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There will have to be a reduction in headcount. It's math. It is impossible to absorb a 20% revenue hit. First to go will be Partners/MDs who were already in trouble (happens regularly). Then SMs who are not going to be making Partner/MD. Followed by low performing Ms. People at analyst/associate level don't have to worry about layoffs as much unless they are really low performers. They are the margin makers.

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EY will shrink it’s consulting cost 20%. It will start at the top with 100 PPEDD cuts, and cascade down from there - but with less demand you need less supply.

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If it’s a real partnership, e.g., PwC/EY then it’s a buyout. If it’s not a real partnership (Accenture/IBM) it may be a little different. Rest assured that all will get massive golden parachutes.

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Unfortunately headcount MUST be reduced if this is true (which I’m sure it is). The next 8-10 months at the firms will be interesting for sure

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I think the economics are different at MBB and some tier 2. For example, all of MBB has a ~10% profit share they can get rid off. Then with slight increases to up or out criteria, delaying start dates, reduced expenses (e.g travel, hiring freeze) you start getting close to covering a 20% reduction. The issue becomes when you get a 30-40% reduction.

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I was an MBB partner in my past life so I think I have more insight into this than you think. I agree nothing is guaranteed in this environment, but if the hit is 20% for 1 year, MBB is going to be fine. If the hit is 30-40%, I agree things won’t look as good. It’s important to state the obvious here, non B4 firms do not have the massive cost obligation of a partner pension that require short term cost cutting.

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Natural turnover of employees in consulting is usually more than 20%. So if a firm stops hiring and turnover stays at that level it would get fixed. But turnover is likely to decrease. So most firms would turn to a broader use of forcing out low performers - at all levels, but tends to be more at lower levels. Good firms will also reduce or eliminate profit sharing, as the short term hit is easier to deal with than having to hire a large number of people.

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