When businessmen talk to McKinsey partners, the high priests of management consulting, it's as if Catholics would confess. They reveal everything. They expect confidentiality. And whether or not it changes behavior, the act itself is good for the soul. In this age of corporate unrest, from the next recession to climate change, executives are lining up in the confessional. But McKinsey also has something to do to search for souls. Its industry, estimated at $ 300 billion, is, like its customers, being transformed. And as its most revered – and airtight – standard bearer, it is under more scrutiny than ever.
Kevin Sneader, who took over as Global Managing Partner last year, has a lot to offer. The last few years have been uncomfortable. Until a decade ago, no McKinseyite had been prosecuted for securities law violations. In 2012, his former managing partner, Rajat Gupta, was convicted of insider trading after he left the company. So in 2016, McKinsey got involved in a scandal in South Africa after working with Trillian, a local consulting firm owned by a controversial Gupta family member (unrelated to Mr. Gupta). Sneader apologized repeatedly.
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More recently, it has faced allegations that its work on behalf of bankrupt companies in the United States represents a conflict of interest because its $ 12.7 billion investment affiliate, McKinsey Investment Office (MIO), may invest in related securities. to bankruptcy. He denies the allegations, saying that MIO is a separate entity whose investments are controlled almost entirely by outside investment managers. Jay Alix, the founder of AlixPartners, a bankruptcy veteran, tried to drag McKinsey through the courts. He claims that his alleged lack of disclosure should prevent him from working in bankruptcy. So far, the judges have filed four of the five cases, claiming that Alix had no standing to pursue them. In August, a federal judge made another complaint by Alix that McKinsey had violated the extortion laws. In a remaining case involving the bankruptcy of Westmoreland Coal, a Texas judge set a trial date in February to rule on the dispute.
McKinsey says Alix is embroiled in a revenge aimed at stifling competition. Alix, whose litigious investment firm, Mar-Bow Value Partners, is misnamed by Marvin Bower, one of McKinsey's founding fathers, says he is struggling to defend the integrity of the bankruptcy system. But the saga is unfortunate for McKinsey, even if it's fully justified. The bankruptcy business is not lucrative. McKinsey says it gets bankrupt just because its customers ask for it. He has worked in only 15 cases since the beginning of his restructuring practice in 2001. But it is understandable that Mr. Alix is heavily armed with the business. This has made this an unusual public dispute for a company that stands out for its discretion.
It is possible to think of these controversies as punctual. McKinsey can win the remaining bankruptcy trials. Both scandals can be explained as the work of unauthorized operators. But they talk bigger questions about the scope and mission of the company that Sneader must deal with. McKinsey has grown rapidly. Partners now total 2,200, compared to 1,250 a decade ago, and employ 30,000 people worldwide, compared with 17,000 in 2009. Many of them are different from past management graduates. He has diversified into new lines of business and some of his most valuable work is now outside of America. As the company became larger and more complex, it became harder to manage.
To complicate matters further, management consulting itself is also changing. Six years ago, Clayton Christensen of Harvard Business School warned that it was an "on the brink of rupture" industry. Now this interruption is in full swing. According to Tom Rodenhauser of ALM Intelligence, which analyzes the industry, customers no longer want to hire just legions of people, no matter how smart. They want consultants to supply and install products, including new technologies, that transform them from top to bottom and keep switches at bay. Strategy advice, which used to be meat and potatoes for companies like McKinsey and its peers, Bain and the Boston Consulting Group (BCG), is now a dish; represents about one tenth of the revenue.
Sneader could keep things running as they are, at least for a while. Customers ignored the media attention. McKinsey's revenue has grown in recent years to approximately $ 10 billion. And the company still attracts armies of aspiring candidates – last year 800,000 applied for 8,000 jobs. But he is making changes. McKinsey says it "is dealing with the changing landscape, internally and externally." Partly in response to the South African disaster, its customer selection standards and processes have been improved. Partners are discouraged from working for undemocratic governments.
McKinsey has also made technology advice more essential to your business. He worked with 1,200 companies on digital and analytical issues last year. It creates and sells tools for companies to use in their business, which generates new sources of recurring revenue. And it has bought a dozen companies since 2011, including QuantumBlack, a British startup that has developed advanced data analytics for Formula One. However, industry observers say McKinsey is often outdone by Big Four technology offerings, as well as by companies like Accenture.
Sneader must go further: it means getting slimmer by abandoning activities, customers and teams that cause more headaches than money and investing in technology. This is where McKinsey can have a secret weapon – their partnership, perfected for 93 years. It is not a listed company, so it faces less pressure to increase profits in the short term. And with luck, the priesthood has not yet become so broad that it has lost its sense of its values. Whisper it in the box of confessions: McKinsey must shrink its path to greatness. ■