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Inside McKinsey’s papal-like election for a new leader
North America boss Eric Kutcher is the candidate to beat in the consultancy’s byzantine election, but his past performance as CFO turns some voters off.
At a 2024 gathering of senior McKinsey partners in Copenhagen, then chief financial officer Eric Kutcher put on a baseball catcher’s mask and invited hundreds of colleagues to hurl stress balls at him.
By his own admission Kutcher had “failed miserably” at explaining his actions during the post-COVID period of weak financial performance and divisive lay-offs. He hoped the stunt would ease tensions and act as a reset – both for the firm and himself.
“I think I went into that role as well liked as anyone and I came out of that role really in a bad spot. For the first time in my 28 years, I felt pretty unwelcomed,” he said this year on the How Leaders Lead podcast. But as the balls bounced at his feet, “everything started to heal itself again”.
That claim will be tested in the coming months in the byzantine election to determine McKinsey’s next leader.
Having switched in mid-2024 to heading the firm’s business in North America, where a much-improved financial performance has eclipsed some other regions, he is now the frontrunner to succeed Bob Sternfels as global managing partner, according to current and former McKinsey figures.
Yet the unhappy four-year tenure as CFO looms large in conversations among voters, the people said, as does the perception that Kutcher represents continuity with Sternfels’ approach to running McKinsey – centralised decision-making that has not been universally lauded by the firm’s fiercely independent-minded partners.
“Eric is the presumptive leading candidate. He is managing the largest region. Roughly half of McKinsey is North America. It would be hard for someone else to step forward from a region that is not growing as fast,” said one former executive familiar with the internal dynamics. “But it’s not like a presidential election where you have polling done.”
‘Not-Eric’ candidates
The closest election metaphor is not presidential but papal. McKinsey’s roughly 760 senior partners can select anyone from among their number when the voting begins in January. The top seven candidates will go forward to a second ballot that will whittle the field to three.
If Kutcher or a rival has not passed the 50 per cent threshold by that stage, the partnership will pick the winner in person, conclave-style, at their next meeting in Sydney in February. Some partners could support “not-Eric” candidates in early rounds to ensure a vigorous contest.
McKinsey’s previous two elections for managing partner were fractious. Kevin Sneader lost his re-election bid in 2021 after a scandal over the firm’s work for opioid manufacturers that cost it hundreds of millions of dollars in legal settlements. The 2024 race was also close, with several rounds of voting before Sternfels claimed victory.
“Is there campaigning? There’s certainly politicking,” said John Seaman, a business historian who has written about McKinsey.
“Often the process will start out with a favourite from a particular region but it’s not a popularity contest. Partners vote on substance, in response to the perceived strengths and weaknesses of the previous global managing partner and to express their hopes for where the firm will go from here.”
Election-weary partners agreed last year that managing partners should now serve four years, not three, with a two-year extension subject to an up-or-down confidence vote.
‘Project Magnolia’ lingers
Kutcher told the podcast host David Novak that he had not wanted to be CFO but took the job when offered it, “because I’ve always been a good soldier”.
The appointment in 2020 coincided with the pandemic and the ensuing consulting boom. Like other professional services firms, McKinsey hired thousands of new staff to keep up with demand, only to find itself bloated when activity reverted to normal.
Kutcher was an architect of “Project Magnolia”, which aimed to lay off more than 1400 back-office staff and prompted outrage in some quarters of the firm for the way it treated longtime employees and disrupted support for consultants. Even with the cuts, partner profits remained weak.
At the same time, the firm embarked on two ponderous reviews of partners’ remuneration – projects codenamed Oak and Acorn – to deal with the fact that clients were tying fees more closely to the results of McKinsey’s work, delaying performance-related payments and complicating cash flows.
“Eric had to institute a series of measures to make sure the books started to improve,” the former executive said.
As leader for North America, Kutcher is taking a gentler approach to remaking the back office, but adoption of AI means it could be no less dramatic over time.
The ratio of support staff to frontline consultants will drop, he told reporters last week. Hiring of executive assistants and “professional development” staff who organise which consultants are placed on which jobs will rise this year by “low single-digit” percentages and remain flat in other administrative roles, compared with 12 per cent growth for consultants.
McKinsey’s optimistic pitch to American business is that the firm now has the AI tools as well as the knowhow to help chief executives plot their companies’ transformations.
Close to Sternfels
Kutcher has arguably the fullest résumé of the plausible contenders for global managing partner – as well as running a major region and the stint in the finance role, he was previously head of a practice area, technology, media and telecoms.
Based in the same San Francisco office as Sternfels, the two formed a close working relationship. Partners took note when Sternfels gave Kutcher the North America job despite his rocky tenure as CFO.
Kutcher took a prominent role in celebrations for the firm’s 100th anniversary this year. Hundreds of retired partners descended in May on New York’s Lincoln Centre for several days of panel discussions involving current executives and guests including JPMorgan Chase boss Jamie Dimon, while their spouses went on trips to Central Park or city museums. Several of those in attendance said at the time that Kutcher looked every bit the heir apparent.
Other potential contenders include Tunde Olanrewaju, who was promoted last year from running McKinsey in the UK to leading the firm’s business Europe-wide, and Asutosh Padhi, Kutcher’s predecessor running North America.
People familiar with internal conversations said partners would also consider other members of the 17-strong global executive team, such as client capabilities head Becca Coggins or industry practices leader Alex Panas, and the 13-strong shareholders’ council that acts as McKinsey’s governing board, as well as other regional leaders.
“It’s papal – in that you cannot be seen to want the job,” said one senior partner. Kutcher declined to comment.
In his podcast appearance, Kutcher reflected on a period earlier in his career. “One of the things I often got criticised for is maybe having too much ambition,” he said, but added that it was always ambition for his team or for McKinsey as a whole.
The firm sometimes puts people in leadership roles before they are comfortable in their own skin, he added, but wisdom comes with age. “You have to have lived through failure.”
Financial Times
