Management

The McKinsey Mystique


McKinsey's Amsterdam office

Photograph by Peter Hilz/Redux

McKinsey's Amsterdam office

Management consulting is an enigmatic business. The industry is ridiculed, reviled, or revered, depending on one’s perspective. The same attitudes hold true for consulting’s standard-bearer: McKinsey & Co., though only the most ill-informed would ridicule a company about which so little is known.

Journalist Duff McDonald’s new book The Firm: The Story of McKinsey and its Secret Influence on American Business promises to pull a Toto and reveal McKinsey more as the Kansas medicine man than as the great and powerful Oz of global business.

Founder James McKinsey (and Marvin Bower, who is properly credited for shaping the firm) both fit the bill with their relatively humble Midwestern origins. But despite a plethora of entertaining stories and characters, readers looking for new revelations of what makes McKinsey special will likely come away unsatisfied. Nor will they gain insight into how the 2009 Galleon insider trading scandal that ensnared former McKinsey managing director Rajat Gupta and director Anil Kumar has affected the consulting firm.

Despite McDonald’s efforts to demystify McKinsey, the many anecdotes he compiles feel more like a self-actualization exercise: Why choose McKinsey? Because they’re the best. Why is McKinsey the best? Because they’re McKinsey.

Certainly the firm’s history is enlightening for the uninitiated. Chronicling McKinsey’s evolution from a 1930s-era, lawyerly-like endeavor of a few dozen people to a multibillion-dollar global juggernaut is interesting but not particularly revelatory.

McDonald correctly points out that McKinsey is not necessarily the best innovator. Competitors such as Boston Consulting Group captured clients’ fancy with the simple-to-grasp growth matrix, while Bain introduced the concept of measuring its contribution to clients’ value. McKinsey, by comparison, comes across as stodgy and mildly curmudgeonly. Furthermore, the book lauds the firm’s many lions, which merely reinforces the dearth of lionesses (and overall diversity) at McKinsey, an oversight that has been rectified only in the last two decades.

One comes away thinking McKinsey’s growth is more about willpower masked as intellect. Like a force of nature, McKinsey is deliberate in its formulation. Yet once mobilized, McKinsey simply overwhelms the competition. The book reveals that when clients expressed an expectation that consultants demonstrate their “knowledge,” McKinsey created the McKinsey Quarterly—a direct contradiction of Bower’s belief that McKinsey consultants should not flout their expertise publicly. (McDonald claims the Quarterly ultimately usurped the Harvard Business Review as showcasing critical thinking on global business issues.)

While McKinsey was founded shortly before World War II, it was Bower who burnished the firm’s credentials by helping businesses cope with the unprecedented prosperity brought by post-WWII growth. One could correctly surmise that McKinsey achieved its stature due to the relative naiveté of American business. Modern management consulting owes its existence to Bower and McKinsey’s audacity.

McDonald plumbs deeply the limited published material detailing the firm’s history—both self-generated by McKinsey, and articles from Bloomberg Businessweek and other business publications. He resurrects some chestnuts that even today make one marvel at McKinsey’s influence beyond business (e.g. working for the Eisenhower administration, McKinsey recommended creating the presidential Chief of Staff position). Even former U.S. presidential candidate Mitt Romney—who headed rival Bain & Co.—went on the record saying that as president, he would consider hiring McKinsey to help wring inefficiencies out of the federal bureaucracy. Full disclosure: The author mentions that Bloomberg (which owns Bloomberg Businessweek) hired McKinsey to help Bloomberg chart its future.

Other stories are far less remarkable, though still interesting. James McKinsey’s observation when he went from his namesake firm to chief executive officer of Marshall Field at the behest of its board: “Never in my whole life did I know how much more difficult it is to make business decisions myself than merely advising others what to do.” The fact that McKinsey is known as a petri dish for CEOs is touched on, with such famous examples as Lou Gerstner (American Express (AXP), IBM (IBM)) and Michael Jordan (Westinghouse, CBS (CBS), Electronic Data Systems). The book also suggests that the best McKinsey people are those who left.

McKinsey partners past and present speak with equal parts bravado and uncertainty. For a firm that is projected by the author to play puppet master to American business, McKinsey’s self-reflecting insecurities seem out of place. The firm’s collective notion is that the will to succeed eclipses the fear of failure. All McKinsey partners reflexively value the firm over the individual. Even individuals who violated that ethos with their own brand (Tom Peters, Kenichi Ohmae) speak admiringly—or maybe fearfully—of McKinsey’s cultural cohesion.

One would have thought that the insider-trading convictions of Gupta and Kumar might inspire some soul searching at McKinsey. Unfortunately, McDonald gives those events almost epilogue-like treatment in the book, a scant 20 pages culled from widespread media coverage. The book’s most revealing passage is that McKinsey banished Gupta from the partnership prior to his trial, not for his alleged crime but for violating the firm’s ethics.

McDonald’s book probes enough of McKinsey’s fallibility—disastrous results with Enron and General Motors (GM), for example—to satisfy the naysayers. He also likens the firm to a fading empire, where hubris and changing times have diminished the firm’s stature.

But like any elite club to which membership is granted exclusively by its members, those who believe in the institution brush aside such critiques. McKinsey’s mystique may be an illusion, but the curtain has yet to be pulled back to reveal this Oz.

Rodenhauser is managing director for Kennedy Consulting Research & Advisory. Kennedy is owned by Bloomberg BNA, a wholly owned subsidiary of Bloomberg, which also owns Bloomberg Businessweek.

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