How McKinsey Became One Of The Most Powerful Companies In The World

From boardrooms to the
White House and beyond McKinsey’s influence in
business is virtually unparalleled. It is quite possibly
the most influential private institution on
the planet. An organization has a problem that they cannot solve with their
internal resources. That’s the most classic
way that McKinsey is brought in. I have had a
lot of exposure to firms with a high
opinion of themselves. McKinsey takes the cake. Its alumni control some of
the largest and most powerful companies in
the world. And have also been involved
in some of corporate America’s Most
Sensational scandals. Now is the company having
a moment of reckoning? One of the world’s
most storied and respected management consulting firms is
finding itself in the subject of
critical media scrutiny. Or will it somehow
continue to fly below the radar? McKinsey was founded in
1926 by James O McKinsey. He was a professor at
the University of Chicago and an expert
in management accounting. The firm began
advising companies locally and slowly opening up
offices in major urban hubs around the country. By the 1950s the firm
was assisting the White House with staffing
organization which according to the company would lead
to the creation of the chief of staff role. In 1970 McKinsey
helped create the barcode. Yes. That barcode with
the uniform grocery product Code Council. It’s all about solving
the most pressing and complicated business
problems. First of all you know people
who go to work for McKinsey tend to be elite individuals in terms
of their intellectual ability
business acumen drive ability to
think creatively. Plenty of people have said
you know going to McKinsey is like getting the PHD on
top of your MBA but in a much more
polite way than an academic way. The company touts more than
30 Rhodes Scholars on its staff and at
least six Olympians. The way I sketch it
out in the book there are three
main ingredients. Fact based hypothesis
driven and structured it’s not so
much what the specific structure is but the
fact that there is a structure and it’s
logical and coherent. And it drives the problem solving
process in terms of what is
the problem? How do we scope it out
break it into its constituent elements go about
getting the data? All the way down to how
do we then present it to the client in a
way that will enable them to
implement the changes that McKinsey might
be recommending. The experience the tools and the way to think
to try to bring this information. These questions these data
that we were gathering to a level shots that you can
draw a conclusion. And I think at McKinsey what
you learn is to be able to move really
up and down. Up and down the hierarchy
up and down the problems up and down the
levels of thinking. And I think this
is extremely different when you compete with the
people who didn’t have the chance to go
through this experience. Mckinsey is not the
only firm offering consulting services
like these. It has serious competition
like Bain and Company and The Boston
Consulting Group. But out of the Big
Three as they’re called McKinsey is the leader
when it comes to management consulting revenues
according to ALM intelligence. They’re still quite prominent
from a revenue standpoint they’re also
on that temptation standpoint but
when you really look at consulting today they’re not as prominent
as the big four accounting firms. Deloitte TWC and Eli and KPMG
they’re actually the largest consulting firms but
of course it’s also about who you know. Certainly when I
was there McKinsey was famous
for having decades long relationships with
any number of Fortune 500 companies. They were on tap for the senior executives. You always think with
McKinsey about strategy but you work
with people which later I used
to that Solar Impulse Solar Impulse
was a project which was
considered impossible by the. But the aviation
industry we wanted to be an airplane
which was bigger than a 747 in terms of
wingspan but the weight of a car and I got out of my time
at McKinsey essentially working with teams the
way to were to organize these people and
to make them understand where they would go all
they could go there and deep look
through right empowerment. There’s no point not
to hire McKinsey if you can afford it
because it’s a SWAT team of analysts that
is at your beck and call. They traffic and
influence industry intelligence helping
executives make a decision I’ve
already made by backfilling a report. It’s basically a firm that
will come into the office and say What do
you want us to do. The nature of the role
does not necessarily make the consultants at McKinsey
the most popular people. Their job is
to help organizations become as efficient and
effective as possible and to complete their
own missions. It is simply a fact
of life it’s not necessarily pleasant and that’s
why sometimes when consultants whether it’s McKinsey
or anybody else comes in they
can be viewed not particularly favorably
by the people in the
organization themselves. Certainly it was part
of my experience. In many ways it’s management
bringing them in to do it so they
don’t have to. The people who work there
they do very well. They don’t get. They don’t make hedge
fund money but they’re making more than most of
the people you know. Nobody brings McKinsey in because they’ve got
the world in their hands. And the firm gets
paid handsomely for its services. Generally the fee
rates are closely guarded and they are
all over the map and at the same
time they can be quite well known. The government naturally
publishes the fee rates for McKinsey
and others. You know the inside
joke in the industry is you hire
McKinsey and it’s two hundred fifty thousand dollars
a week for a team. However consulting pay
structures have evolved. Alternative fee
structures. Results based fees for taking
a stake in the client an equity stake. Something like that. It’s very attractive
for clients when they hear that they pay
a smaller upfront fee. It’s also a way to get
more bang out of the project than just the
straight time and materials. The forces that McKinsey
stands for which are efficiency and
rationality. It’s hard to have a
problem with those on their face you know who
votes for inefficiency but I think that
we have to decide what our values are
what do we want as a people and is efficiency our
top priority? Perhaps even more infamous
than the company’s work itself is its
alumni network. Many years after I left McKinsey I was still
talking about we and not about they people
that have worked at McKinsey run the gamut
of corporate leadership. Big names include the likes
of Sundar Pichai the CEO of Google James
Gorman CEO of Morgan Stanley Jørgen
Vig Knudstorp chairman and former CEO
of The Lego Group and Sheryl Sandberg the
chief operating officer of Facebook. Yeah McKinsey is
everywhere and they have built
a machine that sort of the alumni interaction with
the with the current firm sort of feeds
itself in a constant virtuous circle of
fees and engagements. It’s kind of
stunning to behold. And the influence
extends into politics. Republican Senators Tom Cotton
and Ben Sasse have both either worked
for or advised McKinsey briefly. Chelsea Clinton also did a
stint with the firm. As did Susan Rice
Obama’s national security adviser. And Democratic mayor of
South Bend Indiana Pete Buttigieg who’s running
for president. McKinsey is a private
company so it doesn’t regularly disclose sales
or profits. It’s even impossible to find
a complete list of their clients. Although McKinsey told CNBC
that it serves more than 90 of the
top 100 companies worldwide. Duff McDonald lists
AT&T General Motors and IBM just
to name a few. He also reports praise from
Jamie Dimon CEO of JP Morgan Chase – all
in his book the firm. This is a firm that has a historical policy of not disclosing anything about
what they do to anybody. One of the most difficult
things to find is satisfied McKinsey clients
because what McKinsey does that it sells
credit for its ideas. If you’re the CEO of a
company and hire them you don’t want them running
around saying we told them to make that
acquisition that was us. That was us. They take no credit and
they take no blame. That is also a brilliant
part of their business model. For years they claim
they were only in the advice business and what
their clients did with their advice was
up to them. I think that’s a
little less defensible than they’d like you to think. And the company’s alumni have
had ties to some major recent
corporate scandals. Good evening. The stunning collapse
of Enron. The main question Did
Enron illegally conceal hundreds of millions of dollars
in debt that it racked up from outside
investments making it appear more profitable than
it actually was. Jeff Skilling was briefly
the CEO of Enron during the company’s fall
from grace spent 12 years in prison. He worked at McKinsey for
more than a decade. Reports at the time
confirmed Enron was McKinsey’s client for years. The Wall Street Journal
called the firm instrumental in the
energy companies transformation. A major insider trading
case getting under way today and Bertha Coombs is
live in New York City as Rajat Gupta goes
on trial in a separate scandal. Rajat Gupta who was
convicted of insider trading in 2012 was a
managing director at McKinsey from 1994 to 2003. More recently pharmaceutical
company Valent was one of the hottest
stocks from 2012 to 2015 before it lost more than
90 percent of its value in an accounting and
price gouging scandal. What you’re seeing in
this stock is mass abandonment of
this story. Now it already was done in
this was a $240 dollar stock six months ago. Its CEO Michael Pearson
was a McKinsey consultant for more
than 20 years. Mr. Pearson began begin
with their testimony. Valeant was too aggressive
and I as its leader was
also too aggressive. As a company McKinsey
was not legally implicated in any
of these scandals. Mckinsey’s global footprint
is expanding. It tells CNBC it’s
in 133 cities across 66 countries around
the world with about 17000 consultants. While 75 percent of the
firm’s business was in what they call core
management consulting 15 years ago, today it’s only about
a quarter of their business as McKinsey
is expanding into technology data
analytics and visualization artificial
intelligence and industrial design. You bring into McKinsey
because they are change agents. Think about it this way. Consultants are the least been
one step ahead of their clients. That’s how they sold
themselves more and more companies are saying well
you don’t really need consultants to help us
in the big picture. We need them
in just very tactical little areas and those
kinds of projects are not the kind
that can sustain organizations the size
of McKinsey. You got to
feed the beast. And that’s that’s why they
got to change their business. They are everywhere
in D.C. and abroad also you
know McKinsey is very influential in
Western Europe. They have been for
half a century. Whether that’s Englander in
Germany or elsewhere. But also some recent
New York Times reporting has shown that
they are very involved with China. A lot of state
owned enterprises Saudi Arabia. South Africa is
a great example. There the company was
ensnared in a government corruption scandal. McKinsey repaid about 74
million dollars in fees and while not
admitting legal wrongdoing has apologized for its
involvement in global managing partner Kevin
Sneader told CNBC Africa. I think we’ve learned many
lessons from this saga not the least of which is
when you make a mistake it’s best to say sorry
quickly and clearly and then take steps to ensure
you don’t repeat the errors. And so the second thing
we’re doing is really looking hard at
what went wrong. And then on the back
of that we’ve already started to make a number
of changes to how we serve clients. The oversight the risk
policies the kind of clients we serve and
more importantly the partners that we choose
to do client service with. We really know much
more digging into the backgrounds of those who are
not just going to accept at face value
what people tell us. You know McKinsey is an
institution that is built on trust. Everybody is supposed
to trust it. Its clients are supposed
to trust securities regulators are supposed
to trust. The public is supposed
to trust it. And increasingly
we’ve seen different instances where that
trust may appear to have been misplaced. This is a firm that could
be a seedbed of all manner of potential
conflicts of interest. We’re supposed to trust
that they manage them properly. It may be
that they’re so big now that that
is almost an impossible task. The New York Times reported
in early 2019 that McKinsey runs a
multi-billion dollar hedge fund that may have a
stake in the outcome of some of the corporate
restructurings the company consults on including their
work trying to turnaround the public finances
of Puerto Rico. This has opened up questions
about what needs to be disclosed by the
company in bankruptcy court. McKinsey called the New
York Times report quote fundamentally misleading and
said the assertion of a conflict
of interest between our consulting activity and
MIO the company’s investment wing is wrong. Specifically on Puerto Rico
the company insists there was no information
sharing between its consultants and its fund. And it pointed to
an independent report commissioned by Puerto Rico’s
oversight board to backup its position. Overall I think they
have maintained their quality and for the most part and you can
always point to the failings of an organization
you know but they mostly maintain their
integrity and they’ve maintained their relationships
long term with major industrial companies
and financial companies while trying as
much as possible to move into space spaces
filled by new industries. Will McKinsey’s secretive
behind the scenes business model persist in
this more transparent world of the
digital economy. Only time will tell. One of the first articles
that covered us when I joined the firm was
the McKinsey mystique. I think there is a
period of time when mystique was a good thing. Mystique is not a
good thing anymore. People don’t like secrecy
and we have to change with that.

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100 thoughts on “How McKinsey Became One Of The Most Powerful Companies In The World

  1. Their alumni network must be phenomenal if they were able to get Robert De Niro'a european brother to work for them

  2. It’s a brilliant organization! Never met a single person who has worked with them and didn’t like it! Love this place!

  3. How about the sick corrutption MckINSEY pulled in South Africa. Are you guys trying to make them sound good?

  4. When McKinsey and Goldman Sachs working togehter, nothing good is gonna happen,for normal middleclass 😢

  5. Literally everyone I've met that's boasted working at McKinsey is an out of touch moron. They outsource to vendors who actually know what they're doing. Modern McKinsey does nothing but play with old world money and rely on existing fortune 500 connections.

  6. Watched the whole video… But still don't know exactly what the heck McKinsey does?!

    Can someone comment in plain English what exactly they do?

  7. Over hyped co . If u avail their services , Initial engagement will be done by best qualified and experienced guys . As time proceeds , these guys will be replaced by bunch of freshers ..Their engagement managers are intelligent guys .They charge a bomb as well ..

  8. Here is the thing. Strategy has changed, worlds have changed. With AI and machine learning, coming in, the pie is certainly moving elsewhere.

  9. Greetings from Germany. Where McKinsey is more influental in the military than the actual defense minister.

  10. What McKinsey did over the years is it has built Cos from Scratch and taken them to the Top

    But today it has got Good competition and also the economy not doing so good globally is Harming thier revenues seriously

    There are ways it can make more money and get on top

    So if anyone from McKinsey is reading this comment to make your Revenue Stream Grow and Make more and More money please do Contact us we will give you the best Advise for the Business you are in

  11. If they are such an elite company, how did they completely flub their consulting for the New York Knicks by giving them such "advice" as to not even look at game film? No team does what McKinsey told the Knicks to do, even at the college or high school level:

  12. People and corporations cannot sustain productivity, relevance and increasing rates of profits forever.

    Why should we be surprised that there is always something underhanded or in conflict with public interest, in all organisations peopled with entrenched interests ?

  13. Two words: pompous prats!

    We don't need these sons of b*tches What we need is a hardworking humble workforce in this planet. Compassionate, broad minded, socially aware and ethical while learning to be intelligent.

    These people has paved the way for people like at Lehman brothers in the shadows which duped and killed many people. Selfish. They are like the humping fox traitors poisoning world's societies.

    We do not need people who are not genuine and "all business". Not everything can be solved by straight solutions and "crunching the numbers"

  14. They took over a billion rand and they didn't even solve half the solution like what reputation are you guys talking about…

  15. Core management consulting, technology, data analytics and visualization, artificial intelligence, industrial design

  16. Being relared to delinquent activity of such big companies trust them for advice is very suspicious a lot of people has been affected and they say we only adivice didn't do anything wrong yeah right guilty for sure

  17. I know so many college students salivating over a BA role at McKinsey for the prestiege (meaningless) and high salary (actually relatively low when converted to hourly). It's very sad. McKinsey and similar firms hire these "insecure overacheivers" (their words) and the positions, little more than PowerPoint and Excel grunts, cause these people to waste what could've been wonderful years in one's early 20's.

    Please consider jobs other than those in consulting and IB/PE.

  18. So to fix their reputation they teamed up with the Trump administration to advise them that cutting food and health for people in migrant detention camps would save money. Yeah real pro team they have over there.

  19. All of the most pathologic people in my med school class; the kids who only wanted to tell people they got into med school or that they were doctors, rather than actually do the work, were poached by recruiters to try out for consulting groups like BCG and McKinsey. I don't have much respect for their line of work, no matter how much money they make or travel they do.

  20. McKinsey is trash. Led by morons and propogated by idiots who buy into their philosophy. Had them at a place I worked at and they put in the most half assed effort I've ever seen. They will claim a lot, but offer little in substance.



    They don't just give advice to private companies most of their clients are government.

  22. Love how this randomly pops up since I like a certain mayor whos running who had his first job for 3 years after college the algorithm really working hard i see

  23. The answer to your problem is downsizing. Now pay me. McKinsey's recommendation just provides the excuse for cowardly Management to fire their employees.

  24. When the proposition is that they will guarantee X revenue for Y investment, and X is a positive number, I'm in. And, I wish I had enough to bring their knowledge to bear for my own concern.

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