McKinsey to cut 500 jobs in China, reducing ties with govt-linked clients

McKinsey's employee restructuring is aimed at separating its China unit from its global operations amid political pressure in the US over its work in Saudi Arabia and China

US consulting giant McKinsey & Co is cutting 500 jobs in its China unit amid major restructuring in the country, according to a report by the Wall Street Journal. This move follows the consulting firm’s decision to reduce the firm’s involvement with government-linked clients in China.

The job cuts are part of a broader move to separate McKinsey’s China unit from its global operations. With this, the firm aims to mitigate security risks associated with doing business in the country. McKinsey’s workforce in Greater China, which includes mainland China, Hong Kong, and Taiwan, has been significantly reduced over the past two years. As of June 2023, McKinsey listed nearly 1,500 employees on its Greater China website.

Global restructuring amid slowing demand

The China cuts are not an isolated incident but part of a global trend for McKinsey. Earlier this year, in April, the firm began eliminating around 360 jobs globally. The firm said that this was due to declining demand for consulting services. These reductions would affect about 3 per cent of the firm’s 12,000 employees with specialist or technical expertise, including roles in design, data engineering, cloud services, and software. However, traditional consultants, who engage directly with clients, were reportedly not impacted.

McKinsey has a global workforce of over 45,000 employees across 130 cities. The firm has advised organisations ranging from the US Pentagon to China’s Ping An Insurance. But recently McKinsey has faced political pressure in the US over its work in Saudi Arabia and China, said one report by Bloomberg.

As part of its ongoing restructuring, McKinsey extended an unusual offer to some employees earlier this year: a voluntary exit package, which included nine months of pay for those willing to separate from the company.

Decline in client demand affects the industry

McKinsey’s job cuts reflect broader trends in the consulting industry. Over the past year, many firms have delayed hiring, slowed the pace of recruitment, and reduced headcount amid a slowdown in demand from clients. McKinsey, in particular, has experienced fluctuating demand for its services, prompting a reassessment of its staffing needs.

Last year, the firm planned to cut approximately 1,400 roles, mainly among support staff. These cuts affected about 3 per cent of its global headcount. Despite these setbacks, McKinsey reported a record revenue of $16 billion at the end of 2023.