Big Four advisory firm Deloitte is set to cut jobs in its US consulting arm in response to shrinking federal contracts and evolving client needs. While the exact number of layoffs hasn’t been revealed, a spokesperson confirmed “modest personnel actions” are expected in the coming weeks.

These job cuts align with declining voluntary attrition and a slowdown in consulting growth.

In 2024, Deloitte’s US management consulting business posted under 1% growth – significantly down from the 17.8% growth seen in 2023 and the 25.5% in 2022.

A casualty of DOGE cost-cutting measures

Despite employing nearly 173,000 people in the US, Deloitte has found itself under pressure due to a steep US government cost-cutting initiative targeting consultancy spending.

Since January this year, Deloitte has seen at least 127 federal contracts cut, modified, or cancelled – a casualty of the US federal government’s renewed focus on trimming back costs under the Department of Government Efficiency, or DOGE, helmed by White House adviser Elon Musk.

The crackdown – which is part of US President Donald Trump’s directive to cut red tape and consulting waste – has prompted the General Services Administration to ask major consultancies to reduce project costs substantially.

Deloitte, alongside other firms, agreed to shave billions off existing contracts, though reviews are ongoing and further reductions may be mandated.

Josh Gruenbaum, a 39-year-old private equity veteran appointed by Trump, now heads the Federal Acquisition Service within GSA. He is spearheading the mission to strip consulting services of unnecessary expenditure.

Gruenbaum’s no-nonsense approach has included requests for firms to present cost-saving proposals without resorting to “jargon or gobbledygook,” stating how proposals should be simple enough for a 15-year-old to understand. His sharp memo warned that failure to identify waste would be seen as misalignment with administration goals.

The government’s aggressive review has already resulted in the termination of approximately 1,700 federal consulting contracts.

Turbulence after years of rapid hiring

While Deloitte bore the brunt with over 129 affected contracts – more than any other firm – others including Accenture, Booz Allen Hamilton, Guidehouse, and IBM have also taken a hit. Accenture, for instance, reported that US federal services made up 16% of its American revenue in 2024.

This period of turbulence follows years of rapid hiring by the major consultancies during the pandemic, which saw low attrition and surging demand for digital and advisory services. But now, with slower dealmaking and digital transformation projects, firms are readjusting their sails.

Deloitte’s move underscores the industry’s pivot, triggered by shifting client priorities, tighter budgets, and a leaner public sector.

HR lessons from Deloitte’s layoffs

The recent job cuts at Deloitte offer a window into the massive overhaul happening in the professional services industry – particularly in government consulting. For business and HR leaders, this development suggests the consequences of overreliance on a single revenue stream and the perils of mismatched growth strategies.

Deloitte’s US consulting growth slowed to under 1% in 2024 – a far cry from its 17.8% rise the year before. That’s a nosedive no amount of optimistic spin can disguise.

When attrition is low and new business slows, something’s got to give. In this case, it’s jobs.

The trigger is a sweeping crackdown on government consultancy contracts driven by DOGE.

Meanwhile, the GSA – which serves as the government’s procurement watchdog – has demanded that consultancies show precisely where and how they’re cutting waste.

Gruenbaum wasn’t mincing words when he wrote in a missive to the firms: “Do not submit a scorecard that does not identify any waste.”

Apart from fiscal pruning, the move was a full-on slash and burn, dressed up in plain English.

So, what can HR and business leaders learn?

1) Agility matters

Deloitte, like many firms, went on a hiring spree during the pandemic. Demand soared, attrition dropped, and the good times rolled. But as the tide recedes, those who overextended are scrambling to recalibrate.

HR leaders should take heed: workforce planning must include contingency thinking. Hiring should be elastic, not just aspirational.

2) Political risk isn’t just for emerging markets

The abrupt policy shift under Trump’s administration shows how political winds can reshape business landscapes overnight. Companies dependent on government contracts need scenario planning baked into their risk models.

Beyond the headlines, this episode shows how the consultancy model is undergoing a reset. Cost-conscious clients, volatile political climates, and the rise of AI are rewriting the rulebook.

Firms must now prove their worth in plain language, deliver measurable results, and pivot quickly when the playing field shifts.

For HR, this is a reminder that talent strategy is business strategy. Managing change effectively and ensuring alignment with client needs will separate the resilient from the rest.