Is McKinsey and Co. The Root of All Evil? (2011)
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It doesn’t even address the simplest explanation for most of this: big companies that are doing bad contact McKinsey to try and change strategies, so of course many bankruptcies follow hiring them. It’ll be like blaming the fire department for fire deaths because the trucks always seem to be near a fire.
- Shady accounting at Enron
- Aggressive denial of claims at Allstate
- Aggressive marketing of opioids at Purdue Pharma
These strategies were not just one-off misfires, but deeply involved McKinsey's senior leadership over multiple years.
EDIT: after poking around for more info on the Enron-McKinsey relationship, I'm not sure what is known with certainty other than that Jeffrey Skilling, CEO during the scandal, was a former McKinsey consultant, and McKinsey was doing stuff with Enron the whole time. McKinsey appears to have successfully convinced everyone that they weren't involved in the accounting scandal.
The company that actually advised Enron on how to do its false accounts, Arthur Andersen, was broken up. McKinsey's documented involvement was fluffy stuff on management culture and writing press releases citing Enron as a success story which look pretty funny in hindsight.
Even from this article you can see they're doing an excellent job.
If I were an executive I would absolutely hire them after reading this article since I can just use them to enact unpopular changes I've always wanted, and wouldn't be blamed if it goes south.
What seems to commonly happen is a consultant comes in, listens to leadership, and then regurgitates what leadership already really wants to do. This lets leadership absolve some of the responsibility when it fails ("The consultant told us to do X").
And it makes sense because who knows the business better than leadership? The consultants can't really do much else other than take their cues from leadership. What routinely surprises me is just how much companies are willing to pay for this service.
The company pays but the leaders benefit. You can charge a lot when it's other people's money.
Large consultancies have subverted many large organisations with a revolving door hiring system - jump into a consultancy, jump back out and bring your consultancy in to fix the company, years later jump back out to the consultancy in a senior role that's low effort as a reward.
Before I worked with consultants directly at large banks I thought they must have all been geniuses but that's not the case, they're merely people from good universities who follow the instructions of the more senior people inside the consultancy rather than independent thinking. Basically they're bodies.
Combine that with working with a majority of F500s and governments, and it’s a high risk situation.
Great initial job training though, so no limit to talent pipeline when they get college grads for 2 years.
It seems that selection bias is something journalists really struggle with...
Notable exceptions to this rule exist, but they are rare. One should be exceedingly skeptical of journalism absent expertise.
This could become a nice Rorschach test, where eveybody can come to different conclusions based on which metrics they pick as important.
Some of the stupidest decisions I've ever witnessed has been driven by multi-million dollar strategies from McKinsey. At a place I worked previously McKinsey advised in-housing software development to spark innovation and digital transformation. Then three years later in 2020 to it was advised that software development be outsourced to cut costs.
Obviously this was a move of utter insanity but for our executives it didn't matter. If McKinsey suggested it, we did it. There was literally no debate on these decisions no matter how hard we tried or how obvious of a mistake it was.
During my time at said company I was working on an innovation project which imo would have been fairly revolutionary for the company's future. For about a year we gathered input across the business and it was understood by every team we spoke to that this technology would be central to the continued success of the company. Importantly, it was understood the importance of us owning the IP and being market leaders in this technology so we could use it as leverage.
The cost of the project was estimated at around £100,000 - which was a fraction of what we were being billed by McKinsey every year. Encouraged by the the overwhelming support we got from every segment of the business and the relatively affordable development costs, we pitched our plan to the executive team.
A couple of weeks later we learnt that the executives deemed the project too expensive and sent us several companies who were suppliers of McKinsey who had built similar solutions. We tried to explain to executive team that the tech we wanted to build didn't yet exist and these solutions from McKinsey's suppliers were no where near ready for rollout, and in most cases these suppliers were actively lying about their tech. But it was an impossible battle. In their eyes we knew nothing despite months of research and McKinsey's word may as well have been gospel.
I left the company shortly after this and have heard things have continued to go down hill. I guess I never understood why the executive team seemed to just defer all of their executive decision making to McKinsey in the first place, especially given the lack of success and costs. Why was our own executive team not better placed to form corporate strategy? Is it common for corporate executive teams to just serve as puppets to large consultancy firms like McKinsey?
The relationship said company had with McKinsey was unlike any I've ever seen before. In my experience suppliers are normally on the backfoot, not calling the shots, yet this doesn't seem to be the case for McKinsey. It seems many corporates are more than willing to follow McKinsey over a cliff and I have no idea why.
Look into how many CEOs and executives of large corporations are former McKinsey partners.
IMHO the current system supports a whole layer of consultants, MBAs, CEOs, and financiers who are either destroying the 'real' economy, or at best sucking all the juice out of it for their own gain.
Late capitalism, financialization, feral capitalism, managerialism. I've seen several terms thrown around, but the essence seems to be something like the profits come from owning and/or tapping into the flowing money; the actual work involved in creating those flows is virtually irrelevant and certainly under-rewarded.
Both of these are nice to have, but in McKinsey influenced “MBAized” businesses, optimization is often almost THE end goal. This leads to all sorts of situations innovation centers get gutted and long term bets are eschewed in favor of immediate profits.
It's up to the client to (choose to) implement the guidance, and, as a consequence, to realize the consequences, good, bad, or a combination of both.
Capitalism is the system out of which these problems have sprung. People keep shouting about "real" or "pure" capitalism being better but that's all a lie spread by the capital owners through their think-tanks. Its propaganda
If we organize corporations to be owned by the workers instead of shareholders, the few with real capital, then the interest of the corporation will shift to that of the workers instead of driving profits to shareholders. A corporation with the interest of workers won't hire consultants like McKinsey
Consultancy might still exist as it provides value, it's just that some kind of suggestions would be completely unacceptable if your priorities are worker welfare and prosperity and you are not allowed to externalize costs on society.
Fuck crypto, but the concept of a DAO may change this.
If managers start hiding things, workers could easily remove the managers. We also should remember that managers are workers too, almost never are they the capital owners
People are people, regardless of what faction you've been brainwashed to believe supports the greater good
Changing the structure and incentives can alter that, it's a systemic effect
That model isn't a good solution either - it would require for workers to "buy in" into the cooperative in order to have a job. Most cooperatives are founded by a group of people pooling together their individual assets to start operations.
Consider a worker-owned coal mining operation. It will have the same self-preservation drive that works to the detriment of all the rest of us.
It also allows the workers to have the knowledge of what's going on, in the case that the organization does decide to destroy the environment we then have more people who know the facts behind the decisions and can speak out to regulators
For example, 3M and PFAS contamination. It’s a stretch to imagine workers local to the factories and very directly bearing the brunt of it, would go along with it.
A worker-owned coal mine has workers who are going to say "keep the place open forever to pay our rent", but also workers who will say "I'm dying of black lung" or "the river my kids like to swim in is purple from runoff" which will help moderate the decision making process. Maybe they stay open, but do a better job of managing emissions, because they're accountable to people who are directly impacted. Maybe they are more directly aware that there's N years of viability left in the coal business and start looking to bootstrap alternatives sooner.
When the stakeholders are predominantly outside investors, there's no reason for them to ask about mitigration or the long term. If they realize that coal is dead in ten years, they personally aren't impacted, they just have to hype the price long enough to sell the asset to some other sucker. Their kids aren't swimming in waste products, so go ahead, funnel it directly into the river.
I always figured the strongest mix was to find a way to manage that represented the worker stakeholders and the consumer stakeholders (the ones who are going to walk away after you shrinkflated the product to death). Solve their needs, and capital will get its money back.
On a related but unrelated note, the structured McKinsey methods of thinking and analysis have been my go-to for decades now.
Notable frameworks I recommend looking into are: The Pyramid Principle, MECE, 7s, SPC, to mention a few.
https://books.google.com/ngrams/graph?content=capitalism&yea...