
Inside McKinsey - bane
http://www.ft.com/cms/s/2/0d506e0e-1583-11e1-b9b8-00144feabdc0.html#axzz1enItOpBZ
======
mmaunder
This is how you hit the undo button on a nuclear detonation. If this wasn't
buried in FT Magazine, I'd be tempted to cancel my subscription. It's so
obviously part of the damage control campaign that it brings the integrity of
FT's journalists into question. Extracts:

"... links between key former employees of the world’s best-known, most
prestigious, most self-consciously high-minded consulting firm and a corrupt
hedge fund boss..."

"...it was a public embarrassment, a private outrage – and even a potential
threat to the future of “the Firm”, as McKinseyites call their employer."

"... the older partners were “completely ashen-faced”..."

"The partners’ principal anxiety was summed up in one recurring question: “Why
didn’t we pick up on it?”"

"As shocking to them was the fact that they had not previously been made aware
of any such activities."

"insiders offered two analogies to help him understand the Firm: the Jesuits,
and the tailors of Savile Row, who “unlike fashion houses and designers … are
always in the background”."

"Yet McKinsey is arguably better known than either the Catholic religious
order or the London suit makers. Founded in 1926 by James O. McKinsey, who
originally styled its consultants as “management engineers”, McKinsey is to
consulting what Goldman Sachs is to banking: it supplies the most prestigious
– and perhaps the most expensive – advice that top corporate and government
clients can buy."

...and on and on including a lovely historical photo of founder James O.
McKinsey.

~~~
VladRussian
sounds like another "most self-consciously high-minded" firm - Arthur
Andersen.

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danso
Consulting firms such as McKinsey are undoubtedly filled with brilliant
people. But because specific expertise in an area is worth more than general
intelligence/accomplishments when it comes to specific, actionable
recommendations, this cynical criticism (as used in the FT comments section)
comes to mind:

>..."Consultants are people who charge you a fortune for interviewing you
about your organization and then writing a report repeating what you've just
told them and what you already knew!"

Realistically speaking, though, this is actually a very useful thing:
providing political cover so that an executive can institute an unpopular but
needed change. However, this is more indicative of a weakness in an
organization's (perhaps unavoidable in all large companies) culture than it is
the effectiveness of consultants.

It reminds me of Richard Feynmann's role in the post-Challenger disaster
investigation. He's famously known for explaining the O-ring deficiencies
during a televised press conference. But he admits in his memoir that the
O-ring revelation was passed to him (through another intermediary), from an
anonymous source -- most likely from an astronaut who worried about his/her
job -- who had said that the O-ring problem was known to NASA's engineers but
the bureaucratic managers had chosen to ignore it.

If all it took was a $1,000,000 fee to get in some consulting engineers (or
hell, just Dick Feynmann) to spotlight this fixable -- if inconvenient problem
-- so that the Challenger wouldn't blow up, I'm sure we'd all agree that would
be money well worth spent.

I know people who go to fortune tellers even though they wouldn't put money on
their predictions. But most fortune tellers at least can act as the friendly
voice who tells their client want he/she needs to hear, whether it has
absolute truth or not.

Has anyone here ever been the beneficiary of a concrete effect from a
consultant's work, such as a tangible new idea that resulted in better
profits/efficiencies, beyond what is merely CYA?

~~~
jackfoxy
I don't have the reference for this, but I recall the seals between shuttle
booster segments were originally engineered to use asbestos, not rubber as the
gasket. The engineery qualities of asbestos for this purpose were perfectly
understood, lower tempature lift-offs would not have been an issue, and most
importantly, all the expensive live testing had already been performed when
higher-ups recognized how politically incorrect asbestos was, even though a
program as high-tech as the shuttle program was perfectly capable of handling
asbestos perfectly safely. There probably was no $1M engineering fee that
would have ever fixed this, because the multi-$M live fire tests were
complete. No one considered this relatively minor engineering change (after
all, the seal was redesigned to work with rubber) worthy of another round of
very expensive tests (which primarily focused on the motor).

In a similar fashion (sorry, also doing this from memory, no reference)
sometime in the late 80s or early 90s the main fuel tank insulation was
switched-out because foam manufactured with CFC became verboten, so another
material, with apparently unknown (or not completely desireable) engineering
characteristics, was swapped in. I never recall hearing about ice ripping off
big chuncks of fuel tank foam during the boost phase in the 80s. I only
remember hearing about this starting in the 90s (or at least after the
Challenger accident).

This is certainly tangential to the OP, except that there probably was copious
high-priced consulting which provided political cover for both of these
mistakes.

~~~
gammarator
Thirty seconds of googling reveals that this is a myth:
[http://www.msnbc.msn.com/id/11031097/ns/technology_and_scien...](http://www.msnbc.msn.com/id/11031097/ns/technology_and_science-
space/t/myths-about-challenger-shuttle-disaster/#.TtLdKEo7qWU)

~~~
jackfoxy
You're right. A little more googling
<http://en.wikipedia.org/wiki/Space_Shuttle_external_tank> reveals the old
foam began to be phased-out in 1996, with complete phase-out in 1997. Tile
loss and other damage starting even with the first flight were assumed to be
related to foam loss, and the foam loss itself was determined/assumed to be
due to anomalies in foam application.

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Jun8
OK, call me ignorant, but I think that these highly paid strategy consultants
are closer to a placebo than problem solving, i.e. in most cases the
management thinks that calling in McKinsey (or Bain, etc.) was "totally worth
it" because (i) no one would admit that their decision to spend _hundreds_ of
thousands of dollars for consulting was wrong and (ii) the problems _do_ seem
like solved, from the high managements POV. The truth, though, is usually
different. Most engineers and mid-level management complain that such
interventions of cocky consultants, who may be super intelligent (because, you
know, they passed the hard McKinsey interview) and knowledgeable, generally
understand little of the specifics of the company and try to get the gist of
it in a couple of weeks to address deep problems. This is akin to going to
cardiologist for a serious brain tumor, because he's a good doctor and
expecting him to quickly learn enough to solve your problem.

Paraphrasing Ada, these people do not originate anything! I wonder how many
McKinsey alumni sit in the tech startup boards. How many have created
startups?

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jgill
Just a word of advice. McKinsey consultants are potentially worse than just an
MBA on your founding team. There's a reason you never hear about McKinsey
consultants ever going on to actually start a company that actually matters.
They are "value extractors" not creators and generally if you have one on your
founding team, I pray for you. They can't do anything on their own. In my
experience they do not really understand what it takes to actually create a
company and are motivated so much by money and their insecurities as the
writer of the FT piece hints at.

~~~
lancewiggs
We can be hard to absorb, that's for sure. I've successfully helped a lot of
start-ups, but I (and they) have been careful to ensure that the time I spend
there is limited. eBay hired too many MBAs/consultants and stuffed themselves
as a result.

But arguing that McKinsey alumni are all-bad is clearly over the top. They can
produce results incredibly quickly and are comfortable dealing with very
senior levels at corporates. Business development and major deals are a
specialty.

Try calling one when it's time to think about major decisions, pricing,
figuring out how industries work and just general business advice.

~~~
rhizome
_I've successfully helped a lot of start-ups_

So what do you make of the grandparent's observation that none of them go on
to form vital startups themselves?

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radicaldreamer
Good attempt at a PR puff piece, but I find it extremely hard to think of an
organization being pristine throughout with such corruption at the top.

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nradov
Malcom Gladwell has an interesting article about how McKinsey contributed to
the Enron debacle.

<http://www.gladwell.com/2002/2002_07_22_a_talent.htm>

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louhong
I'm curious to hear opinions of the "up or out" philosophy at startups. I can
conceive of both pros and cons (mostly cons) but a forced philosophy sounds
flawed.

~~~
arethuza
I've only heard of "up or out" being used in high-end professional services
companies - which are usually _very_ different places to start-ups.

~~~
nekojima
A variation is used in many financial services sales teams, where the bottom
10-20% each year are fired, or if sales don't increase. Similarly was/is used
at IBM to remove the bottom 5-10% of under-performing staff each year.

~~~
otoburb
You're referring to the practice made widespread by Jack Welch when he was CEO
of GE (20-70-10 aka "differentiation")[1].

[http://www.usatoday.com/money/companies/management/2005-04-1...](http://www.usatoday.com/money/companies/management/2005-04-17-welch-
advice_x.htm)

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budley
If they really can't figure out how Gupta got so far in the firm then they
aren't as smart as their PR puff piece says they are.

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MaxGabriel
I'm not at all familiar with consulting, but some of the things I do now
(research disparate subjects in-depth) sound related. What kind of questions
do consultants answer/what work do they do?

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pitdesi
This article does an absolutely terrible job describing work "Inside McKinsey"
and seems to be more of a puff-piece for the firm than anything else.

If you are interested in what management consulting is or looking for an
interesting read (the background is fascinating and unexpectedly
entertaining), I highly recommend the book Lords of Strategy referenced in the
article. Here's the WSJ review which gives a good summary:
[http://online.wsj.com/article/SB1000142405274870486930457510...](http://online.wsj.com/article/SB10001424052748704869304575109591109900792.html)
and a BW interview of Kiechel:
[http://www.businessweek.com/managing/content/feb2010/ca20100...](http://www.businessweek.com/managing/content/feb2010/ca20100226_079249.htm)

The origins of management consulting are actually in Frederick Winslow
Taylor's work around scientific management, using a stopwatch to cut excess
labor on railroads... you could call it hacking labor
<http://en.wikipedia.org/wiki/Scientific_management>

I worked at BCG before coming to FeeFighters, as did our CEO. My 2 roommates
worked at McKinsey and Bain, so I have a pretty good perspective on the
industry. This article goes way overboard on the prestige associated with
working at McKinsey - noone at my school chose an offer from McKinsey if they
had one with BCG or Bain (more of a culture/fit decision than anything else at
that point). I worked with multiple Rhodes and Baker scholars at BCG... but
you don't get to 10,000 employees only hiring the smartest guys in the room.
People are generally VERY smart, but you also have partners where you wonder
how they got there. There are a few different types of partners... the
rainmakers (they can sell), the teachers (awesome to work with, they teach
junior people a lot), and the ones that do amazing client work. I hated
working for rainmakers.

Working in consulting can be an awesome time... at times, you get to do
strategy work that decides how billions of dollars will be deployed (that is
when you do pure strategy work). But at other times, you're spending days
building gantt charts deciding who will manage a particular document in a new
organization (most of the work these firms do now - they had a desire to grow,
so they take on shitty operational things that they aren't well suited to, to
create an "ongoing relationship" with clients). As for recycling stuff, sure -
you are paid for your expertise and part of that expertise was learned at your
competitors. It is no different from hiring anyone from a competitor, which
happens all the time, even at junior levels. There is a huge chinese wall
where you can't get information from someone who serves or has served a
competitor.

BTW - there are certainly skills that transfer well from the consulting world
to startups... I wrote about some of them (sub consulting for MBA)
[http://feefighters.com/blog/should-you-hire-mbas-at-your-
sta...](http://feefighters.com/blog/should-you-hire-mbas-at-your-startup-and-
why-we-love-them/)

~~~
gammarator
For a contrary opinion, try Matthew Stewart. His book, "The Management Myth,"
was nicely excerpted in the Atlantic [1]. He's particularly harsh on Taylor's
early experiments, which claimed to be scientific but were anything but.

[1] [http://www.theatlantic.com/magazine/archive/2006/06/the-
mana...](http://www.theatlantic.com/magazine/archive/2006/06/the-management-
myth/4883/?single_page=true)

~~~
yuhong
"How many tons of pig iron bars can a worker load onto a rail car in the
course of a working day?"

That should be a big sign that Taylorism and scientific management is
basically only suitable for industrial manufacturing.

