Book review: inner workings of management consultancy McKinsey

Duff McDonald's The Firm: The Story of McKinsey and Its Secret Influence on American Business is more of a historical account of the company's rise to success than an analysis.

Duff McDonald’s The Firm: The Story of McKinsey and Its Secret Influence on American Business. Simon & Schuster

McKinsey consultants are capitalism’s Jesuit army, the high priests of organisational culture, and the guardians of the mystic magic of management. They are an elite, acculturated cadre of intellectuals, who belong to an institution that has reified itself – McKinsey, to its intimates, is not a firm, but The Firm.

That's one way of looking at the world's most influential management consultancy, says Duff McDonald in The Firm: The Story of McKinsey and Its Secret Influence on American Business. It's a firm that created an industry and a profession from scratch, and eked out an exclusive reputation through high prices, exhaustive and exhausting recruitment processes, and a deliberate programme of socialisation of its staff.

McDonald tells an interesting story about an American firm that has benefited almost continuously from what the Time editor Henry Luce in 1941 called the American Century – 100 years of American economic and political power. As the US grew, it fostered gigantic corporations with global reach, McKinsey peddled advice and analysis to industry leaders with deep pockets, while marketing itself as a premium product – and netting itself premium fees.

A lack of on-the-record sources, a by-product of McKinsey’s secretive reflexes, limits the light McDonald can shine on the company.

He unsuccessfully attempts to evaluate the benefit of hiring McKinsey. But without looking at specific engagements, this is unsurprising. Organisations are complex beasts, with many intangibles and moving parts. To conduct a profit and loss ledger for the firm’s clients would be tricky. It’s hard to get to the heart of an organisation that won’t furnish you with specifics.

On the downside, McKinsey advised Enron before its almost operatic denouement, and spent years at General Motors to no appreciable effect.

It’s also possible that McKinsey enfeebled the corporate world, argued McDonald, that, in the JPMorgan chief executive Jamie Dimon’s words, “consultants … become a disease for corporations”. Dealing with slow, sclerotic institutions can be difficult – regularly hiring an obedient crack squad of consultants to shake things up may be much easier.

That this may be the company’s deliberate strategy is also worrying. McDonald writes that “a huge part of effort is spent figuring out how to turn a middling client into a US$10million-per-annum [in fee revenue] cash cow.”

On the other hand, it’s the firm that invented the bar code, and the position of White House chief of staff. It’s hard to tell how much it has improved the corporations it has served, even if it hasn’t always revolutionised them. The company remains popular.

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