Culture is like the wind. It is invisible; yet its effect can be seen and felt.
How an anonymous letter caused chaos at McKinseyThe Times
For decades, the firm advised clients to slash staff and be more efficient. Now a single anonymous letter claiming to be from alumni has sparked turmoil at the top, writes Laith Al-Khalaf
Despite having run the most famous management consultancy in the world for three years, he still struggles with the question. Its work, he argued, was so varied, its clients so diverse, that it defied definition.
There is no doubt, however, that “The Firm”, as insiders call it, is one of the most influential private businesses in the world. Its consultants can be found sitting in the boardrooms of the biggest companies, who pay McKinsey handsomely to help them overhaul their operations. It stalks presidential palaces and parliaments the world over, whispering advice to princes, ministers and mandarins.
Its consultants generate $16 billion in revenues a year on projects ranging from advising the NHS on how to reduce waiting lists, Rolls-Royce on how to cut thousands of jobs, and Saudi Arabia’s sovereign wealth fund on how it can buy prestigious sporting events such as the premier Golf tour.
Every year, more than a million people apply to work there, hoping it will be a passport to success long after they leave. Former McKinseyites include Sundar Pichai, boss of Google; Lord Hague, the former foreign secretary; Jane Fraser, the chief executive of Citigroup; Dido Harding, the ex-TalkTalk boss; and Archie Norman, City veteran and chairman of M&S. “McKinsey,” Sternfels likes to boast, “is the No 1 CEO Factory.”
Self-inflicted harm
All is not well at the fabled firm, however. Last weekend, a mysterious letter was posted online purporting to be from disaffected former partners who called for an overhaul of the 98-year-old institution, which employs 46,000 people. The missive blasted McKinsey for pursuing growth at all costs, which, the authors claimed, had harmed its employees and cost McKinsey its distinctive culture.
“We are all devastated to see what it has become through self-inflicted harm, a lack of strategic focus, and short-sighted commercialism. Let us not lose our Firm. Let us rebuild. Let us be distinctive again,” it read.
Archie Norman, City veteran and chairman of M&S, joined McKinsey from 1991 until 1999
Archie Norman, City veteran and chairman of M&S, joined McKinsey from 1991 until 1999
SIMON DAWSON/BLOO
If anybody knows who penned the 850-word notice, they’re not telling. It could even be a hoax. But, voiced in the high-minded language typical of McKinseyites’ lofty view of their firm and themselves, it resonated with some at the firm. It was even entitled “An obligation to dissent”, the company’s speak-truth-to-power rule of the late Marvin Bower, a McKinseyite known as the father of the modern consulting industry. His face gazed out at readers from the letter’s masthead in sepia tones. Citing “unmanaged infighting,” “self-inflicted overcapacity” and a “decline of both the quality and quantity of partner engagement”, the letter demanded new senior leaders to replace the “stagnant” management team. It also called for the firm to scale itself down and focus only on areas where it had “an ironclad right to win,” while cutting staff numbers with “compassion” and “respect”.
The apparent call to arms was deemed so serious that Milan-based Massimo Giordano, the head of the firm’s European operations, sent an email to fellow partners last Sunday in an attempt to address the criticisms. One of the linked talking points in his email, which has been viewed by The Sunday Times, read: “Some resonate with me, some are false and some have been acted upon.”
The UK’s managing partner, Tunde Olanrewaju, a gregarious engineer, appeared more irritated. Based in ritzy new offices in the Post Building in London’s New Oxford Street, he emailed staff declaring the note “at best naive and at worst disingenuous”, “divisive” and “stimulating internal turmoil”.
Insiders said Olanrewaju, who has been at McKinsey for 22 years, was offended that the dissenters did not come to him directly with their grievances.
The note disappeared as quickly as it was fired; by Monday night, it had been taken down. But, according to many McKinseyites past and present, its arrows found their mark.
The authors’ key concern was that the firm had for years been “aggressively” seeking growth, with its employee numbers growing 60 per cent in the past five years. It had expanded into areas outside its natural realms of expertise, they claimed, damaging the quality of its advice and the reputation of McKinsey.
Sundar Pichai, the CEO of Google, is among the notable former McKinseyites
Sundar Pichai, the CEO of Google, is among the notable former McKinseyites
OSE LUIS MAGANA/AP
Indeed, the firm has become controversial. In 2016, it agreed to pay $600 million to settle claims in the US that its advice to opioid manufacturers, including Oxycontin maker Purdue Pharma, had “turbocharged” sales amid the opioid crisis. McKinsey has declared its work was lawful. In 2022, it was charged for its involvement in the biggest corruption scandal in South Africa since the fall of apartheid, in a case involving alleged pilfering of public contracts during the presidency of Jacob Zuma. McKinsey has apologised for its involvement with so-called state capture, but pledged to defend itself against criminal claims.
But these were external fires. Now it faces dissent internally. Like many consultancies, it went on a hiring spree during Covid, when clients were desperate for advice on working from home and trading online. New starters were paid handsomely. The starting salary for those in the US with MBA qualifications leapt from $175,000 to $190,000.
Now that it is having to cut headcount as the work has dried up, the methods of carrying out the cuts are under fire. Employees say managers are using the staff appraisal process to get rid of people outside formal rounds of job cuts, giving them low scores to “manage them out”. Staff have also complained that portions of their compensation at the end of the year have been deferred; the firm said that this was nothing out of the ordinary.
“It is a culture that is rotting from within,” said one employee. “Most people don’t leave the firm pissed off, but a lot of people are pissed off now,” they added. McKinsey said that the quotes were “selective” and “misrepresented” the firm. It also said that attrition rates are at historic lows.
Raising the bar
Started by the Missouri accountant James O’McKinsey in 1926, McKinsey was originally focused on providing book-keeping advice to managers. But it was under Bower that the firm would broaden its mission to advising chief executives on how to run the world’s largest companies. Early clients included General Motors, Hewlett Packard and Heinz. Its UK expansion began in the 1950s when it restructured Royal Dutch Shell, whose joint owners in London and Holland did not want a British, nor a European, consultant.
Bower demanded unflinching professional standards. “It was not really like a corporate job — more like being in the military,” said a former McKinseyite.
McKinsey partners re-elected Bob Sternfels after a leadership challenge this year
McKinsey partners re-elected Bob Sternfels after a leadership challenge this year
AL DRAGO/GETTY IMAGES
The rapid growth — it now has 2,000 staff in the UK alone — has left it unrecognisable to its old guard and not in a good way. “It is definitely not the same firm. How can you instil that culture in so many people?” said a former partner.
Insiders also said that the firm’s appraisal policy has forced out staff. Every six months, McKinsey calls its consultants in to evaluate their work. If performance is deemed unsatisfactory, they are put on a “concerns” rating, meaning they will get a performance review. If their work remains poor, they are “counselled to leave”.
“Concerns have picked up massively. They are being handed out all the time,” said one employee. McKinsey said it maintains a high bar for performance, and its evaluation criteria was consistent with former years and was not meant to manage headcount.
Feuding factions
Some alumni agreed with the dissent letter that the emphasis on growth was what had landed McKinsey in hot water for its questionable client work. One said: “If you have more mouths to feed and need to increase your profit pool, you have to take on some marginal work.”
“There has been a push towards more governance and that hasn’t been popular with the old guard. And it probably hasn’t gone far enough for the younger people who were embarrassed by the banana skins the firm has slipped up on,” said a firm alumnus.
This factionalism manifested itself in Sternfels’s rocky re-election campaign in January. Leadership elections are held every three years, and Sternfels only narrowly scraped through for a second term after failing to secure 50 per cent of the partners’ support in the first round.
In the meantime, rival firms, facing similar challenges of too many staff and not enough work, are revelling in the divisions within their most prestigious peer. As a partner at one said: “It is a bit like running the Conservative Party.”
