The Enduring Power of Culture—and Chutzpah: Duff McDonald’s new book on McKinsey
The Firm: The Story of McKinsey is an in-depth profile of the consulting firm McKinsey & Company. It was written by journalist Duff McDonald. Many terrible books have been written about the consulting industry, mostly by people who worked for a few years at a big consulting firm and then decided to write a “tell-all” story about how awful and hypocritical their former employer was (Greg Smith’s book, Why I Left Goldman Sachs, is the same genre, just a different industry).
Almost to my surprise, McDonald has written a thorough, well-researched, and even-handed account of McKinsey. I personally know quite a few of the players he mentions in the book, and have first-hand knowledge of some of the incidents he describes. I feel comfortable about the accuracy of his reporting. It’s well written and pretty entertaining.
Here are six important takeaways about the development of the most influential management consulting firm in the world.
- Selfless leaders are rare and leave an indelible impact. Marvin Bower (pictured above), who shaped McKinsey into the firm it is today after James O. McKinsey left in the 1930s, sold his shares back to the partners at book value in 1963. This became the custom, rather than trying to cash out by selling the firm or demanding market value for the shares. This had an enormous impact on the firm’s ability to keep younger partners and attract new ones.
- Culture is everything in a professional firm. In a 1937 memo, Bower put forth the values McKinsey consultants should exemplify, which included always putting client interests first over revenue growth and only performing work that is necessary and which McKinsey was good at. McKinsey grew organically, rather than through acquisition, and over many years built its famous “one firm culture” that enabled it to field global teams of consultants that easily meshed even though they had never met. Future leaders who did things that were in opposition to this culture damaged the firm (see number 3, next).
- An excessive focus on money and growth can destroy an organization. In June 2012, former McKinsey Managing Director Rajat Gupta was convicted of four counts of conspiracy and securities fraud. He was sentenced to two years in prison. McDonald makes a strong case that under his long tenure he had put a large and ultimately damaging emphasis on growing revenues and increasing per-partner compensation to levels never before seen at McKinsey. The results would have sickened Marvin Bower, according to McDonald.
- Knowledge creation is the key to success in services. Early on, McKinsey realized that it must invest heavily in intellectual capital in order to be seen as trusted advisors to the c-suite and the board. Now, many service firms recognize how important it is to do this to avoid being commoditized. However, they just aren’t able to consistently do it or they don’t do it well enough.
- If you want to be a top brand, you must think big. While McKinsey does a lot of nuts-and-bolts implementation work, they have always aspired to work with the CEO and help companies with their highest-level strategic challenges. That singular focus—even if it is not always realized—drives them to always define problems broadly and push to build relationships at the very top.
- Strong relationships can trump everything else in business including quality, performance, delivery, and even just being right about important issues. The c-suite and boardroom relationships that McKinsey has assiduously cultivated have insulated them from the periodic episodes of poor advice that McDonald documents. These deep, senior level relationships have also helped insulate the firm from the price pressure that other lesser professional firms now feel, allowing McKinsey—historically—to charge higher fees than anyone else.
What do you think drives long-term success in a professional firm? Leave your comments, below:
My new book has just been published. Click here to get a copy of Power Relationships now on Amazon.com, and you can then download the 90-page Power Relationships Personal Planning Guide I wrote for my readers for free.