Accenture helps private sector eliminate jobs too

Some public universities like the University of Texas at Austin have contracted with Accenture, a global consulting firm based in Ireland, to find ways to make  universities operate more efficiently.

Last year, Accenture produced the first part of its plan to make UT more efficient. The plan, called Shared Services, would eliminate 500 jobs.

Accenture also contracts with private corporations for the same purpose. The company’s recent partnership with private equity firms that bought H.J. Heinz Co., the ketchup and other food products manufacturer, demonstrates that Accenture has a one-size-fits-all formula for creating efficiencies–eliminate jobs.

The Brazilian private equity firm 3G Capital and Warren Buffett’s Berkshire Hathaway in 2013 paid $23.3 billion to buy Heinz. The deal paid shareholders $72.50 per share, so that the new owners could take the company private.

After the two private equity companies bought Heinz, Accenture was called in to study the company’s cost structure.

In August, Heinz announced that it was eliminating 600 office jobs, including 350 in Pittsburg, the company’s headquarters, and in November, the company announced that over the next six to eight months, it would be closing three plants in North America, eliminating nearly 900 jobs.

The lost jobs are about 10 percent of the company’s workforce.

According to Heinz the job cuts and plant closures were regrettable but necessary because they would “enable faster decision-making, increase accountability, and accelerate growth.”

The company’s statement makes it sound like Heinz was bloated with job redundancies.

But Fortune reports that before the 3G-Berkshire takeover, “Heinz was already viewed by analysts and competitors as a relatively lean, hard-working enterprise.”

The company’s assertion that the plant closures and job cuts would lead to greater efficiency puzzled the leader of the economic development corporation in one town where Heinz closed a plant.

John Regetz, executive director of the Bannock Development Corporation in Pocatello, Idaho, where the Heinz is closing its plant, told the Idaho State Journal that in 2011, the Pocatello plant was recognized as being the most productive facility in the entire Heinz operation.

IUF’s Private Equity Buyout Watch argues that the Heinz job cuts are less about creating efficiencies and more about shedding labor costs, so that when the new owners decide to sell Heinz, as they will surely do, the company will fetch substantially more than the investors paid.

Shedding labor costs also helps 3G and Berkshire enhance their short-term rate of return.

The Heinz acquisition isn’t the first time that 3G and Accenture have worked together.

According to the Financial Times, 3G hired Accenture to help it trim costs after 3G bought AB InBev, an international brewing company that owns more than 200 brands including Budweiser and Stella Artois, and Burger King.

In both instances, 3G implemented aggressive cost cutting measures that included significant job cuts.

The Wall Street Journal reports that shortly after 3G acquired Burger King in 2010, 300 employees at the company’s headquarters were let go and layoffs continued for months after that.

According to the South Florida Business Journal, by 2011 40 percent of the employees at Burger King corporate headquarters had been laid off. Some were top executives, but plenty of middle-class people working as administrative assistants, analysts, quality control supervisors, and others lost their jobs.

Low-wage workers at Burger King restaurants weren’t affected because most of them work for franchise owners.

Private Equity Watch reports that by shedding labor costs, 3G “achieved the seemingly impossible by squeezing even more cash out of Burger King when they took over from earlier rounds of private equity investors who effectively vacuumed out large quantities of cash.”

After the mass sackings at Burger King, 3G cashed out. In 2012, it took Burger King public again in a $1.4 billion deal with Justice Holdings Limited, a UK investment firm.

Accenture’s work has caught the eye of other private equity investors in the food production industry.

Mondelez, the maker of such snack foods as Oreos and Cadbury chocolates, recently announced that it had hired Accenture to help it slash costs.

“We’ve watched the work that 3G has done with AB InBev and Heinz – Accenture was the partner with them, and we believe they can be of great help to us,” said Irene Rosenfeld, chief executive of Mondelez to the Financial Times.

“(Accenture) has managed more synergy than anticipated in the merger between AB Inbev and Interbrew, while it also shut down 3 Heinz factories with 2,000 jobs lost,” added Johan Van Geyte writing for retaildetail.

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One thought on “Accenture helps private sector eliminate jobs too

  1. “the Heinz job cuts are less about creating efficiencies and more about shedding labor costs.” Gee, we must be smart. This is the same thing we’ve been saying about the situation at UT. And isn’t it what we said when Accenture got the Health and Human Services contract with the State? And the State had to cancel it because Accenture did such a crappy job?

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