For years, consulting firms benefited from companies’ heavy spending on transformation projects, regulatory work, and technology upgrades.
But that demand has become more uneven, forcing some of the biggest names in professional services to adjust to a slower market.
KPMG is cutting hundreds of U.S. jobs as the Big Four accounting firm responds to weaker demand in parts of its advisory business.
It is laying off about 4% of its U.S. advisory business, according to the Wall Street Journal.
KPMG cuts hundreds of U.S. advisory jobs
KPMG’s advisory business has more than 10,000 employees, meaning roughly 400 workers will be affected by the cuts, primarily consultants specializing in regulatory risk advisory, customer operations, and financial services, according to the report.
About half of the cuts involve lower-performing consultants, and no partners were affected in this round of advisory layoffs.
In a statement to The Wall Street Journal, KPMG noted that these cuts are part of “strategic realignment” to ensure “skills and capabilities are aligned with future demand.”
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The firm also said parts of its advisory business are still growing, especially in transactions, strategy, and artificial intelligence.
That means KPMG is not pulling back across the board. Instead, it is cutting in slower-growth areas while continuing to focus on businesses where client demand remains stronger.
The advisory layoffs are not the only workforce changes happening at KPMG.
The firm recently informed employees that it plans to cut 10% of its U.S. audit partners, according to the WSJ.
Roughly 100 partners will leave the firm, including those volunteering for early retirement.
Layoffs at large accounting firms in recent years have mostly been concentrated in advisory divisions amid slow revenue growth in some areas.
Consulting firms face a tougher market
The latest layoffs come after KPMG and other large professional-services firms expanded during the pandemic, when companies were spending heavily on consulting, technology, compliance, and transformation work.
But the market has changed. Clients have become more cautious with outside consulting spending, and demand has slowed in certain advisory practices. The shift has been more noticeable in regulatory work.
A shift toward lighter regulation at the White House has also reduced demand for some compliance and regulatory consulting work, especially among banks and other financial-services clients.
And KPMG is not the only major consulting firm adjusting its workforce.
McKinsey executives discussed a 10% reduction in its headcount across non-client-facing departments, according to Bloomberg. These cuts, expected over the next 18-24 months, could affect a few thousand workers at the firm.
AI was not cited as the main reason for KPMG’s advisory cuts, but it is reshaping the broader consulting industry, notes a Harvard Business Review research.
With AI assisting in synthesizing research and analyzing data, many consulting firms are rethinking how much junior- and support-level work they need.
Accenture took a similar approach. The consulting giant has been exiting employees, it says, who cannot be retrained for the AI era, while still planning to grow headcount in areas with stronger demand.
CEO Julie Sweet said that to be promoted at Accenture, workers need to use AI, according to Business Insider.
Challenger, Gray, & Christmas has also said that AI is changing the way work is done and the workforce, requiring employees to upskill and reskill.
“One thing that is clear is that AI is changing work and the workforce. Workers will need to be more strategic as they lead AI-powered agents that handle increasingly complex tasks. Human workers will need strong decision-making and judgment skills in the age of AI,” warns Andy Challenger, chief revenue officer for Challenger, Gray, & Christmas.
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