McKinsey & Co. are supposed to know it all. They’re business consultants who travel the world and charge corporations top dollar to help them run with state-of-the-art efficiency. McKinsey gets called in when things are good (time to expand!) or, like now, bad (to give bosses cover to make bloody-minded decisions). Known as “the Firm,” McKinsey has consultants in 90 offices in 50 countries. They hire the best-credentialed people, and they pay them well. By their own count, they serve 80 of the Fortune 100, though who, precisely, retains them, they try to keep confidential. Last week, they were hired to try to fix the fabulously free-spending Condé Nast.
The firm was founded in 1926 by James O. McKinsey. Born in 1889 and raised in a three-room house in the Ozarks, the ambitious McKinsey was a professor and consultant, and an early practitioner of the principles of “scientific management,” or the detailed study of work flow and the division of labor. The company not only survived the Depression, it thrived, until the untimely death of McKinsey in 1937. His disciple Marvin Bower took the firm to consulting glory over the next 30 years, in part through an obsession with being “professional”—in appearance, tone, and conduct. Bower once forbade all junior consultants from wearing argyle socks because he thought they would distract clients. And the firm’s consultants were required to wear fedoras until President Kennedy stopped wearing them.
McKinsey is brought in to let companies in on the latest in global management fads (a few years back, McKinsey reportedly evangelized about “the war for talent,” which meant “promote stars,” even if they don’t have experience), or to target workers for layoffs (e.g., “streamlining,” “downsizing”). McKinsey consultants Tom Peters and Robert Waterman pretty much invented the notion of “corporate culture” in their book In Search of Excellence, which sold 6 million copies.
McKinsey hired its first Harvard M.B.A. in 1953 and continues to cherry-pick from the school’s Baker Scholars—the top 5 percent of the graduating class. At one point, more than a third of the firm’s consultants held a Harvard M.B.A.
Mayor Bloomberg has used McKinsey repeatedly since he’s been in office. Sometimes McKinsey did it for free (troubleshooting the Police and Fire Departments’ responses to 9/11) and sometimes for pay (a report on how the city could stand its ground in high finance against London). The Department of Education has also used them, and PlaNYC was based on McKinsey data-crunching.
McKinsey took heat for its closeness to Enron, which the consulting firm had advised for eighteen years. Former Enron CEO Jeff Skilling was a McKinsey alumnus, and consultants had endorsed Enron’s “asset-light” strategy; it was reportedly very much in thrall to the “war for talent” theories, too.
McKinsey reportedly earned $96 million from AT&T between 1989 and 1996, including $30 million in 1992 alone.
More CEOs of Fortune 500 companies have been McKinsey alumni than from anywhere else, including Lou Gerstner (IBM, Carlyle Group), Harvey Golub (American Express, Campbell Soup), and Michael Jordan (Westinghouse). Louisiana governor and Republican in a hurry Bobby Jindal? He’s McKinsey, too. McKinsey alumna Nancy Killefer is Obama’s “chief performance officer.” The firm has 19,000 alumni around the world.
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A 2008 study by USA Today calculated that the odds of a McKinsey employee’s becoming CEO at a public company were the best in the world, at 1 in 690.