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In recent months, the Big Four accounting firms have intensified their efforts to trim costs, with a new focus on scrutinizing employee workloads and client engagement, according to a report from The Times of London.
Increased Scrutiny on Workloads
Sources cited by The Times revealed that firms such as EY and Deloitte have ramped up assessments of employee workloads, particularly in terms of time spent directly with clients. This heightened scrutiny is leading to the identification and subsequent dismissal of what are termed as “underemployed” staff.
Performance-Driven Layoffs
These terminations based on performance metrics are distinct from broader company layoffs and primarily affect the consultancy divisions of these firms. The Times outlined that both EY and Deloitte have been evaluating employee “utilization rates,” examining factors such as time sheets and work schedules to gauge the extent of client interaction.
Utilization Rates as Key Metrics
Employees actively engaged with clients are categorized as “utilized,” while those primarily involved in internal initiatives are deemed to be “on the bench.” The assessment of utilization rates also sheds light on individuals who may not be pursuing lucrative client engagements actively.
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Company Responses and Clarifications
In response to inquiries, EY emphasized its comprehensive performance management procedures, which encompass various metrics beyond mere utilization rates. Similarly, Deloitte clarified that its performance evaluations aim not to reduce headcount but to invest in and develop talent effectively.
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Industry-Wide Staff Reductions
The Big Four accounting firms, comprising EY, Deloitte, PwC, and KPMG, have undertaken significant job cuts in the face of challenging economic conditions. Deloitte, for instance, announced plans to eliminate 800 positions in September and an additional 100 in February across various business segments.
Factors Driving Staff Reductions
Analysts attribute these layoffs and the implementation of stricter performance metrics to the firms’ overhiring during the COVID-19 pandemic. Moreover, low attrition rates in recent years have resulted in reduced turnover, limiting opportunities for advancement within the organizations.
Impact on Consulting Industry
The consulting sector, including industry heavyweight McKinsey, is grappling with similar challenges stemming from pandemic-era hiring surges. McKinsey reportedly issued poor performance reviews to 3,000 staff members, prompting concerns about potential counseling out of the company if performance does not improve within a specified timeframe.
In conclusion, the ongoing restructuring efforts within the Big Four and broader consulting industry underscore the complexities of balancing staffing needs with evolving client demands amidst uncertain economic conditions.
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