CXO

PwC cuts foreshadow a worrisome year

PricewaterhouseCoopers is the latest in the line of many big consultancies to announce layoffs. Columnist Tom Rodenhauser says the slowdown in e-business and a weakening economy point to a grim year for the industry.


Conventional wisdom says the big consultancies have benefitted from the e-consulting carnage. Both business and staff are flowing back to the major firms, right?

So how do we explain PricewaterhouseCoopers (PwC) trimming roughly three percent of its U.S. staff this past week? PwC is slicing about 400 consultants at a time when the street is awash with dashed dreams. The knee-jerk reaction: Something is amiss.

Actually, PwC has that age-old problem of any sizable consultancy: What do you do when you have the wrong people for the right jobs? Retraining only goes so far. Ultimately, a firm pulls the plug on folks who can’t adapt to changing business cycles. (Note to MBA students: Firms don’t tell you this during campus interviews.)

PwC claims strong demand across the board and has comparatively high utilization rates. The firm has hired more than 1,800 client service staff this year and expects to hire another 2,500-3,000 before the 2001 fiscal year ends in June. But PwC didn’t ramp up quickly enough for the CRM craze.

For all the positive talk, PwC and the other major firms are anticipating a much different market in 2001. The relative slowdown in e-business—combined with a weakening economy—makes this coming year a bit more worrisome for the entire consulting industry. The big guys may be smugly watching the pure plays get their comeuppance. But they can’t help but fret about their business as jaded clients delay consulting expenditures.

Running a consulting firm is like maintaining a swimming pool. Maintain the right pH balance, and everyone frolics in crystal-blue water. By cutting staff now, PwC hopes to avoid an algae bloom later this year. Don’t be surprised if others follow suit.

Heard on the street
God love KPMG Consulting. While other consulting firms sponsor golf tournaments, KPMG cuts right to the chase and buys (oops, sponsors) an actual golfer. KPMG announced a multi-year agreement with Phil Mickelson, one of the sport’s rising stars. Mickelson will wear KPMG-adorned headgear along with his Hugo Boss attire. He’s no Tiger, but Mickelson is probably a sure bet to be there on Sunday afternoons.
Inside Consulting is written by Tom Rodenhauser as a free weekly supplement to The Rodenhauser Report. The report informs senior advisors and business executives of consulting trends and best practices. Subscription cost is $295 per year for 10 issues. Copyright 2000, Consulting Information Services, LLC. Reproduction is prohibited. Quotation with attribution is encouraged.

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