From the article: “McKinsey started as a business that sold candid, dispassionate advice to corporate managers, but selling advice and building a brand around it also sets up a mechanism for diffusing responsibility. The managers can say they’re just following the best available advice, and the consultants can say they’re just trying to help their clients boost profits and efficiency.“
I spent some time with an Engagement Manager at McKinsey a few years ago, and he noted one function that they provide to executives is a seemingly neutral arbiter for tough decisions that may be politically untenable inside an organization. A CEO may know exactly what drastic steps they need to take, but will face internal executive strife, board pressure, or lack of buy-in from the business to execute. McKinsey provides credibility in cases of extreme actions (layoffs, re-orgs, shutting down business functions, etc), which is why the final deliverable of an engagement will often times simply state what was already known across the organization, but in a more packaged, compelling format. The same Engagement Manager then noted that if management doesn’t know exactly the “answer” is to the question they are asking, often times the McKinsey Partner supervising the case has seen the problem enough times to generally know the solution they will recommend out of the gate, as they specialize in industries. Their team arrives and then spends the cycles putting together justification for their upcoming recommendation.
It seemed to me similar to the old adage “nobody gets fired for buying IBM,” executives can lean on the good will of the McKinsey brand to justify and expedite certain tricky decisions. In many cases this is about providing confidence to move in a certain direction. This has two benefits: the broader organization can be told an outside firm was able to arrive at said battle plan - ideally increasing buy-in since the “experts” recommended it, and if things go awry the executive can point to the deliverable handed off by the consultants as the sanctioned playbook. So this “diffusing responsibility” is a feature, not a bug.
I’ve seen two solutions to some of the implicit problems described above, neither or which are cheap or easy: either A) the management team is solid enough and garnered enough goodwill that they can navigate such troubled waters (hard to do as the business scales) or B) An organization gets large enough they can fund their own internal management consulting team to tackle tough problems on a case by case basis - Samsung has used this across their business lines.
GDP growth comes from productivity growth. Productivity growth comes from research and development.
Michael Pearson [1], a 23 year McKinsey veteran pharma CEO, claimed that R&D was "inefficient". It is just mind blowing that people see this and don't panic.
We are allowing ourselves to be ruled by mediocre spreadsheet jockeys.
The idea that r&d is inefficient is not unreasonable. the reality behind valeant's demise is more complex. valeant initially began its strategy of buying cheap, cash flow generating assets. But as time went on, they ran out of low hanging fruit as asset prices rose and deals became harder to find. to generate revenue growth and support their growing debt balance, they resorted to unethical, and illegal, tactics such as raising prices and defrauding insurance companies into reimbursing their products.
People didn't "panic", but the markets and industry did certainly react to his ideas and behavior - the pharma company he ran (Valeant) tanked and he was ousted as CEO.
While I agree that R&D can be a major driver, it’s not the sole way to increase productivity. Making existing processes more efficiently is also a means to increase productivity, often with more immediate ROI and less risk than R&D. I have a feeling that may be the “inefficiencies” he was alluding to
Just because R&D is inefficient (it is almost by definition). It does not follow therefore that R&D is uneconomic. Though sometimes the government has to carry the cost.
It's not usually a problem. Big companies are inefficient and over-conservative (because they're risk averse and short-term oriented). Thus unsurprisingly they are bad at adapting, and sometimes there's a correction needed. Eventually the market will give them enough incentive to either get their shit together or a competitor will eat their lunch. (And McKinsey will just provide consulting to that one.)
I think a big part of the value proposition that firms like McKinsey and BCG brought during the 70s'-80s' is the idea of operational excellence.
Many companies work on the same markets and sell the same products than others, but operate much more efficiently. Best practices are hard to share though, because companies cannot become full monopolies or engage in corporate espionage. McKinsey became then a discreet way of ensuring that your operating model was at least as good as the competitor, as they would share with you some fully anonymised benchmarks related to how competitors are operating.
When I was a product manager in the 80s, there was a whole class of company that was largely in the business of being an intermediary for data that everyone needed to operate but which they couldn't request directly from a competitor.
It worked by the intermediary firm requesting things like data sheets from everyone which they were generally given because the firm was an ostensibly neutral analyst firm. Then when we needed competitive data we'd basically request the analyst firm to fax us over whatever they had in a particular product segment we had a subscription for.
The firm did some value-add work too but a lot of their business was basically acting as a conduit for companies to indirectly share information.
It's more than just benchmarking, a core part of the model is being able to legally share proprietary information. With a veneer of anonymity a person's "knowledge" and "experience" are too nebulous to regulate strictly - similar to silicon valley nda's.
Consultants can also help companies be dishonest with themselves. Imagine a company who has failed to find product market fit bringing in a sales consultant to "fix their sales problem" or a engineering consultant to fix their "product problem". Are either of these consultants going to turn down the work and point out the real problem of missing market research?
> Are either of these consultants going to turn down the work and point out the real problem of missing market research?
This comment is extremely real. I was hired as a software engineer for a Big 3 Management Consulting firm that was building out a development lab. Every single time I was brought in on a case, it was clear that the client and the consulting firm simply did not care about things like market research, product market fit, good engineering, or even solving things that were actual problems. The client had paid for us to solve a “problem” they had designed, and whether or not the “problem” was an actual problem worthy of spending millions on a solution, we were going to cut as many corners as possible to make it seem like we “solved” the “problem”
After 18 months, and an insane amount of harassment, degradation, and humiliation for insisting that our organization does the correct thing instead of continuing to swindle the clients, I left, having solved few client problems worth solving.
Consulting firms are full of con-men getting their friends at other companies in on a swindle together.
if you are good at market research / product market fit / good engineering and solving actual problems you will be EXTREMELY successful both with the big mgmt co's and working as a consultant yourself.
Successful projects breads success and great word of mouth which I've found is the best way to get high margin business - word of mouth deals are generally not being shopped, the customer comes to you and wants to hire you. At at a big management co, if you are bringing in the deals - you are the god.
I have however seen folks who are hired to do X, who then feel it's critical they disagree about Y, Z and Q. That is NO FUN for anyone because the right thing is sometimes to do what you were paid to do. For most managers when staff go on tangents it can be pretty tiring to focus them on actually delivering on even the imperfect solution that for whatever reason a client wants (not uncommon).
Consultants do it; I have done it, and I have been in companies where we did it as a matter of policy.
Even people who started out by grabbing everything they can get learn to be selective with their clients later. This is just enlightened self-interest -- small companies can only work with a limited number of clients every year, and you want those projects to do well and the customers to be happy with you. This is simply because this is a word-of-mouth, relationships based industry. Every project that does not do well is an opportunity lost in building a healthy pipeline down the line.
This dynamic however goes out of the window as the company becomes successful and becomes brand-driven - customers reach out because of the aura of the company and not necessarily because a friend of a friend talked about how you once helped save their company from a cliff.
Well, if they're as good as they claim and you tasked them with solving your sales problems, then I would assume so. That's their job, they sell honest dispassionate advice...
They sell you a pretty package around what you already want to hear. They sell you internal buy-in and political cover. And most importantly, they sell you on the next engagement. That’s their job: to keep the client coming back for more.
> McKinsey started as a business that sold candid, dispassionate advice to corporate managers, but selling advice and building a brand around it also sets up a mechanism for diffusing responsibility.
> The managers can say they’re just following the best available advice, and the consultants can say they’re just trying to help their clients boost profits and efficiency.
This diffusion of responsibility just strikes me as bad leadership.
If you are a leader of an organization, you still have to own those decisions. After all, whose decision was it to follow that advice or hire those consultants?
It’s like when a leader blames their employees for a problem. Whose job is it to hire or train (or even fire) employees? Truman famously had a “the buck stops here” placard on his desk; did this leadership ideal get lost somewhere along the way?
To the corporation, all that matters is returns generated for shareholders. None of the things you talked about contribute to that (or at least not very directly), thus they're not valued.
Amusing to see those 20-somethings (including H1Bs) arrive with their laptop and spreadsheets. Then interview experienced workers twice their age as how their duties are redundant. Life changing consequences for the workers.
Everyone thinks they're an experienced worker, everyone thinks they're underpaid, and everyone thinks they're valuable. The reality is most of the workforce is simply not that extraordinary and are unimportant when it comes to the overall business.
I have seen these consultants make their changes and create way more dysfunctional workplace then previously. I mean, "people who were not fired are demotivates not even pretending to work" dysfunctional. I mean, "people in positions not matching their abilities" and "respected managers leaving voluntary cause they don't want to be responsible for this mess".
That's the entire point of hiring McKinsey and friends to "announce/order" layoffs. The consultants are the scapegoats on which the workers direct their fury, while the management which explicitly hired the consultants for this gets off scot-free and in many cases is even rewarded for "reducing payroll cost".
I don't think it's as common to hire consultants to announce layoffs as the Up In The Air / Office Space caricatures lead people to believe.
Layoffs are a huge distraction for a business, and so, don't happen except at need. When they do happen, they almost invariably involve losing employees tasked with things the company still needs to do. That leaves a bunch of short term business design problems of how to reassign those tasks to minimize disruption:
"We had to lose 30 salespeople, who will cover those sales territories?"
"If we got rid of dedicated agile coaches, would product managers have time to plan and run the scrum meeting? If we're able to keep 1, which teams should they work with?"
These types of questions can be analysis-heavy, are non recurring, and land on top of normal workloads (meaning executives may not have time to do them themselves), so it makes sense to hire a contractor to work on them.
> Corporate jobs were increasingly divided between replaceable cogs at the bottom and stressed-out captains of industry at the top.
This phenomenon deserves attention all by itself. I’ve noticed in a lot of companies that at one relatively entry level tier but there is no real way up. Then there’s another group recruited out of university to do the leading.
There was a time when McKinsey could probably say they “hire the best of the best” but I’m not aware of anyone that honestly believes this to be the case today. Top talent doesn’t want to work for consulting firms anymore.
Relevant: You don't see graduate hires in consulting or banking who couldn't also moonlight as underwear models. Unless Daddy or Mommy is rich, powerful and connected. Then you can be ugly but well dressed for sure.
Without trying to detract from current anti-racism movements that should absolutely have their say; prejudice is more nuanced than people mostly discuss. Pretty-person priviledge exists accross racial and gender spectrums. Especially in pathways to power. How brilliant does your brain have to be if you're from a poor family and you're afflicted with having "eyes a little too close together" before you'll manage any serious resources? It's a question worth pondering in an idle moment.
haha, so much experience where i see these consultants summarising the same suggestions i made but with a fancier language, accent and level of confidence and managing to sell it to leadership
Quite often its not even "fancier language, accent and level of confidence", but just that management - for whatever reason - trusts these "outsiders" more than their own employees. We live in a weird world. When I (used to) sit next to McKinsey consultants on a plane I always asked "what's your current outsourcing project?".
Having worked as employee and manager in places doing transformation, it’s hard to trust employees because of internal political strife, etc.
McKinsey (or whomever) is only motivated by money and are loyal to whomever they understand the principal to be. Given an idea or concept, you’ll have reasonably competent people running it down, backed by people who grind out tight PowerPoint stuff overnight.
I got to experience this first hand. A consulting client was starting a big project right around the same time I was trying to buy a house. The bank was uncomfortable giving us a mortgage when our primary income was from self-employed consulting. The client hired me as an FTE, and almost immediately started completely ignoring my advice and putting me on projects that I a) thought were pretty misguided and b) were definitely not a good use of my skills. This, after 5 years of on-and-off engagement to do really great work on projects I have specific skills to address.
It basically boiled down to “now that I’m a member of the engineering team, I’m expected to participate with the processes that are in place”. When I was a consultant, I was generally brought in to solve problems caused by those processes breaking down. Not sure why they couldn’t square that circle, but I went back to consulting 6 months later and retained them as a client, wherein they started taking my advice again and not throwing misguided projects at me.
If you wanted to learn a lesson from that, it’s that your stakeholder management probably isn’t very good. If your ideas are being adopted when suggested by somebody else, then you know you have ideas that the business likes. Your potential impact however is going to be limited by your ability to convince other people that they’re good.
I see this a lot with engineers who often resent having to participate in office politics. The result is that they come across as dogmatic, and unable to appreciate the concerns of other stakeholders, so people can be unwilling to trust their advice.
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I spent some time with an Engagement Manager at McKinsey a few years ago, and he noted one function that they provide to executives is a seemingly neutral arbiter for tough decisions that may be politically untenable inside an organization. A CEO may know exactly what drastic steps they need to take, but will face internal executive strife, board pressure, or lack of buy-in from the business to execute. McKinsey provides credibility in cases of extreme actions (layoffs, re-orgs, shutting down business functions, etc), which is why the final deliverable of an engagement will often times simply state what was already known across the organization, but in a more packaged, compelling format. The same Engagement Manager then noted that if management doesn’t know exactly the “answer” is to the question they are asking, often times the McKinsey Partner supervising the case has seen the problem enough times to generally know the solution they will recommend out of the gate, as they specialize in industries. Their team arrives and then spends the cycles putting together justification for their upcoming recommendation.
It seemed to me similar to the old adage “nobody gets fired for buying IBM,” executives can lean on the good will of the McKinsey brand to justify and expedite certain tricky decisions. In many cases this is about providing confidence to move in a certain direction. This has two benefits: the broader organization can be told an outside firm was able to arrive at said battle plan - ideally increasing buy-in since the “experts” recommended it, and if things go awry the executive can point to the deliverable handed off by the consultants as the sanctioned playbook. So this “diffusing responsibility” is a feature, not a bug.
I’ve seen two solutions to some of the implicit problems described above, neither or which are cheap or easy: either A) the management team is solid enough and garnered enough goodwill that they can navigate such troubled waters (hard to do as the business scales) or B) An organization gets large enough they can fund their own internal management consulting team to tackle tough problems on a case by case basis - Samsung has used this across their business lines.
Michael Pearson [1], a 23 year McKinsey veteran pharma CEO, claimed that R&D was "inefficient". It is just mind blowing that people see this and don't panic.
We are allowing ourselves to be ruled by mediocre spreadsheet jockeys.
[1] https://en.wikipedia.org/wiki/J._Michael_Pearson
[2] https://dealbook.nytimes.com/2013/09/02/in-a-new-book-mckins...
Another way I've heard this said is: "McKinsey doesn't typically sell you the plan for the hard change - they sell you the credibility to act on it."
Many companies work on the same markets and sell the same products than others, but operate much more efficiently. Best practices are hard to share though, because companies cannot become full monopolies or engage in corporate espionage. McKinsey became then a discreet way of ensuring that your operating model was at least as good as the competitor, as they would share with you some fully anonymised benchmarks related to how competitors are operating.
It worked by the intermediary firm requesting things like data sheets from everyone which they were generally given because the firm was an ostensibly neutral analyst firm. Then when we needed competitive data we'd basically request the analyst firm to fax us over whatever they had in a particular product segment we had a subscription for.
The firm did some value-add work too but a lot of their business was basically acting as a conduit for companies to indirectly share information.
This comment is extremely real. I was hired as a software engineer for a Big 3 Management Consulting firm that was building out a development lab. Every single time I was brought in on a case, it was clear that the client and the consulting firm simply did not care about things like market research, product market fit, good engineering, or even solving things that were actual problems. The client had paid for us to solve a “problem” they had designed, and whether or not the “problem” was an actual problem worthy of spending millions on a solution, we were going to cut as many corners as possible to make it seem like we “solved” the “problem”
After 18 months, and an insane amount of harassment, degradation, and humiliation for insisting that our organization does the correct thing instead of continuing to swindle the clients, I left, having solved few client problems worth solving.
Consulting firms are full of con-men getting their friends at other companies in on a swindle together.
Successful projects breads success and great word of mouth which I've found is the best way to get high margin business - word of mouth deals are generally not being shopped, the customer comes to you and wants to hire you. At at a big management co, if you are bringing in the deals - you are the god.
I have however seen folks who are hired to do X, who then feel it's critical they disagree about Y, Z and Q. That is NO FUN for anyone because the right thing is sometimes to do what you were paid to do. For most managers when staff go on tangents it can be pretty tiring to focus them on actually delivering on even the imperfect solution that for whatever reason a client wants (not uncommon).
Even people who started out by grabbing everything they can get learn to be selective with their clients later. This is just enlightened self-interest -- small companies can only work with a limited number of clients every year, and you want those projects to do well and the customers to be happy with you. This is simply because this is a word-of-mouth, relationships based industry. Every project that does not do well is an opportunity lost in building a healthy pipeline down the line.
This dynamic however goes out of the window as the company becomes successful and becomes brand-driven - customers reach out because of the aura of the company and not necessarily because a friend of a friend talked about how you once helped save their company from a cliff.
> The managers can say they’re just following the best available advice, and the consultants can say they’re just trying to help their clients boost profits and efficiency.
If you are a leader of an organization, you still have to own those decisions. After all, whose decision was it to follow that advice or hire those consultants?
It’s like when a leader blames their employees for a problem. Whose job is it to hire or train (or even fire) employees? Truman famously had a “the buck stops here” placard on his desk; did this leadership ideal get lost somewhere along the way?
Layoffs are a huge distraction for a business, and so, don't happen except at need. When they do happen, they almost invariably involve losing employees tasked with things the company still needs to do. That leaves a bunch of short term business design problems of how to reassign those tasks to minimize disruption:
"We had to lose 30 salespeople, who will cover those sales territories?"
"If we got rid of dedicated agile coaches, would product managers have time to plan and run the scrum meeting? If we're able to keep 1, which teams should they work with?"
These types of questions can be analysis-heavy, are non recurring, and land on top of normal workloads (meaning executives may not have time to do them themselves), so it makes sense to hire a contractor to work on them.
It's obvious the company is making the call, it doesn't matter if it's through an intermediary.
This phenomenon deserves attention all by itself. I’ve noticed in a lot of companies that at one relatively entry level tier but there is no real way up. Then there’s another group recruited out of university to do the leading.
Without trying to detract from current anti-racism movements that should absolutely have their say; prejudice is more nuanced than people mostly discuss. Pretty-person priviledge exists accross racial and gender spectrums. Especially in pathways to power. How brilliant does your brain have to be if you're from a poor family and you're afflicted with having "eyes a little too close together" before you'll manage any serious resources? It's a question worth pondering in an idle moment.
McKinsey (or whomever) is only motivated by money and are loyal to whomever they understand the principal to be. Given an idea or concept, you’ll have reasonably competent people running it down, backed by people who grind out tight PowerPoint stuff overnight.
It basically boiled down to “now that I’m a member of the engineering team, I’m expected to participate with the processes that are in place”. When I was a consultant, I was generally brought in to solve problems caused by those processes breaking down. Not sure why they couldn’t square that circle, but I went back to consulting 6 months later and retained them as a client, wherein they started taking my advice again and not throwing misguided projects at me.
I see this a lot with engineers who often resent having to participate in office politics. The result is that they come across as dogmatic, and unable to appreciate the concerns of other stakeholders, so people can be unwilling to trust their advice.