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The Firm: The Story of McKinsey and Its Secret Influence on American Business by Duff McDonald

1.       The Firm: The Story of McKinsey and Its Secret Influence on American Business by Duff McDonald

a.       Recommended if you’re interested in consulting.

b.      How I chose it: I wanted to learn more about consulting because a significant fraction of students attending Ivy League universities end up working in consulting. And McKinsey is the most prestigious consulting organization. I wanted to know what the work was like, what the people who do it are like, where the people do it end up, and how useful it is. Also, I’ve heard that consultants are generalists, and I wondered how useful these generalists are. This was the most relevant book I could find on this subject on Audible.

c.       What it’s about: It’s a history of McKinsey from its founding in 1926 to the insider trading conviction of Rajat Gupta in 2012.

d.      What I got out of it: It has some information about advancement in McKinsey, suggesting that most new consultants move on after a few years, only 1 in 6 stay for 5 years, and a very small portion stay in the firm for 10 years or more. Perhaps the most interesting thing was the absence of achievements that really turned companies around or McKinsey playing a role in innovations that really did much good. I’ve been reading a lot about the history of science and Silicon Valley, and there’s a very strong qualitative sense that people in these areas are doing a lot more for the world. Finally, McDonald is pretty skeptical of the value of McKinsey’s generalists, arguing that while the firm prizes generalists and frameworks, more specialist approaches to consulting have been in greater demand.

 

It’s possible to view McKinsey as a kind of “industrial espionage.” McKinsey gets to see your business practices, and you get to hear about business practices of other companies. (Chapter 1, 9:38)

McKinsey people value generalists, and like to think of themselves as generalists. McKinsey has a practice of “value billing,” where they charge clients for what they deem their services to be worth. This can come up even for large billings, such as $10M. (Chapter 3, 34:00)

Why do people work at McKinsey? The people they hire are driven by a desire for status and fear of failing. McKinsey makes it very easy for people who don’t know what they want to do with their lives and keep their options open. (Chapter 4, 42:00)

Most young consultants stay at McKinsey for only a few years. Only 1 in 6 consultants stay at the firm for 5 years or more. This is partly due to the firm’s “up or out” policy. (Chapter 4, 46:00)

At a presentation on the future of McKinsey, “the presenters joked that in 10 years or so, only 1% of those in the room would still be with the firm.” [Based on writing from Matthew Stuart [sp?].] The opportunity to become a partner only comes after about 8 years of work. At McKinsey, people get promoted from Associate to Principal on the basis of their ability to analyze and present data, and then on the basis of one’s ability to promote the firm (sales ability). (Chapter 4, 48:00)

“Former McKinsey consultant Mike Allen argued that McKinsey’s work at General Electric laid the groundwork for Jack Welch’s acclaimed career. “‘Without McKinsey, you would not have had an organization that worked,’ said Allen. ‘You have had no strategic planning or organizational structure to work with. We helped put him on the map. It was the high point of our interaction with GE, from a creative Standpoint.’”  (Chapter 5, 33:30)

Marvin Bower and other McKinsey people thought they were a bulwark against communism during the Cold War. (Chapter 5, 53:30)

Only 1 in 5 associates became a principal, and only half of those who made principal became directors. This was during the Fred Gluck era, 1988-1994. (Chapter 8, 33:00)

“Just what have the consultants done? Ask McKinsey about the greatest piece of advice that the firm ever gave? […] the answer will be wholly unsatisfying. There are no legendary consulting engagements at the firm. There are only legendary client relationships.” (Chapter 13, 16:00)

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