After the styling rain project launched a competitor, employee Exodus FTI consultation reel
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FTI Consulting, one of the largest publicly traded business consulting groups in the United States, is preparing for the wave of employee defections after one of its Rainforesters set up a rival company and taking over the top lieutenant and possibly with him. Together, they obtained tens of millions of dollars in business.
FTI controversially in 2023 on its economic consulting practices, Jonathan Orszag’s profit sharing and control, which provides economists as witnesses for litigation experts. FTI’s financial results began to have consequences last week.
Orszag announced the second day of his new company, which includes expected profit forecasts for 2025, blamed in part on Orszag poaching FTI professionals. FTI shares fell 14%, reducing its market capitalization to $5.9 billion.
Management is scrambling to limit defection and says it faces a choice between increasing salaries to keep employees or losing income, emphasizing the fragile balance of the professional services business.
“When clients hire experts, they hire individuals rather than brands,” Orszag told the Financial Times at the founding of his company, Econic Partners.
“In the end, there is only one person on the witness booth, which is about the analysis and credibility of the individual. The brand they are associated with doesn’t matter, which is different from banking or management consulting.”
Economic consulting has become a profitable niche in professional services, competing for investment banking and management of consulting stocks’ salaries. Strengthening antitrust challenges to deals has created a bungalow industry for scholars to provide testimony on behalf of companies and regulators about financial losses.
“It’s no longer a professor above the garage that works with some graduate students,” Olsage said.
He believes diversified publicly traded companies, such as FTI, are at a disadvantage, and private partnerships can share profits more generously.
FTI’s economic consulting unit Compass Lexecon is built on a business called the “Competition Policy Association” which was acquired in 2006 for $72 million. Orszag is one of five co-founders including his brother Peter Orszag, now CEO of investment bank Lazard.
In Compass Lexecon’s recent mission, Tesla’s financial analysis comes in an effort by automakers to confirm Elon Musk’s $56 billion compensation package.
Econic was launched on Wednesday with several FTI alumni, including former FTI chairman Dennis Shaughnessy. Goldman Sachs invested in the company.
“The gravity of joining Econic is very strong,” Olsage said. “We hope a large number of people continue to join the company.”
FTI executives said Thursday’s earnings call that the operating profit from Orszag’s launch could be $35 million this year. FTI’s total operating profit in 2024 is approximately US$500 million.
“We expect the increased competitive pressure to affect our ability to attract and retain customers and will increase compensation costs to retain employees,” said Chief Financial Officer Ajay Sabherwal.
CEO Steven Gunby added: “The people who didn’t leave were just a bunch of fabulous people.”
FTI sued Orszag in late 2023, accusing him of breaching his fiduciary obligations to FTI, threatening to launch a competitor and steal the company’s secrets.
“We intend to pursue these claims vigorously, including seeking damages and revoking all profits from Mr. Olsage’s new cause,” the company said.
Orszag fought back against FTI and Gunby, saying he was wrongly terminated and that he himself owed losses.
He told FT that he wouldn’t change anything [he] It did it in 2023, referring to his confrontation with guns.
“I’m negotiating a better long-term outcome for 800 people in Compass Lexecon, more control and better economics.”
