New book 'When McKinsey Comes to Town' illuminates consultancy's work
A new book from New York Times journalists Walt Bogdanich and Michael Forsythe – “When McKinsey Comes to Town: The Hidden Influence of the World’s Most Powerful Consulting Firm” – examines the influence and controversies the consultancy has racked up while chasing profits at any cost.
The book catalogues how McKinsey helped shape our present circumstances (rapidly heightening inequality, heating up the Earth, etc.) while taking on seemingly any job, provided their handsome fees are paid in full.
Resting at the core of both the modern corporation and McKinsey is a responsibility to shareholders, which essentially boils down to profits above else (despite the current PR blitz on CSR and shifting corporate values). McKinsey were and remain the smartest guys in the room – picking only the most promising MBAs who inevitably go on to do big things, like Sheryl Sandberg or Pete Buttigieg. But the advice they are giving is not, historically at least, how to build a more equitable and compassionate society – it’s just the best way to maximize profits for shareholders. And if McKinsey didn’t give the corporate executives what they wanted, then it would be difficult to maximize profits for their own shareholders – the partners.
The book charts a similar insidious influence on American society as the one described in Daniel Markovits’ article in The Atlantic: “How McKinsey Destroyed the Middle Class.”
In a mid-century study published in the Harvard Business Review, McKinsey’s Arch Patton found that from 1939 to 1950, hourly workers’ wages rose roughly three times faster than elite executives’ pay. This was a function of the growth of middle management and the strengthening of unions, which compressed the distribution of wealth and status.
In subsequent decades McKinsey would advise on downsizing and offshoring, which would liquidate middle management (and conversely balloon executive salaries and secure future work for McKinsey technocrats) while also crushing the domestic industrial base of unions.
The book notes how in the 1990s the firm advised American clients to ship jobs to cheaper, foreign countries such as India, where McKinsey was also advising major outsourcing firms like Infosys. The firm in the 2000s advised Walmart to boost profitability via increasing part-time employment, depressing salaries and health plan costs, and reducing contributions to employee 401(k)s.
But in terms of the 1980s-present Friedman-Reagan-fueled destruction of the middle class, McKinsey was simply telling clients like AT&T and GE the best way to do what they already wanted to do (maximize profits). Companies would presumably have otherwise hired BCG or Bain to help them do their dirty work. Corporations were never going to hire an angel to sit on their shoulders and whisper to them how to build a more robust benefits package to retain lifetime workers and look after the needs of the community. McKinsey were the executioners, but up until recently they were able to wear their hoods.
Bogdanich and Forsythe go in depth on the firm’s various engagements for seemingly any well-resourced client throughout the years – which McKinsey famously prefers to keep secret. Chapters delve into McKinsey’s work for opioid manufacturers, tobacco firms, and its role at the center of a massive South African government corruption scandal, among others.
McKinsey The Good
Maintained throughout the controversies which have bubbled to the surface in the last several years is a strident defiance (at least partially for legal reasons): that McKinsey's social media advice In Saudi Arabia was misused, that the work they did had nothing to do with arms manufacturing in Russia, that no wrongdoing was admitted in the settlement with US state governments over its role in the opioid crisis, and that the firm is reforming ethically questionable organizations from the inside.
One of the more irritating facets of McKinsey is its attempts to brand itself as a force for good, both internally and externally. The firm has recently been telling its bright-eyed Gen Z Ivy League business school recruits that they will be tackling issues like climate change and poverty.
Goldman Sachs – the other top-tier suitor for those business graduates – puts on less of a performance. As one grad said in the book, “There was never ever, ever an attempt to be anything other than what they were — ‘We are the sharks and that’s why we are the best and everyone wants to work here because we are the sharks. And that’s refreshing. No one was lying to themselves at night.”
There is a strange sort of of dignity in owning one's actions and being honest about one's character, as in Goldman Sach's corporate culture.
Is it morally wrong to complete management consulting work for opioid manufacturers, Russian defense conglomerates, Chinese state communications companies, the Saudi Arabian government, and ICE? Probably, sure. That’s why more ethically minded younger consultants put up a fuss about it (ICE specifically).
McKinsey doesn’t like its work being exposed to the light, however. Preferring to dwell in the shadows, the company recoils from publicity (almost entirely negative, aside from its own efforts to change the narrative through signal-boosting its corporate social responsibility program).
That’s why such a book is important – because it helps illuminate that which McKinsey prefers to keep secret – its clients, its work. There can be no public scrutiny of secrets well-kept.
First of all, how dare you
McKinsey addressed Bogdanich and Forsythe’s new book in a press release on its website. The firm says the book “fundamentally misrepresents our firm and our work.” McKinsey then lists all the noble work it is executing, including helping deploy Covid-19 vaccines and decarbonizing power generation (for which, it should be noted, the firm is handsomely compensated).
McKinsey also highlights that it “apologized” for its “past work on opioids” and was the first company to work with the US state attorneys general to help communities affected by the opioid crisis – which, of course, it helped fuel with its trailblazing marketing advice.
McKinsey complains that Bogdanich and Forsythe didn’t highlight any of the firm’s extensive changes in the last several years, including a more than $600-million investment to upgrade legal, risk, and compliance capabilities. The firm also says it now follows “a global client selection policy more rigorous than any other in our industry.”
“As we approach our firm’s second century, we aim to set the standard for accountability and compliance in our profession, and we welcome good-faith criticism or advice for how we can do better,” the New York-headquartered consultancy said. “We will not, however, let fear of criticism stop us from undertaking work that we believe makes a positive difference.”
That’s right, NYTimes reporters. McKinsey will continue to do good in the world and you can’t stop it.
