McKinsey & Company is trimming its workforce as internal AI tools undermine the traditional consulting business model, according to reports circulating in industry channels. Global Managing Partner Bob Sternfels has signaled a need to become "leaner," per sources familiar with the firm's direction.
The slide factory problem
For decades, McKinsey built its empire on selling analyst hours. Junior consultants would spend weeks doing the kind of data work that the firm's internal AI tool, Lilli, now handles in minutes. That math doesn't hold up anymore.
The firm has reportedly seen revenue plateau around the $15-16 billion mark. Some industry observers suggest layoffs could affect roughly 10% of staff, though McKinsey hasn't confirmed specific figures publicly. The firm typically doesn't comment on workforce changes.
What's interesting is the timing. McKinsey is hardly the only consulting firm dealing with AI pressure, but they've been among the most aggressive in building internal tools. Lilli, which the firm launched internally, was supposed to be a competitive advantage. Turns out it's also a headcount reducer.
The pricing shift nobody wanted
Here's where it gets uncomfortable for everyone in professional services: clients are starting to refuse hourly billing when the work is done by machines.
Reports suggest that around a quarter of McKinsey's fees are now tied to measurable outcomes rather than hours worked. That percentage is apparently climbing. Good for clients who hated paying for "process." Less good for consulting firms that built their entire compensation and staffing models around billable time.
The catch, and there's always a catch, is that outcome-based pricing means McKinsey will cherry-pick projects. Complex transformations with uncertain results? Those might not find a partner anymore. Firms will want the sure wins.
Geography isn't helping
Two of McKinsey's historically lucrative markets are cooling simultaneously.
Saudi Arabia, which has reportedly generated over $500 million annually for the firm, is pulling back as the Kingdom adjusts Vision 2030 timelines and budgets. China is a separate headache entirely, with regulatory pressure effectively pushing Western consulting firms toward the exit.
Neither situation is unique to McKinsey. Bain, BCG, and the accounting firm consulting arms face similar constraints. But losing two major revenue sources while also rethinking your core pricing model is a lot to handle at once.
What comes next
The consulting industry's pitch used to be: we have smart people who will analyze your problems. The new pitch has to be: we have smart systems that will implement solutions and guarantee results.
That's a fundamentally different business. It requires fewer analysts and more engineers. Fewer presentations and more deployed code.
Smaller AI-focused boutiques are already moving into this gap. They're not selling advice about how AI might change your business. They're building and deploying the systems directly. The question for McKinsey and its peers is whether a 100-year-old firm can pivot fast enough to compete.
The firm's centennial is in 2026. The celebration might look different than anyone expected.
