McKinsey’s Extensive Outplacement Plan

The Consulting Giant Just Announced Layoffs. Here We Analyze the Pros and Cons of Their Headline-Making Strategy.

McKinsey, arguably the world’s most prestigious consulting firm, recently announced a downsizing plan. And last year they announced a record $16 billion in revenue and a re-election of their global managing partner. It goes to show that no company, no matter how well-run or well-respected, is immune to a disrupted economy.

But back to McKinsey’s current downsizing effort: their approach is interesting. They are offering nine months of full pay to engagement managers and associate partners to look for jobs elsewhere.

Although McKinsey didn’t specify how many of these offers they’re extending, they did state that they’re targeting UK-based consultants and will make a similar offer to US-based consultants.

The offer is not performance-based. Those who receive it are in good standing with the company. And during the nine months of outplacement services, these employees will not only receive their full salary but also access to McKinsey’s career coaching and other job search resources.

This kind of extensive outplacement program offers a few pros and cons that companies can consider when faced with their own potential downsizing. Today we’re going to talk about those pros and cons.

Here’s what we’ll cover:

The Pros: Brand Image, Recruiting Power, and Operational Efficiency

The Cons: Financial Strain, Employee Morale, and Public Perception

Hopefully, by the end of this article, you’ll have an idea of what to emphasize and what to avoid if you must design and announce an outplacement program at your company.

The Pros: Brand Image, Recruiting Power, and Operational Efficiency

McKinsey’s outplacement plan provides a lot for employees to like, for the market to respect, and for McKinsey itself to benefit from. Let’s break it down.

Brand Image
By offering such generous support to the consultants it is offboarding, McKinsey is protecting and even enhancing its reputation as a standard-bearer in the consulting industry. A package that includes a full salary for the better part of a year, career coaching, and access to job search resources like McKinsey’s network demonstrates:

  • A genuine investment in people and respect for their worth.
  • A commitment to employee welfare even during economically motivated decisions.
  • A brand strong enough to offer a five-star offboarding experience, no matter the pressures it is facing.

Another way that McKinsey is protecting its brand image here is by minimizing knee-jerk, negative reactions from employees. The longer McKinsey gives employees to adjust to the news and make a plan, the less likely those employees will air their grievances on social media or employer ratings sites. 

Recruiting Power
McKinsey is the dream company for almost any business school grad. And it’s certainly the destination for thousands of pedigreed professionals from some of the most exclusive universities in the world.

By caring for its departing employees with a long-term, feature-rich outplacement program, McKinsey is safeguarding its sought-after status. It shows future recruits that the company is still an illustrious professional goal, and that there’s no increased risk in joining the firm at some later date when the company is hiring.

In fact, the perceived risk of accepting an employment offer from McKinsey might even be lower right now. Recruits can see that even higher-paid managers are granted months upon months to figure out their next move while McKinsey helps them do it.

Operational Efficiency
Nine months of offboarding isn’t purely selfless. McKinsey is also helping itself by ensuring stability in the following ways:

  • A nine-month offboarding period allows ample time for knowledge transfer. So much of any company’s intellectual property is inside key employees’ heads. A top-quality outplacement package allows a company to harness this knowledge from much more willing employees.
  • This time period also enables a thoughtful and strategic team reorganization rather than a rushed one.
  • One of the roles targeted for offboarding are engagement managers. These are the point people for clients. Generous transition time quells clients’ concerns, gives them peace of mind, helps McKinsey deliver as promised, and decreases the risk of customer churn.

The Cons: Financial Strain, Employee Morale, and Public Perception

While McKinsey’s outplacement plan is a top-notch one, it’s not without its downsides. Let’s take a look at those.

Financial Strain
To state the obvious, outplacement plans like McKinsey’s, which center employees above cost, are expensive.

McKinsey has the financial, brand, and social capital to succeed with this kind of outplacement program. But other companies—say, smaller ones without the same gold-plated history—may struggle to make the tradeoff of bottom-line health for market goodwill.

At Promark, we do manage to show companies that extensive outplacement programs are wise decisions and well within their reach, even while tradeoffs are unavoidable.

Financial tradeoffs may include bonuses for leadership, or bonuses for everyone. They may include projects, products, or partnerships that have to be delayed or jettisoned. In fact, McKinsey has reported that it has postponed some client engagements this year.

There are always financial tradeoffs, plus the work of deciding among those tradeoffs. Another thing we do at Promark is help companies build decision-making bodies and frameworks for exactly these kinds of scenarios.

Employee Morale
Yes, McKinsey is investing in its people with a generous outplacement plan. For the employees leaving the company, and for future employees watching, this resonates.

But there’s a flip side to this coin: the employees who are staying.

Granted, the employees staying can see that those leaving are being treated very well. This is positive for morale.

But it’s also true that:

  • Nine months is a long time to have offboarding employees still at the company, where their presence is a constant reminder of a shrinking workforce. McKinsey has resources enough to give dedicated space to the consultants who are job hunting, but not all companies can do this.
  • Employees staying at the company need some kind of encouragement to counteract their concerns that more layoffs are on the way. Or they need some kind of services or “perks” too, like an investment in their training to take on more responsibility. Otherwise their morale takes a hit, and McKinsey may have more employee turnover than they planned for.

Thus far, McKinsey has not made a public announcement on any plans to expand or halt layoffs. Nor has the company made a public announcement regarding its remaining workforce specifically.

Public Perception
Downsizing of any kind is prone to cast a shadow over a company. Analysts are bound to speculate whether the company is in real trouble, and to pontificate on its strategic decisions and management practices. This is especially true for high-profile companies like McKinsey.

The key to dispelling the shadow is to be as transparent as possible up front about difficult decisions that affect employees and their livelihoods.

We say “as transparent as possible” because sometimes full transparency isn’t possible. And sometimes there are excellent reasons why it’s not possible.

However, generic corporate speak is rarely a good substitute for transparency. It doesn’t earn companies any feathers in their caps.

McKinsey’s public announcement summed up its outplacement plan with these words: “These actions are part of our ongoing effort to ensure our performance management and development approach is as effective as possible, and to do so in a caring and supportive way.”

We agree that the outplacement package itself is caring and supportive. But as one of the all-time greats in their field, McKinsey might have added some explanation on why this move at this time makes them more effective. It’s not common for McKinsey to embark on downsizing, so what’s going on, why did it happen, and who is responsible? These are the kinds of questions that current employees, future employees, and clients who spend hundreds of thousands on McKinsey’s services are asking.

Further, this downsizing comes on the heels of a few other seemingly contradictory developments, including:

  • A layoff of about 1,400 support roles last year.
  • The record revenue McKinsey earned last year, which we mentioned at the beginning of this post.
  • A staffing increase about five years ago from about 28k people to 47k.  

This is the point at which we’d likely advise our own clients to announce a downsizing and outplacement plan with a little more detail. Otherwise, public perception can be worse than the real story. McKinsey has done so many things right that they have set a precedence and standard for others to try to match, and what they are offering is impressive. However, even the best of the best at giving advice can learn how to take outside counsel to achieve their goals.

If you’re putting together an outplacement plan and drafting your announcement about it, we at Promark would be happy to take a look at your strategy. We’ll help you serve your employees, your bottom line, and all your stakeholders. And even more importantly, we’ll help you get ahead of all the questions you may be asked, as well as the questions you might not be asked, but still need to be answered.

Reach out to us today, or learn more about our outplacement services. Or call us at (513) 768-6500. That number is connected to our Cincinnati HQ, which can connect you with the office closest to you.

We look forward to hearing from you!

McKinsey’s Extensive Outplacement Plan

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