Accenture is making good on plans to whittle down its massive workforce. Here's how they could play out.

  • Professional services firm Accenture is cutting up to 25,000 jobs from its workforce, including layoffs in the US and more planned cuts in the UK and India.
  • The cuts are targeting low performers, its CEO said in a June earnings call.
  • Analysts say the proposed cuts — about 5% of Accenture's workforce —are on par with how many employees usually leave the company per year and could affect all teams and industries.
  • Visit Business Insider's homepage for more stories.

Accenture, one of the largest global consulting firms, is moving forward with plans to pare down its workforce this year by as many as 25,000 employees.

In all, 5% of Accenture's massive workforce could be cut this year, the firm told employees last week, the Australian Financial Review first reported. Consulting firms typically take stock of employees periodically and cut underperformers to control costs and make room for other employees to advance. 

What's different this year is that the share of people who are losing their jobs through so-called involuntary attrition ticked higher — and for a huge company like Accenture, even a small change percentage-wise means a large number of job cuts.

And while the coronavirus pandemic has impacted its business, analysts said that another factor at play could be that more employees are staying put than usual because of an uncertain job market, meaning the firm has to take more proactive steps as opposed to relying on people leaving on their own to help manage headcount.

Lisa Ellis, a partner and senior equity analyst at MoffettNathanson, said the planned number of Accenture layoffs is consistent with the total number of employees who have left the company, both voluntarily and through performance-based cuts, in other years.

"This is not an unusual level of annual workforce reduction," said Ellis, who added that prior to the pandemic, Accenture's total annual attrition was about 15%-20% per year, 2%-4% of which was through layoffs.

"Not surprisingly, with the pandemic, demand has flattened, and voluntary attrition has dropped, so it is normal that involuntary attrition would tick up a few points — so 5% is not at all odd," she said. 

A representative for Accenture confirmed that a 5% global workforce reduction was in line with how many low performers involuntarily leave the company every year.

"At this time we are not planning extraordinary global workforce actions," the company spokesperson said. "We continue managing our business for the long term and critical to this is ensuring we have the right people with the right skills to best serve our clients."

Job cuts hit US-based Accenture workers in June

The firm, which has about 55,000 employees in the US and half a million globally, had cut US jobs in June, Business Insider first reported. While Accenture did not comment on the exact number of layoffs, the cuts could have affected up to 10% of US staff, according to posts on websites devoted to job losses such as thelayoff.com and blind.com at the time. 

Accenture is also cutting between 700-900 jobs in the UK, Consultancy.uk  first reported, as well as up to 10,000 jobs in India, the Australian Financial Review reported. An Accenture spokesperson confirmed the UK job cuts to Business Insider, but did not respond to a request to confirm reports on cuts in India. 

Moshe Katri, an equity research analyst at Wedbush Securities, told Business Insider he believed the cuts could affect workers who aren't as tech-savvy and that the company would prefer to "refresh" its headcount with new employees who already have in-demand skills, such as SMAC (social, mobile, analytics, cloud) -based technologies, rather than invest in existing staff.

"The consultants that are being let go cannot be retrained in the new technologies," he said, adding that because the cuts aren't necessarily due to business challenges but rather are performance-based, layoffs may impact most of Accenture's verticals.

Read more: Accenture is cutting US staff, and top execs just warned of more pain to come as the consulting giant promotes fewer people and looks to control costs

In a June earnings call, Accenture CEO Julie Sweet said that cuts would be targeted to low performers while referring to the June US cuts as "focusing on our cost structuring."

Sweet said in the June earnings call that the firm also promoted fewer staff this year and is doing less hiring.

Additionally, the firm delayed some of its first-year consultants' start dates and gave them a stipend, and a firm spokesperson said in May it would honor all of its full-time offers.

Accenture did not respond to a request for an update about their hiring strategy or whether they were still honoring full-time offers for their first-year consultants.

Accenture's revenue exceeded analysts' expectations in the third quarter of the 2020 fiscal year, although it still reported revenue declines. It reported $11 billion in total revenue for the quarter ending May 31, a 1% decrease year over year, according to financial results reported in June.

The firm's strategy and consulting division was hit hardest by the pandemic, with consulting revenue in the second quarter declined 4% year over year to $6 billion, according to executives on the June earnings call.

At the end of the second quarter, Accenture adjusted its full-year revenue growth forecast from 3.5 to 4.5% from 3 to 6%.

The company's third-quarter earnings call is scheduled for late September. 

Ellis, the MoffettNathanson analyst, said more layoffs could be on the way for peer firms who are also seeing fewer people leaving their positions on their own terms.

"We would expect to see similar moves by other IT Services firms, all of which depend on voluntary attrition to maintain the shape of their labor pyramids and all of which are seeing significant drops in voluntary attrition – many of them will likely have to increase the involuntary attrition," she said. 

Source: Read Full Article