Ernst & Young is undergoing a substantial reduction in partner positions across its U.S. operations, a more extensive round of cuts than typical for the Big Four accounting firm. This move comes in response to diminishing demand for specific services and a cost-cutting initiative prompted by the unsuccessful attempt to split the firm.
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The majority of these cuts are concentrated in the advisory segment of the U.S. operation, impacting over 10% of consulting partners and approximately 4% in strategy and transactions. However, audit and tax branches are also affected, with over 100 partners in consulting and more than 30 in strategy and transactions, spanning both junior and senior levels.
Ernst & Young
Notifications to affected partners began last week and are expected to continue this week. While the firm usually undergoes annual partner cuts due to performance issues, this current wave is more substantial than usual. It follows EY’s decision in April to lay off 3,000 U.S. employees, constituting less than 5% of its workforce.
EY, along with other accounting and consulting firms, is grappling with slowing revenue growth, prompting a reduction in staff. The aggressive hiring during the pandemic, driven by increased demand for consulting in areas like corporate strategy and digital transformation, has not been offset by anticipated attrition post-pandemic.
The firm claims that the layoffs impact only a “limited number of people.” It has also deferred start dates for some new hires in specific areas. EY emphasizes that these decisions have been made thoughtfully, with respect and fairness to all affected individuals, and comprehensive support will be provided.
EY is undergoing a long-term transformation, focusing on areas aligned with clients’ greatest needs. Consulting demand, influenced by economic fluctuations, contrasts with the relatively steady business line of audit due to reporting requirements for public companies. The firm’s actions align with an industry-wide trend of restructuring and staff reduction.
In the wider industry landscape, KPMG and Deloitte have also implemented staff reductions, and McKinsey has scaled back its new partner class. Despite challenges, Ernst & Young revenue from the Americas region, including the U.S. unit, reached $23.62 billion for the fiscal year ending June 30, reflecting a 12% increase from the prior year.
Globally, consulting and transactions contributed significantly to EY’s revenue, amounting to $22.17 billion, or about 45% of the total. Ernst & Young continues to seek cost reductions and structural improvements in the U.S. following the abandonment of plans to split auditing and consulting in April. Governance reforms have been proposed, with U.S. partners gaining more influence in voting related to strategy and oversight, a move aimed at overcoming challenges stemming from the failed split. Janet Truncale, named as Ernst & Young new global chair effective July 2024, will lead efforts to move beyond the split’s aftermath.
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