With the recent publication of The Firm: The Story of McKinsey and Its Secret Influence on Business (affiliate link) by Duff McDonald, McKinsey has been in the news a lot. As a disclaimer, I have not read the book, but even the reviews have some juicy facts:
In 2011 more than 150 McKinsey alumni were running companies with more than $1 billion in annual sales
A 2008 study by USA Today calculated that the odds of a McKinsey consultant becoming CEO of a public company were the best in the world, at 1 in 690
Despite the fact that McKinsey was pulling in more than $10 million a year from Enron at its peak, the firm wasn’t named as a civil or criminal defendant, nor were any of its consultants asked to testify at congressional hearings
McDonald says the firm is at risk of becoming a “pit stop for talent,” a place that trains people for more exciting careers elsewhere. He says that only 1 in 6 new hires remain at the firm for more than five years. Throughout the book, he describes the firm in numerous ways [including]
- “Industrial espionage couched in the language of best practices”
- “Corporate mandarin elite”
- “Corporate shrink for the insecure CEO”
Though lesser firms may be facing disruption, McKinsey dispenses a special sort of consultorial fairy-dust that is hard to replicate, and as much in demand as ever. The global ruling class is seized with a toxic combination of status-obsession and status-insecurity. It also pioneered the idea that business is a profession rather than a mere trade—and a profession that thrives on raw brainpower more than specialist industry knowledge or plain old common sense.
You can’t get fired for hiring McKinsey & Company. It often goes unmentioned, but McKinsey has indeed offered some of the worst advice in the annals of business. Enron? Check. Time Warner’s merger with AOL? Check. General Motors’s poor strategy against the Japanese automakers? Check. It told AT&T in 1980 that it expected the market for cellphones in the United States in 2000 would amount to only 900,000 subscribers. It turned out to be 109 million. The main reason we don’t hear about McKinsey’s advice is that the firm prevents clients from disclosing the work that McKinsey does.
WSJ: There’s an idea in the book “The Firm” that the prototypical McKinsey consultant is very bright, very motivated and very insecure. What do you think about the insecure part? Mr. Barton: Well, I do think there is that element. The phrase was “insecure overachiever.” WSJ: So what matters most to a company over time? Strategy or culture? Mr. Barton: Culture. Culture is what enables you to attract really good people. Are we attracting the best people that we possibly can find? We’re at sort of a 20-year high now in terms of the acceptance rate…and where are the people that leave here going? What type of roles do they go into? Those are really important measures.
It was harder to find satisfied customers to talk. That’s part of the whole compact of strategic and management consulting, which is that McKinsey, or any other consultant, doesn’t get to publicly claim credit for a great idea. That will always accrue to the CEO. I think the most surprising thing was that even companies that have received bad advice from McKinsey still tend to continue using them. From what I can tell, many big companies who can afford McKinsey consider it a required expense, if only for the purpose of maintaining contact with a great “aggregator” of best business practices and otherwise.