McKinsey: A profile in amorality

When McKinsey Comes to Town

Author: Walt Bogdanich and Michael Forsythe

Publisher: The Bodley Head/Penguin RandomHouse

Pages: 368

Price: Rs 1119

McKinsey, the storied global management firm, will be celebrating its centenary in 2026. The authors of this book, journalists with the New York Times, use their considerable investigative skills, to craft an evidenced, albeit selectively curated, assault to expose the rot behind McKinsey’s public image. It makes for a riveting read but fails to shake the reader’s faith in either the market for consulting or in McKinsey.

The book gets quickly off the mark with a hint of the knife attacks on McKinsey to follow by egregiously conflating unconnected events with McKinsey’s failures — the decline of US Steel — a long-term client - along with other manufacturing industries in the US because of global, structural market changes; the Enron bankruptcy caused by greedy, poorly managed bets on energy derivatives or the misuse of analytics in American baseball. As unconvincing is attributing fatalities and accidents due to poor maintenance at Disneyland — America’s cultural icon— as a direct consequence of cost-cutting suggestions by McKinsey, particularly since no one sued McKinsey, nor were they legally indicted.

Admittedly, the absence of hard evidence between McKinsey’s advice and the adverse client or public service outcomes could also be thanks to the consultancy’s strategy of shying away from direct implementation, aligned with their value to “follow the top management approach” relying instead on its research, publications, and informal networks for outreach. This strategy helps avoid or limit liability claims. Other values that ensure long-term client engagement are —“preserve client confidences” and “put client interest before the firms”. “Most Fortune 500 companies have paid McKinsey for advice”,  as have over 100 governments.

McKinsey employees, called partners, have exceptional business smarts but also a sense of values – albeit fuzzily defined. Rarely do values trump profitability. For example, profitable engagements were not foregone in Saudi Arabia following the murder of Jamal Khashoggi or with China, despite its qualified approach to human rights with “Chinese characteristics”. Yet neither aligns with liberal McKinsey values of “equity, diversity or inclusion”.

McKinsey enjoys long and profitable business associations with tobacco companies, oil and gas majors and pharma companies, producing opioids. The authors call out McKinsey for being Janus-faced, simultaneously earning profits by improving the efficiency of companies producing harmful products like tobacco, carbon-spewing fossil fuel or enhancing the productivity of pharma to pump harmful, addictive, poorly regulated opioids, whilst also making profits by advising governments to improve health services, implement decarbonisation projects or community benefits programmes.

Alternatively, McKinsey could be termed amoral — targeting inefficiency and enhancing profits for businesses being its core mission since it was founded. When McKinsey is held to account, the blame is invariably taken by the partners engaged in that transaction. In South Africa, close association with the electricity utility ESKOM led to fraudulent collaboration. The partner concerned was fired. No questions were raised about the failure of the internal oversight mechanism to identify and nip in the bud unholy merging of interest in dodgy deals between the client and McKinsey. The sources of an ever-increasing inflow of revenue are rarely scrutinised to red-flag potentially unsavoury engagements, detrimental to society and the McKinsey image.

The firm’s highly decentralised operations provide a cover. Regional and local heads operate autonomously, supported by a matrix of specialised global professional teams. There is no designated head office. The office of the Managing Partner acts as such. Leaders are elected to their positions by partners for fixed but renewable terms. Statis is anathema. If a partner is not on the “up” elevator, then walking “out” is the only option, reportedly, for a high proportion of partners. But these ex-partners also transition into the McKinsey alumni network, a useful global calling card. All this is elegant, efficient, and admirable.

Nevertheless, a lightly regulated matrix organisation with highly specialised global partners, working across regions, could also be a convenient dodge to avoid blame ever sticking to the firm. Instead, deviant partners — a disproportionate number cited are of South Asian origin - take the rap for infringements of the firm’s woozy moral code or legal indictments with docility. None of this is exceptional. McKinsey is not the only business that puts profits first. Why hold a business to account based on standards of social rectitude higher than even for governments?

It is unlikely that the authors’ efforts will serve to knock McKinsey off its lofty pedestal, convince young recruits to shun it at compensation levels a quarter higher than elsewhere or employee to exit its Omerta -bound alumni network or make it less trusted as an advisor for big business and governments. Scale, pervasiveness, flexibility, unrelenting achievement orientation and matching performance are good calling cards.

The jury is out on whether McKinsey could change positively. Equity or fairness are subservient to enhancing shareholder value in any efficient, enduring business, along with a commitment to working within the rules, and paying taxes, none of which is new for McKinsey. It is governments that make the rules and define the prevailing business and socio-economic environment. Sadly, there is little in the prevailing trends of exclusionary trade practices, combustible geopolitical contestations, flexible moral standards, or the growing returns on proprietary technology, to suggest that a kinder era of decency, fairness, or equity is around the corner. Nevertheless, critiquing those at the top and being heard is always healthy.