The Firm – Duff McDonald 2013

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A really interesting book. It is especially entertaining as from the 50s to the 80s McKinsey seemed to have suffered all the problems that agencies struggle with today.

On industry experience:

 “The great open secret of the McKinsey business model is that a large part of its success has come by reselling the insights of others.” (McDonald quoting Bower, 2013, p.88).

Responsibility of advice:

 “He (the consultant) is not a banker, accountant, or lawyer. He is a thinker. He has had the chance to whisper into the ears of power, to exercise influence while being insulated from responsibility.” (McDonald, 2013, p.7).

Professionalism

“”And we look to hire people who are: first, very smart; second, insecure and thus driven by their insecurity; and third, competitive. Put together 3,000 of these egocentric, task-oriented people, and it produces an atmosphere of something less than humility.” (McDonald, 2013, p.166).

 “The McKinsey consultant would be selfless, be prepared to sacrifice money and personal glory for the sake of building a stronger firm, never look for public credit, and always be confident and discreet.” (McDonald, 2013, p.42).

All done with a truly interesting purpose:

“We’re selling the benefit called change. Change is where the value is.” (McDonald, 2013, p.185). The firm works “by pushing companies fearlessly into the future.” (McDonald, 2013, p.8).“In a word, McKinsey sells its own enlightenment, the firm’s ability to see things more clearly than its clients.” (McDonald, 2013, p.9). “One of the firm’s recently stated goals is helping to “(solve) the world’s great problems.” (McDonald, 2013, p.336).

The key is analytic knowledge - Tools are for tools.

“We need a conceptual supernova, a direct response to BCG’s matrix. And I rejected that notion. That was exactly what we didn’t need. We want to help our clients solve the problems they have, not the problems we know how to solve. We don’t want to be a solution in search of a problem, and that’s what the four-box matrix was.” (McDonald, 2013, p.140).

“To that end, Gluck introduced practice bulletins, one-page summaries of what had been learned on a particular engagement or series of engagement with clients, so as to keep all consultants abreast of current work being done by the firm. Gluck intended to build an internal McKinsey knowledge network one piece of paper at a time.” (McDonald, 2013, p.141).

 “”McKinsey evolved from general advisers to ‘knowledge bearing advisers.” (McDonald, 2013, p.197).  “”Today McKinsey positions itself as the repository of all business information and theory worth knowing,” (…) The firm claimed to do more research in business issues than the business schools at Harvard, Stanford and Wharton combined.” (McDonald, 2013, p.215).

Creativity

 “”It was a given, of course, that (Skilling) was brilliant and that he could get to the essence of an issue faster than anybody,” wrote McLean and Elking in Smartest Guys. “But once he felt the audience understood the strategy, he lost interest. Execution bored him. ‘Just do it!’ he’d tell his subordinates with a dismissive wave of his hand. ‘Just get it done!’ The details were irrelevant.” (McDonald, 2013, p.245).

Culture

“Bower came up with a new language. McKinsey had clients, not customers. Its consultants played a role, rather than worked at a job. It had practices and firm members, not a business and employees. It didn’t sell, nor did it have products or markets. The firm did not negotiate with clients, that being far too adversarial a term. It merely made arrangement. It didn’t have rules. It had values. And, perhaps most important, McKinsey was not a company; it was The Firm.” (McDonald quoting Bower, 2013, p.45).

“”up-or-out” rules.: Whenever business turns down, instead of laying off people, the firm simply lowers the percentage that gets promoted at each level and problem takes care of itself in a year or two. Voila!” (McDonald, 2013, p.127). “Even so, McKinsey has the temerity to refer to its “tradition” of people leaving the firm to seek greener pastures. In most companies that’s called quitting or getting fired. At McKinsey, it’s raised to the level of ritual.” (McDonald quoting Bower, 2013, p.84).

Money

“turning problems into profits.” (McDonald quoting Bower, 2013, p.453). “”value billing”: simply charging clients what McKinsey deemed its services to be worth.” (McDonald quoting Bower, 2013, p.57).

“Because consulting firms pay out all their profits at the end of each year, they are usually funded for about the next three months and nothing more.” (McDonald, 2013, p.268).

Democracy

“Bower appointed an election committee that produced an elaborate set of rules. There would be a secret ballot, for starters, with the results tallied by McKinsey’s auditors, Arthur Andersen.” (McDonald, 2013, p.100). “Talented people don’t like to be managed, Clee argued, and so if the firm wanted to attract and retain talented people, it had to trust them to do the right thing without due oversight.” (McDonald, 2013, p.103).