McKinsey & Company

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McKinsey & Company
Image:McKinsey&CompanyLogo.gif
Type	Incorporated Partnership
Founded	1926
Headquarters	90 offices in 51 countries
Key people	Ian Davis, Managing Director
Industry	Management consulting
Products	Management consulting services
Revenue	US$ 3.8 billion (est. 2005)
Employees	about 13,000
Website	www.mckinsey.com

McKinsey & Company is a privately owned management consulting firm that focuses on solving issues of concern to senior management in large corporations and organizations.

Known among its employees simply as "The Firm" [1], James O. McKinsey & Company was founded in Chicago in 1926 by James O. ("Mac") McKinsey. McKinsey was a professor at the University of Chicago who pioneered budgeting as a management tool. Marshall Field's became a client in 1935, and soon convinced James McKinsey to leave the firm and become its CEO; however, he died unexpectedly in 1937.

Marvin Bower, who joined the firm in 1933 and succeeded James McKinsey when he left, oversaw the firm's rise to global prominence. When McKinsey died, the Chicago and New York branches of the firm split up. In 1939, with the help of the New York partners, Bower resurrected the New York office and named it McKinsey & Company. While he always gave James McKinsey credit for the firm's success, Bower established many of its guiding principles. Inspired by his experience at the law firm of Jones Day, he believed that management consulting should subscribe to the highest standards, emphasizing professionalism over any other consideration.

McKinsey maintains offices on all continents (except Antarctica) and in most major cities; in the last few years, the majority of its work has derived from non-U.S. clients.

1 Organization
2 Recruiting
3 Interviewing
4 Publishing and public relations
5 Knowledge Management System
6 Criticism
7 Offices
8 Notable current and former employees
9 External links

[edit] Organization

McKinsey is formally organized as a corporation, but functions as a partnership in all important respects. (It dropped the "Inc." from its company name in 2001.) Its managing director is elected for a limited term of three years by the firm's senior shareholders, titled directors. Each managing director can only serve for three terms. Several committees develop policies and make critical decisions. Geographically based McKinsey operates under a practice of "up or out," in which consultants must advance in their consulting careers within a time frame, or else are asked to leave the company.

Today McKinsey has over 7,500 consultants in 90 offices across 51 countries. They help solve strategic, organizational, operational and technological problems, for some of the world's largest organizations. Clients include three of the world's five largest companies, two-thirds of the Fortune 1000, governments and other non-profit institutions. McKinsey also performs pro bono engagements for a number of charitable organizations and government agencies worldwide. 'Forbes' estimated the firm's 2005 revenues at $3.8 billion in its list of largest private companies.

A controversial aspect of McKinsey's practice is that it is non-exclusive, and thus a conflict of interest could arise as different teams of consultants might work for direct competitors in an industry. This works to the company's advantage, as it does not require it to rule out working for potential clients; furthermore, knowing that a competitor has hired McKinsey has historically been a strong impetus for 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 to discuss details of their work with members of other teams. Consultants are also prohibited from serving direct competitors unless they wait 3 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.

[edit] Recruiting

Marvin Bower broke with industry practice in his time^{[citation needed]} by focusing hiring efforts on recent graduates from the best business schools, rather than among experienced managers. The premise for this was that analytical rigor and fresh insights were of greater value to clients than conventional wisdom. McKinsey has been known to make rare exceptions to this policy by hiring senior staff from industry (John Sawhill being a noted example).

Recently, McKinsey has diversified by soliciting candidates from graduate programs in law, medicine, engineering, science, and the liberal arts as well as by recruiting "experienced hires" from a variety of professional backgrounds including the military, law and medicine. Today, roughly half of McKinsey consultants with a graduate degree are not MBAs. These Advanced Professional Degree candidates (APDs) attend a training program before starting their careers at McKinsey.

McKinsey also recruits very selectively among undergraduates, hiring as "Business Analysts" recent graduates from top universities to work as consultants alongside its associates for about 18 to 24 months. A small number of candidates with master degrees also can be hired as BAs. The BA program is one of the most competitive in the industry and is coveted by many business-oriented undergraduates.^{[citation needed]} Some business analysts choose to stay at McKinsey for an additional year as a BA, often to join an office abroad or specialize in a given industry. Many business analysts are sponsored by McKinsey to attend graduate schools, usually for a MBA but sometimes for other master's or Ph.D. degrees, after their initial two years at McKinsey and rejoin the firm afterwards. Some are offered a coveted "DTA" - direct to Associate offer which means they effectively skip 2 years ahead of their peer group, but must forgo any educational support from McKinsey.

[edit] Interviewing

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McKinsey's interviews are rigorous. MBA-level interviews usually take place on-campus and follow a two round process.

Since summer 2007, the first round starts with a 60 minute test, consisting of 26 multiple choice questions on 3 to 4 strategy cases; the intensity and difficulty levels are beyond those of GMAT's. Sample questions of milder level are found on the company's website.

The first round typically continues with two or three 45-minute interviews. Each interview consists of two parts.

The first part, usually referred to as the "FIT" portion, is designed to test the interviewees skills in 4 key areas: Problem Solving, Achieving, Personal Impact, and Leadership. Common questions during this portion of the interview include: "Tell me about a time you had to convince someone of something" and "Tell me about a time when you had to lead a team through a challenging situation." Interviewers will often push the interviewee in certain directions to verify truthfulness, as well as gain further insight into the interviewee's thought process.

The second part of the interview consists of a formal business case. This part of the interview is designed to test a candidate's problem solving skills. Typically a business problem, often resembling prior work done by the interviewer, is presented to the candidate. The interviewer then asks the candidate a series of focused questions that test basic math skills, business sense, and communication/presentation skills. An example of the case portion of the interview and type of questions asked can be found here: [2]

Candidates who are successful in the first round will be asked to come back for a second round of interviewing, usually taking place in the actual McKinsey office. These rounds usually consist of two or three interviews, typically conducted by McKinsey partners, or other senior firm members. The interviews themselves are largely similar to those of the first round, albeit slightly more informal and high-level. Candidates who succeed in their second round interviews are made an offer to join the firm.

[edit] Publishing and public relations

McKinsey publishes several publications with internally-authored articles. A print and online publication, The McKinsey Quarterly [3] (published six times a year) offers journal-length articles on strategy, organization, marketing, and other topics of interest to senior executives. The company's Business Technology Office also publishes McKinsey on IT, a quarterly publication aimed at CIOs. The corporate finance practice publishes McKinsey on Finance, aimed at CFOs.

The Firm does not typically contribute to academic marketing or finance journals. Several McKinsey-authored business books have been written including The Alchemy of Growth, Creative Destruction, The War for Talent, and most notably In Search of Excellence.

The Firm also funds or participates in various industry conferences and forecasts. In Washington, DC, McKinsey runs the Global Institute, which studies macroeconomic trends.

[edit] Knowledge Management System

McKinsey invests significantly in a large, world-class, knowledge management system to support field consultants. The system includes generalist researchers, industry (and function)-specific experts and librarians, and access to journals and databases. In addition, consultant-authored internal "practice development" documents capture generalizable insights from client engagements. There are also methods to access individual consultants with expertise from previous client studies or previous employment, for background assistance (competitive information is not shared).

[edit] Criticism

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The factual accuracy of this article is disputed.

Much criticism against McKinsey can be applied to management consulting as a whole. The firm itself will not discuss specific client situations and maintains a carefully crafted and low-profile external image, which also protects it from public scrutiny of the results of its involvement, making an assessment of its client base, its success rate, and its profitability difficult. This secrecy also helps conceal McKinsey's prices, which often far exceed $10,000 (U.S.) per day for a consulting team.^{[citation needed]}

Client confidentiality is maintained even among alumni of the firm, and as a result, journalists and writers have had difficulty developing fully informed accounts of mistakes McKinsey consultants may have made, such as with Enron, (formerly one of the firm's biggest clients),^{[citation needed]}Swissair, and Sabena.

Much of the distrust toward McKinsey can be categorized as:

Misguided or unimaginative analysis, such as its alleged recommendation in 1983 to AT&T that cellular phones would be a niche market^{[citation needed]}
Groupthink, as its consultants strive under time pressure to converge on a unified set of findings and recommendations^{[citation needed]}
Hubris or arrogance toward executives, in particular underestimating the difficulty of implementing recommendations^{[citation needed]}
Emphasis on shareholder value, often at the price of investment and long-term strategy. For example, this may have doomed the British railway company Railtrack, which collapsed after a series of accidents, allegedly after following McKinsey's advice to reduce spending on infrastructure and return cash to shareholders instead.^{[citation needed]}
Concern that it aims to become an expensive permanent presence with clients, rather than focusing on solving a clear set of problems, thereby functioning as a substitute for proper leadership and organization. This is an increasing concern in the public sector, where McKinsey has become involved with agencies such as the British National Health Service.^{[citation needed]}

Among other books and articles, The Witch Doctors, written by The Economist journalists 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.

McKinsey is credited in a recent CNN article with developing a controversial car insurance company practice in the mid-1990's. In this tactic, insurance companies will fight injury claims against them if the claim involves a soft tissue injury. This is done, the article alleges, because these types of injuries are hard to verify by X-ray or other common examination methods other than surgery.[4]

British Prime Minister Tony Blair faced criticism in the Financial Times for hiring McKinsey to consult on the restructuring of the Cabinet Office. A top civil servant described McKinsey as "people who come in and use PowerPoint to state the bleeding obvious."^{[citation needed]}