Thursday 22 March 2018

McKinsey profile fails to offer any solid conclusion

Susan Antilla

McKinsey & Co, the global fix-it firm for companies and governments, laboured in Tanzania in the late-1960s and charged fees so high that it merited a line item in the country's budget, according to 'The Firm: The Story of McKinsey and Its Secret Influence on American Business'.

Astonishingly, author Duff McDonald considers this and other dazzling examples of McKinsey's greed and concludes that "in large part" the firm's people aren't motivated by money.

McDonald, a contributing editor at 'Fortune' and the 'New York Observer', has put together an instructive history of McKinsey, but on key points he leaves us scratching our heads.

He says it's an "open question" whether McKinsey has transformed the way businesses are managed, but a page later allows that McKinsey "has certainly made the world a more efficient, rational and objective place".

Nearly 200 pages into the book he wonders about McKinsey's boast of having smart guys who can fix any client problem even as the firm suffers high-visibility failures, such as its ill-fated advice on the restructuring of General Motors in the 1980s.

"Is it a con?" he asks. The maddening answer: "Maybe."

When McKinsey director Anil Kumar was arrested for insider trading in October 2009, it was the start of a publicity nightmare that culminated in the sentencing of former leader Rajat Gupta (right) for insider trading in 2012. Curiously, that didn't affect business, McDonald writes.

The takeaway, as they say in consulting-land, is that customers shrugged at the scandal because they got something valuable from McKinsey. But what? The author includes examples of the plusses but doesn't commit himself on whether clients gain or lose on balance.

The firm was founded in Chicago in 1926 by a former accounting professor and is now a 102-office global behemoth.

Marvin Bower, who took over in 1950, professionalised McKinsey but imposed rules that amounted to "cooking the individuality of his consultants out of them", McDonald says.

McDonald has a good eye for examples of McKinsey's massive institutional ego and seemingly limitless ability to weave a line of baloney.

A partner once told 'Fortune' magazine that "it's almost never that we fail because we come up with the wrong answer". Rather, a McKinsey plan goes awry because errant clients fail to obey instructions.

The firm has been on the scene advising companies that undergo spectacular meltdowns.

McKinsey had a 17-year relationship with Enron, writes McDonald, and a McKinsey partner's 2001 book, 'Creative Destruction', was "nothing short of a big wet kiss" to Enron, which went bankrupt in 2001 after a massive accounting fraud. While McKinsey was not accused of malfeasance, it's hard to fathom that a competent consulting team could spend that much time hanging around a client without noticing that something was amiss.

McDonald speculates that many tales of McKinsey advice gone wrong will never get told.

Which leads us back to the question, never really answered, as to whether McKinsey is a treasured adviser or a waste of money. Fear of losing access surely infers there is something worth losing. McDonald tells many pieces of the story. But he can't seem to decide at all what the

bottom line is.

Susan Antilla

Irish Independent

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