Two hundred thousand of the world’s brightest graduates apply for jobs at McKinsey & Company every year. Each of them, perhaps, does so in the belief that not only will a successful application guarantee a shed-load of cash – those with MBAs might earn $195,000 in their first year – it will also allow them to create, as the PowerPoint slides declare, “change that matters”.
The world’s original and most successful management consultancy has, for a century, wanted to sell itself to clients and employees as a “values-driven organisation”. This detailed account of the firm’s activities – the result of a five-year investigation by two senior New York Times reporters – provides an often devastating insiders’ story of the ways in which McKinsey fails in that mission.
James O McKinsey, an accountant from the Ozarks, was an evangelist of the new management science of efficiency. From the beginning, his company operated with a high-minded, somewhat delusional sense of its own integrity, as if the advice it gave was on a higher plane than bottom lines. “The very word commercial, when spoken about anyone at McKinsey, is akin to profanity,” one consultant suggested.
To this end, the company quickly created a lexicon to describe its operations. It was a practice, not a firm; it engaged with clients, rather than worked for them. Over the years, reflexive euphemism became very lucrative. Suggesting an ill-advised revision to a maintenance regime in Disney theme parks, one partner is quoted here as saying: “Change of this magnitude is not managed – it is led… and leaders must inspire and develop a bench of true change champions.” Savage cost-cutting became “optimising”; brutal redundancy programmes, “rightsizing”.
A great deal of this work was done in secrecy. McKinsey’s claims to ethical purity have never extended as far as transparency. To this day, the firm won’t identify clients or disclose the advice it gives. As a result, the authors suggest, “Americans and, increasingly, people the world over are largely unaware of the profound influence McKinsey exerts over their lives, from the cost and quality of their medical care [or] their children’s education”. There are so many McKinsey alumni at the top of public and private client organisations that conflicts of interest are priced in. For example, the authors’ search of internal records shows that “the firm has advised virtually every major pharmaceutical company – and their government regulators…”
They identify several key ways in which McKinsey has been directly responsible for a corporate culture that works for the benefit of the elite 1% rather than the wider workforce. One occurred in 1950, when a partner at McKinsey, Arch Patton, published comparative details of executive pay, and proposed ways in which chief executives – his clients – could be better rewarded by incentivising their remuneration against profit. His consultancy was soon in enormous demand. In 1950, directors of Fortune 500 companies were paid 20 times that of production workers. In 2021, that differential was 351 times. Late in life, Patton was asked by a reporter how he felt about the impact of his work. He gave a one-word reply: “Guilty.”
That shift enabled other neoliberal orthodoxies. Tom Peters, the business writer and former McKinsey partner, suggests here that McKinsey strategies of outsourcing and rationalisation really meant “disinvestment in people” to ensure bigger profits. “I really think the shareholder value maximisation thing has done more harm than any single thing in the country. It is the father of inequality, and inequality is the father of Trump.”
The authors reveal how this erosion of McKinsey core values, not least the eye-watering remuneration of its own executives, has led the company into many morally bankrupt places. For many years, the firm promoted Enron – run by McKinsey alumnus Jeff Skilling with the help of a raft of McKinsey consultants – as the new model of corporate innovation. Immediately before Enron became the biggest corporate bankruptcy in US history, its top five executives took nearly $300m in wages in one year alone.
No doubt McKinsey does a great deal of ethical and effective “engagement” – it has released a statement suggesting that this book does not represent its values – but that record is seriously undermined in successive chapters here. Witness, for example, the $83.7m in fees McKinsey received for marketing advice from the pharmaceutical company Purdue to “turbocharge” the sale of the painkilling drug OxyContin, which in turn fuelled the opioid crisis, related to half a million deaths. Or its consultancy to ICE, the US federal agency for expelling illegal immigrants from the US, which included cost-cutting proposals relating to the care of detainees that were so extreme they drew complaints even from Trump’s border force. Or read the detailed accounts of work undertaken under authoritarian regimes, including China, Saudi Arabia and Putin’s Russia.
Given this is a book largely targeted and focused on the American operation of the firm, it is dispiriting to note that the concluding chapter is an account of how “with startling speed, McKinsey conquered Britain. By the early 1970s, it had helped restructure 25 of Britain’s top 100 companies.” During the Thatcher privatisations and ever since, this lucrative influence has become endemic. The authors end their investigation with a brief deconstruction of the staggering cost and failure of the UK’s Covid test and trace programme led by Dido Harding, a former McKinsey consultant (for which McKinsey charged £563,400 to provide “vision, purpose and narrative”). In this, as in the other cases studied, the book’s scrutiny – and measured sense of outrage – is overdue and, you hope, only the beginning.
• When McKinsey Comes to Town: The Hidden Influence of the World’s Most Powerful Consulting Firm by Walt Bogdanich and Michael Forsythe is published by Bodley Head (£20). To support the Guardian and Observer order your copy at guardianbookshop.com. Delivery charges may apply
