By | Dr Pavan Soni | IIM-B Innovation Evangelist
McKinsey & Co., one of the most revered management consulting companies of all times is a source of admiration and envy alike. A great brand to have on one’s resume and a rubber stamp for the CEOs who want to get their ways. Founded almost a century ago by the Professor of Accounting at the University of Chicago, James O McKinsey, the Firm (as referred by insiders and even outsiders) has shaped management thinking and practice in serious ways. For a perspective on the man, James used to be billed at $500 for a day in 1931!
Very little is known about this enigmatic, yet widely successful firm, and the author Duff McDonald does a terrific job in documenting the history, the evolution and the present state of the company. ‘Firm: The Inside Story of McKinsey‘ is so incisive and critical that through the pages your perspective might well swing from that of admiration to loating to empathy and then to envy. The company is often compared to the Jesuits, the US Marines and the Catholic Church, not just by its employees, but also the alums (ex-McKinsites).
The 300+ pages of dense text is punched with several vignettes, timeless insights, relevant statistics, and some real investigative journalism. The book is a relentless exploration on how institutions are built and how they weather personal and institutional failures. The firm counts Louis Gerstner, Sheryl Sandberg, James McNerney, and Jim Collins, amongst others as its aluminus; and has given more CEOs to the industry than any other company in the world!
The firm is responsible, foremost, in setting up the rigor and analytical approach that has come to characterize management consulting. The hypothesis-driven, fact-based, intellectual horsepower that is presented with a force and style, that McKinsey has perfected over the years. It’s the so-called SWAT team of business management, and that too with a clear mandate of engaging with only the corner offices.
The book presents the journey of the firm from an accounting setup by James McKinsey and Marvin Bower to the dominant position it enjoys today. In the initial years, the firm legitimized the multi-divisional structure, and then was instrumental in mass layoffs in the USA and continental Europe, most prominently in Germany. By developing close ties with the Harvard Business School, McKinsey could create a battery of ‘insecure overachievers’ who would serve the firm and its clients at some exorbitant billing rates for years to come. The value-based billing soon became the standard for consulting firms worldwide, but not as successful as that at McKinsey.
For all the achievements, it was the same McKinsey for years at the site when debacles such as Enron happened. The Enron CEO — Jeff Skilling was a seasoned McKinsey consultant and brought the same toxic ‘up or out’ people management practice at the company. In many ways, McKinsey was accountable for the problems at AT&T, Swissair, BBC, NHS, the ill fated merged of Time Warner and AOL, the problems at General Motors, and the buildup of 2008 financial meltdown (80 out of 120 large banks were clients to McKinsey!). Needless to count in the debacles of Anil Kumar and more infamously, the formed Global MD, Rajat Gupta in the insider trading charges. As an Indian it feels very sad, but the book presents the case threadbear and compels you to think of the talent vs. character debate.
The book closes with the concerns of the McKinsey of today, in terms of its bloated size and global expansion, the continued debate on values and wealth, the boundaries of professionalism, and the value it adds to the new-age technology driven companies.
Leaving you with some insights from the book on institution building, from one of the finest institutions in the world- McKinsey.
- Get your strategic priorities straight. The leadership at the firm always maintained the pecking order as – Client, Firm, and You. Letting the client take all the credit of its success (and failure), remains a key discipline. The first statement in the mission remains ‘(to) help clients make distinctive, lasting, and substantial improvements‘.
- Build world class talent. Since the days of selective hiring from Harvard Business School to expanding its hiring based in the Rajat Gupta era, the firm has always remained true to its mission of ‘attracting, developing, exciting, and retaining exceptional talent‘. Still remains the go-to place for starting a career at B-School, even in the face of Wall Street and Silicon Valley.
- Rigorous introspection. Every setback, whether it was the emergence of BCG, or the aftermath of Enron, the 2008 financial crisis, or the Rajat Gupta scandal, the firm collectively debated for what it stands for and has emerged triumphant. It hasn’t shied away from applying what it preaches. The numerous hours its partners spend in reviewing each other and the rigorous selection of the Global Managing Director is worth an imitation.
- Continuous reinvention. From a firm that ‘doesn’t practice law’ to the wide adoption of General Survey Outline, and frameworks, such as the McKinsey/ GE Matrix or the 7-S framework, and adoption of knowledge management practices, the firm has kept pace with environmental demands. Each leader brought in a distinctive value- Marvin Bower brought the discipline, Ron Daniel brought style, Fred Gluck brought intellectual rigor, Rajat Gupta brought scale, and Dominic Barton is bringing steadiness. They have played their part.
- Build a sense of pride in your work. With over 20,000 strong alumni base, the firm enjoys a reputation unparalleled in the business world, much because of the pride it instills in its employees for working with the best in the world and for taking up significant projects. Professionalism of highest degree, coupled with a careful selection of associates and clients, and work ethics has made the former employees adore their association, however short lived it was (typically the case).
A must read for anyone consulting on, or executing strategy; from B-Schools to the corporate world. Thank you Duff, once again for this masterpiece.