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| Company type | Incorporated Partnership |
|---|---|
| Industry | Management consulting |
| Founded | 1926 |
| Headquarters | 86 offices in 46 countries |
| Key people | Ian Davis, Managing Director |
| Products | Management consulting services |
| Revenue | US$ 3.8 billion (est. 2005) |
| Number of employees | about 13,000 |
| Website | www.mckinsey.com |
McKinsey & Company is a privately owned management consulting firm that focuses on solving issues of concern to senior management in large corporations and organizations.
Known among its employees and clients simply as "The Firm" , James O. McKinsey & Company was founded in Chicago in 1926 by James O. ("Mac") McKinsey. McKinsey was a professor at the University of Chicago who pioneered budgeting as a management tool. Marshall Field's became a client in 1935, and soon convinced James McKinsey to leave the firm and become its CEO; however, he died unexpectedly in 1937.
Marvin Bower, who joined the firm in 1933 and succeeded James McKinsey when he left, oversaw the firm's rise to global prominence. When McKinsey died, the Chicago and New York branches of the firm split up. In 1939, with the help of the New York partners, Bower resurrected the New York office and named it McKinsey & Company. While he always gave James McKinsey credit for the firm's success, Bower established many of its guiding principles. Inspired by his experience at the law firm of Jones Day, he believed that management consulting should subscribe to the highest standards, emphasizing professionalism over any other consideration.
For many years, McKinsey was the unchallenged leader in consulting, and many of its alumni went on to head leading companies, often their former clients, generating further business for the firm. It now maintains offices on all continents (except Antarctica) and in most major cities; in the last few years, the majority of its work has derived from non-U.S. clients.
In 2003, McKinsey made headlines when it hired Chelsea Clinton, daughter of former U.S. President Bill Clinton and Senator Hillary Rodham Clinton.
International renowned publications acknowledge McKinsey's qualities: Newsweek called McKinsey “by far the most influential consulting firm in the world”. The Financial Times stated McKinsey is “the world’s leading management consultancy.”
Many reputable financial-services companies have added consulting branches over the past two decades and many other large companies, recognizing the importance of consulting, have created their own in-house consulting divisions, drawing business that might otherwise have gone to McKinsey.
Competitors
McKinsey's main strategy consulting competitor is the The Boston Consulting Group.
Other competitors include A.T. Kearney, Booz Allen Hamilton, Bain & Co., and Monitor Group.
Organization
McKinsey is formally organized as a corporation, but functions as a partnership in all important respects. (It dropped the "Inc." from its company name in 2001.) Its managing director is elected for a limited term of three years by the firm's senior shareholders, titled directors. Each managing director can only serve for three terms. Several committees develop policies and make critical decisions. Geographically based offices act as the main organizing cells, but the firm maintains cross-geographical practices around industry sectors and management areas. Associates are invited to join the partnership through an evaluation and election process, and shareholders who reach a certain age are obliged to sell back their shares according to a set formula.
McKinsey operates under a practice of "up or out," in which consultants must advance in their consulting careers within a time frame, or else are asked to leave the company.
Today McKinsey has over 7,500 consultants in 84 offices across 45 countries. They help solve strategic, organizational, operational and technological problems, for some of the world's largest organizations. Clients include three of the world's five largest companies, two-thirds of the Fortune 1000, governments and other non-profit institutions. McKinsey also performs pro bono engagements for a number of charitable organizations and government agencies worldwide. 'Forbes' estimated the firm's 2005 revenues at $3.8 billion in its list of largest private companies.
A controversial aspect of McKinsey's practice is that it is non-exclusive, and thus a conflict of interest could arise as different teams of consultants might work for direct competitors in an industry. This works to the company's advantage, as it does not require it to rule out working for potential clients; furthermore, knowing that a competitor has hired McKinsey has historically been a strong impetus for companies to seek McKinsey's assistance themselves. The policy also means McKinsey can keep its list of clients confidential. However, because of this there is great emphasis placed on client confidentiality within the firm, and consultants are forbidden to discuss details of their work with members of other teams.
Recruiting
Marvin Bower broke with industry practice in his time by focusing hiring efforts on recent graduates from the best business schools, rather than among experienced managers. The premise for this was that analytical rigor and fresh insights were of greater value to clients than conventional wisdom. McKinsey has been known to make rare exceptions to this policy by hiring senior staff from industry (John Sawhill being a noted example).
Recently, McKinsey has diversified by soliciting candidates from graduate programs in law, medicine, engineering, science, and the liberal arts as well as by recruiting "experienced hires" from a variety of professional backgrounds including the military, law and medicine. Today, roughly half of McKinsey consultants with a graduate degree are not MBAs. These APDs ("Advanced Professional Degree candidates") attend a "mini-MBA" training program before starting their careers at McKinsey.
McKinsey also recruits very selectively among undergraduates, hiring as "Business Analysts" recent graduates from top universities to work as consultants alongside its associates for about 18 to 24 months. The BA program is one of the most competitive in industry and is coveted by many business-oriented undergraduates. Some business analysts choose to stay at McKinsey for an additional year as a BA, often to join an office abroad or specialize in a given industry. Many business analysts are sponsored by McKinsey to attend graduate schools, usually for a MBA but sometimes for other master's or Ph.D. degrees, after their initial two years at McKinsey and rejoin the firm afterwards. Some are offered a coveted "DTA" - direct to Associate offer which means they effectively skip 2 years ahead of their peer group, but must forgo any educational support from McKinsey.
Interviewing
McKinsey's interviews are notorious for their difficulty and rigor. MBA-level interviews usually take place on-campus and follow a two round process. The first round typically consists of two 45 minute interviews. Each interview consists of two parts. The first part, usually referred to as the "FIT" portion, is designed to test the interviewees skills in 4 key areas: Problem Solving, Achieving, Personal Impact, and Leadership. Common questions during this portion of the interview include: "Tell me about a time you had to convince someone of something" and "Tell me about a time when you had to lead a team through a challenging situation." Interviewers will often push the interviewee in certain directions to verify truthfulness, as well as gain further insight into the interviewees thought process.
The second part of the interview consists of a formal business case. This part of the interview is designed to test a candidates problem solving skills. Typically a business problem, often resembling prior work done by the interviewer, is presented to the candidate. The interviewer then asks the candidate a series of focused questions that test basic math skills, business sense, and communication/presentation skills. An example of the case portion of the interview and type of questions asked can be found here:
Candidates who are successful in the first round will be asked to come back for a second round of interviewing, usually taking place in the actual McKinsey office. These rounds usually consist of three interviews, typically conducted by McKinsey partners, or other senior firm members. The interviews themselves are largely similar to those of the first round, albeit slightly more informal and high-level. Candidates who succeed in their second round interviews are made an offer to join the firm.
Notable current and former employees
See List of McKinsey & Company people.
Publishing and public relations
A print and online publication, The McKinsey Quarterly (published six times a year) offers journal-length articles on strategy, organization, marketing, and other topics of interest to senior executives. McKinsey prides itself on collecting and interpreting all business theories and information of any possible utility. Firm employees are fond of claiming that McKinsey does more research into business issues than the business schools at Wharton, Harvard, and Stanford combined. The firm also builds knowledge through conferences, research projects, online databases, and intrafirm training and communication. In Washington, DC McKinsey runs the Global Institute, which, located just steps from the White House, studies macroeconomic trends. The company's Business Technology Office also publishes McKinsey on IT, a quarterly publication aimed at CIOs and other top executives. The corporate finance practice publishes McKinsey on Finance, aimed at CFOs.
In total, it is estimated that McKinsey spends more than $50 million per year on its information gathering and internal research.
Criticism
Much criticism against McKinsey can be applied to management consulting as a whole. The firm itself will not discuss specific client situations and maintains a carefully crafted and low-profile external image, which also protects it from public scrutiny of the results of its involvement, making an assessment of its client base, its success rate, and its profitability difficult. This secrecy also helps conceal McKinsey's prices, which often far exceed $10,000 (U.S.) per day for a consulting team.
Client confidentiality is maintained even among alumni of the firm, and as a result, journalists and writers have had difficulty developing fully informed accounts of mistakes McKinsey consultants may have made, such as with Enron, (formerly one of the firm's biggest clients) Swissair, and Sabena.
Much of the distrust toward McKinsey can be categorized as:
- Misguided or unimaginative analysis, such as its alleged recommendation in 1983 to AT&T that cellular phones would be a niche market
- Lack of coordination among multiple engagement teams working with one client
- Lack of originality in coming up with ideas; restating the obvious with business jargon
- Groupthink, as its consultants strive under time pressure to converge on a unified set of findings and recommendations
- Hubris or arrogance toward executives, in particular underestimating the difficulty of implementing recommendations
- Emphasis on "current thinking" that may amount to little more than forcing the latest business theories on clients without taking a longer-term view
- Emphasis on shareholder value, often at the price of investment and long-term strategy. For example, this may have doomed the British railway company Railtrack, which collapsed after a series of accidents, allegedly after following McKinsey's advice to reduce spending on infrastructure and return cash to shareholders instead
- Concern that it aims to become an expensive permanent presence with clients, rather than focusing on solving a clear set of problems, thereby functioning as a substitute for proper leadership and organization. This is an increasing concern in the public sector, where McKinsey has become involved with agencies such as the British National Health Service
Among other books and articles, The Witch Doctors, written by The Economist journalists John Micklethwait and Adrian Wooldridge, presents a series of blunders and disasters alleged to have been McKinsey's consultants' fault. Similarly, Dangerous Company: The Consulting Powerhouses and the Businesses They Save and Ruin by James O'Shea and Charles Madigan critically examines McKinsey's work within the context of the consulting industry.
McKinsey is credited in a recent CNN article with developing a controversial car insurance company practice. In this tactic, insurance companies will fight injury claims against them if the claim involves a soft-tissue injury. This is done, the article alleges because these types of injuries are hard to verify by X-ray or other common examination methods other than surgery.
British Prime Minister Tony Blair faced criticism in the Financial Times for hiring McKinsey to consult on the restructuring of the Cabinet Office. A top civil servant described McKinsey as "people who come in and use PowerPoint to state the bleeding obvious."
Offices
North America
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