MCKINSEY & CO: Have you ever heard of a company McKinsey
& Co?
They’re the oldest and largest of the “Big Three” management consulting firms and they
work with virtually every company you can think of.
This includes everyone from American Express and AT&T to Citibank and General Motors.
McKinsey also offers some of the best salaries for college graduates and offers them an exciting
opportunity to travel the world and work with the largest companies.
But, behind the hood, McKinsey isn’t all that it’s hyped up to be.
For one, their business in management consulting which isn’t all that effective or useful.
If you’re wondering why companies hire them despite that, check out our video about that.
But, being ineffective isn’t the only critic of McKinsey.
If anything, it’s actually the smallest critic.
The biggest red flag is that they’ve been involved in the biggest scandals of all time
from Enron and the 2008 Financial Crisis to the Opioid Epidemic and Election Scandals.
And those are just to name a few.
McKinsey has also played a role in most of the scandals and evil businesses that Jake
Tran has covered even including the ones about authoritarian regimes like Saudi Arabia and
Russia.
Ironically, it seems like they’re much more effective at helping shady nefarious projects
than they are when it comes to doing actual positive management consulting.
But, despite their large influence, they’re rarely talked about on the news or social
media.
The fact that they’re completely privately owned just makes them even more discrete and
secretive.
But, McKinsey & Co wasn’t always so shady.
Like most companies, McKinsey was established with good intentions and for many decades,
they had a relatively clean record.
So, here’s the story of how McKinsey & Co became the consultants that deserve hell.
HUMBLE ORIGINS: Taking a look back, the story of McKinsey
dates all the way back to 1926 to a man named James O McKinsey.
James was an accounting professor at the University of Chicago, and he got the idea to create
McKinsey & Co after witnessing a bunch of inefficiencies across military suppliers.
Given that he was an accounting professor, he felt that he could clean up their books
and make these suppliers a lot more efficient.
So, he went ahead and established an accounting and management firm called James O. McKinsey
& Company.
While the firm carries Jame’s name to this day, James actually didn’t play a very big
role in it’s growth or expansion largely because he couldn’t.
You see, about ten years after founding the company, James would be hit with a severe
case of pneumonia that took his life.
But, on the brightside, it looks like James had already hired a star partner named Marvin
Bower who could carry on his legacy.
By trade, Bower was actually a lawyer, but he never really worked as a lawyer given that
he joined McKinsey a few years after graduating and he basically became the father of the
company.
Bower established much of McKinsey’s corporate culture and created policies that are now
used around the world like the “Up or Out” policy.
As the name suggets, if you don’t get promoted within a certain time frame, you get fired.
This ensures that no employee is stagnating or getting too comfortable, but this policy
has come under fire during recent times as it also encourages backstabbing and corporate
politics.
Anyway, McKinsey would drift away from it’s accounting roots not long after James’ death.
In fact, the company would physically split up in 1939 into three companies called Scovell,
Wellington, & Company, McKinsey & Company, and McKinsey, Kearney & Company.
The accounting practice would be shifted to Scovell, Wellington, & Company which left
the other companies with the classic management consulting.
While this division robbed McKinsey of much of it’s subject matter expertise, McKinsey
retained much of the military supplier relationships that James had established.
And this was extraordinarily valuable given that WW2 and the Cold War were just around
the corner.
McKinsey became the go to consultants for governments, defense contractors, and military
organizations around the world which allowed for exponential growth throughout the 40s
and 50s.
They went from 88 consultants in 1951 to over 200 consultants by the 1960s.
They were also able to establish a massive base of operations in Europe with offices
in London, Paris, and Amsterdam.
Despite all this growth, Bower never forgot about his employees.
In fact, he would constantly work to make sure his employees were well taken care of.
For example, in 1951, he established a profit sharing program and in 1956 he would shift
100% of the company’s ownership to the firm’s employees.
And that’s how it is to this day.
But, while things were developing great within McKinsey, the same could not be said about
the industry and busines as a whole.
As the era of the red scare came to an end in the late 1960s, so did the era of the original
McKinsey & Co.
THE DEVOLUTION: While McKinsey was highly sought after in
the early days due to their services being novel and unique, the same could not be said
by the 1970s.
You see, after McKinsey ditched their accounting roots, they never focused on another technical
discipline.
And while this worked out early on, as the industry matured, McKinsey’s services became
less and less valuable.
Most companies preferred to hire technical consultants with strong backgrounds in engineering,
information technology, and enterprise resource planning as opposed to generalists.
This is why technical consulting firms like Accenture and TCS have far outperformed the
legacy consultants in recent decades.
New competition for management consulting from firms like Boston Consulting Group and
Bain & Company didn’t help the situation either.
In fact, in 1971, McKinsey’s own internal commission found that McKinsey had become
too focused on geographic expansion and lacked adequate industry knowledge.
The commission advised that McKinsey slow its growth and develop industry specialties.
Ideally, McKinsey would have specialized in the rapidly growing tech industry, but instead,
they decided to specialize in various management consulting niches.
This included sectors such as strategy, operations, and organization.
While these sectors better defined what McKinsey was offering, it didn’t exactly change what
they were offering, so they continued to face many of the same issues.
You could say that McKinsey had trouble pitching their value proposition to companies, but
they would eventually figure it out after they analyzed what company leaders truly wanted.
Company leaders didn’t necessarily want strategy or branding consulting.
What they really wanted was growth, happy shareholders, a good reputation, and less
responsibility.
McKinsey couldn’t guarantee growth or happy shareholders, but they could help leaders
achieve a good reputation and less responsibility by becoming scapegoats.
Are you the leader of a fortune 500 company that needs to make a bunch of hard decisions?
Well, hire us and we’ll probabaly tell you to make the same decisions, but we can make
it a win win scenario for you.
If the choices end up working well, you can take the praise and glory.
If they don’t work on the other hand, you can blame us and walk away relatively clean.
For many legacy leaders, this is a deal that’s too good to turn down, and in modern times
this is very much the real appeal of management consultants.
While this turned out to be quite lucrative and in demand, McKinsey had regressed from
being accounting experts to becoming generalists to becoming scapegoats.
But this was just the beginning of their devolution.
Remember how we talked about company leaders having to make hard choices.
Well, these hard choices didn’t just include completing layoffs or shutting down an underperforming
sector.
Many of these choices related to truly nefarious activities.
TRULY EVIL: Before you knew it, McKinsey was knees deep
in shady activities and evil projects like Enron.
If you’re not familiar with Enron scandal, it was the largest accounting fraud of all
time leading to shareholder losses of $74 billion.
The first thing we should note is that the mastermind of the scandal, Jeff Skilling,
was formerly a McKinsey consultant for 21 years.
But, that’s just the beginning fo McKinsey’s connection to Enron.
Enron would use McKinsey on 20 different projects and the two companies were so close that McKinsey
consultants had quote “used Enron as their sandbox.”
McKinsey would never be convicted for their connection to Enron, and while you could write
off Enron as a one off connetion, McKinsey has so many such connections that it’s hard
to write off everything as just a coincidence which brings us into our next exhibit which
is the 2008 financial crisis.
McKinsey is iconic for encouraging banks to securitize mortgage assets and fund their
balance sheets using debt.
These practices are what would eventually make the global financial system insolvent,
leading to the crisis.
During this time period, McKinsey also advised financial institutions to deliberately screw
over end users.
For example, they advised Allstate insurance to purposely give low offers to claimants.
The idea was that fighting this injustice would be so expensive that lawyers would refuse
to help these clients.
Moving on, we have likely their most disgusting scandal as it didn’t just screw over people’s
finances, it literally screwed over their lives as their next scandal relates to the
opioid epidemic.
McKinsey created a strategy for pharmaceuticals that would quote on quote “turbocharge”
sales of OxyContin.
This essentially consisted of McKinsey advising pharmaceutical companies how they could actively
circumvent opioid regulations and deliberately encourage and get people addicted.
For victims of addiction, it’s common for their close family, if they have any, to try
to talk to them and persuade them from an emotional standpoint.
If you’ve ever been in this situation and you’ve had trouble getting to the victim,
well you can blame McKinsey because they were literally proposing strategies to counter
the emotional messages from mothers with teenagers who overdosed on OxyContin.
They were also proposing that pharmaceutical companies pay pharmacies a rebate based on
how many overdoses and addictions they caused.
I mean, they literally had it down to a science.
In 2019, they projected that 2,400 CVS customers would become addicted and that each “event”,
which is what they called it, deserved a rebate of $14,810.
This meant that Purdue Pharma would have to pay CVS $36.8 million that year for their
“work”.
Fortunately, these scumbags got exposed, but they would walk away with a settlement of
$573 million which is ridiculous because this is not the type of crime that you get fined
for.
It’s the type that you get shut down for, yet here we are.
At least, with this one, McKinsey wasn’t directly causing deaths.
With these next few cases, well, you can be the judge.
AUTHORITARIAN CONNECTIONS: McKinsey and Saudi Arabia are basically best
friends given that McKinsey has completed 600 projects for Saudi Arabia between 2011
and 2016 alone.
Saudi Arabia is an authoritarian regime that doesn’t like its citizens dissenting with
the leaders.
So, naturally, many of McKinsey’s projects have to do with silencing dissenters.
Now, let me be clear, McKinsey only identifies such individuals, they’re not involved in
what happens next.
But, when you know that there’s a good chance that the people that you identify will be
unfairly arrested if not offed, it’s quite immoral that you continue consulting for said
government.
Saudi Arabia isn’t their only authoritarian client either.
Another authoritarian client is of course China.
A great example of their indifferent and soulless behavior is their behavior during the peak
of the Uyghur genocide in China.
Back in December of 2018, McKinsey hosted a lavish company retreat alongside Chinese
officials while thousands of Uyghurs were being detained and offed just miles away.
McKinsey received quite a bit of public backlash for this behavior, but it doesn’t look like
they’ve changed their ways.
You know how virtually every western corporation has withdrawn from Russia due to the war?
Well, it looks like McKinsey didn’t get the memo as it’s reported that McKinsey
has been offering consulting services to the Russian state owned enterprise Rostoc who’s
responsible for manufacturing missile engines in the Ukraine war.
What makes this even more unethical is that McKinsey was consulting with the Pentagon
at the same time.
McKinsey also has a history of scandals with democratic countries.
For example, it’s alleged that McKinsey helped the Gupta family to position corrupted
individuals across the South African government.
Similarly, it’s also alleged that McKinsey helped French president Emmanual Maron to
bypass campaign finance laws.
And finally, it’s also alleged that McKinsey has been helping Canada implement immigration
policies that don’t have the public’s best interest in mind.
A SPOT IN HELL: Hearing all this, I don’t think I need to
explain the title.
While McKinsey started off with good intentions of improving corporate accounting and management
efficiency, they slowly saw their value proposition decline decade after decade.
Instead of pivoting to the technical space which was the up and coming consulting industry,
they decided to turn to the darkside.
They became corporate scapegoats and secret advisors on shady strategies.
These include everything from financial fraud and corporate scandals to ruining countles
lives and causing deaths.
Yet, given that McKinsey is a just a consulting firm and doesn’t make the final decision,
they’re rarely held accountable, and even when they are, their punishment is laughable.
And that’s why McKinsey & Co are the consultants that deserve hell, but that’s just what
I think.
Do you think McKinsey deserves a spot in hell?
Comment that down below.
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