McKinsey Exists Because CEOs Are Cowards

We don’t blame Pete Buttigieg for anything he may have dome while in their employ, we blame the people who hired the firm in the first place

“Mayor Pete” at a rally in New Hampshire Sunday. He’s been slammed for work he once did for the consulting company, McKinsey. And it’s stuck.

And for that same reason we take exception to a rather lengthy piece from the Atlantic entitled: “How McKinsey Destroyed the Middle Class“. Because no: McKinsey, the consulting firm that’s in the employ of 90 of the world’s 100 largest corporations didn’t destroy the middle class. CEOs did it themselves. Willingly. Willfully. Often with no obvious objective than accelerating their ascent into the high reaches of the 1%.

McKinsey, in exchange for huge fees, was gladly willing to take the blame and be the scapegoat for downsizing and finding efficiencies, which both really most of the time mean mass firings. Of course McKinsey can choose who they work for, and what they do for them, and they definitely made some questionable decisions and choices. But blaming McKinsey for the decline of the middle class in this country is like blaming the executioner for Anne Boleyn’s death, not King Henry.

We’ve worked in a number of places where we were told McKinsey was being brought in to “look at things”. We always knew even before they set foot in the door that would mean layoffs. Also, even before McKinsey set a foot in the door, almost everyone inside the company would’ve been able to predict with a high degree of accuracy just who was going to be fired and from which units or projects. Usually it boiled down to one of three things:

  1. Areas that were underperforming and/or the company had not really supported whole-heartedly with the best resources in the first place.
  2. Areas that were redundant. Almost all successful companies have redundancies: that is, different people performing the same functions in different units. It’s sometimes almost a credit to a company’s booming fortunes that this kind of thing invariably happens; a side effect of robust growth. Again, most people inside the company already know where these redundancies exist, because it also invariably becomes a source of frustration. Redundancies are also created at successful business when they go out and start buying up smaller rivals, or companies that were not direct potential competitors, but in tangentially affiliated businesses. One would think the inclination of a CEO would be to keep their original crew because they were the ones responsible for helping the company achieve so much success in the first place that now they’re able to go and swallow up their rivals. But McKinsey can and does give the CEO cover to take a different decision: keep whomever is cheaper. This happens all the time. Based on the recommendation of a consultant—usually McKinsey—a lot of the people central to the company’s prosperity up to that point are fired, and the people in an acquired company are kept on, because they are cheaper, even though a CEO has little first-hand knowledge of their abilities. But it looks good to shareholders, and that CEO can say McKinsey says it’ll be better.
  3. Areas that were so specific and required such as specialized and deep knowledge that we knew as smart as McKinsey people might be, they’d never be able to figure out. (And nor, in most cases, could the CEOs.)

We’ve seen and heard firsthand McKinsey consultants being accused of not having sufficient imagination to even begin to understand the potential value of something that is truly new. While we do acknowledge their employees have increasingly specialized knowledge, they’re not really equipped with or that interested in having the ability to assess products or project with no existing basis for comparison in the outside world. Even more simply put: they’re not in the imagination business.

So we’re more willing to accuse McKinsey of being innovation killers than job killers, because those jobs would’ve been gone anyway, but at least in that latter case, they slowed the pace of innovation. But that’s based on our own personal anecdotal experience. So we acknowledge we’re biased on that part of it.

So let’s get back to the part where our top managers decided to pay McKinsey millions of dollars to do studies and reviews which reached the conclusion that people should be fired who we all knew were the people who were going to be fired anyway, because we all knew that’s who the top managers wanted to fire in the first place. And we always wondered, wouldn’t those millions be better spent on severance packages and taking care of the folks who were being let go, than enriching some already very rich outsiders?

From the perspective of top management, guess not. McKinsey gave them cover. Gave them deniability. Gave them a scapegoat. “I don’t want to fire you, but McKinsey says we have to to keep the company growing”.

That’s the whole secret to the consulting firm’s success. They’re not out to rip the hearts out of middle management. They’re also not out not to. They’re there to do the analysis that validates multiple job killings that the people running the companies intended to do anyway but needed to make look necessary, not cruel and unreasonable. And McKinsey is happy to take on the weight of being viewed as cruel and unreasonable too. Because then they leave. And because it’s actually a good selling point to the next CEO at their next job.

And then those top execs who remain behind–in our view, the real perpetrators–more often than not reap financial benefits from increasing efficiency either in the form of bonuses or increasing stock prices. In that sense, the Atlantic’s right: a lot of CEOs got fat off of McKinsey.

So don’t blame Mayor Pete (whom we don’t support, BTW). Blame the CEOs who hired him.