When the bosses of one big bank realised it was time for a shake-up, the one thing everybody could all agree on was McKinsey should be involved. Even though the game plan for the institution was “obvious”, as one senior executive involved admits, bringing the American consultancy into the room gave those in charge confidence.
“If you have a tough decision, then if McKinsey is round the table helping with those discussions, you have de-risked that process for yourself,” the person explains. “You don’t get sacked for hiring McKinsey. If it goes wrong for you and you didn’t have them, then people might look at you and say, ‘what were you thinking trying to save $US100,000 ($135,000)?'”
Wielding power over the corporate world with expensive advice – McKinsey advises 85 of the world’s largest 100 corporations and one year charged its biggest customer $US60 million – is not its only skill.
The powerful management company nicknamed “the Firm” has long been described as a “CEO factory” due to the sheer number of McKinseyites who go from advising big businesses to running them. It has produced more than 70 past and present Fortune 500 CEOs and has 12 alumni (all men) in FTSE 100 chief executive or chairman jobs.
Despite calls for companies to diversify their boardrooms and although McKinsey has historically been viewed as a bastion of white, privately educated men – it did not hire a female associate until 1964 and did not have a black director until 2005, according to The Firm: the Story of McKinsey and its Secret Influence on American Business – the odds of an employee becoming a chief executive are still high. Last week alone Britain’s biggest high street bank Lloyds has made low-profile HSBC banker Charlie Nunn, a former McKinsey consultant, its next chief executive, while Yoox Net-a-Porter Group, one of the world’s most successful luxury fashion companies, picked ex-McKinsey staffer Geoffroy Lefebvre as its new boss.
Other big moves from alumni this year have included the promotion of British banker Jane Fraser to the top of Citi, where she will become Wall Street’s first ever female chief executive, the hire of Tony Danker to head of Britain’s biggest business lobby group the CBI, making him its fifth ex-McKinsey boss, and the appointment of Baroness Dido Harding to run the government’s test and trace system.
McKinsey’s global head of recruitment, Brian Rolfes, tries to explain why so many people he hires go on to run big companies with typical consultant-ese – as well as pumping $US200 million a year into training, the group has a “strengths-based feedback culture” and “people gain an incredible breadth of experience and expertise”. But critics take a more cynical view.
“Why do people keep hiring them? Hell if I know. The only reason I can think of is if [a business] values money over everything else. These are the numbers guys,” says Duff McDonald, author of The Firm. “If you want to squeeze out one last penny of costs, they’re your guy. It would be nice if people thought differently, but I’m not hiring any CEOs. If I were in position to hire a CEO I wouldn’t hire from McKinsey. They’re way too focused on the numbers, and you don’t want to be making human decisions from the standpoint of a quantified reality.”
McDonald argues that the advice McKinsey gave to the billionaire Sackler family and their drug company Purdue Pharma – the maker of prescription painkiller OxyContin – underlines the extent to which the consultancy can prioritise “ugly rationality” above “morality”. In court filings seen by The New York Times last week, consultants allegedly persuaded the Sacklers to aggressively market the addictive drug, blamed for helping spark the opioid epidemic, and suggested giving pharmacy companies rebates for overdoses. The filings were also said to show consultants discussing whether to destroy documents as they feared legal repercussions, even though McKinsey had not been charged. There is no evidence that documents ended up being destroyed.
“What we’re seeing out of McKinsey recently is they don’t even know how to make easy decisions, where the moral decision is obvious,” McDonald argues. “They’re working with the maker of the most lethal and abused opioid in history, and their work for them is about how to cover your arse if people start dying. In corporate America, if your goal is just to make the numbers and you don’t give a s— about anything else, then by all means go and find a McKinsey person [to run your company].”
A spokesman said the firm was no longer advising any clients on opioid-specific business, was fully cooperating with opioid-related investigations and that rebates were explored to ensure insurance coverage for patients prescribed opioids for legitimate needs. Recruitment chief Rolfes also defends the “old stereotype of consultants being solely data-focused,” arguing that the best advisers can “coach and collaborate” rather than just number crunch. Those who have worked for McKinsey also disagree with any criticism of their elite club.
“Never underestimate how much McKinsey hires the best people – those who go to Goldman and McKinsey go on to do amazing things but they were always going to do amazing things,” says one chief executive, who used to work there himself.
“The reason they become CEOs is because the whole training is about the CEO perspective. When you are in your 20s you are spending an unbelievable amount of time with the CEOs of companies debating CEO issues. This whole idea that it’s just safe to hire from McKinsey, I don’t think it’s that at all. The truth is when McKinsey people turn up at interviews they sound like a CEO. It’s also an ‘up and out’ place – if you don’t get promoted you get asked to leave.”
Rolfes argues that this “up and out” culture that McKinsey is known for is “more true decades ago than it is now” and, addressing criticism that hiring so many people from McKinsey could impact diversity across business, says the company is now trying to hire from more universities, has introduced “problem solving games” in interviews, so candidates are assessed in an “unbiased fashion”, and plans to double its black leadership over the next four years. FTSE 100 veteran Sir Philip Hampton, chairman of a government-backed review into boardroom diversity, says it is unsurprising that so many McKinsey executives do well in top jobs. “The firm draws from an elite pool of younger people, for example from top universities, and that can have some diversity issues. Elites are often self-reinforcing. But if they are very able there’s no reason in my view why they shouldn’t succeed.
“The main issue is wider than just McKinsey – a lot of senior people in the UK make their careers as advisers or consultants, they are generally very clever and learn to be very persuasive. But they will not get the direct operational or executive experience, which is valuable or necessary for some top jobs.”
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