Coordinates | 29°25′″N98°30′″N |
---|---|
Company name | McKinsey & Company |
Company type | Incorporated Partnership |
Company logo | |
Foundation | 1926 |
Founder | James O. McKinsey and Marvin Bower |
Locations | over 100 officesover 45 countries |
Key people | Dominic Barton(Managing director)Ron Daniel(Senior partner emeritus)Fred Gluck(Senior partner emeritus)Rajat Gupta(Senior partner emeritus)Ian Davis(Senior partner emeritus) |
Num employees | 17,000 (9,000 consultants) |
Revenue | $ 6.6 billion (est. 2009) |
Aum | over $ 5 billion (MIO Partners) |
Industry | Management consulting |
Services | Management consulting services |
Homepage | www.mckinsey.com }} |
McKinsey & Company, Inc. is a global management consulting firm that focuses on solving issues of concern to senior management. McKinsey serves as an adviser to many businesses, governments, and institutions. It is recognized as one of the most prestigious firms in the management consulting industry and has been a top employer for new MBA graduates since 1996.
Former managing director Rajat Gupta explains McKinsey's structure as follows:
It is very much, in many dimensions, like an academic organization. We have senior partners who are very much like tenured faculty: they are leaders in their own right. [...] We have about 80 to 100 performance cells -- a geographic office or industry practice or functional practice. They are very much autonomous and they are not organized in any hierarchy beyond that. We don't have any regional structures or sectoral structures. So all these performance units, in a theoretical sense, report to me, which means they don't report to anybody, because nobody can have 80 or 100 people reporting to them.
McKinsey operates under a practice of "up or out", meaning that consultants must either advance in their consulting careers within a pre-defined timeframe or leave the firm. "25% of the firm is new every year," Gupta says, "so half the people have less than two to three years' tenure in the firm, and their values need to be reinforced."
All leadership positions, including the position of managing partner, rotate among the senior partners and directors.
McKinsey has about 9,000 consultants in 99 locations in 56 countries. Forbes estimated the firm's 2009 revenues at $6.6 billion. The notion of company growth has been controversial from the 1970s as the firm began its global expansion; McKinsey opened many new offices under Rajat Gupta's tenure in the late 1990s. The election of Ian Davis as Gupta's successor was seen as "a return to McKinsey's heritage" against firm expansion.
Another controversial McKinsey practice is its non-exclusivity policy: a conflict of interest could arise as different teams of consultants might work for direct competitors in an industry. This works to McKinsey's advantage, because it does not rule out working for potential clients. Furthermore, knowing that a competitor has hired McKinsey has historically been strong motivation for other 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 from discussing 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.
This philosophy has come under increased scrutiny with the Galleon case, with some questioning whether the firm is a discreet broker of confidential or even inside information marketed as "best practices".
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. He is called the father of modern management consulting.
Ron Daniel was Bower's protégé and managing director from 1976 to 1988. He remains a senior partner and “the bridge between McKinsey's founding generation and the present.” The firm takes mentorship very seriously; Daniel mentored Rajat Gupta, who mentored Anil Kumar, who advised current managing director Dominic Barton. Gupta and Kumar were later entangled in the Galleon scandal.
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The Firm is organizationally divided into partners and non-partners. It is generally not possible to join the firm as a partner; instead, partners are promoted internally from the existing ranks of principals and associates. According to the Firm's career website, "successful consultants who join McKinsey early in their career can expect election to principal (the first stage of partnership) within five to seven years. ... There is no limit to the size of our partnership." Successful partners are sometimes elected senior partner after at least seven years as partner, though there are fast-rising exceptions (notably Ron Daniel, Rajat Gupta, and Anil Kumar) who become senior partner ~10 years after joining the firm as associates.
Officially, "senior partner" is the highest position (other than managing director) at McKinsey, though top senior partners are distinguished by reputation and influence. The firm's mandatory retirement age is 60, after which directors become "senior partner emeritus."
Junior directors were said to earn at least $1 million a year in 1994 dollars ($2 million today). There are over 400 directors at the Firm today, up from 150 in 1994.
A 1993 Fortune profile says, "The Firm places itself above discussing money as a motivation, yet senior partners often earn as much, or more, than the CEOs they advise", though over the last 15 years CEO compensation has increased disproportionately.
This system was created and chaired by former senior partner Anil Kumar as an early example of knowledge process outsourcing.
As of 2011 these funds had over $5 billion in assets under management (AUM).
From the firm's website:
This firm manages a wide array of investment vehicles for the Firm’s Partners and pension plans, with significant expertise in alternative strategies including hedge funds and private equity. A principle objective of the Investment Counseling Function is to help our investing partners create long term wealth by constructing appropriate investment portfolios and avoiding expensive and/or inefficient products. At the same time, the products and services offered must save Partners time relative to those which are available externally. This firm’s role is to provide investment education, counseling and select products to Partners.
MIO is "responsible for pension and discretionary partner investments, with a particular focus on alternative investments."
McKinsey 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’s most notable alumni are:
Notable longtime McKinsey partners include:
Academics who were formerly McKinsey consultants include:
The policy of client confidentiality is maintained even among former employees; as a result, journalists and writers have had difficulty developing fully informed accounts of mistakes which McKinsey employees may have made. It naturally also prohibits quantifying the benefits that good advice may have delivered. Despite this difficulty in attributing mistakes to McKinsey employees and alumni, some suggestions have been put forward:
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", a HR program implemented at Enron with McKinsey's knowledge, resulted, in the opinion of one author, 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." However, Enron's failure was fraud-related and would have been in the domain of auditors to detect, not by authors of its HR policies. 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, after which there were a number of fatal accidents. Misguided analysis, such as its recommendation in 1980 to AT&T; that cellular phones — admittedly then a tiny market — 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. General Electric's CEO Jeff Immelt in defending GE Capital's poor performance, maintained that no one had foreseen the crisis. He maintained that he had sought external opinions from McKinsey in 2007 before the global financial crisis which suggested that that "money from nations with a trade surplus, like China, and sovereign wealth funds, among other investors, would provide enough liquidity in the financial system to fuel lending and leverage for the foreseeable future." 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.
Among other books and articles, The Witch Doctors, written by The Economist editor-in-chief 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.
In 2009 and 2011 Rajat Gupta and Anil Kumar — both longtime top senior partners and luminaries at McKinsey, the co-founders of the Indian School of Business, with Gupta also having served as managing director of the firm — were charged by the SEC for illegally tipping the Galleon Group hedge fund with insider information about Goldman Sachs, Procter & Gamble, and other McKinsey clients. Gupta and Kumar were close friends of each other and of Galleon founder Raj Rajaratnam.
The SEC alleged that Gupta, who had since retired as a senior partner of McKinsey and was serving on the board of Goldman Sachs, had passed information to Galleon about Goldman that yielded nearly $20 million in profits and losses avoided. The SEC also alleged that Gupta passed information to Rajaratnam within 4 minutes of the completion of a special Goldman Sachs board meeting to approve a capital injection by Warren Buffett during the height of the financial crisis in 2008. Gupta also stood to profit as would-be chairman of Galleon International and chairman of New Silk Route. Gupta has maintained his innocence and countersued the SEC.
Kumar, who in 2010 pleaded guilty and was fined nearly $3 million for his role in the scandal, provided insider information on the acquisition of ATI Technologies by AMD while at McKinsey. He was the government's star witness in U.S. v Rajaratnam.
In U.S. v Rajaratnam it was also revealed that a third McKinsey partner, David Palecek — now deceased — had been involved in the insider trading scandal, though did not accept money from Rajaratnam.
The firm has come under significant controversy for having its longtime former senior partners (Gupta and Kumar) as well as a “rising star” junior partner (Palecek) all implicated with the Galleon Group and insider trading.
Category:Companies based in New York City Category:Companies established in 1926 Category:Economics consulting firms Category:History of Chicago, Illinois Category:International management consulting firms Category:Management consulting firms of the United States Category:McKinsey & Company Category:Privately held companies of the United States Category:Management consulting firms
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