to support all the audit needs that they have.”