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| Company type | Incorporated Partnership |
|---|---|
| Industry | Management consulting |
| Founded | 1926 |
| Headquarters | New York, New York |
| Key people | Dominic Barton, Worldwide Managing Director |
| Products | Management consulting services |
| Revenue | US$6.00 Billion (est. 2008) |
| Number of employees | 17,000 (9,000 consultants) |
| Website | www.mckinsey.com |
McKinsey & Company is a global management consulting firm that focuses on solving issues of concern to senior management. McKinsey serves as an adviser to the world’s leading businesses, governments, and institutions. It is recognized as a leader and the most prestigious firm in the management consulting industry. It has been ranked No.1 for 6 consecutive years in the Vault.com list of top consulting firms, and has been a top employer for new MBA graduates since 1996.
Organization
McKinsey & Co., while formally organised as a corporation, functions as a partnership in all important respects. Its managing director is elected for a three year term by the firm's senior shareholders (referred to as "directors", even if they are not company directors). Each managing director can serve a maximum of three terms. At a strategic level, a number of committees are charged with the development of policies and the making of critical decisions. McKinsey operates under a practice of "up or out", meaning that consultants must either advance in their consulting careers within a pre-defined time-frame or leave the firm.
McKinsey has about 9,000 consultants in 99 locations in 56 countries. Forbes estimated the firm's 2008 revenues at $6.0 billion.
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. While still working for McKinsey, consultants are prohibited from serving direct competitors unless they wait two or more years between the date they cease serving one competitor and begin serving the next; in some cases, consultants are forbidden from ever serving a competitor.
History
McKinsey & Company was founded in Chicago in 1926 by James O. ("Mac") McKinsey as James O. McKinsey and Company. Previously, McKinsey served as an accounting professor at the University of Chicago Booth School of Business and is considered the father of managerial accounting. In 1935 Marshall Field's became a client and soon convinced McKinsey to leave the firm and to become its CEO in 1935. This soon led to a merger between James O. McKinsey and Company and Scovell, Wellington & Company as McKinsey, Wellington & Company. The new firm had both an accounting practice and a management engineering practice.
In 1937, James O. McKinsey died unexpectedly of pneumonia, which led to the division of McKinsey, Wellington & Company in 1939. C. Oliver Wellington returned to manage Scovell, Wellington & Company full time and took the accounting practice with him. The management engineering practice was split into two affiliated firms: McKinsey & Company and McKinsey, Kearney & Company. McKinsey & Company was led by Guy Crockett, Dick Fletcher, and Marvin Bower. McKinsey, Kearney & Company was led by Andrew Thomas Kearney.
By 1952, McKinsey & Company formally parted ways with McKinsey, Kearney & Company, which was renamed A.T. Kearney & Company. At the time, McKinsey was led by Marvin Bower as then managing director. Bower had joined the firm in 1933 and served as managing director from 1950 to 1967. During his tenure he oversaw the firm's rise to global prominence and established many of its guiding principles. Even after formally leaving McKinsey in 1967, Marvin continued to provide guidance and counsel to the Firm for many years.
Recruiting
Marvin Bower broke with current industry practice by hiring recent graduates from the best business schools rather than among experienced managers. Today, the firm is among the top recruiters of graduates of the top ranked business programs in the US and overseas, in addition to hiring a significant number of people with other advanced degrees in science, medicine, engineering and law. The firm is notable for the number of Rhodes Scholars it is able to recruit.
Competitors
Four primary competitors provide strategy services to Fortune 500 entities: McKinsey & Company (McKinsey), The Boston Consulting Group (BCG), Bain & Company (Bain), and Booz & Company (Booz). McKinsey also competes with other strategy consulting firms, notably Roland Berger Strategy Consultants, A.T. Kearney, Oliver Wyman, Deloitte Consulting, Ernst & Young and Monitor Group.
Publishing
McKinsey publishes several publications, including McKinsey Quarterly, McKinsey on Business Technology, McKinsey on Payments, McKinsey on Corporate and Investment Banking, and McKinsey on Finance. Several McKinsey-authored business books have been written, including Valuation: Measuring and Managing the Value of Companies, The Alchemy of Growth, Creative Destruction, The War for Talent, and, most notably, In Search of Excellence.
Knowledge management system
McKinsey invests significantly in its knowledge management system to support field consultants. The system includes generalist researchers, industry (and function)-specific experts and librarians, and access to journals and databases. McKinsey maintains an organisation called the McKinsey Knowledge Centre (McKC) that provide rapid access to specialized expertise and business information. In addition, consultant-authored internal "practice development" documents capture generalizable insights from client engagements. There are also methods to access individual consultants with expertise from previous client studies or previous employment, for background assistance (competitive information is not shared).
This system was created and chaired by former partner Anil Kumar.
Notable current and former employees
Main article: List of McKinsey & Company peopleMcKinsey has produced more CEOs than any other company and is referred to by Fortune magazine as "the best CEO launch pad". More than 70 past and present CEOs at Fortune 500 companies are former McKinsey employees. Among McKinsey most notable alumni are Louis V. Gerstner, Jr. - former chairman and CEO of IBM and chairman of The Carlyle Group, James McNerney - chairman and CEO of Boeing, Helmut Panke - former chairman and CEO of BMW AG, Christopher A. Sinclair - former chairman and CEO of PepsiCo, James P. Gorman - President and CEO of Morgan Stanley, Peter Wuffli - former CEO of UBS AG, Stephen Green - chairman of HSBC, Jonathan Schwartz, CEO of Sun Microsystems, Jeffrey Skilling, former (now incarcerated) CEO of Enron, Marius Kloppers - CEO of BHP Billiton, Bobby Jindal, current Governor of Louisiana, and Vittorio Colao, CEO of Vodafone. Past employees also include Chelsea Clinton, daughter of former President Bill Clinton and present Secretary of State Hillary Rodham Clinton.
Criticism
According to a former employee, 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, making an assessment of its client base, its success rate, and its profitability difficult. This secrecy also helps conceal McKinsey's prices. Client confidentiality is maintained even among former employees, and as a result, journalists and writers have had difficulty developing fully informed accounts of mistakes which McKinsey employees may have made.
- Enron was headed by McKinsey alumni and was one of the firm's biggest clients before its collapse. In particular, McKinsey's "deep-seated belief that having better talent at all levels is how you outperform your competitors", implemented at Enron with McKinsey's knowledge, resulted in a workplace culture of prima donnas that "took more credit for success than was legitimate, that did not acknowledge responsibility for its failures, that shrewdly sold the rest of us on its genius, and that substituted self-nomination for disciplined management." Jeff Skilling, sentenced to 24 years in federal prison as the CEO of Enron, was formerly a partner at McKinsey and "loyal alum."
- Another notably troubled company associated with McKinsey is Swissair, which entered bankruptcy, after McKinsey recommended The Hunter Strategy.
- Railtrack, the British railway company, also collapsed, allegedly after following McKinsey's advice to reduce spending on infrastructure and return cash to shareholders instead, subsequently there were a number of fatal accidents.
- Other client companies that ultimately filed for bankruptcy include Kmart and Global Crossing.
- Misguided analysis, such as its recommendation in 1980 to AT&T that cellular phones would be a niche market.
- McKinsey is a named defendant in Hurricane Katrina litigation. Louisiana Attorney General Charles Foti's suit accuses McKinsey of being the "architect" of sweeping changes in the insurance industry, starting in the 1980s. The suit alleges McKinsey advised insurers to "stop 'premium leakage' by undervaluing claims using the tactics of "deny, delay, and defend".
- Several civil suits have been filed against home insurance and vehicle insurance companies after the insurers were advised by McKinsey, and allegedly paid the insured parties significantly less than the actual value of the damage. McKinsey was cited in a February 2007 CNN article with developing controversial car insurance practices used by State Farm and Allstate in the mid-1990s to avoid paying claims involving soft tissue injury.
- Anil Kumar, a senior McKinsey consultant, pleaded guilty in January 2009 to providing the New York based hedge fund Galleon Group with inside information.
- 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.
- Concerns from teachers and parents regarding their consultation for public school districts. Recently, McKinsey worked for the Minneapolis Public Schools, where the firm recommended that the district cut "high costs" such as teacher health care, and recommended converting the 25 percent of schools that scored the lowest on standardized tests to privatized charter-school status. Teachers in Seattle passed a resolution of non-compliance with McKinsey's study of the Seattle Public Schools in protest.
References
- "McKinsey & Company on Forbes' America's Largest Private Companies list". October 28, 2009. Retrieved 2009-11-16.
- "McKinsey & Company Swiss Office - Key Facts". Retrieved 2010-07-02.
- Huey, John. "How McKinsey Does It," Fortune, November 1, 1993
- Vault.com, "Management Strategy Consulting Firms Rankings: Top 50 Consulting Firms, 2009"
- Fisher, Anne. "For new MBAs, a California lifestyle beats big bucks" Fortune, May 3, 2007
- http://www.mckinsey.com/aboutus/locations/list.asp
- "America's Largest Private Companies" Fortune, October 28, 2009
- Edersheim, Elizabeth Haas, McKinsey’s Marvin Bower: Vision, Leadership and the Creation of Management Consulting, 2004, John Wiley & Sons.
- Schaeper, Thomas J. Rhodes Scholars, Oxford, and the Creation of an American Elite, page 300, 2004, Berghahn Books.
- Selling Professional Services to the ... - Google Books
- McKinsey Quarterly
- Home | Knowledge Network
- Sharma, Amol; Lublin, Joann S. (October 21, 2009). "A Star Partner's Galleon Arrest Shakes Up Ranks at McKinsey". The Wall Street Journal.
- Jones, Del. "Some firms' fertile soil grows crop of future CEOs" USA Today, Jan 1, 2008
- Reuters news outlet
- Hwang, Suein and Rachel Emma Silverman "McKinsey's Close Relationship With Enron Raises Question of Consultancy's Liability," The Wall Street Journal, January 17, 2002
- Gladwell, Malcolm. "The Talent Myth," The New Yorker, July 22, 2002
- Byrne, John A., "Inside McKinsey: Enron isn't its only client to melt down. Suddenly, times are trying for the world's most prestigious consultant." Business Week, July 8, 2002
- Hirst, Clayton, "The might of the McKinsey mob," The Independent, January 20, 2002
- Barrie, Giles, "The land that timetables forgot," Property Week, May 25, 2001
- Joel Garreau, Joel, "Our Cells, Ourselves," "Washington Post," 2/24/08
- Foti files lawsuit against insurance companies, alleges price-fixing | News for New Orleans, Louisiana | Local News | News for New Orleans, Louisiana | wwltv.com
- Home Insurers' Secret Tactics Cheat Fire Victims, Hike Profits - Bloomberg
- Auto insurers play hardball in minor-crash claims - CNN.com
- Ex-McKinsey director Kumar took $1.75m for tips to Galleon
- "Private Firm Gets Failing Grade"
External links
- Official Web Site
- McKinsey Quarterly
- McKinsey on Business Technology
- Google Finance - McKinsey & Company Company Profile
- McKinsey Hospital Institute
- McKinsey Health Systems Institute
- McKinsey Solutions