
Why Taxpayers Pay McKinsey $3M a Year for a Recent College Graduate Contractor - jashkenas
https://mattstoller.substack.com/p/why-taxpayers-pay-mckinsey-3m-a-year
======
jshaqaw
Former McKinseyite here (and one reasonably skeptical of the firm as a
whole)... nobody hires McKinsey for fresh college grads. That’s just something
they tell fresh top of class Ivy League college grads to make them feel
important. Clients hire Directors to give them peer level strategic counsel.
How they technically allocate payment for time across consultants is just
backfillling to get to a number already agreed to in advance.

~~~
iudqnolq
I'm trying to parse the phrase "peer level strategic counsel".

Does it mean advice as good as the advice we're giving other firms like you?

~~~
jshaqaw
I meant that C suite folks see McKinsey Directors as people at their level of
judgement and skill who they can talk to in an open and honest manner to get
advice. I’m not saying this is good/bad or right/wrong. Lots of CEOs want a
consigliere with good advice who is on their side and that’s what they pay to
get with a Director.

~~~
iudqnolq
Thanks for the clarification. I think my mistake was interpreting what you
said as the perspective of a hypothetical company and thus assuming you meant
a peer-level company. It seems in general McKinsey is rather targeted at the
C-Level.

~~~
ethbro
It's typically targeted at someone of sufficient seniority that the cost of
McKinsey is negligible when compared to the cost of doing the wrong / less
optimal thing.

Or, in other words, if a manager makes a wrong decision then it costs the
company $x00,000. If an SVP or C-level screws up, it costs the company
$x0,000,000+.

------
code4tee
Have been on the receiving end of several McKinsey engagements.

The work itself was generally not all that good. The knowledge of “experts”
brought into meetings rarely contributed more than what a reasonably
intelligent person could dig up on Google search results in an hour. They were
also often farmed out on random staff augmentation functions that just annoyed
the hell out of people. “Hi I need you to fill out this excel spreadsheet with
35 columns so we can put a presentation together... oh and if you could do
that by 6 PM tonight that would be great.” That sort of nonsense so they could
produce some nonsensical 50 page PowerPoint deck that nobody read.

There were a few decent people there but by and large value was not generated.
As others have pointed out a major motivator seemed to be to provide some
C-level exec with CYA coverage to claim that programs being implemented were
based on the advice of outside “experts.”

In the two main cases I saw the McKinsey strategy ended up being a total
disaster that seriously damaged the company and the C-level exec that hired
them in both cases got canned as a result so in the end even the CYA concept
didn’t really work.

~~~
edelans
CYA = Cover Your Arse

(I just found about that one, sharing if it can help others)

~~~
blaser-waffle
CYA is SOP, you FNG

(Cover Your Ass is Standard Operating Procedure, you, uh, "Friendly" New Guy)

------
MFLoon
Sort of a buried lede here. There's nothing shocking about overpriced,
underdelivering consultants. But the bit about how the GSA is essentially
_profit sharing_ with said overpriced consultants at the expense of the rest
of the government and taxpayers, via the IFF incentive structure, is pretty
mind blowing. Another brilliant financial "innovation" by the Clinton
Administration that's been quietly burning billions of taxpayer dollars to the
end of significantly less efficient government for decades now...

~~~
TrackerFF
McKinsey, Bain, BCG, et. al. are all extremely close to state and industry in
all countries.

I'm from Norway, and every now and then someone will publish articles about
the governments exorbitant use of consultants (McKinsey at that) for seemingly
menial tasks which should be handled internally.

Truth is, these management consulting firms have some very good advantages to
keep their business model going:

1) Their alma matter is spread all over the world, usually in the upper
management.

2) They get highly detailed information from all sides, and can tweak their
best practices accordingly.

3) They take the blame, so as others have mentioned, they're basically a
million $ CYA insurance for both politicians and executes alike.

You could remove incentives like those mentioned, but I'm sure they'll find
some other way to make money. They're so tightly integrated, and in so many
places around the world, they probably have hundreds and thousands of
strategies up their sleeves.

~~~
MFLoon
Yea, I don't doubt they would remain closely entangled with the US Government
even if we changed the IFF incentive structure. But even so, the present
incentive structure is particularly perverse because it's creating a positive
feedback loop. The GSA has ~$40 billion yearly revenue because of the profit
sharing model, which it is incentivized to continually increase, and the
consulting firms don't even need to lobby for bigger contracts, the GSA itself
lobbies for them.

~~~
ethbro
The article gives short shrift to the reason this was originally put in place:
to incentivize the GSA to aggressively outsource the government.

The GSA, like the departments they're serving, are filled by government
employees.

Absent an incentive structure, a radical new executive commandment like
"Outsource all the things" would get a yawn, papers filed, and absolutely no
mass action.

And unlike private industry, I believe performance bonuses aren't really an
option for government employees.

The flip side of job security is decreased initiative.

------
Vaslo
Had a lot of experience with McKinsey doing projects at my company at
different levels I’ve been in throughout it the years. When it’s highly
technical things like implementing a new technology you know nothing about or
a new manufacturing footprint that is tangible to perform, they do good work.
Anything “Strategic” or fluffy I find a waste of time. They are excellent
salespeople and do a lot to calm the C-suite but I rarely see these fluffy
items driving employee happiness or the bottom line after spending millions.

~~~
mumblemumble
Doesn't seem surprising. If it's implementing a specific technical process,
there are measurable outcomes that must be met, and your client will know
whether or not you met them.

Senior leadership contracting an outsider to tell them how their own industry
works and explain their place in it, though, is right up there with asking the
Psychic Friends Network for career advice. They're just begging to be taken
for a ride.

~~~
mumblemumble
I'm realizing that I should temper my cynicism.

"Senior leadership contracting an outsider to tell them how their own industry
works and explain their place in it" might be a straw man. Strategic
consulting could just as easily be, "We're considering expanding into this new
market that we don't know as well, and we're hiring a consultant who
specializes in that." Or, a previous employer hired a consultant for guidance
on how to prepare the company to be sold.

------
z3ugma
I was a technical project management consultant for a long time. The value
that most orgs get from a consultant isn't really in the advice the consultant
gives them, it's the political cover to make changes they knew they should
make all along, but didn't have the social capital or the focus to make those
changes until they had a person in a chair across from them.

~~~
crazygringo
It's _exactly_ this.

Within any organization, you can have 3 or 6 important people pushing in
completely different strategic directions. And it can be clear to any unbiased
observer that there's only one good, responsible choice, but within your org
that gets met with essentially "but that's just your _opinion_ , man".

So you call in a consulting firm and they deliver what most of the people
already know. The consultants don't need to be rocket scientists.

But afterwards, _nobody can say it 's just your opinion any more_. It's now
expert analysis that you paid good $$$ for, and everybody who disagreed before
now basically has to get on board.

So it's not even necessarily political "cover", but almost like a referee that
brings enough credibility to settle otherwise intractable internal disputes.

Also, this lets the CEO appear unbiased to all the people who "lost". So they
can get on board with the new policy but not feel like the CEO shot them down
personally, which is bad for morale, can lead them to quit, etc. (Just because
they believed in the wrong strategy doesn't mean they still can't be super-
valuable in the future in executing the right strategy.)

~~~
slg
>Also, this lets the CEO appear unbiased to all the people who "lost". So they
can get on board with the new policy but not feel like the CEO shot them down
personally, which is bad for morale, can lead them to quit, etc.

The flip side is that it is also bad for morale for someone to be recommending
a solution for some time, the recommendation is ignored, a consultant is
hired, the consultant recommends the same solution, and then the
recommendation is implemented. This is exacerbated when the consultant's fee
is some large percent or maybe even a multiple of the salary of the person who
originally recommended the solution. It makes the original employee feel
worthless and doubt the leadership's ability to properly evaluate solutions.

~~~
underdown
Wouldn't one enjoy some benefits from being proven right?

~~~
alistairSH
Right up until you realize the 23 year old snot who made the recommendation
billed ~$3 million against your ~$100k salary.

~~~
crazygringo
If you look at entry-level consultant salaries at McKinsey and then divide by
the fact that they're often working 7-day, 100-hour workweeks... you'll
quickly discover that your "23 year old snot" is actually making around
minimum wage on an hourly basis. They could be flipping burgers instead with a
lot less stress.

The consultants aren't the ones taking the money home, the firm is. So don't
blame the 23 year old. He or she is honestly just doing their insane best to
pay off their huge student loans.

~~~
opencl
100 hours a week at federal minimum wage is less than $38k. These people are
not making anything remotely close to minimum wage.

~~~
solveit
But federal minimum wage ($7.25) is a lot smaller than, say, the NYC minimum
wage ($15), which is more relevant. At the NYC minimum wage, 100-hour work
weeks get you about 80k a year, which is about the base pay for an
undergraduate new hire at McKinsey.

------
astanway
$1M for a six week “EM plus two” engagement is on the high side, but it’s
about par for the course for most McKinsey contracts. The standard is usually
$500k-$1M for that kind of engagement. I think this is kind of a non-story for
anyone who is actually familiar with the consulting business model. The brand
is all McKinsey really has, and they are very quick to offer free engagements
to protect the brand if true value isn’t being delivered.

------
xvector
From the linked article[1]:

I find it absolutely INSANE that highly specialized organizations like the NSA
rely on McKinsey to direct their future operations.

These people have intimate knowledge of their organization and culture, shaped
and hardened by years of challenges and learned experiences. What can they
possibly think bringing an outsider in to do a complete overhaul will solve!?

Why can they not apply their own experience to solve problems in their own
organization!? The proliferation of consulting firms _baffles_ me. It seems
like you’re just paying people for critical thinking.

Unrelated: All of my classmates that went into consulting joke about how
absurd the field feels to them.

[1]: [https://www.politico.com/story/2019/07/02/spies-
intelligence...](https://www.politico.com/story/2019/07/02/spies-intelligence-
community-mckinsey-1390863)

~~~
txcwpalpha
>It seems like you’re just paying people for critical thinking.

That's _exactly_ what it is. Unfortunately most organizations, probably even
ones like the NSA, really struggle with doing any kind of critical thinking on
their own. This is especially true when trying to decide on a future direction
for the org: the org itself is most likely biased to just doing things the way
it's always been done. In that regard, having an outsider's perspective,
especially one that has also done work at other similar organizations and has
taken note of all the various ways other orgs do things and knows what works
and what doesn't, can be quite beneficial.

~~~
xvector
Getting an outsider perspective - sure. That I can get behind, it can
obviously be helpful.

But getting an outsider to tell you what to do? A complete overhaul? That’s a
leap. You’re going from getting perspective to getting directed by an
outsider. A recipe for disaster, and from what we’re seeing here, that’s
exactly what has happened.

~~~
txcwpalpha
>You’re going from getting perspective to getting directed by an outsider

Yes, but it's not like this outsider has no idea what they're talking about.
This outsider has decades (sometimes centuries) of knowledge working with
organizations exactly like yours, and they have seen what works and what
doesn't. When McK goes to consult for the NSA, they likely bring along with
them experience from doing similar projects for the CIA, or DIA, or DoD. Your
own organization likely doesn't have much insight into the successes and
failures of your fellow (sometimes competitor) organizations, while a
consulting company does, and they can lend you that knowledge.

At least, that's what is _supposed_ to happen (and indeed it does happen if
you are diligent about the specific team of consultants you hire). I have
increasingly witnessed a lot of deception and bullshit in the consulting
industry, so it's completely understandable to me why people are skeptical.

~~~
xvector
Makes sense. Thanks for pointing this out.

------
hwbehrens
The IFF referenced in the article seems like a great example of how good-
intentioned changes to incentive structures can have very warped outcomes,
potentially years later. These kinds of effects keep popping up for me, even
in industry contexts (e.g. stack ranking).

Are there accepted mechanisms for systematically identifying these knock-on
effects, and if so, what are they and how can they be more broadly applied?
How many "hops" of influence can you get away from the change before the
effects are impossible to predict?

Or does it just boil down to "ask very smart domain experts to think about the
problem very hard for as long as you can afford to pay them"?

~~~
smacktoward
In terms of lawmaking, the usual way to deal with this problem isn't with
front-end analysis, but rather by adding a "sunset provision" (see
[https://en.wikipedia.org/wiki/Sunset_provision](https://en.wikipedia.org/wiki/Sunset_provision)).
That's a clause in a bill that requires it to be re-authorized periodically in
order to stay in effect. If a law with a sunset provision ends up causing
unintended consequences, then lawmakers can let it die just by doing nothing.
That's an easier lift than you get in a bill without a sunset provision, which
can only be killed if you can convince a majority of lawmakers to actively
kill it.

Sunset provisions aren't nearly as widely used as they probably should be.

~~~
codesforhugs
If I were writing the constitution for a representative democracy today, I
think it would include mandatory sunsets for all legislation.

Yes, this would lead to the legislature spending a lot of time just
reauthorizing existing legislation, but I would argue that the majority of new
legislation being passed in modern representative democracies would be better
off as revamps of existing legislation anyway.

~~~
johnnyo
This assumes you don’t have gridlock in the House/Senate, so it’s a bad idea.

We already have govt shutdowns when we can’t pass a budget, imagine if a law
that legalized gay marriage was allowed to expire, or one that granted people
health care or immigration status.

Even if a non-discrimination law only expired for a short period of time, that
would be enough to do real damage to people’s lives.

~~~
guntars
Other countries have solved this issue simply by automatically forcing an
election if a budget is not passed. Their representative are somehow able to
overcome ideological differences and pass legislation once their jobs are on
the line.

~~~
johnnyo
That doesn’t solve the problem because the idea here is that some laws should
sunset, some shouldn’t.

When a civil rights law sunsets, lots of bad can happen in a short period of
time.

I’m using the example of the government unable to agree on a budget as an
analogy.

What happens when we can’t agree on how to renew the Civil Rights Act and it
sunsets for a period of time?

~~~
guntars
If the civil rights act requires over 1/2 votes to extend it and it doesn't
gather that much support, maybe it should sunset. The budget votes are
different because they require 2/3 of the votes which is what allows the
minority party to block it from passing.

~~~
mschuster91
The problem with this is that there may be laws that are highly valuable for
poor people (e.g. minimum wage, workplace safety, building/fire codes), but
irrelevant for rich people/politicians and thus end up way way down on the
priority list compared to, let's say, budget laws or the next big tax cuts
package.

A mandatory sunset provision can only work if the legislators act with the
interests of their country and constituents first and their individual pockets
second, which isn't the case any more in many Western democracies. The US are
just the most obvious example where Republicans blocked everything Obama tried
to pass through.

------
cafard
I don't remember seeing HN articles about McKinsey before this month or last.
Now there are three articles about McKinsey on HN, including one that says
that the Houston Astros' sign-stealing exemplifies the decline of a
McKinsified America. (Or maybe it's the Astros that are M'd.)

How did it become the flavor of the month?

~~~
theslurmmustflo
Pete Buttigieg is surging, McKinsey is in the air.

[https://www.huffpost.com/entry/pete-buttigieg-secret-work-
mc...](https://www.huffpost.com/entry/pete-buttigieg-secret-work-
mckinsey_n_5de83018e4b00149f73aef4e)

~~~
drawkbox
Sundar Pichai is also McKinsey alum, so in a way McKinsey has Google now.

People are also starting to take note of some of the bad things McKinsey have
been involved in like their role in Enron (CEO was McKinsey and it was their
'sandbox'), role in U.S. Immigration and Customs Enforcement (ICE), role in
Saudi clampdown on dissidents, support of authoritarian regimes and the Great
Recession 2008 financial crisis and many, many more scandals or questionable
actions. [1][2]

> _McKinsey is said to have played a significant role in the 2008 financial
> crisis by promoting the securitization of mortgage assets and encouraged the
> banks to fund their balance sheets with debt, driving up risk, which
> 'poisoned the global financial system and precipitated the 2008 credit
> meltdown'..._

Overall, like the other management consulting firms, McKinsey and the like can
be used to justify some anti-competitive/anti-consumer/anti-employee but pro-
board/executive or authoritarian policies and introduce plausible deniability
for the directors that employ McKinsey.

Some have said McKinsey is a "culture of corruption". [1]

> _McKinsey 's fingerprints can be found at the scene of some of the most
> spectacular corporate and financial debacles of recent decades. — Ben Chu,
> The Independent (2014)_

> _Defenders of McKinsey claim that the firm merely advises, and is not a
> decision-maker._

Plausible deniability on both the company and consulting firm, they deny
liability for all parties involved in a McKinsey action.

> _Nevertheless, since the end of the 20th century, McKinsey has been either
> directly involved in, or closely associated with, a number of notable
> scandals. Reuters describes these incidents as indicating "not bad apples,
> [but] a culture of corruption"._

[1]
[https://en.wikipedia.org/wiki/McKinsey_%26_Company#Role_in_c...](https://en.wikipedia.org/wiki/McKinsey_%26_Company#Role_in_corporate_accounting_scandals)

[2]
[https://en.wikipedia.org/wiki/McKinsey_%26_Company#2008_fina...](https://en.wikipedia.org/wiki/McKinsey_%26_Company#2008_financial_crisis)

------
UltimateFloofy
This is true for most NOVA contractors. In 2010-2012, Accenture and KPMG was
pretty new to Federal IT Auditing and most of their consultants had never done
anything IT related in their lives.

It's ridiculous that accounting and tax firms like Arthur Andersen was able to
rise out of Enron's scandal and were able to create catch-all IT divisions and
win those contracts from the US government when they had no expertise.

------
12xo
This type of stuff is endemic to all bureaucracies.

Managers are too scared to make decisions so they look outside in order to
justify any decision.

Its maddening as these are the very people who are paid to make these types of
decisions, yet they dont. And due to their employer being a public entity,
they are not held to any real standards nor limited by such pesky matters as
profits and productivity.

It happens in local government,it happens at the state level and its
absolutely enormous at the federal level. The waste is astounding, as are the
underlying causes.

Its so simple to solve, yet as long as we have the fox's guarding the hen
houses, it will remain.

------
sailfast
> The consulting firm’s sway at ICE grew to the point that McKinsey’s staff
> even ghostwrote a government contracting document that defined the
> consulting team’s own responsibilities and justified the firm’s retention, a
> contract extension worth $2.2 million. “Can they do that?” an ICE official
> wrote to a contracting officer in May 2017.

Nope. This is illegal under the FAR. If they're doing it, they should be
barred from Federal contracting.

For what it's worth, I think this author gives the GSA a bad wrap based on the
analysis of one individual. GSA has to do a LOT of work to award and manage a
large number of contract vehicles that allow everyone in government to
purchase goods and services at negotiated rates (which also saves them
hundreds of thousands on hiring their own contract staff). The fact that the
funding fee incentivizes GSA to help people spend more money is not
necessarily a perverse incentive - it gives them the incentive to ensure their
contract vehicles are effective vs. a normal procurement.

------
surak
McKinsey have messed up government policies all over the world when it comes
to McDonaldization of Society. They are using simple measurements to model how
complex societies should work, unfortunately this is only works for McKinsey
and their partners.

~~~
gwd
Sounds a bit like a lot of "machine learning" actually (when it's done
blindly).

But do you have any specific references for the kind of thing you're talking
about? It sounds plausible, but if I had a dollar for every time something
plausible-sounding was completely wrong...

~~~
WhompingWindows
Sounds like someone doing linear regression, claiming it's artificial
intelligence, and charging $150k salary in a year for said data science...

------
xenocyon
It's not just governments. Large corporations too frequently use McKinsey to
make recommendations for things they want to do anyway (e.g. layoffs or
restructuring). From the client executive's point of view, the money spent on
a McKinsey contract effectively purchases credibility for these decisions.

------
anonu
My favorite McKinsey story: Back in 2005 UBS (big Swiss Bank) brought McKinsey
in to figure out how to expand more rapidly in the US. The consultants
suggested, "Hey, you have almost no sub-prime exposure. Everyone's trading
this stuff! You gotta go in, and in a big way! It will certainly be a pillar
of your US strategy."

So UBS did... The result was one of the most severe debt writeoffs of the
Great Financial Crisis.

~~~
jankyxenon
Is the point that McKinsey didn't know the Great Recession was coming / it's
causes ahead of time?

~~~
anonu
The point is that they suggested a strategy that other big banks were already
doing. There was no creativity in their suggestion in this regard.

------
ramzyo
Lost me at the end ... took an otherwise detailed and nuanced analysis and
concluded it with a broad generalization that smooths over all of the detail
and nuance.

“At any rate, at some point decades ago, we decided that most political and
business institutions in America should be organized around cheating people.
In this case, the warped and decrepit state of the GSA leads to McKinsey-
ifying the entire government. Mr. Clinton, you took a fine government that
basically worked, and ruined it. McKinsey sends its thanks.“

------
corporate_shi11
As another comment here mentioned: outsourcing of decision making (consulting)
is endemic to bureaucracies, whether that's in government, education or
elsewhere.

Has research been done on the amount of money saved/wasted on these consulting
firms? Have any economists tried to evaluate whether or not these consulting
firms provide any value at all beyond political cover for bureaucrats afraid
to make or incapable of making decisions?

From my brief experience working in a large University's bureaucracy and
seeing how consulting firms took advantage of the school, I believe the public
is being swindled by companies like McKinsey and others. If private
corporations want to spend money on consulting firms without any tangible
benefits, fine. But taxpayer money should not be wasted on these corporate
vultures.

------
txcwpalpha
There's a lot to unpack here, but the general gist is that McKinsey is
overpaid for mediocre services. It's hard to argue against that, and McK in
particular does have some insanely unjustifiable rates, but I do think the
author has a bit of a misunderstanding of why consultancies are hired in the
first place.

To be clear, when a consultancy like McK puts a 23 year old analyst on a
project, the $50k/week bill isn't just paying for the knowledge in the
analyst's head. The analyst is really just a vehicle to deliver the expertise
of the actually-experienced consultants and knowledgebase of the entire firm.
The experienced consultants don't have the time to sit and write out the
powerpoint deck, so instead they throw as much knowledge as they can at the
analyst and the analyst is the one who synthesizes it into something
digestable by the customer. Is it worth $50k/week? Fuck no. But it is at least
worth recognizing that you are getting more expertise than a sole bachelor's
degree.

Second, as someone who has both worked as a consultant at major companies like
McK and worked on the other side of the table, and as someone who has long
despised the consulting profession because of its overpriced bullshit, I think
the author would be surprised at how effective even a measly 23 year old can
be. As a consultant, it would drive me _insane_ that my company was billing me
out at $700/hr to help implement an IT system when all I was actually doing
was reading and regurgitating the software's documentation and making sure
that the client didn't ignore it. Surely the client could do this themselves
and save the $700/hr, right?

It took me a long time to realize that the answer to this question was
actually _no_. The typical HNer will probably be surprised (and saddened, if
you're like me) to realize that the average corporate worker bee is in fact
not competent enough to do the most basic tasks, such as refer to
documentation, without hand-holding. It is an unfortunate reality that
sometimes a well-educated and well-vetted 23 year old analyst can do things
much better than an 20-year industry veteran. Companies do know this, and this
is what they are paying for, much to the chagrin of the rest of us.

As a last note, the author mentions the possibility of just hiring an IT
professional to do the work instead of hiring a consultant. This is something
I also see come up a lot in consulting discussions. The reason this isn't done
is because hiring an employee full-time brings on a lot of risk to the hiring
company. It can take months to hire someone, many more months to train them,
and then if they don't perform up to snuff, it can take _years_ to build up a
case to fire them, all the whole they are sitting on your payroll taking up
budget. A consultant, on the other hand, can be hired in a day, trained in a
week, and if needed, can be fired in a minute. You pay a premium for the
agility to hire and fire them quickly, but that's the entire point.

~~~
mips_avatar
It seems like people do really well for themselves after they leave McKinsey,
do you think this is mostly a function of the cache having McKinsey on your
resume brings? What skills are really developed as a management consultant?

~~~
throwaways66722
McKinsey data scientist (basically a consultant who codes). Can answer this
after following some colleagues who have left and seen many technical teams at
clients for my general role.

Most data scientists... don't know what to do. And most clients... don't know
what to do with them. So they do little data science projects and build
dashboards that few people use. Coming out of McKinsey you can quite
confidently say you've learned how to identify top problems, organize a
project around it, and solve it in a fast timeline with realistic solutions.
That's pretty much gold. It's really useful to be able to say you've worked
with c-suite leaders.

Finally, it's probably a function of just fast growth internally. You gain
responsibilities much faster at McKinsey than at most most companies. The
company invests in your development more. And when you leave, you get weeks of
paid time off to search for a new opportunity.

~~~
mips_avatar
I feel like I do data investigations pretty often in my role as a PM at a tech
company, how does this differ as a consultant?

~~~
throwaways66722
This only really applies to really large companies mind you, but I would say:

1) You don't need to work your way up the approval chain. Your idea is already
going to people with the authority to act on it.

2) You have significant ability to just call people and get them to share
their data and domain knowledge

3) You have little risk of long term problems from saying something that
someone doesn't like, so long as its not the person who hired you.

4) The pace is probably very very fast relative to the speed of most large
orgs. Probably not sustainably fast tbh. It's fine because it's several weeks
of hard focus and then a bit of a break.

If you feel like you're doing fine and are answering important questions then
you probably are doing just fine and your company's data culture is healthy.
IMO people who build analyses that few people want or need are acutely aware
of it.

------
riazrizvi
I'm sorry but no case is made to support the idea that taxpayers are buying
generic advice. Let's agree that the service buys a fresh college grad
assigned full time. The grad might be a customer contact collecting and
organizing customer issues before presenting them to internal subject matter
experts, and then presenting those findings back to the client. I'd like to
hear evidence to support how the service is fresh college grads simply using
what they learnt in college and their chutzpah, which is what the article
implies.

~~~
austinhutch
> _The grad might be a customer contact collecting and organizing customer
> issues before presenting them to internal subject matter experts, and then
> presenting those findings back to the client_

This might describe how technical consulting is done at big firms where the
output is a product, but when the output is strategic documents... this is
grunt work done by the front line analysts with a generic playbook. There is
no "behind the scenes" strategy work like there is for dev. Maybe there is a
lower analyst or intern that doesn't interface with the customer.

~~~
txcwpalpha
FWIW this is the direct opposite of my experience working in both strategy and
technical consulting. When it comes to dev work, it often actually _was_ just
a 23 year-old new grad writing code with little oversight (when I was 23 I
actually wrote a lot of code that was reviewed by no-one, tested by only
myself, and is probably still being used across a couple of F500s). Strategy
work on the other hand was almost always reviewed and revised by several tiers
of higher-up, more experienced consultants before being delivered to the
customer.

------
sjg007
I am guessing nothing will change unless there is significant outrage... I
imagine McKinsey kicks back money into election campaigns as well.

It seems worth it to become a govt contractor though..

------
ismail
Not surprised. This happened in South Africa.

[https://www.dailymaverick.co.za/article/2017-09-14-scorpio-a...](https://www.dailymaverick.co.za/article/2017-09-14-scorpio-
amabhungane-how-mckinsey-and-trillian-ripped-r1-6bn-from-eskom-and-planned-to-
take-r7-8bn-more/)

------
ineedasername
I guess it doesn't change the value proposition much, but the whole "23 year
old recent college grad" thing is a little overblown. Sure, a college grad
like that might land somewhere with a title of "Business Analyst", but the
higher the consulting contract the more likely it's some "distinguished" or at
least older person with a shoe shine and 30 years of absorbing all of the
management buzzword trends.

I just had a round of them come through where I work, and 3 of the 4 met this
description. The 4th was the younger "college grad" and they made him actually
click the power point slides forward.

------
abeppu
On glassdoor it seems like that recent grad business analyst is taking home
~100k [1]. One of the articles earlier this week about McKinsey as "Capital's
Willing Executioners" [2] talked about how the firm spreads a specific
capitalist ideology.

Given that (in this instance), the company is charging a 30x markup for the
labor of that recent grad business analyst ... should we be thinking of
McKinsey analysts as misguided exploited workers?

[1] [https://www.glassdoor.com/Salary/McKinsey-and-Company-
Busine...](https://www.glassdoor.com/Salary/McKinsey-and-Company-Business-
Analyst-Salaries-E2893_D_KO21,37.htm) [2]
[https://www.currentaffairs.org/2019/02/mckinsey-company-
capi...](https://www.currentaffairs.org/2019/02/mckinsey-company-capitals-
willing-executioners)

~~~
tedsanders
I worked as a management consultant. When my firm billed my time out at
~$10K/day and paid me ~$150K/yr (a ratio of ~20:1), I didn't feel exploited.
That ~$10K/day covered way more than just my time.

Here's what that billing had to cover:

* My normal work hours [the thing we billed for]

* My overtime hours

* My annual bonus

* My benefits & retirement savings & overhead & employer-side taxes

* My time spent on business development & sales (most of which don't pan out)

* My time spent on discounted or free projects performed to seed future sales

* My time spent in training & development (probably ~4 weeks in the first year)

* The time of managers spent training & developing me

* My support staff (industry analysts, Powerpoint designers, internal experts)

* Multi-million-dollar IT investments to build tools and databases to support me in my work

* A couple first-class flights a week

* A few nights a week at expensive hotels

* Lyfts & Ubers everywhere

* All meals expensed

* The firm's partners working the case

* New employees for whom we don't bill

* Fees for market reports

* Fees for expert interviews with industry executives (in some cases we'd do dozens of interviews a week, paying ~$1K/hr each)

* Office overhead (rent, power, insurance, etc.)

* Office support staff (HR, finance, janitors, etc.)

* Profits for the firm's equity holders

(Now a few of these expenses were billed separately I believe, but it shows
the wide breadth of costs that a firm has to cover.)

None of this opportunity would have existed without the firm, the network, the
brand, and the partners. It's amazing to think that all I had to do was show
up and work, and in exchange, I would get paid a high salary, get experience
working with senior executives, get a prestigious brand on my resume, and
accelerate my career relative to most career tracks. I don't regret the job,
nor do I think it's surprising that there are crowds knocking on the door
trying to get in.

Looking at other industries, I wouldn't be surprised if a cashier at a grocery
store made less than 5% of what they put in the register each day. And I
wouldn't be surprised if a oil driller got paid 5% of oil that they extracted
each day. Even if we're the ones touching the revenue, we're still a small
part of what it takes to run a big business.

------
TheMagicHorsey
I don't know much about this article, but Matt Stoller wrote one of the most
garbage articles about Netflix a while back, where he claimed Netflix has a
monopoly on online TV show production.

I think he lacks analytical rigor and basically bangs on a keyboard with
strong emotions.

Having said that, McKinsey consulting services really are 90% a finishing
school for Ivy League liberal arts majors so they can move onto real work.

------
thorwasdfasdf
from the article >>> "In other words, the agency of the government in charge
of bulk buying isn’t paid for saving money, but for spending too much of it.
The IFF also incentivizes the GSA to get the government to outsource to
contractors anything it can, simply to get more budget. The IFF has been
creating problems like the McKinsey over-payment for a long time."

~~~
hef19898
And yet there are people refusing to accept that fact, I met one of them. And
that guy also failed to realize what an immense cash flow advantage government
has against private sector companies. Government _wants_ to spend money as
soon as possible. That alone is a huge lever in procuring hardware. Not sure
why they don't use it.

------
gcbw3
And let's not forget the outcome of those illegally overpriced contracts:
[https://www.propublica.org/article/how-mckinsey-helped-
the-t...](https://www.propublica.org/article/how-mckinsey-helped-the-trump-
administration-implement-its-immigration-policies)

------
faizshah
Matt Stoller wrote a really interesting book giving a history of monopoly
power in America: [https://www.amazon.com/Goliath-Monopolies-Secretly-Took-
Worl...](https://www.amazon.com/Goliath-Monopolies-Secretly-Took-
World/dp/1501183087)

On my winter reading list :)

~~~
Wordball
Thanks for the recommendation, I didn't read the article either.

~~~
faizshah
Darn my pinning in google keep and reading the thread the next day has
backfired on me! :)

------
Matticus_Rex
Ugh...

I work at a much, much smaller niche-focused management consultancy. I'm
really glad we don't do this or play political cover...

but also it would be fantastic to make what they make. The perils of _actually
having expertise that clients need_ and _not playing pork games_ , I guess.

------
billions
Who's going to be the tax payer's hero in that government department? This
squeaky wheel would effectively defund his colleague's cush jobs and likely
his or her own. Not going to make a lot of friends but it will save the tax
payer a fraction of a cent.

------
abbadadda
> In other words, the agency of the government in charge of bulk buying isn’t
> paid for saving money, but for spending too much of it.

I'm shocked SHOCKED to learn the U.S. government is not a well oiled machine
free from fucked-up incentives or outright corruption.

------
cafard
Many years ago, David Owen wrote about this--though the customers mentioned
were in the private sector--in an essay called "Punks in Pinstripes". It
suppose that it may have been collected in _The Man Who Invented Saturday
Morning_.

------
kfk
The power point thing is so important though and consultants make amazing
power points. It’s so important I’d hire a power point master just for
explaining to executive all the concerns and issues me and my team have over
our IT practices.

------
Myrmornis
It's depressing to think that there are people who aren't already aware that
corporate consulting is pure BS, but I guess there are and so I guess it was
worth writing it.

------
WhompingWindows
Pete Buttigieg worked at McKinsey after his college days...which was only
10-15 years ago. I wonder if/how he was exposed to unethical practices and
grafting like this...

~~~
sjg007
If he was I expect he understand the issue and as President would work with
Congress to reform the practice.

~~~
thundergolfer
Why would you expect that? He’s been given opportunity to acknowledge the
problems with McKinsey and he has avoided the issue.

~~~
sjg007
Do you have a reference? I’d be interested to read more about it.

~~~
thundergolfer
Here it is: [https://nymag.com/intelligencer/2019/02/a-long-talk-with-
dem...](https://nymag.com/intelligencer/2019/02/a-long-talk-with-
democratic-2020-candidate-pete-buttigieg.html)

I originally came across these comments of his when reading the piece written
about him in Current Affairs.

~~~
sjg007
The latest article in the NYTimes says he is under an NDA so that may explain
it.

~~~
thundergolfer
He might be under an NDA with respect to his specific involvements at
McKinsey, but he would not be stopped from commenting generally.

He really just doesn't have a problem with McKinsey's various immoral
practices. That's the simple way to see it.

------
benmarks
Only recently discovered Mr. Stoller's media/reporting, and I have been
absolutely impressed with his weekly mailing. Can highly recommend
subscribing.

------
m0zg
Hmm. HuffPo ran a front-page hatchet job on Buttigieg disclosing that he's ex-
McKinsey. Coincidence?

------
dboreham
One of those "we're in the wrong business.." moments.

------
akayoshi1
Consultant-ceptio

------
oefrha
Title’s terrible, I read it as taxpayers pay $3M a year per U.S. college
graduate. It’s not even the original title, “Why Taxpayers Pay McKinsey $3M a
Year for a Recent College Graduate Contractor.”

~~~
CharlesColeman
The actual article title is "Why Taxpayers Pay McKinsey $3M a Year for a
Recent College Graduate Contractor," don't know if it was edited or the poster
just chose something different.

------
dsfyu404ed
TL;DR organizations respond to incentives and the incentive laid out in the
legislation for the organization responsible for setting prices the government
pays is to spend money, not save it and McKinsey takes advantage of that.

Considering that a big player like McKinsey can't systemically overcharge the
government and get away with it due to how noticeable it would be in terms of
sheer dollar amount there are likely be other smaller players that are making
even more absurd profits on their services and I wonder who they are since IMO
their existence is more worthy of investigation than some BigCo walking right
up to but not over the line drawn by the law (as BigCos do). This is not to
say that the incentive structure shouldn't be changed to categorically prevent
all this.

~~~
rootusrootus
Okay, I'll ask the next question. How do I get to be one of those smaller
players. Ha!

~~~
smacktoward
You'd need to get your business listed on the GSA's schedule of approved
contractors (see [https://www.gsa.gov/buying-selling/purchasing-
programs/gsa-s...](https://www.gsa.gov/buying-selling/purchasing-programs/gsa-
schedules)).

Being "on the schedule" means you've already been pre-vetted and deemed a
legitimate vendor by the GSA. For government agencies, doing business with a
contractor on the GSA schedule lets them skip a whole bunch of approvals and
paperwork that they'd otherwise have to do if they just pulled in a vendor off
the street.

Getting on the schedule can be a long and bureaucratic process, but once
you're on it you have a privileged position when it comes to winning
government business. So if you want to sell to the Feds, you really want to be
on that schedule.

------
starpilot
If you know anyone personally who works at McKinsey, you know them to be
brilliant, humble, hardworking, and unfailingly likeable. Think Pete
Buttigieg. It's hard to square this with the company's public reputation in
anti-establishment screeds.

~~~
boudewijnrempt
I guess you meant this to be sarcastic, right? Doltish, vainglorious, lazy and
unfailingly boorish is what comes to my mind when I review the McKinsey people
I've met.

~~~
shantly
That'd all go for about 80% of my exposure to same, can confirm. Doltishness
and lack of self-awareness re: the same sorts of things the consult on for
others were especially surprising to me.

------
alexchamberlain
> ... Work of a 23-Year Old

This really bothers me. I understand the point of the article is that they're
charging a lot of money for an inexperienced consultant and no bias
(discrimination) was meant, however, age is irrelevant. There are a lot of
very "experienced" 23 year olds, as long as you're asking them about the work
they've done. There are a lot of people in their 50s with very little
experience (as their actual experience is irrelevant to the topic at hand or
their actual experience has been very repetitive).

I think we need to be a bit more conscious of unconscious bias towards age (in
either direction).

~~~
whiddershins
By definition a 23 year old can’t have 25 years of experience in anything,
even tying shoes.

They can’t legally have worked full time in the United States for more than 7
years.

Unless they are a wild outlier, they can’t have an advanced degree and
significant years of professional experience doing anything.

You kinda have a point but sensitivity to age discrimination towards the young
in this sort of statement is a bit of a stretch imo. It’s also shorthand for
absolute realities of time and space.

Edit: Age discrimination also isn't perfectly symmetrical because:

If you’re young, you will very likely get to be old one day.

If you are old, you never get to be young again.

