How 25,000 Accenture Layoffs Will Impact Customers

The pandemic has prompted businesses to hit the brakes on their large transformation projects, seek ways to reduce project costs, or even in some cases, cancel projects indefinitely.  This caused a sudden drop in demand for system integrator (SI) services.

In an effort to cut their own costs amid decreasing demand, consulting companies like Accenture are turning to layoffs.  In mid-July, it was reported that Accenture was starting to make up to 900 job cuts in the UK that targeted all job levels.  A company memo sent to UK staff stated “The crisis has caused additional strain on the business due to lower demand and reduced national attrition.  In addition, we have identified structural costs that we need to address.”

A little more than a month later, it has come out that Accenture will be cutting as many as 25,000 jobs worldwide, targeting the bottom 5% of performers.

Why Should You Be Concerned?

Accenture CEO, Julie Sweet, insists that identifying around 5% of its staff as the lowest-performing and letting them go is standard procedure each year.  What should concern companies most is not the layoffs of the bottom 5% of performers but the decision to halt standard hiring practices.  Sweet informed the company in a global staff meeting that it would not hire to replace the 5% as they would in a normal year because they are “not in a demand scenario”.

With the lack of new talent coming into Accenture, companies should expect to see a shortage of top talent in key roles going forward.

What is even more concerning is Sweet’s statement, “This year, in addition to the normal 5%, we’ve identified more people who need improvement … So, we’re making sure … if we have to make other actions, we know where our performance is.”

This statement, combined with Accenture’s decision to halt standard hiring practices, does seem to indicate Accenture’s bear market view for its services in the near term.  It also suggests Accenture is preparing for even further staffing reductions.

What Does This Mean for Companies?

I think it’s important for companies to not be immediately alarmed by Accenture’s most recent workforce reductions as this is a common ongoing practice to weed out the non-performers and reward the high performers.  The larger concern for companies is that Accenture is not back-filling for these positions.

In the near term, I suspect companies will see an increase in turnover of their current Accenture resources as they look to rebalance their talent across accounts.  In particular, high-performing senior resources are at risk of being transitioned out of projects as Accenture looks to put their stars in front of new prospects to win new business.  If Accenture is unable to draw down on these resources from existing accounts, don’t be surprised if they underwhelm you when presenting their team and capabilities.

What Should Accenture Customers Do?

First, dust off those key personnel clauses.  You’ll want to ensure that you protect those resources who are critical to your programs and support.  Ideally, you set clear and strong expectations for your named resources from the start and can continue (or begin) to hold them accountable in your SI quality reviews.

You may also want to consider accelerating discussions on early renewals to maximize your leverage in preserving existing favorable terms, rates, and existing star performers.  The closer you get to renewal, the less leverage you’ll have as those high performers will no doubt be committed early to new business or key client engagements.

At a minimum, expect Accenture to dig in on rates and even propose increases. To combat that, it will be critical to secure benchmarks as a baseline for negotiations.

Lastly, the pandemic is a unique situation that put pressure on everyone to cut and optimize costs.  Though this comes with its own challenges, there are still ways to maximize the value you receive from your System Integrator while maintaining relationships.

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