Why use McKinsey — or any of the other guys?

Jay Rosen has a plaintive tweet:

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.

4 thoughts on “Why use McKinsey — or any of the other guys?

  1. L Evans

    When it comes to your good reason it is fair to say that while McK et al are great at analysis they have little or no track record in implementation. When it comes to making corporate takeovers work or achieving the cuts or savings, companies do not call the ‘big boys’ to make it happen. Even if they did McKinseys and the rest would decline -too much chance their success or failure could be measured and who wants that?

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  2. Eugene

    Wow, you make an excellent point about McKinsey becoming a potential scapegoat (if we can call it that; at the very least, a “deflection of criticism” as you write) if things don’t work out for Rupert Murdoch.

    I would actually argue that based on the current circumstances, this is a better reason for hiring McKinsey for their services. There is tremendous upside in the move, while the downside risk is also protected based on McKinsey’s expertise, experience, and status (i.e, the notion that “they told us to do that”).

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  3. Nico Macdonald

    I remember a TV documentary some years back in which McKinsey consultants advised a Scandinavian newspaper about strategy in response to online media. From memory, their main advice was about cutting staff, which seemed particularly unimaginative. (That said, the degree to which documentary creators paint black and white pictures is hard to overestimate.)

    Bringing in external parties to give credibility to decisions one wants to make anyway is not restricted to the corporate sphere. As The Times (London) Science Editor Mark Henderson recently noted on The Media Show, BBC Radio4: “The government talks… about wanting to make evidence-based policy, but what really prefer… is to get policy-based evidence.”

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  4. EC

    I worked as McKinsey consultant. Companies hired us because we have lots of very smart people. Many companies lack the in-house intellectual horse power to perform fact-based analysis. McKinsey does fact-based analysis very well. McKinsey consultants also work significantly longer hours than most corporate bureaucrats. McKinsey charges a great deal for their services. Even so, they’re a bargain.

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