This non-fiction book, written by Walt Bogdanich and Michael Forsyth, two New York Times reporters, offers an unflattering view of McKinsey & Company, reputedly the most influential consulting firm in the world. It paints a picture of a secretive firm that pursues profit at all costs, wins contracts by influencing individuals in key institutional positions and recommends actions that are detrimental to the larger society.
When McKinsey Comes to Town: The Hidden Influence of the World’s most Powerful Consulting Firm, is positioned as ‘an explosive, deeply reported exposé’ of McKinsey. It largely lives up to that billing as it makes for compelling reading, at least in parts. Much of what is said here would probably not come as a surprise to those who are familiar with the consulting industry. But for those who are not, there is many a revelation here between the covers.
How much of the contents of this book you accept and how much you don’t is entirely your prerogative. But a quick scan of the web suggests this book has evoked anger and outrage in some quarters. This reaction has largely been overseas, as this exposé is not about India; it’s mostly about the US and McKinsey’s conduct there.
The book begins with two examples (US Steel and Disneyland) of severe cost-cutting that led to employees losing jobs, and to some of them even losing their lives. Aggressive cost reduction resulted in critical maintenance tasks being ignored, which in turn, led to accidents that claimed employees’ and customers’ lives. The firm that recommended the cuts, the authors say, was McKinsey.
It is not clear who took the decision to cut those key, safety-critical tasks – the company executives or the consulting firm. Nor is it apparent who implemented the changes. If McKinsey’s role was only that of an advisor, it may not be appropriate to lay the entire blame at its doorstep.
Similarly, the authors write about McKinsey’s role in several layoffs across America, which cost blue-collar workers their livelihoods. No doubt, downsizings inflict huge pain and suffering, especially among the non-executives. Unfortunately, ‘rightsizing’ seems to be an integral part of corporate America, as we are currently seeing with Twitter, Amazon and Meta.
While one might question the apportionment of responsibility in the opening examples, the subsequent chapters are unambiguous and hard-hitting. Especially the ones about conflicts of interest ( Playing Both Sides: Helping Government Help McKinsey) and immigration ( We do Execution, Not Policy).
The potential for conflict of interest soars when a consultant advises multiple parties in the same transaction or policy space; parties that naturally have opposing and conflicting interests. Advising both the regulator and the regulated, representing both the awarder and the awardees of lucrative government contracts, and facilitating both the outsourcer and the recipient of large chunks of valuable work are typical examples.
If one works with both the FDA and cigarette companies on strategies relating to tobacco, vaping and health, one is likely to run into serious conflicts of interest. Similar is the case with the opioid crisis that swept the US, where McKinsey is said to have recommended ‘turbocharging’ the sales of the harmful painkiller.
Consulting and advisory firms often avoid such situations by not accepting work where project objectives are at odds with each other. When done diligently, it prevents firms from getting into conflicted relationships. Global audit firms, for example, have rigorous processes and automated systems to help manage this. These risk management processes are onerous but necessary.
When declining work is not an option or is commercially very detrimental, firms try to manage conflicts by erecting internal ‘Chinese walls’. These are meant to stop confidential information from flowing from one project team to another. How well these walls work depends on the firm, and more importantly, on the individuals involved. It requires consultants and partners to be deeply committed to confidentiality and ethics, often when the alternative involves hefty profits and personal advancement.
Mutually conflicted teams
The higher one goes in the ‘chain of command’ in these firms, the closer these mutually conflicted teams come. There comes a point in the hierarchy where two conflicting projects report to the same individual, usually a senior person. At senior levels, revenue and profits determine bonuses. It’s a tricky situation that really tests the ethics of the individual.
When a consulting firm doesn’t disclose its client list or its recommendations (due to confidentiality considerations), it becomes very difficult to identify conflicts of interest. One would need to launch a detailed investigation that spans the industry and accesses restricted documents. That is what the authors of this book have done. In addition, they interviewed a large number of people familiar with McKinsey’s projects.
Coming to the chapter that discusses Donald Trump’s crackdown on immigration, the assertions made by the authors leave the reader appalled. To be fair, the authors also discuss the disgust many employees of McKinsey felt when the firm’s involvement in this matter came to light. They raised their voices, making the partners and directors serving the immigration department revisit their role.
The book goes on to discuss other matters, including Enron, Wall Street and McKinsey’s foreign projects in the UK, South Africa and Saudi Arabia. India is largely ignored except for a passing reference while discussing outsourcing. It also briefly mentions the former Managing Director, Rajat Gupta. However, this book is primarily about McKinsey in the US and the conflicts between its stated values and its actions in that country. It is not necessarily a reflection of the firm in India.
All in all, When McKinsey Comes to Town is an engaging book that may serve as an eye-opener to some.
Disclosure: The writer used to work with McKinsey’s competitors.
(The reviewer is a retired management consultant who now writes crime fiction set in corporate India and traditional detective mysteries. Find him at rvraman.com)
Check it out on Amazon.