The churn rate of companies has gone up significantly. In 1935, the average lifetime for an S&P 500 company was 90 years; today, it is about 18 years, says Dominic Barton
A recent Economist article indicates that the global consulting industry is going 'gangbusters' at the moment, with double-digit growth amidst all the economic doom and gloom. Why this is?
I think it's because we're in such a period of profound change - and I actually believe that this will continue for the next 20 to 30 years. There are five particular megatrends that are converging to great effect. The first shift is the re-rise of Asia and Africa's emergence: 2.2 billion people will join the middle class in Asia and Africa in the next 15 to 20 years - half from China alone. The second shift is disruptive technology: this is changing three times faster than management and presents both an opportunity and a challenge. The third shift is resource scarcity. With so many new consumers wanting to live and consume like a 'regular' middle class person, food, energy and water are going to be under severe constraints.
The fourth major shift is population ageing around the world (even though some countries, like India and Nigeria are 'young'.) And last but not least is the struggle that Western governments are facing to deal with all of this. They have become increasingly short-term in their thinking and as a result, they are gridlocked and face significant fiscal challenges.
The combination of these five things all happening at once has major implications for all organisations - including McKinsey. Whenever there is volatility or disruptive change, there is a strong demand for objective perspectives and analysis. Alongside all of this, the churn rate of companies has gone up significantly. In 1935, the average lifetime for an S&P 500 company was 90 years; today, it's about 18 years. There is a growing need at the moment to innovate and to make bolder choices, as well as to focus on risk management tools. These are just some of the reasons why consulting is so in demand these days.
At last count, 359 ex-McKinsey-ites, who you call 'alumni', were running $1 billion-plus companies. No other organisation even comes close to this. What is in the proverbial water at McKinsey?
I think the key thing is that we are very fortunate with respect to the incoming talent we attract. I will always remember Marvin Bower telling me that you win or lose on the talent that comes through your door. If you attract the best people, they are, in a sense, by definition going to do very well. For the 2,200 consultants that we hire each year, we look at about 225,000 applicants. I knock on wood when I say this, but we're fortunate to be at an 87 per cent acceptance rate on the offers we make. Despite the ups and downs of the economy, we've consistently been able to get more than our fair share of great people.
The second thing is our focus on leadership development. We spend about $120,000,000 per year on various training programmes for our people. More importantly, in our job design, we try to provide as much variety and intensity as possible. I think one of the best ways to foster leadership is to have people work in different countries and industries, on different types of issues and projects - growth, turnarounds, a mix of things. Of course, we would love for our people to stay with us forever, but sometimes, their 'higher order calling' is to go and lead another organisation - and that is totally fine. Those who leave become 'alumni', but remain part of our wider network.
Another part of it is the apprenticeship and mentorship that people get here, which, by the way, extends to our alumni. We have big alumni events every year, but people there are less interested in hearing about what McKinsey is up to; instead, they want to catch up with their friends and talk about how they can help each other out. I also think our 'up or out' approach helps. We really like to push people into the deep end, not knowing if they can swim or not. You just grow faster that way.
Has the sort of talent you seek out changed in recent years? If so, how?
Definitely. For one thing, we've shifted away from just hiring MBAs. When I joined McKinsey in 1986, I was one of the very first non-MBA hires. Obviously, MBAs are still our core in terms of human capital, but today the ratio is about one-to-three for advanced degrees of varying types vs MBAs. We hire about 30 to 40 doctors per year, lots of lawyers and nurses, to name a few.
We're also hiring more experienced people than ever before. Of the 2,200 people we hire each year, around 400 have significant past professional experience. That's a pretty big shift for a company whose traditional approach has been to bring in brand-new graduates. These experienced hires have things like heavy-duty data analytics capabilities and restructuring expertise. Some of them have already turned around companies. For example, we hired one guy with 20 years of experience in operational leadership at places like Motorola and Sears, sort of 'distress' situations.
We're also trying to use technology more in our hiring. We've put some anonymous games out there for people to try, without the McKinsey name on them. When someone does particularly well, we contact them and say, 'We'd be interested in talking to you.' We are very aware that there's a lot of talent in places like India and Indonesia that do not know us, and we want to attract them.
Today's top talent doesn't necessarily want to work a 70-hour work week. Describe your moves to embrace work-life balance for your associates in recent years.
About three years ago, we did a strategy effort on ourselves, to explore what types of services we should be providing and how best to deliver them. As part of this, we turned the spotlight on our people and their needs, and, not surprisingly, we found that a balanced lifestyle was very important to them. They also told us that the nine-to-five schedule is a thing of the past, and that they wanted flexibility. As a result, we've introduced 'flexible work options'. Our people aren't measured by the clock - no one pays attention to what time you come in or what time you leave; instead, you are measured on whether or not you deliver on what you said you would do.
By Karen Christensen, editor, Rotman Management. Reprinted, with permission, from Rotman Management, the magazine of the University of Toronto's Rotman School of Management. www.rotman. utoronto .ca/ rotmanmag THE THOUGHT LEADER
- In his 28 years with McKinsey & Co, Barton has advised clients in a range of industries, including banking and consumer goods. Prior to his current role, he was based in Shanghai as McKinsey's Asia chairman from 2004 to 2009 and led the Korea office from 2000 to 2004
- He has authored more than 80 articles and is a co-author of Dangerous Markets: Managing in Financial Crises (Wiley, 2002). His most recent book is China Vignettes: An Inside Look at China (Talisman, 2007)