I don’t get why managers hire McKinsey. Aren’t they supposed to be able to manage? What am I missing?
Jay’s question comes on the heels of news that Rupert Murdoch’s News Corp has hired McKinsey & Company to run its slide rules over the operations of the Wall Street Journal. Magazine group Condé Nast and Time Warner have recently come under the gimlet eye of McKinsey consultants.
The question on why engage the very expensive services of McKinsey, Bain, BCG or any of the other big strategy consultants is a long-running one in corporate circles. It’s not particularly new in media either. In my Davos days I became friendly with Michael Wolf who ran McKinsey’s media practice in those days. He didn’t look like he was short of work even when media companies were thriving.
There’s not a simple answer, but I think companies hire McKinsey (let’s use them as a proxy for all the others) primarily for two reasons, one good, one not so good. The good reason is that there are plenty of management tasks that most companies face relatively rarely. Most companies don’t integrate new acquisitions all that often (there are exceptions, like Cisco, which become hugely expert at the task). A company wants to install a new ERP (Enterprise Resource Planning) system only once in a great while. And it may be relatively rare for a company to go through a brutal stripping out of inefficiencies and costs — even if it’s as hard-nosed as News Corp.
In those cases, a lot of companies turn to McKinsey because it has done it all before. The promise the well-suited McKinsey partner can make to Rupert Murdoch or any other corporate chieftain is, “We’ve seen this problem before dozens of times. We have procedures for dealing with it. We can do it efficiently.” For a very large sum of money.
The less good reason for using McKinsey is to deflect criticism. The ax comes down and a surviving executive can say to her shell-shocked employees: “My hands are tied. Those hot-shots from McKinsey came in and said we had 30% more editors than the industry norm. There was nothing I could do.” Or it could be that it’s a political ploy: “McKinsey said we should shut you down, but we decided to go with swingeing cuts instead.”
Murdoch has never seemed shy about wielding an ax, so I suspect the consultants are coming into the WSJ because they can do the analysis more quickly and efficiently than Rupe’s own bean counters.