
McKinsey, technocratic management, and structural inequality - cushychicken
https://www.theatlantic.com/ideas/archive/2020/02/how-mckinsey-destroyed-middle-class/605878/
======
dvt
Oh boy, another Yale, LSE, and Oxford graduate lecturing us on "structural
inequalities" \-- yawn. He's also decided to double-dip and is now back at
Yale Law teaching after clerking for a federal judge. Excuse me while I roll
my eyes a full 720 degrees. How exactly, sir, are you _better_ than Pete
Buttigieg? This is the pot calling the kettle black to the n-th degree.

My main problems with the article, apart from the above:

1\. The connection between consulting firms like McKinsey and dwindling union
memberships is tenuous at best. I'm not sure that there's any causal link, and
the article just kind of shoehorns it in.

2\. Wait, why are we talking about CEO salaries? What does this have to do
with anything? Oh, I get it -- it's going to get The Atlantic a bunch of
"controversy clicks" on Facebook and Twitter.

3\. "Whereas a century ago, fewer than one in five of America’s business
leaders had completed college, top executives today typically have elite
degrees" \-- a century ago, we also didn't have little boxes that could access
the entirety of human knowledge in about 30 milliseconds. A millennia ago,
most of us were illiterate. Times change. I'm genuinely not sure what the
point is here.

4\. "This is a dangerous belief. Technocratic management, no matter how
brilliant, cannot unwind the structural inequalities that are dismantling the
American middle class.." \-- but Yale & Oxford educated lawyers can. Got it.

~~~
samcal
I don't expect to change your mind, but I had a very different reading of this
article than you did and here are my thoughts on the 4 points that you raised:

1\. I don't think it's a big secret that stamping out unions is a key part of
modern management. If McKinsey and other consulting firms were management
consultants, they should be even more aware of that strategy and would have
been in a key position to effect that change over a large number of companies.

2\. CEO salaries are certainly relevant to the working middle class, since
they are commonly seen as tremendously too high and the extra money could
contribute to the middle class' wage.

3\. I think the point of that sentence is more like "the amount of effort it
takes to become successful is significantly greater than it was when the
system worked better."

4\. He's not trying to be the technocratic management, he's literally arguing
against its existence.

~~~
creato
> 2\. CEO salaries are certainly relevant to the working middle class, since
> they are commonly seen as tremendously too high and the extra money could
> contribute to the middle class' wage.

This may be how they are "commonly seen", but is it correct?

Walmart pays 5 of its executives a total of ~$70m/year [1]. Walmart employs
2.2m people [2]. Redistributing 100% of these 5 executives' salary to all 2.2m
workers would be a raise of... $32/year.

The bigger issue with wealth inequality is the investor class and favorable
treatment of capital (low capital gains tax rates, carried interest, shady
real estate business, etc.), not salaries/wages, even extremely high salaries
like those of executives. Even talking about "management" as relevant to this
issue is a distraction.

1\. [https://www1.salary.com/WALMART-INC-Executive-
Salaries.html](https://www1.salary.com/WALMART-INC-Executive-Salaries.html)

2\. [https://corporate.walmart.com/newsroom/company-
facts](https://corporate.walmart.com/newsroom/company-facts)

~~~
ddebernardy
> Redistributing 100% of these 5 executives' salary to all 2.2m workers would
> be a raise of... $32/year.

But that's besides the point. What on earth do they need to get paid that much
for? Even if you assume they're contributing 100x what line workers are doing,
they'll do just fine earning under $1M/year.

Plus, you then pinpoint the bigger issue. Yeah, the investor class exists
because, you know, someone shaved $32 off of everyone's salary so 5 people
could get paid a total of ~$70M/year.

~~~
manigandham
This is what the job is worth, if you want someone competent and responsible
for thousands of employees and billions in revenue. Nobody is doing that for
$1m/year when one wrong decision could end up costing 1000x more than their
salary and hurting livelihoods of the workers.

Focusing on a single number is irrelevant, you must account for everything in
the organization and the results.

Also nobody is stopping anyone from creating corporations with different
compensation, but clearly there's a certain price required when you get to
these levels.

~~~
nkrisc
> Nobody is doing that for $1m/year when one wrong decision could end up
> costing 1000x more than their salary and hurting livelihoods of the workers.

You make it sound like they'll somehow lose out personally by losing the
company 1000x their salary and hurting the livelihoods of workers, like
they're somehow being compensated for personal risk.

What you cited represents no personal risk to the CEO. They already made their
millions. Now maybe if CEOs were actually liable for the damage they could do
to the company and economy, would it be more justified.

~~~
manigandham
There is personal risk. If the CEO does a poor job they might not be hired
again or have other career impacts. There are numerous Fortune 500 CEOs that
have a negative reputation that impacts their future earnings.

Also corporations partly exist to shield liability so CEOs are not going to be
personally held responsible outside of gross negligence or criminal acts, the
same way you wouldn't be held responsible if you caused a major outage in your
company that lost customers. There is an general move towards more
performance-based compensation though, which I think you would agree is a good
thing.

~~~
nkrisc
> There is personal risk. If the CEO does a poor job they might not be hired
> again or have other career impacts. There are numerous Fortune 500 CEOs that
> have a negative reputation that impacts their future earnings.

And if I do a shit job I might have trouble getting hired too, but I'm not
paid millions for it.

~~~
manigandham
Perhaps, but extremely unlikely. Who would know? I'm sure you can see there's
a massive difference from a major CEO who is known publicly vs you switching
jobs and not getting a reference callback at worst.

------
jayparth
I think it's interesting how this article painted middle management as the
good guys. In my experience, "intricate layers" of middle management is not a
good thing- most of these "layers" do not add value and it's why companies
chase a flat org chart.

Arguing that management takes the lion share of pay, and McKinsey has captured
this value away from the middle class, is also a silly argument. McKinsey's
revenue is small on an absolute scale- $10B last year. Companies in the
Fortune 100, which they mention, generate trillions in revenue. They haven't
really captured this value at all.

Here are some things that are true:

\- A typical company nowadays has slimmed down, especially in middle
management, compared to 50 years ago.

\- The profits of this slimming have not necessarily trickled down.

The rest of the article feels like fluff.

~~~
dcolkitt
> In my experience, "intricate layers" of middle management is not a good
> thing

Well, the academic research paints a different picture. Here's what we know.
Even within the same industries, in the same markets, there's a substantial
dispersion in management practices and adherence to best practices between the
best and worst firms.[1]

The firms with the best management practices have substantially higher
productivity and profits than their poorly managed counterparts.[2] We also
know from randomized control trials, that interventions designed to improve
management practices at the organizational level have long-lasting effects on
firm performance.[3]

Moreover this isn't just a case of "good management" meaning abusing
employees. There's a strong positive correlation, at the firm level, between
management best practices and employee satisfaction.[1]

That's a pretty strong indicator that management, at least done right, isn't
just BS. That it makes a significant impact on tangible economic output.
Incompetent management really is just pure inefficiency with no upside for
anyone.

[1]
[https://www.aeaweb.org/articles?id=10.1257/jep.24.1.203](https://www.aeaweb.org/articles?id=10.1257/jep.24.1.203)
[2]
[https://academic.oup.com/qje/article/122/4/1351/1850493](https://academic.oup.com/qje/article/122/4/1351/1850493)
[3]
[https://academic.oup.com/qje/article/128/1/1/1838606](https://academic.oup.com/qje/article/128/1/1/1838606)

~~~
mjparrott
This is a great fact based argument. However, it is confusing "good quality
management" with "more managers". "Best management practices" does not
necessarily mean "more managers". I would actually argue that the more
incompetent managers you have, the more of them you need to get business done.
Finding incompetent managers and highlighting them is something consulting
firms can help to do.

------
kriro
My first lesson in the real world after I graduated was that the big name
consulting companies are in many instances just well managed brand names. They
are often used by management to "objectify" decisions tat are already made.
Specifically decisions that are not easy to sell to everyone like layoffs. It
basically goes like this:

1) We think X people need to go

2) Hire BCG/McKinsey (the more recognized, the better so usually one of the
two)

3) After an "independent" audit they recommend X people need to go (sorry we
can't really do anything about it, after all this famous consulting company
recommended it)

Had the same experience with technology consultants when management wanted to
switch the tech stack to something they thought they needed. At a smaller
company I worked for, we basically needed to add a tech consultant to all
bigger projects as insurance for big companies that were our customers and
that was a hot mess because they knew it and sent the most
junior/inexperienced people who were usually a net negative on productivity.

I also had two cases of very lackluster big name consulting companies. One had
done some of the calculations in the wrong currency which lead to interesting
results and one had the classic slides with names/logo of another client on
them. Back at university I strongly considered putting in some years at a big
name consulting company to boost my CV, make some money and get insights into
some interesting projects. It seemed like genuinely interesting work, too.
Pretty glad I didn't go that route.

I'm curious if someone here has more positive experiences working with (or
maybe for) consulting companies. My current mindset is...avoid at all costs.

~~~
throwaway_bcg
Hi,

I have worked at a top tier consulting firm to improve a companies technology
offering.

From my experience, there are two stories consultants of these companies tell
themselves. One of them is the one you just told right now.

The other is where they can genuinely help with the problem at hand. Some
consultants really provide objective value to the current working of a
companies system and provide well needed direction to a companies strategy.

Our firm has helped change operation fundamentals for these firms at crucial
points in their lifetime.

~~~
majos
What do you think is the split between these stories? How many gigs/how much
revenue fall into bucket one vs bucket two, if you had to guess?

~~~
throwaway_bcg
Honestly, the people who make it big in the firm have a great knack of
delivering. It's a 50-50 from what I know.

It is true consultants have less skin in the game, they can basically not
deliver and the firm gets more business from other big names. But reputation
is everything, one consultant that delivers splendid on a project has his
reputation to maintain.

------
supernova87a
Yawn. Popular as it is to falsely attribute blame for all of the corporate
world's ills on consultants, it's inaccurate and lazy.

When you've worked for a consulting company, you learn that none of them are
centers of innovation. They didn't create these trends. That's not what their
strength is. They're not (and weren't) the ones inventing offshoring,
telecommuting, barcodes, bluetooth, etc. They only greased the wheels to help
existing trends in business to happen. How could they be the leaders of
important business trends? The average tenure of people in consulting is about
3 years. They get in, help do some work a company wanted to do anyway, and get
out. Maybe make a few 2x2 charts while they're there to point out the obvious
to the oblivious.

Don't blame the consultants for getting companies or governments to become the
soulless entities they are today. Blame lazy (or malicious or incompetent)
thinking at companies and governments, fueled by the desires of everyone to
have things at lower price, faster, and smaller, and to not pay for it now but
shirk it off as debt to be paid by the future responsible people who can't
vote right now.

We're all responsible for the trends in business, every one of us in our daily
civic and commercial behavior. Consultants were just some of the messengers.

~~~
whatshisface
Not just the world's consultants, on one particular consultant who kept
getting called out, and who is presently running for office. Not that I have
any particular support for the 2020 candidates, but what does this author have
against that particular individual? It's like the whole thing is written to
get at the candidate by convincing people that McKinsey consultants are evil
and then mentioning that he used to be one of them.

------
travisoneill1
It should also be noted that McKinsey makes a substantial part of its income
from ripping off the government.

[https://www.nytimes.com/2019/12/14/sunday-review/mckinsey-
ic...](https://www.nytimes.com/2019/12/14/sunday-review/mckinsey-ice-
buttigieg.html)

~~~
pcurve
And clueless management at large corporations. My opinion or them is very low
after a few engagement in technology implementation. Maybe they are better at
general consulting so your mileage may vary.

------
adaisadais
“...foment a stratification within companies and society” by concentrating the
management function in elite executives, aided (of course) by advisers from
consultants’ own ranks...”

Good ole boys club. Lords, Dukes, and Earls, Senatores and Equitares. It’s the
same old story just repackaged slightly.

“Meet the new Boss / Same as the old Boss” -The Who

------
tacitusarc
I really despise McKinsey but this just feels like a strange hit piece on Pete
Buttigieg.

------
bduerst
This article is a little light on the data.

Yes, the premise of trends showing union busting and falling middle class
wealth levels are established, but the author seems to want to show they were
caused, not correlated, by the management consulting industry. This seems to
be in an effort to incriminate Buttigieg by proxy (whom I do not care about
either way).

The argument seems to be willfully ignoring other factors that have
contributed to the trends, the most obvious being political. As a counter: I
remember protesting the breakup of the public sector unions in my state, which
was lead by a Governor with a very specific anti-union agenda, not a
management consultancy.

------
throwawaysea
This just seems like an article written to attack a viable moderate Democrat
(Pete Buttigieg). The narrow characterization of management consulting
companies seems disconnected from reality. And of course, there’s the author’s
biased worldview, as he authored “The Meritocracy Trap”.

------
myspy
As a non-americas, I view these companies with wariness. They are at the
center of a change that is outsourcing what wouldn't have needed to be
outsourced. Of people overworking themselves and pushing that behaviour down
on others.

On young people having no life experience and inflicting massive damage on
other people. Maybe there are some that do good work, but there are so many
consultancies, that we forgot somehow to structure businesses without making
profit the one and only goal.

The sentence about profit in that article best describes the problem.
Businesses should be about humans and not profit first. At least when trying
to increase profit think about the consequences on society and the people.

~~~
apexalpha
McKinsey came into my company with a new, foreign CEO. They wrote some report
that (obviously) agreed with what the CEO was planning to do.

Then it turned out all their numbers about Churn, employee engagement, profit,
revenue. All turned out wrong. Quarter after quarter all their prediction are
turning out to be complete bullshit, even though there was no economic
downturn or any big change that happened.

They left with millions in fees, taking no credit or blame. The CEO left as
well.

The rest of the company is trying to fix their mess.

------
lambdasquirrel
How is it that there's no mentioning that the pipeline to get into McKinsey is
hardly technocratic – and that there's little reason to believe that its
management is technocratic too? The values of that world are not exactly
aligned with "Hackers and Painters."

Say what you will about one value system versus the other, if you will. We
don't have to judge their culture versus ours. But, cmon...

------
Legogris
The article brings up very interesting correlations and it'd be interesting to
see someone dive deeper in this, but I find the subtitle "Technocratic
management, no matter how brilliant, cannot unwind structural inequalities."
very opinionated, fatalistic and not backed up by the article.

------
sjg007
This reminds me of the adage that if a small town has one lawyer then that
lawyer is broke due to a lack of business. But if the town has two lawyers
then they will have more business then they know what to do with. I want to
say it is a Mark Twain quote but I can't find the reference.

------
ausbah
Regardless of whether or not major consulting groups are actually ever worth
the money or as good as their reputation makes them out to be, they're still
morally bankrupt organizations that have no issue helping authoritarian
regimes, rich people rip off governments, or the like.

------
matchbok
Anyone who criticizes McKinsey has no idea how consulting, or real companies,
or the real world, works.

These anti-Pete articles are so shallow and ignorant. Any parent would have
been proud to have their son get a job there at his age.

I guess in 4 years the only acceptable prior job to being president is a
lemonade salesperson.

Most people, including middle class folks, don't have the luxury of only
choosing non-profit jobs or volunteering.

~~~
tempsy
I think there’s a perfectly valid question as to whether the best and
brightest going into prestige shops for the sake of building prestige is the
best use of talent in our society.

~~~
matchbok
That's up to them, and the market. It is not their fault those industries pay
more.

~~~
_jal
So which is it - not Pete's fault, or something to be proud of?

For the record, I grew up very poor. Lower-middle class was an unattainable
aspiration for my parents. I'm doing very well for myself, and have never
compromised my morals to do so. I turned down good paying jobs when it hurt to
do so because the work was slimy.

You don't have to sell yourself out to make money. If you do, that's a choice.

(To be clear, I'm not saying Mayo Pete is a sell out - I don't really care
enough to look, but from what I've seen he seems like a true believer in the
notion that his job is to tell the proles why they can't have nice things
while cutting deals in wine caves. It is easy to understand why the Democrats
produce so many of these people; what is inexplicable to me is why anyone
except Republicans like them.)

~~~
remarkEon
>...what is inexplicable to me is why anyone except Republicans like them

Might be my own bubble, or perhaps things are changing, but I haven't met a
Republican that likes these people. They are usual quite hostile to them.

~~~
_jal
Because they cause internecine conflict on the other side, not as someone to
vote for.

------
spyckie2
What a disingenuous article. To put the entire blame on management consultants
for wealth inequality and then to say, btw, Pete is one of them - it reeks of
agenda politics and a hit piece.

Let's talk about the actual substance of the article, which there is
surprisingly little. First, the author claims that managers used to come from
the working class before 1955, and that the managerial consultant class made
it so that working class people could never become managers.

A more plausible explanation is that in the older days, planning capacity was
more evenly distributed among the working class and as the education system in
the US matured, smarter people with the capability for planning and strategy
were less likely to start off as a clerk or factory worker.

Second, the author claims that the managerial consultant class is responsible
for wealth inequality by systematically reducing middle management and pushing
the "profits to shareholders" maxim that has dominated corporate America. He
implies that America would be just as wealthy and much more evenly distributed
if they didn't exist.

As much as I would love to pull out a torch and ascribe blame the way the
author does (blissfully), it's just not what is happening. No one wants to
hear this, but middle managers were cut out not because of an agenda but
because they were over payed and inefficient, as measured by the economic
system.

It's popular but unfair to say that companies benefit the shareholders at the
cost of society. Companies benefit the consumer the most through better
products and lower costs, which is a tenant of globalism and largely true, as
we've experienced a consumption boom that we've never experienced in the
history of mankind. Standard of living is incredibly high as consumers.

However, consumers are also the employees of companies, and wages have been
stagnant for a long time. But it's not that smart, rich, capable people steal
from poor, middle class, working people, but rather the systemic properties of
capitalism make wealth unequally distributed as a byproduct of producing value
efficiently. If you must scratch the itch to blame something, blame the
system, not the people in the system.

This problem of growing inequality existed for a long time but the lack of
visibility and ultra cheap consumption by companies exploiting global
opportunities to temporarily reduce cost of goods placated most Americans.
Employees (consumers) still get gains from the economy by benefitting from
stuff being either cheaper or continually better quality. As long as we can
continue to reduce costs or improve quality at same cost, then stagnant wages
is not an issue because standard of living is still rising.

(Yes, I know standard of living as a metric has been constant or falling since
forever, but you can't compare telegraphs to iPhones).

Well, after employing cheap labor from 3rd world countries and making possibly
the cheapest produced goods in history from China, we've mined out all the
global opportunities. Going even cheaper is no longer an option (although
there is no lack of trying) - that bandaid is no more, and now people want a
stronger fix - this has been the conversation topic of the election and for
most America for about 5-10 years.

To do what the author does - imply that people, not systems, are to blame - is
a step back in terms of discourse. It indicates to me that the author puts
blame and agenda politics over a desire to understand and solve issues, and
cleverly masks it by sounding intelligent.

~~~
spyckie2
Since it's in my head, here's a summary of the public discourse of the current
economic situation:

Topic in question: the economy is unequally distributed to the point where the
majority of the middle class are not getting the value gains in the economy

### 2 themes:

1) get more money into working class people's hands (via pay, social benefits,
or systematic transfer of cash)

2) continue to improve cost/quality ratio of goods and services

#### In getting more money into working class people hands, there are many
proposals:

a. UBI

b. Social safety net improvements, wealth tax, health care

c. Just get the bosses to pay their workers more (minimum wage)

d. Unsurprisingly, no one is saying we need to make our employees be more
valued in the market by working harder or smarter, but this is an option

#### In continuing to improve cost/quality of goods and services, we've done
the following:

a. Globalism

b. Entrepreneurship

c. Gig economy

d. AI / Robots

e. There's not much left that we can do here

Comes as no surprise that government intervention into the system via UBI or
wealth tax is a popular topic.

------
jshaqaw
American democracy, the left believes, cannot be rejuvenated by persuading
elites to deploy their excessive power somehow more benevolently. Instead, it
requires breaking the stranglehold that elites have on our economics and
politics, and reempowering everyone else. ... says the Guido Calibresi
Professor of Law at Yale Law School

~~~
lordlic
By analogy... I'm a well-off technocrat and I think the big tech monopolies
should be broken up and taxed more (and I think I should be taxed more also).
That doesn't make me a hypocrite, it makes my position _stronger_ because it
eliminates resentment toward successful tech elites as a possible motive.

I think it speaks well of this guy that he's not some bitter barista ranting
about elites - he's talking about knocking his own class down a peg.

~~~
throwaway17_17
It may speak well of him, but it is the bitter barista, ready to enforce that
knocking down a peg, who ends of in control. Just because you are willing to
accept a tax increase of some percentage does not align your motives and
position with the hypothetical barista. I think that is the actual substance,
of not the intent of the parent comment. After all, that bitter barista and
his friends have no problem spray painting ‘liberals get the bullet too’ on
things as they attempt to prove there point.

~~~
lordlic
I'm not just willing to accept some small tax increase, I'm willing to accept
(and actively advocating/voting for) radical socialist transformation of our
economy to a point that would be far beyond anything that would be in my own
interest. I vehemently disagree that I'm not "really" on the same side as the
barista because our interests don't align. There are some of us out there who
will fight for what's right even if it's against our own selfish interests.
Obviously we don't share the same struggles as, say, the struggling barista on
a day-to-day basis so sometimes the appropriate urgency isn't there but in the
end we are 100% on the same side.

> it is the bitter barista, ready to enforce that knocking down a peg, who
> ends of in control

This is not really the goal in my experience moving in leftist circles.
There's a lot of talk about bringing the wealthy down to the same level as
everyone else to eliminate various forms of inequality, but not much talk
about inverting the system so that the formerly rich are now under the heel of
the formerly poor. The ones "in control" would be _everyone_ , including the
former elites.

