McKinsey to pay $573M to settle claims over opioid crisis role: source
reuters.com
reuters.com
All this settlement achieves is 'a cost of doing business', as they say. It's not punishment or deterrence. McKinsey and other companies like them will do similar in the future, and simply pay it off, again.
To me, "a cost of doing business" implies that they're making more money than it costs them. Here at least, that doesn't seem to be the case. So while this may not have been sufficient for retribution, I think it's easy to make the case that this will be a pretty good deterrent.
Consulting companies will start to realize that they can be liable for the advice the give.
https://www.nytimes.com/2021/02/03/business/mckinsey-opioids...
It's wayyyy more than the cost of doing business. This project represents less than 0.001% of a year's revenue. Company is losing 5-6%.
15 years of work must have cost more than $1M
https://www.aljazeera.com/economy/2021/2/4/mckinseytopay-573...
I think the only proper fix would be to disallow companies from going bankrupt - ie. if a company has unpaid debts, the shareholders must pay them, and the share price can become negative. That forces everyone to build such risks into their models from the start, and company directors will be discouraged from taking such risky bets.
Other similar financial instruments exist - like stock shorts, futures contracts, lloyds names, etc.
We saw last week how bad it is to hold excessively large short positions. This proposal would effectively make long positions have unlimited downside risk as well. I think it would have extremely deleterious effects on investment and the bad actors would still find ways to avoid the downside by leaving other shareholders holding "the bag."
Then if the remaining investors pay the debts, they've also lost all the money they invested.
Where do you draw the line for investors responsible? Anyone who's still in? Whoever was ever in?
(Not an argument, just an observation)
I'm serious, this guides decisions with Attorney Generals.
It amounts to literal gambling with people's lives and the individuals responsible face almost no risk. The worst thing that happens is that their company has to pay a big fine. Someone who steals a car will face a multi year federal sentence. Who had the biggest negative impact on society, the dude that stole a car or the people responsible for hundreds of thousands of deaths?
It currently is and I don't see any sign of it stopping. The foundation was laid in the 80s, the roof fell in on January 6th, and the Democrats don't have enough of a spine to actually fix the problem because Republicans keep calling them mean names.
Not sure if that was the intended connotation though.
Edit: to the reply comparing this to murder, not it's not. And even if you do compare it, the court look at an individuals standing and contribution to the community all the time in sentencing.
This person is no longer working there, and I'm not surprised.
1) Lenders probably shouldn't be lending money to people they know cannot repay the debts. This is also why APRs are so high - most people simply don't.
2) People who know they can't repay the debts shouldn't be borrowing in the first place. This is also why lenders have to go to such extremes to collect their debts.
This is a function of being poor in a country like America with zero social safety net. If you're desperate and on the ropes and have nothing to fall back on you'll do whatever it takes to get by including take out loans that you can't afford, from lenders who know you can't repay them.
The problem isn't predatory lending, or deadbeat borrowers, it's a deeply unequal society which doesn't look after its own, with rampant wealth and income inequality and a total lack of social safety net.
In an ideal world, folks would be able to rely on unemployment or UBI to get by tough stretches, and this system would disappear instantly. Half the country is busy breathlessly screaming socialism over what the rest of the world considers a "functioning government" and the other half has other things on their mind like walking back stupid bathroom laws, and in the end, nothing fundamentally changes.
In my Prosper experience that was the rare exception. The typical defaulting borrower bought themselves a shiny new toy and literally felt entitled to the money. As if their success in securing the loan was sufficient justification to have earned the money outright.
The drama on the Prosper lending forums, where lenders and borrowers could directly communicate with each other, was epic and educational.
Fall behind far enough and your debt takes priority over staying in your home. Hell, even the government will kick you out if you fall behind far enough on property taxes
Not everyone who borrows money is a "victim" and not everyone who asks for their money back is a "predator". It's not so black and white. I've lost money to worthless people who lied while borrowing only to find out they blew it all on prostitutes instead of that family emergency they claimed they had.
I think the disagreement may be on the definition of “reasonable”.
Similar to utilities, I don’t think most people begrudge a company for making a “reasonable” profit. The problem sometimes comes when it starts to become unreasonable level of profit, predicated on lack of transparency and shady tactics
The average person thinks companies make over 5x the profit they actually make, and they think the amount of profit correlates negatively with how responsible and good for the world the company is (when in fact there's very little discernable correlation, and it may be positive). What profit people begrudge is likely not particularly relevant, given how uneducated those opinions generally are.
Agreed. It very much does depend on the default rate.
FWIW when I now see 10%+ APRs on unsecured loans for presumably highly rated borrowers and much higher rates for riskier borrowers, I’m no longer shocked.
The Purdue OxyContin's 12 hours higher dose and thus higher addictiveness "solution" instead of the 8 hour based lower dose cycle similarly bears all the hallmarks of being produced by MBA consultants.
People obviously have different metabolisms, so the duration of effect was different for different people. When these people told their doctors that their dose didn't last a full 8 hours, and they were experiencing pain after, say, 6 hours... their doctors were advised by Purdue to simply up their dosage, rather than give them a different dosing schedule. Pretty direct approach to creating addicts.
Turned out to be even more of a gold mine since the FDA approved formulations where each tablet simply contained way more of the API than it had on the label.
Full detailed data from the clinical trials supported the labeling for each tablet to show the amount from that tablet that would be released into the bloodstream when taken as directed, not the actual full amount of API in each tablet.
For the "taken as directed" dosing to be reliable enough for doctors to correctly gauge how much habit-forming toxic API their patients were absorbing compared to established & generic non-time-release formulations, the target is for the time release pills to have quite a bit of API remaining at the baseline upon excretion.
But this is an API that opiate addicts crave and it didn't take long for them to figure out they could simply crush the pills to ingest the full amount of API a tablet contained.
On the black market this escalated each pill to the top shelf category.
For addicts and chronic pain patients building a progressive tolerance they can't get enough, and this is the regular kind of opiate API that has always fomented eventual overdose when the increases are not curtailed and the toxic effects become much more prominent or fatal.
For any patient on generics who wanted _more drugs_, if they got switched to Oxycontin at the same dose they were a happy camper. Until they wanted even more. But multiple time-release pills were not in the prescribing guidelines so Purdue escalated by stepping up to the plate and developing stronger-dose product in the same time-release formulation.
This was a sign that so many people were building up a tolerance where it took more API to give them the same perceived effect.
The non-addicted occasional consumer of these powerful pain pills could sell their surplus for more each year. The financial incentive to refill prescriptions is greatest for those who don't actually take any of the pills. The Sacklers got richer at the same rate as the drug dealers too, since they raised the pharmaceutical price in step with the increases in street price.
The growing financial economy paralled the spread of the tolerance-building consumption habit, so realistically the demand was stronger than that from all of the ultimate consumers' habits by a large margin.
Opium wars had been fought over this kind of thing.
Doctors, nurses, patients, addicts, narcotics agencies were raking in the bucks like there was no tomorrow, and even those who were not benefitting by one dime were not going to stop.
Sacklers simply declared opium wars and the casualties are still mounting.
I’m trying to see that argument applied in any other instance and it becomes totally ridiculous.
“You see, your honor, I merely suggested to my client that he kill his neighbor in order to take his land, I didn’t think he’d actually DO it!”
The more salient facts for someone who's looking to this as an instructive story are: they advised a company to do some things that had some pretty hefty consequences, those consequences came back to bite them, and it cost them $573M plus legal fees and damaged reputation.
$573M is $573M, regardless of whether a court orders you to pay it, or whether it's the amount you're paying to avoid having to find out how much the court would order you to pay. The fact that no ruling went onto the books is small consolation.
Frankly, I think it’s such transparent bullshit that we should abolish it. Really, you admit to no wrong doing but you’re willing to fork over half a billion because ...?
By way of analogy this is why it’s a needed change. Applying settlements to criminal law I could murder you, and settle the case for some dollar amount and not have to admit guilt.
In short settling out of court is a way for the wealthy to avoid meaningful penalties.
That's not the vast majority of law, though.
Having an experienced industry lawyer review future business plans is just good sense.
Companies like McKinsey will say whatever you want them to say, and there is no shortage of conflicting case studies to 'prove' their points.
Not really, there are plenty of cheaper companies you can hire to do this when you know the solution and just need to bring in someone to do something unpopular - McKinsey is expensive!
In my experience there are 4 key types of job. I've put my own percentages for what I have experienced, but different people in different companies will obviously vary dramatically.
* Problems where the client genuinely doesn't know the right solution, and wants you to help (30%-40%)
* Problems where the client knows a kind of half-baked solution, or has a load of ideas, and wants you to make a fully-baked solution (30%-40%)
* Problems where the client knows the solution, and you are assisting in implementation/further work because the client doesn't have resource or time to do it, or wants someone with specific skills that they don't have internally, for example procurement support, negotiating a merger/acquisition, time sensitive projects e.t.c. (20%)
* Problems where the client knows the solution, and just wants you to tell it to them in a report because that gives it authority or the consultants can take the blame (less than 10%)
Isn't McKinsey like the IBM of their field, though? Hiring someone cheap makes it harder to pass the buck if it doesn't work out. "Nobody ever got fired for buying McKinsey" and all that.
Far more common is a project where the client half knows what they want, but their thinking isn't detailed enough to implement it.
As an example that might happen in my field, let's say a company has three distribution centres, each with a general manager, and they report directly into a 'head of logistics'. The project is that they want to look at closing one distribution centre, they think they could probably get away with 2.
The client might know what they want, but probably wont understand the impact on transport costs, the capacity that exists at the other two distribution centres, likely delapse costs, how much they are likely to get for sublease as they have a long lease, the cost of redundancy, system changes required because some specific activity happens in the central DC, impact on the cost of goods sold, what are the inventory benefits, when according to their financial plan will they need the 3rd facility again. They are also unlikely to have an implementation plan and a cost estimate for making the change.
Even if the Head of Logistics can do all that, he has a full time job managing the network and working out all the impacts isn't a part-time job. It's also important to get right, so can be hard to delegate because the company probably doesn't have someone that has worked all this out before (e.g. do they know how to calculate inventory savings?).
So that's how a company can kind of know what they want to do, but consultants can still add value.
Your employees get to make decisions based on what they think is best, what feels right. You don't have that luxury. Investors, the board, other managers who are vying for your position all demand numbers-based decision making and justification. So what do you do? You hire a well known consultancy to produce documents and data that supports your position. You can now justify your actions by pointing to what they've made for you. And, you have the added bonus of the sunken cost fallacy. "Well of course we took their advice, don't you know how much we paid for it?"
I feel like all the comments talking about a breakdown of trust seem even more poignant now after reading your comment.
[0] https://en.wikipedia.org/wiki/McKinsey_%26_Company#Controver...
[1] https://www.propublica.org/article/how-mckinsey-is-making-10...
https://www.independent.co.uk/news/business/analysis-and-fea...
https://www.theguardian.com/business/2002/mar/24/enron.theob...
McKinsey was integral to designing Enron's asset light strategy and also creating the stock borrow structure, their internal talent marketplace, etc. etc. Seems like where Enron stopped and McKinsey started is hard to place.
Not bad for McK I'd say. The consultants really managed this well.
https://www.nytimes.com/2021/02/03/business/mckinsey-opioids...
If McKinsey knowingly offered advice that led to thousand of deaths then the penalty should be more than $1200/body regardless of what their fees were.
Personally, I think a fine like this is just if it causes consulting firms to think about the consequences of their actions and do the right thing in the future. Making firms responsible for damages they cause would be best. Making it it clearly unprofitable is a good step.
Companies psychopathically seek out profits, and need to be kept in check, but that does not diminish the fact that US (and Canadian) drug policy bears direct responsibility for opioid deaths.
This kind of news story, while maybe satisfying, is a red herring. As long as addiction is criminalized, and legal drug supplies dont exist, it doesn't matter how many Purdues or McKinseys we punish, the problem does not go away.
The end result is a medication profile with a pronounced sawtooth pattern. On a daily basis, patients get relief from pain, suffer waiting for their next dose through a few hours of agony, and then get relief again. If they try to fix this problem and complain of untreated pain, the doctor ups their dosage and makes the sawtooth even worse.
What the war on drugs does is add inflexibility and a criminal dimension to the newly-minted opioid addict's interaction with society. Run out because you accelerated your dosing schedule in order to avoid hours of daily agony? You're not allowed to refill early for any reason whatsoever, and it may get you a drug-seeking label that kicks you out of the official reason entirely.
The original Dr. Sackler invented modern marketing of drugs directly to consumers, starting with getting millions addicted to Valium - which BTW was totally gross sexism. the very Mad Men 60s style marketing /r/oldschool ridiculous keeping women in the house and dealing with their 'emotions and feelings' with downers etc.
The Netflix doc the Pharmacist is really good I highly recommend. Purdue gave direct $ bonus' to their sales people, using prescriber data to knowingly target Drs. prescribing insane amounts of opiates. On purpose because they identified it as the most profitable.
They also basically bribed doctors to attend conferences and put their name on BS 'research.' they spent millions to induce an earth shaking change in pain management - opiates weren't widely used long term before their 'investment.'
Plus the first baseline research they use to justify this was total overstated from one Drs opinion.
It's also the pharmacies, Walmart optimized profits and kept pharmacists from questioning scripts.
And now last I checked the Sacklers still have their billions and are using the same playbook with a new company in the developing world/India.
I'm also totally against the war on drugs and believe we need to fundamentally change attitudes and pretty much remove possession laws.
Personally I would go so far as to provide free prescriptions/handouts for addicts of opiates/stims that are pure, clear doses, and safer to inject or use. Make it mandatory to interact with mental health professionals to get the drugs and offer free treatment (medication focused) when the user is ready themselves to attempt to get clean.
It's also gross that it's a good amount harder for a doctor to prescribe suboxone than it is opiates.
https://www.theguardian.com/world/2019/aug/27/india-opioids-...
In fact they get a dosage in excess of what they need for relief from pain. So, on a daily basis, they are just straight up getting high on opiates, and then withdrawing.
what causes individuals to seek drugs or other harmful substances? Surely,similar substances existed throughout history? (maybe not as lethal, but still...)
I think it is the despair and lack of spiritual fulfillment for a person, and i think this coincides with what has been a failure in religions to make a relevant impact in individuals lives.
they have often made the situation worse by being judgemental further pushing said individual into this trap.
But for better or worse, overall health outcomes are better than at any time in history.
So if you're thinking that people being idle, bored, robbed of any agency, and unfulfilled is a root cause of drug abuse, I agree.
But that boils down to being at the top of the needs hierarchy, and moving down has a set of bigger problems with it.
So as long as we're here, treating opioid use as a disease or chronic condition, instead of as some kind of "criminal" hedonistic behavior we should be punished for, goes a long way to reduce any harm it causes.
This is not true? US life expectancy is actually falling now, and due to the obesity epidemic the "average" adult is fairly unhealthy.
https://www.propublica.org/article/new-york-city-paid-mckins...
Nevertheless, I decided not to take their offer afterwards, partly due to exactly those shady practices that went well beyond even my quite relaxed sense of business ethics.
Also, deploying clueless but well dressed junior people and only sending the seasoned specialists to extinguish fires is not a reasonable model. I mean it is if your sole goal is to rip off your client with delivering minimum value.
Okay, naive, wishful thinking.
"We said we would have no tolerance for those who violate our professional standards. In this case, after a thorough investigation, two partners have been terminated for violating our Firm’s professional standards.""
Source: https://www.mckinseyopioidfacts.com/wp-content/uploads/2021/...
As for the consequences of the current opioid-related debacle, it has been communicated to the firm members today that any economical consequence would be borne out of Partner's comp, as is usual.
"Effect" is an Entity, a noun. They both start with "E."
"Affect" is an Action, a verb. They both start with "A."
Effect is sometimes used as a verb, especially in bureaucratese, but not in the way you're using it.
With apologies.
https://www.reddit.com/r/consulting/comments/k2c8ku/mckinsey...
"In for a penny, in for a pound" - this should be McKinsey's new corporate slogan.
Valeant article: https://www.ft.com/content/0bb37fd2-ef63-11e5-aff5-19b4e2536...
Enron article: https://www.theguardian.com/business/2002/mar/24/enron.theob...
Of course they're going to be around for almost any given corporate failure.
I don't have an opinion on how useful McKinsey is, but I'll note that no one is pointing out that they also did a lot of work for Microsoft before their big turnaround.
That's not cherry-picking.
Some partners can go way off the reservation compared to others, and they may have little to do with one another.
One week I found myself with him in some faraway city. We were a bit lost (this was before smartphones) and late for our next appointment. He was frustrated about it because we couldn't get a cab to save our lives. As the minutes ticked by, he'd get more and more irritated, muttering to himself about losing the fucking clients, etc. You can imagine one of these master-of-the-universe types when they get indignant; it's just like the movies.
At some point in all the running around, he notices how he's acting and tries to summon some perspective on it all, get out of his frustration. "You know," he said, "when the plague comes, society's not gonna need management consultants, nor is anyone gonna miss us. We'll get to the meeting when we get to the meeting; no one's gonna die because we're not there."
From a guy who I'd only known as this very hard-charging white collar business guru, a guy who fell out of a Tom Wolfe novel, this was unexpected and funny to young, naive, impressionable me. I got the impression that while he may not have completely rid himself of being annoyed at being late, he was also sincere. I think about this moment a few times a year, actually, something I wouldn't have predicted.
Looking back on it, I'm pretty sure that at the highest levels, these people know that they're not giving civilization all that much, and that this is never very far from their minds.
It might have helped to have some mgmt consultants on vaccine distribution.
The fact that they are aware of their own lack of usefulness makes the whole enterprise even more cynical and shady.
Everyone seems to imagine their actions are "normal" and "socially appropriate" but if only they were to break out of their lot in life and reach that next rung up, suddenly they'd be more generous, more compassionate, not driven by the same things, etc.
I am utterly flabbergasted. Words fail me which is rarely the case ;)
If you put enough money on the table I'm sure many more people would do the same thing as those currently in power. It's just that most people don't have the opportunity to sell out.
That's the scary truth I think.
It does nothing against evil to pretend that the world is composed of a small number of monsters and the rest of us good ones.
I'm the first one to agree with you: consulting - hell, fundamental aspects of capitalism itself - are deeply cynical and morally suspect, and result in a lot of unnoticed pain and death and ruin. But in my view, ignoring the fact that criminals of all types go home and kiss their children at night, and mean it, is part of what keeps us locked in the status quo.
And by the way: instead of ascribing intentions to me that you, as the reader, can't know for sure from the text alone, why not just ask me what my intentions are?
Some would say this was the origin of charity and corporate social responsibility. It was born as a financial optimization to hedge against optics risk, to engage in moral licensing. And it does its job very well there -- not in spite of, but because it directly humanizes the company and its executives.
"It’s a choice that’s laden with power. Unlike a bank or a traditional business, consultancies have little capital apart from the graduates they hire. A consultancy is a machine for prestige, and you are the source of their prestige, the smoke that obscures the truth of a business that subsists on the crudity of cutting and selling. They purchased your transcript, and they purchased your diploma, but you have the power to take them away. Without you, a firm has no more weight than the shells through which it is paid.
So withhold your labor, withhold your prestige, and watch as the façade begins tumbling down."
https://stanfordsphere.com/2020/01/30/how-your-classmate-bec...
They're paying just over $1,000 per life. According to the U.S. government a human life is worth $10,000,000. Seems totally fair.
https://www.npr.org/2020/04/15/835571843/episode-991-lives-v...
They are also very careful to play the PR game well. A good example of their incompetency intersecting with their PR efforts is their spurious claims on diversity (https://www.mckinsey.com/business-functions/organization/our...). The "Diversity Matters" report here has been quoted by virtually everyone - from the Harvard Business Review to corporate HR teams. And it is remarkably deceptive, because it has been bandied about as evidence that more diversity = better outcomes. Their own study at the link above admits there is no casual link here. It states this in an incredibly misleading way:
> While correlation does not equal causation (greater gender and ethnic diversity in corporate leadership doesn’t automatically translate into more profit), the correlation does indicate that when companies commit themselves to diverse leadership, they are more successful.
And now here we are, with corporations normalizing discriminatory practices relating to hiring, promotion, and so forth.
Your starting line is overly reductive and not based in fact.
McKinsey optimized the business strategy to maximize profit. The strategy is locally optimal but a net negative at society scale.
I always puzzle why some economists oppose the basic idea of regulating drugs. Layman like us won't have the prior knowledge to tell the difference between snake oil and effective treatment. Drug maker won't have the incentive to conduct expensive randomized trials. Are we going to tell by reading Amazon reviews?
The dollar amount might feel impressive. But keep in mind the actual employees who contributed to the "turbochargeing" aren't paying that, and they are still walking the streets.
I can't imagine how this is Justice, or even justice.
Does this mean that the Feds can still go after them? The Dems are historically very friendly to the Pharma industry in ensuring outcomes in-spite of populist posturing. Can Medicare/Medicaid/VA sue them for recovery of monies spent in treating addictions and prescriptions?
The whole business is a scam built around sending in some 26 year-old with an Ivy League degree and $100 haircut to regurgitate snippets from articles in HBR.
I post this fairly frequently, but here we go again. Business is hard. Change is hard. Consultants get a lot of shit for saying things that someone lower in the org could have told them. That's not evidence of abuse, that's evidence that your org isn't working well. A lot of the time substantial portions of the findings come from interviewing and listening to lower ranking experts in the client. Bringing in consultants is, among other ways, a way to bring in people who can get shit done, moving bricks at lower levels of the org with the political mandate of the top. That's quite valuable, because otherwise a lot of orgs are just entrenched. A very large number of senior leaders don't know how to accomplish X, and don't know how to get the information about X from their own company. And again, that's not an insult, because business is hard. It's great and all for you to say "regurgitate snippets from articles in HBR" but I can't say that resembles any work I've done, ever.
Opioid work was bad though, let's not avoid that. (edit for spelling)
* quick witted aikido-move-of-a-sentence to accept OP's insult, thereby disarming it
* enormous paragraph made up of short, frank, vague sentences with an compelling rhythm of overarching claims that frame the 20-something haircut's ostensible work in a positive light. It's the wrong generation but I'm reading them in Ari Fleischer's no-nonsense, eternally dismissive voice.
* anticipating the accusation of happy talk, a final, single sentence to cover one of the many troubling associations McKinsey has had with shithole companies. Even spelled the industry wrong!
I'm not being sarcastic or snooty. This is the HN-post version of the pharma commercial pattern of showing heartwarming images of happy people on swings while the narrator enumerates horrific side-effects. Reliably distracting an audience from a topic is a skill, and that reliability is valuable to companies.
So to all those naive respondents who want to say that McKinsey is some kind of corporate leech that provides no value-- this very comment is proof that you have no idea what you're talking about.
And some at McKinsey, I assume, are just run of the mill consultents.
All I'm trying to convey is that my day to day is listening to client problems, looking at data, talking to employees, and presenting findings. It's neither a conspiracy, nor a scheme, nor a world of wealthy indulgence. I make a healthy wage, but its likely lower than I could get in tech. Like almost every company in the world, its a normal company.
I read your comment as "I am so emotionally invested in this caricature that I cannot tolerate hearing it humanized. The caricature must stand, or I lose something."
I know very little about McKinsey, but I don't think that the haircut of their consultants tells me very much.
You spelled consultants wrong :P
(Boring clarification: riffing off of your "spelled industry wrong!" bit. Not an actual attack.)
I definitely need to learn lucidity or awareness or whatever it is that you springboard off of to be able to read something like this and mentally *hangonaminute* though... I completely went along agreeing with everything, and while I still do after having paused and considered, this isn't the first time I've needed another comment to help with the initial "you're completely not noticing this subtlety here".
Honestly I got more of a '1 life is a tragedy, 1million lives is a statistic' vibe from GP
not only shithole companies. At the total service of shithole governments:
"McKinsey Bans Moscow Staff From Attending Pro-Navalny Protest
...
In line with policy, McKinsey employees must not support any political activity either publicly or privately. This ban does include posts in social media featuring your political views or your attitude to any action with a political flavour. This line of conduct is mandatory. "
https://www.themoscowtimes.com/2021/01/23/mckinsey-bans-mosc...
OMG this is the bes sentence I have read in months! Thanks
---
I worked with a guy who was a previous McKinsey exec and now is the "uber of Dubai" founder and a billionaire and he is slimy AF.
I have worked with multiple companies such as McKinsey PWC and others and their consulting practices are all bullshit.
Now, thats not to say that any large company does not need some financial oversight/consulting/auditing - but still these consultancies are fucking vultures and are more likely to help you "cook your books" than correct your books...
s/consultents/consultants/
It seems more likely that it’s a politically expedient way to get cover for a decision (in other words CYA insurance). If the plan fails, blame the consultants. If it works, take credit for having brought them in. It also puts more pressure on exec to make a decision (we just spent $10M on this strategy plan, are we really going to it on it?). It’s genius, if it didn’t highlight the utter dysfunction of a firm.
McKinsey scandals also aren’t confined to Opiod work. It’s also been involved with Enron, corruption in Africa, peddling of mortgage backed securities during ‘07-‘08 crisis and I’m sure many more that they’ve done a great job at hiding from the public.
https://en.wikipedia.org/wiki/McKinsey_%26_Company#Controver...
In the interest of balance, here is what McKinsey has to say about social responsibility in its "about us" section of its corporate website: Our purpose as a firm is to help create positive, enduring change in the world.
That's certainly one of the reasons you would bring in consultants.
I think critics of consultants are, in general, too quick to dismiss the monetary value of political lubrication. If it's going to get your management hierarchy to admit there's a problem at all, or if it's going to get your management hierarchy out of a deadlock, that's worth something. If your organization is able to actually focus on the problems despite the politics, you are probably not a a typical McKinsey/Bain/BCG/etc. customer.
With maybe one exception, none of the consultants I know ever fit the mold of a fresh-out-of-college generalist who thinks their frameworks and raw intellect will help them come up with better answers than a specialist could. They mostly all understood that their jobs were to escort boring, good enough ideas through the boardroom politics. And that was often something they were good at, and they were often acutely aware that some people in those companies already had the answers but the organization was too dysfunctional to recognize the fact.
That's the core of the problem anyway. But naturally they'll sell you a lot of other promises and products, and those are where I think management consultants are the wrong answer. Just hire real specialists.
The other problem I have with management consultants is that I feel they, both the companies and many of the individuals, are too amoral to be healthy for society, but that's not about their competence.
This is not past tense.
In South Africa there is a commission (a political farce if anyone cares) to investigate state capture and McKinsey[0] keeps showing up on records and testimonies.
[0](https://www.google.com/amp/s/www.nytimes.com/2018/06/26/worl...)
If we had real competition, there would be more money to be made knocking the giants down than trying to keep them in their walker.
In many cases, there was not any question that your job was to justify a decision that had already been made, or attack another group within the company on behalf of whoever was writing you a check. I was literally told on a number of occasions that regardless of what the SOW said, our job was to make whoever was writing the check look good.
I have not doubt that is true in some cases. However, it might be a a bit too cynical to see it that way in all cases.
I have a developer on my team that is the most senior guy on the team. He is a grey beard on a team full of junior developers fresh out of startup code bootcamp. Sometimes he is thinking about big technical challenges and he just wants someone to talk to that can give him some feedback.
One of the things I miss about working in open offices is being able to turn around and fire ideas off of a colleague. Even if I know I am right, even if I have the ability to unilaterally make a decision, often times I just want a second opinion. I've even heard people here suggesting a paid service so you could get a short amount of principal engineer time to bounce ideas off of.
I mean, isn't that more or less what McKinsey is, except for business people? When I think of it that way ... it doesn't feel as cynical anymore. If I'm a CEO (or any level of exec) and I don't have peers that can provide me valuable second opinions and I have the budget - why not pay someone for that second opinion?
Paying the money back (as was agreed, and even then my understanding is that not all of it will be repaid, no interest was offered and no criminal charges have been proffered) will never cover for the gutting of essential skills in key state owned enterprises under the cover of a McK “restructuring”.
South Africa is in a perfect storm right now and big consultancies and accounting firms all had their fingers in the cookie jar. They all had a part to play. It makes me sick to think what these consultants might achieve in less democratic states as it’s evident their reach is global and they are legion.
In my university days many bright eyed youth wanted to work for these companies. I hope people are waking up!
Edit: For anyone interested “Zondo Comission McKinsey” or “McKinsey South Africa Guptas” should get you quite far.
Edit2: I’ve just given a brief summary. It’s enlightening to dig into the role of Bain, McKinsey and KPMG especially, their relation to Gupta enterprises (common cause) and their enabling of deals, cutting really good people at key state institutions like SARS (Revenue Service), Eskom (electricity), Transnet (commercial rail). And that’s only what’s in the public domain. The scale of the rot is enormous. Their executives spin corporate speak at our commissions of inquiry (Nugent and Zondo) and do not take any accountability!
The folks with one to three decades more time at bat who are hiring you most likely do find learning and change literally painful. Not because of age, but because of “number of trials” at the change experiment, where often someone gets burned.
Reading, learning, thinking differently, hurts the ego, as it makes clear you were less informed before, and puts you on unknown ground where you don’t know if you’re failing or not. This is hard for a lot of people, ironically especially hard for folks who started out as high performers in spaces with “known knowns” knowledge available (aka, school and textbooks, where learning isn’t an ego problem, it’s expected that you didn’t know).
You haven’t yet developed the instinct to yank your hand off the stove, and you don’t have to stick around long to see if your hand gets burned anyway, so you’re valuable to these folks.
Truth is, McK and the like, are there just to give mediocre leaders an extremely expensive psychological crutch needed when human beings face uncertainties.
Now that these consulting agencies are the behemoth they are, it's mainly corrupt leaders that are being "pursuaded" to use their services.
Oh and ppl like you are just cheap "brains" to give the optics of credentials for this sordid affair.
> They proposed cuts in spending on food for migrants, as well as on medical care and supervision of detainees, according to interviews with people who worked on the project for both ICE and McKinsey and 1,500 pages of documents obtained from the agency after ProPublica filed a lawsuit under the Freedom of Information Act.[1]
[1]https://www.nytimes.com/2019/12/03/us/mckinsey-ICE-immigrati...
The CEO of Enron was a former McKinsey consultant and helped them transition from an Oil and Gas company. Arthur Anderson was just the firm left holding the bag at the end. [2]
[2] https://en.m.wikipedia.org/wiki/Jeffrey_Skilling
McKinsey helping dictators. [3]
[3] https://www.nytimes.com/2018/12/15/world/asia/mckinsey-china...
> On October 20th, the Times reported that the government of the Saudi crown prince, Mohammed bin Salman, had employed operatives to harass dissidents, including the Saudi journalist Jamal Khashoggi, who was allegedly murdered inside the Saudi consulate in Istanbul, on October 2nd. The article included the revelation that McKinsey had prepared a nine-page report measuring the public perception of certain Saudi economic policies, and cited three individuals who were driving much of the largely negative coverage on Twitter: a Saudi Arabia-based writer named Khalid al-Alkami, a dissident living in Canada named Omar Abdulaziz, and an anonymous writer. After the report was created, Al-Alkami was arrested, and Abdulaziz’s brothers living in Saudi Arabia were put in prison. The anonymous Twitter channel was shut down.[4]
[4] https://www.newyorker.com/news/news-desk/mckinseys-work-for-...
That said, they presumably gave executive management some warm and fuzzies that we weren't smoking weed. Sure, they could have just taken our word for what we were telling them, but having a second pair of eyes is actually not a terrible thing. (And it's part of what I did for clients in a subsequent job.) They also gave our business planning people some complicated financial modeling spreadsheet which kept them busy and mostly out of our hair.)
In what ways do you see McKinsey’s actions with Purdue Pharma as being bad? In what ways were they typical of McKinsey’s behavior with other clients? In what ways do you see the actions with Purdue as being exceptional for McK? What factors allowed the company to act as it did? Have those factors been addressed? How do the events with Purdue show what has and hasn’t changed since McKinsey’s deep involvement with Enron?
I personally will not use a big consulting company until we do a better job of forcing consultants to have more skin in the outcome. It’s really nice to come in, have a flashy presentation and then walk out and collect your money. The only “getting shit done” I’ve seen McKinsey do is lining their own pockets.
I don't think consulting is useless or scammy, but come on, you're not rock stars. Consultants advise a business on how to get revenue, and the business implements changes that generate revenue. This leads to the headline we have before us. There's not much more to consulting. Note: my family are consultants.
99% of the consultants who come in are human Powerpoint/Email factories who just happen to have the skill/trait of being extremely insistent. They push exactly what their client wants to hear and are not doing groundbreaking worldchanging work.
In fact in almost every case I worked on, most of the team had literally NEVER done any work in the clients field before, and never performed in the functional role they were being assigned to outside of maybe the partner or project leader assigned to the case who likely had a PHD/MD of some kind in the related field.
As others said, they are there as an insurance policy to throw blame.
Outliers like the Opioid stuff aside, I do think most day to day typical things that consultants do is valuable work for companies. Say you're launching a new product and want to figure out cost based / value based pricing - it's either a single person in the company that does that that might not have a lot of experience in that area or a consultant from a consulting company that has a good track record at doing value based pricing specifically. I know who I'm going to pick.
Or, to put it another way: You hire a consultant so you can avoid responsibility for your decisions.
"I didn't just fire thousands of people, possibly putting some out on the streets. Nope. We're just right-sizing the company based on the advice of this well-respected consultant with a nice haircut."
Hire a consultant and get a fall guy and the ability to shirk responsibility for the detrimental impact your decisions have on your workforce.
Mostly fuelled by management consultancy firms' marketing and sales teams, of course.
Sorry that’s all you have to say about your employer quite literally supercharging the opioids pandemic causing unimaginable pain and destruction across America? “It was bad though.”
Let me tell you some hard truths. If you’re 20 something you don’t know Jack shit about running a business and the only reason you’re there is because the C Suite wants to “de-risk” their decision making, or the board member heard about McK during golfing with his buddies.
If Senior Leaders can’t do X, they should, you know, get training. Go to online schools, get executive MBA training. Why don’t they do that? Because that’s not really the real reason you’re there.
McK and other consultancies have been a cancer on corporate America, creating chaos in the name of “digital transformation” or whatever buzzword is new. They capitalize on most companies’ fear of being left behind and get inserted into corporations where they make the jobs of regular employees (you know, the people who you went to school with but decided not to go to McK but get a real job and who are familiar with the same types of things that you are) incredibly difficult with inane processes from “the manual”.
In mega enterprises the CEO matters a lot, but the next 3 or 4 layers often exist primarily to filter and spin bad news, diffuse accountability, and occasionally get burned at the stake as a witch in league with evil spirits when nobody wants to acknowledge the cholera water making the whole village ill.
Given that, the easiest witch to lay hands on is the consultant, which is why they bill hazardous duty pay levels.
I hear this all the time but it sounds like an urban myth.
I highly doubt someone is not getting fired because the consultants they hired fucked up. They're still responsible for the business. I think consultants can help more with the "we need to do X, Y, Z" with consultant's report backing it up.
I didn’t hear it. I’ve spent years as an L3 (CEO is L1) of one of the largest enterprises in the free world, interacting with other enterprises at that level, and collaborating with all the top consultancies’ teams that work at that level.
My take is while not always the case, the higher level the committee approving the consulting spend (because even that choice/decision is diffused), the more frequently this is involved.
At the end of the day, the CEO works for the Board, who are external and most definitely do not get paid enough to go to jail. Everyone involved needs decision insurance.
Redirecting blame is a lot easier when you have an external party. More interestingly though is it forces a conversation/decision on a particular problem, since you’ve already spent exorbitant sum of money on the consulting fees.
It took me a while before I understand the political side of how this works. For a while, the biggest question in my head was what the CEO gets out of the whole transaction -- the manager intuitively gets power vis-a-vis proximity, but what does /their/ manager get out of it?
I think this confusion wears off the first time you see a sacrifice in management made. That's when you start being able to see how the value chain which is attached to that confidence default occur. Then it becomes completely rational that decision insurance is priced into both the manager's internal calculus and that of the corporation.
The problem with running a company this way is that "your margin" eventually becomes "my opportunity" and that transition gets especially jerky in a frothy market like the one we have now. Do you really need the layers of middle management there, at all? If someone raised a boatload of cheap capital and rebuilt the high margin bigmoat stuff from scratch, would they out-execute you?
(Disclosure: I do not have an MBA)
Their fingerprints are all over numerous bad decisions in business and government in the past few decades[0]. These are the bare minimum, because there are quite likely many negative outcomes they have championed in their role as consultants that were never publicized or reported on.
Totally separate from the above is their absolutely mercenary tendency to work with anyone who will pay them[1][2].
[0] - https://en.wikipedia.org/wiki/McKinsey_%26_Company#Controver... [1] - https://www.nytimes.com/2018/12/15/world/asia/mckinsey-china... [2] - https://www.newyorker.com/news/news-desk/mckinseys-work-for-...
Take a big construction project. In the like of the Berlin airport. What do you think is more profitable for the consulting companies :
a) A well thought project, done in budget and in time. Where the consulting company gets the whole contract + all the bonuses associated with it.
b) A poorly managed project, that gets refinanced multiple times and that ends up being pushed back decades.
It's actually B. Consulting companies love long projects, because this allows them to place consultant for extended periods of time. And any consultant working for a client is a profitable consultant event without bonuses. Consulting companies hate projects that end up shorter than expected, because any bonus they might get from that project ends up being spent on consultant that are waiting for their next assignment.
The main KPI of any consulting company is "the %age of time you consultant are spending 'on assignment' vs 'on the bench'". And long projects where consultant are busy for years are the best way to bring that KPI to 100%, even when the underlying project is a complete mess. The only thing they get from shorter and better managed projects is a better image, which is easier and less expensive to get using marketing technique and PR.
The issue with the MBA field is that it tends to attract power hungry narcissists/psychopaths who enjoy holding power over others. Engineers like to tinker with stuff and be left alone.
"Your interest" as in whoever pays the check. This service is immensely valuable to stakeholders, otherwise they would not continuously pay for it. A career manager at a company will have much more complexity in interests and loyalties as opposed to a consultant hired by a single, at the end of it, actor (whoever controls the signing and payment process).
Let's take a typical employee manager loyalty conundrum, pick one: loyal to the CEO, your boss, the shareholders at large, a specific shareholder group, the board? They often have different interests, and recruit or are looking to recruit agents for them. For the consultant? Whoever pays!
I found the book "Confronting managerialism: How the business elite and their schools threw our lives out of balance" by Locke and Spencer quite useful to understand some of the realities at play (not specifically consulting, but the broader managerial and by application consulting manager roles).
If leaders keep hiring consultants, there is value for them. This does not mean value for the organization. Most certainly, not for society at large, as the parent article can demonstrate.
What an important book.
Here’s a purchase link (non-affiliate but the URL that donates to your selected cause):
https://smile.amazon.com/Confronting-Managerialism-Business-...
It is somewhat telling that this book mostly gets cited by practitioners of CMS, Critical Management Studies, with a citation index in the hundreds.
Perhaps the explanation lies, as CMS luminary Alvesson puts it, in the basis of mainstream management research seeing itself as in the service of industry.
One thing I've learned over time: expensive fees are a feature, not a bug.
People will listen more to what you have to say about any topic if they're paying a few hundred $K for that. And the same goes when you need to deliver a new tool to your client. Being expensive means my IT tickets won't be shelved for a week or two because some guy didn't like my face. It's often the case where a 3 weeks process with a five-people-approval form gets shortened to a single zoom meeting plus an email, and I really like that :). That's the difference between a 8 weeks project being put in production two weeks early and already getting traction because the "business people" are more engaged ; and a 2 years project going nowhere because the team gets shuffled constantly and requirements keeps changing.
PS: It only works if you can deliver what you promised, though
Not sure how right it is.
A fool and his money...that's their problem TBH. Those that hire them aren't grandmas on Social Security or mom-and-pop stores, they are supposedly super sophisticated businesses.
Sauce?
I have worked in Management Consulting, not with MK, but I have worked with MK alumni and in engagements where MK was there before us.
TL;DR: I respect their work, take the price tag away since it's meaningless. Running a business is hard, Management Consulting is also hard. Unbeknown to most people, Consulting companies also - often - execute, and there's something to be said about an outsider doing the heavy lifting, dirty work, and be the garbage person.
If that comes with a fancy label, well.. there's a price for that too.
Amen.
Also, McK is more about organizing change and getting buy in. That’s their value. Some Director could come up with a strategy but no one would follow it.
Just like IBM, if a strategy fails, nobody gets fired for having hired McK. There is value in that.
This is it right here. A shocking percentage of corporate boardrooms are McKinsey alumni — by hiring McKinsey to develop or even just validate your strategy, you buy credibility from the people who sign the checks because they know and trust senior people at McKinsey.
Consulting is a relationship business. The other purpose of consulting at the boardroom level is to enable companies to sidestep laws around collusion and insider trading — the SEC occasionally charges somebody, but it’s largely symbolic given how pervasive it is. It’s not unheard of for CEOs of companies that are direct competitors to have regular calls to discuss strategy, all while using consultants to create a paper trail that says the strategy was developed through rigorous analysis.
It's conceivable McK and other actually do offer some value. A 26 year-old may not have tons of real world experience, but working at McK would allow him/her to have exposure to a global team that has worked across many companies in the industry. Having an understanding of best practices across multiple companies in the industry is valuable. It's also valuable to come in with a fresh perspective that is not heavily influenced by working at the same company for decades.
Aaaah. What a world...
McKinsey bears some responsiblity but not all of it; nobody forced people to take those opiates, the addicts also bear some responsiblity. The idea in modern society that people have zero responsibility for their own actions is part of why we're in this mess to begin with, because people with that attitude aren't going to work hard to take responsibility for their own health and wellbeing. I'd bet at least half the people here complaining about McKinsey's behaviour are the same people who'd argue that people should just trust their doctor and do whatever the doctor suggests, and refuse to accept that often what's financially in the doctor's best interests is not in the best interests of the patient's health.
I am not defending what the firm did but we are talking about a study that took place in 2017, it has nothing to do with what happened before and certainly doesn't account for all deaths after 2017 either.
However, if the "training" includes explaining how employees breaking these rules will be held accountable and how it will affect their continued employment, it could influence behavior of potential bad actors.
I share the anger and I would probably point it at the firm too it if I didn't work there and know things from the inside. There is real anger (and a sense of betrayal) inside the firm against the partners responsible for this, as there was over the collaboration with ICE or the South African corruption scandal. Not anger because they put the firm in jeopardy but because what they did was wrong and went against the firm's values. Thankfully they have been terminated.
Some will say I am a mouthpiece for the firm on a PR rampage and I have no way to prove them wrong but I still feel I have to try and provide a bit of perspective from the inside. More of that can be found in my fellow firm member klmadfejno's comments to which I subscribe 100%.
It doesn't help that very little of what happens in the inside is visible publicly. It does not stem from a conspiracy to do evil things secretly but is considered necessary mainly because:
1. the firm serves competing companies and handles sensitive information (think strategic commercial and financial information, not conspiracy to feed on innocent newborns. Even internally we are not allowed to discuss a lot of what other teams do or only a very sanitized version)
2. the firm advises and clients must decide whether they follow that advice or not (they often don't) and not be able to shield themselves behind someone else (particularly when the client is a government) for the decisions they eventually take.
This means that a lot of shitty things can happen (think advising ICE, the South Africa corruption scandal, Enron or the current Purdue situation).
The leadership has nothing to do with initiating or managing engagements and doesn't have the kind of executive power that you find in a traditional company. However they do have a role in setting the rules regulating how this takes place.
To avoid shit happening engagements must be approved by several committees and it's part of the responsibilities of the leadership to ensure that the policies that these committees enforce are in agreement with the firm's values.
The current leadership has recognized in the last couple of years that these policies were not strict enough and has worked hard to strengthen them (that's my opinion, not fact). It now is not possible to start an engagement that would derive into harm against society, the environment, human rights etc...
An engagement as the Purdue one (dating back to 2017) would not be possible now, nor can we serve tobacco companies, arms manufacturers or start an engagement that would help create new fossile fuel extraction capacity.
To quote the firm's Managing Partner:
"As you know, we have made fundamental changes to our professional standards, policies, risk management and culture over the past two years. These changes include:
▪ Adopting a new Client Service Policy in 2019 that would have stopped us from doing this work on multiple grounds as the epidemic unfolded. It is also what led us to cease all opioid-specific work anywhere in the world.
▪ Introducing a new code of conduct that leaves no room for doubt as to the conduct that is expected of every colleague. We said we would have no tolerance for those who violate our professional standards. In this case, after a thorough investigation, two partners have been terminated for violating our Firm’s professional standards.
▪ Adopting a purpose statement after a year of debate and dialogue and using this to inform the decisions that we make.
But we need to go further. And we will. We must use this moment to bring further energy to the discussions we have around our values and, critically, to the actions we all take to ensure they are delivered without fail every day, everywhere "
(https://www.mckinseyopioidfacts.com/wp-content/uploads/2021/...)
This means that a hard-left guy like me can work at McKinsey and be very proud of what he does and look at his children in the eye. While policies I am dead against are promoted somewhere else at the firm, as a firm member I can (and do) choose to work on projects that promote policies that I agree with.
The important part is that the control mechanisms that were too weak keep being strengthened as I think the current leadership is doing, but I am looking hard and will keep doing so and hold them accountable, as a lot of my colleagues are. I'd say most but that would be anecdata.
Regarding consultancy value, I can only provide more anecdata. There is a strong culture to overdeliver and bring more to the table than what the client paid for. The young consultant I have seen discussed across the comments is never left alone and is part of a team with experienced subject-matter experts. McKinsey recruits lots of seasoned experts and brilliant minds with amazing skills and working with them is the main part of what makes working at the firm so amazing (along with the challenging problems we are allowed to take a stab at solving).
I have definitely come across buzzword-wielding, smooth-talking McKinsey consultants bullshitting their way through an engagement and delivering little value but in my experience it is not the rule. I cannot discuss what I do but I can say we are very much encouraged to go above and beyond, to share all the knowledge we have and have often seen wizened, experienced, no-bullshit-taking and distrustful engineers ending up genuinely amazed with the new insight and actionable knowledge we have shared with them (and of course we learn a lot in the bargain too)
If you go to a Tattoo artist and ask for a portrait tattooed on your face, it might be gauche as hell, but that didn’t change the fact the artist might’ve done a great job.
The top comment derisively states:
"The whole business is a scam built around sending in some 26 year-old with an Ivy League degree and $100 haircut to regurgitate snippets from articles in HBR"
In the context of fining the company $500MM for being too effective.
At least in the US, where the punishment is relative to the crime; the court clearly agrees about their efficacy.
The reason McKinsey was being sued isn't because they were giving effective advice, but because it was likely illegal.
Because of this I'd understand that both can be the case. That said, I'm not sure McKinsey is always as ineffective as the top comment suggests.
I doubt any marketing firms working for Purdue was fined $500MM despite contributing to the same outcome. And that's because they didn't have the same impact.
The justice system metes out punishment relative to one's contribution to the crime.
Like this sort of thing:
"One was to give distributors a rebate for every OxyContin overdose attributable to pills they sold. The slides are notable for their granular detail.
For example, McKinsey estimated that 2,484 CVS customers would overdose or develop an opioid use disorder in 2019 from taking OxyContin. CVS said the plan was never implemented."
Not implemented, so didn't end up being effective. But damn.
Crimes are boolean, civil is proportional in terms of punishment. Nobody is going to jail, so this is a civil case.
If you break your neighbour’s car, you pay more if it’s a BMW than if it were a Kia.
A quote from that shows some details :-
" In a 2017 presentation, according to the records, which were filed in court on behalf of multiple state attorneys general, McKinsey laid out several options to shore up sales. One was to give Purdue’s distributors a rebate for every OxyContin overdose attributable to pills they sold.
The presentation estimated how many customers of companies including CVS and Anthem might overdose. It projected that in 2019, for example, 2,484 CVS customers would either have an overdose or develop an opioid use disorder. A rebate of $14,810 per “event” meant that Purdue would pay CVS $36.8 million that year. "
source: https://www.theglobeandmail.com/politics/article-mckinsey-is...
edit: beaten w/ the article
There will be another Purdue, except 10x worse, if we don't abolish the http://uspto.gov/.