Booz Allen cuts ranks to reduce costs, increase competitiveness

Booz Allen Hamilton, citing “these challenging times,” is laying off some of its senior and middle managers, the company announced today without providing specific numbers or precisely who will be affected.

“To ensure that Booz Allen will succeed – and lead – in this difficult market, we are taking bold action to be out in front,” a company statement sent today to Washington Technology said.

The statement said the personnel cuts will make the company more cost-competitive by “taking cost out of our infrastructure and overhead. And, we will further shift resources and increase our investments in growth areas across government, commercial, and international such as cyber, health, C4ISR, and finance.”

Ralph Shrader, company chairman, president and CEO, earlier in the week sent a companywide memo outlining the personnel action and acknowledging that “Our growth rate today is significantly lower than in the past,” according to today’s Washington Post.

“We are taking bold action to be out in front. We will become more cost-competitive to win and deliver premier services in all of the markets we choose to serve,” Shrader said in the memo.

“These changes will not be easy, and I assure you, they are not being undertaken lightly,” he said. “The hardest thing I have to do in my job is to tell a long-serving partner or hard-working staff member there is no longer a position in the firm.”

But the changes “will make Booz Allen a more successful, secure, and exciting place to grow and excel,” he added. “When I look back — and more importantly, look forward — bold action is what propels us ahead. The future is ours to lead.”

William Loomis, managing director at financial services firm Stifel Nicolaus Weisel who follows Booz Allen, said the company has done better than nearly all of the bigger government contractors in gaining market share and improve margins in recent years.

“They’ve executed quite well in an environment that a lot of people in the industry say they haven’t seen as this difficult in over 20 years,” he said.

Booz Allen “can put their name on a long list of companies around the Beltway that had to do similar things because of the difficult market. And I think that we’ll see more [layoffs] over the next couple of years,” Loomis said.

However, noting that the cuts will affect mainly partners and other veteran professionals, he added, “Booz Allen relies on its top managers for revenue and when you have to reduce your workforce at that higher end, in my opinion it means that the revenue outlook is a bit dimmer than we thought.”

Booz Allen Hamilton, of McLean, Va., ranks No. 9 on Washington Technology’s 2011 Top 100 list of the largest federal government contractors.

Reader Comments

Sat, Feb 25, 2012 San Diego

Ask about the innovative "hoteling" policy that Booz Allen is implementing. They are able to reduce infrastructure costs by not providing permanent office space to every employee who needs an office. Lower-level employees can only get an office for one week at a time and then have to check-in again to try and get an office for the following week. Those reductions in infrastructure cost allow the company to continue to pay bonuses and not layoff those lower-level employees.

Fri, Jan 27, 2012

Booz Allen must really be in trouble. I've heard the wonderful culture they were known for has changed significantly for the worse since going public...and the Execs still think staff should drink the cool aide. Another Accenture?

Mon, Jan 23, 2012 Bob from Accounting California

What do you expect after going public. Same thing happened at BearingPoint and Anderson once they went public. If you aren't making numbers for the quarter, axe some overhead. As a private partnership, having a local partnership with consistent $5-10M of revenue can be a nice fat check for the partner. As a public partnership, gets you axed. Consulting companies should never be public companies. You don't have a product to sell except for billable hours. Hiring 20% to replace those that leave each year and another 20% to try and increase revenue by 15% year after year is a failed Ponzi scheme. My 2 cents from a former BearingPoint consultant and hiring manager.

Mon, Jan 23, 2012 Jorge

This is second hand (but co. is not talking on de record), but reliable sources indicate about 20 senior VP, at least 3 Exxective VPs, and about 125 sr associates and principles got ax, as they say. While this is a major slice of execs and mgrs, the company will probably remain relatively strong financially and, in some but not all waze a good place to work, for awhile. The private equity owner probably wants to boost profits, which have stank since acwiisition and which need to be more/higher so as to entreat membres of the public to buy the company stock. This is the ways of capitalism

Fri, Jan 20, 2012 Boris Mishbuccha

Looms is correct that high-end cuts can affect revenue production. However, in this case, there is a much-needed cost reduction from these "departures" that will goose up the very unimpressive net profitability of a company that is otherwise strong compared to most competitors. There seems to have been a surplus of low-producing, high-cost management personnel. Cuts are the right and the brave thing to do, though obviously rough on deserving employees. It will be interesting to see what competitors snap up some of them.

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