Deloitte’s decision to undertake its most significant restructuring in a decade reflects the challenges faced by major consultancy firms amid an expected market slowdown. The goal of the restructuring is to reduce the number of Deloitte’s primary business units from five to four, streamlining its operations. The largest Big Four professional services firm is planning to reorganize its global structure and streamline its advisory businesses to reduce the organizational complexity and free up more partners to work with clients, driven by the need to cut costs and simplify operations amid anticipated market challenges.
The four primary units will consist of audit and assurance, strategy, risk and transactions, technology and transformation, and tax and legal. This contrasts with the approach taken by EY (unlike EY’s plan to divide tax work Deloitte aims to consolidate it), which abandoned its attempt to break up the firm last year due to disagreements over how to split its tax practice, and PwC, which has divided its tax practice between its advisory and assurance businesses in the US. Deloitte has rejected the idea of splitting its audit and consulting businesses. Instead, it has opted to restructure its advisory businesses, which account for about two-thirds of its global revenues, according to Avasant’s report Market Insights on Strategy Consulting and Big Four: an analysis of trends, revenue, growth, and partnerships.
Deloitte Revenue by Geography (in USD B) & Deloitte Revenue by Line of Business (in USD B)
The Big Four firms have also faced regulatory scrutiny and public criticism over their audit quality and potential conflicts of interest between their audit and consulting businesses. While the precise savings from the restructuring are yet to be determined, Deloitte’s move aligns with broader industry trends, with other Big Four firms also undertaking cost-cutting measures and restructuring efforts in response to market conditions.
The reorganization will require the approval of the firm’s global board and its network of local partnerships, which may pose some challenges as different regions and practices compete for influence and resources. While the exact impact on the firm’s global 0.45 million employees, including potential job cuts, is not specified, the restructuring may result in changes to roles and responsibilities with a focus on reallocating resources to client-facing roles and simplifying internal management structures. Based on our report Market Insights on Strategy Consulting and Big Four: an analysis of trends, revenue, growth, and partnerships, despite adding 42K resources in FY 2023 (down from 70K in FY 2022), Deloitte’s revenue per employee has seen a decline over the years from USD 151K/employee in FY 2018 to USD 142K/employee in FY 2023 and the revenue per partner has also declined from USD 3.5 million/partner in FY 2018 to USD 3.3 million/partner in FY 2023, due to higher costs and increased hiring.
Global Headcount
Revenue Generated Per Employee
Revenue Per Partner
Impact:
We at Avasant feel the biggest effect of Deloitte’s restructuring will be felt at the partner level and not on junior grades with partners being taken out of management positions. The global restructuring is expected to remove duplicate partner roles, freeing up partners to focus on the marketplace and make it easier to respond to client needs. Deloitte’s success hinges on this restructuring, with potential consequences for the entire consulting industry. Considering that clients are increasingly seeking consulting services for crucial strategic and systemic transformations to stay not just competitive but also relevant, they will naturally gravitate toward firms with a demonstrated history of successfully transforming and reinventing themselves. The new structure is expected to be implemented by June 2025, with member firms starting to adopt it starting June this year.
By Sahaj Kumar, Associate Research Director, Avasant