June 2010

The Nation Reviewed

The hard stuff

By Malcolm Knox
Illustration by Jeff Fisher.

It was a recession; that’s my excuse. A friend got me a job interview with the world’s second-biggest management consultancy. A man and a woman sat me down in a conference room. They seemed barely older than me, children somehow left in charge of the shop. The interview comprised a hypothetical scenario involving a manufacturer of aluminium extrusions. But the company was in financial trouble and the interviewers asked for my advice. Things got worse. I gave more advice. Before long, they told me the company had to sack workers or it would go broke.

Assuming my intelligence was being tested, I tried to think laterally. The company went under, and so did I. The woman seemed furious. Guiding me to the lift, the man said: “Why didn’t you cut staff?”

“I thought you wanted to see how creative I could be,” I said.

He shook his head. He was much more tired than me, and better dressed. “The test isn’t about doing something creative. It’s about doing something nobody likes. The hard stuff.”

Management consultants have always been easy to lampoon. When Tony Blair called upon McKinsey & Company consultants to advise the British government, a civil servant described them as “people who come in and use PowerPoint to state the bleeding obvious”. And Kerry Packer once said of Fred Hilmer, the McKinsey consultant who went on to head Fairfax Media Ltd: “I wouldn’t hire him as a fucking sweeper. For Fairfax to be run by a management consultant I think is just an act of stupidity. I think it’s ridiculous … He came from McKinsey and he has never run a business in his life.”

Packer might have summarised a widespread view of management consultants, but thanks to Senator Stephen Conroy, McKinseyites have to be taken very seriously in Australia right now. The communications minister has appointed three former McKinsey consultants – Siobhan McKenna, Diane Smith-Gander and Clem Doherty – to the board of National Broadband Network Company (NBNCo), the body entrusted with providing a $43 billion broadband network to Australia. NBNCo’s head of industry engagement is another McKinsey alumnus, Christy Boyce. And last August, McKinsey and fellow consulting firm KPMG were appointed to compile, inter alia, an implementation report for NBNCo, which cost $25 million. Given that the most expensive infrastructure project in the nation’s history will bear the fingerprints of McKinsey, it is pertinent to ask what that influence means.

McKinsey & Company was founded in 1926 by a Chicago accounting professor, James O McKinsey. The firm joined others in America in riding the wave of belief – set in motion by Ford and General Motors – that business was like science, with universally applicable rules, tools and principles.

McKinsey opened in Australia in the 1960s. By the mid-1990s, its principal consultants worldwide brought in an average of US$532,000. The explosion in consultancies – offices of McKinsey and its imitators – was due in large part to the Vietnam War veteran and McKinsey consultant Tom Peters, who with his colleague Robert Waterman published In Search of Excellence in 1982. The book, distilling lessons from 43 American companies, was a McKinsey project and the company’s best advertisement. It sold 5 million copies. Between 1980 and 1995, McKinsey operatives – who had only published two books between 1960 and 1980 – published 50 titles.

Former McKinsey consultants have run companies as diverse as IBM, Ben & Jerry’s and, in the person of Siobhan McKenna, Lachlan Murdoch’s private company Illyria. “Consultancies have replaced Oxbridge and the Ivy League as the nurseries of the powerful,” wrote John Micklethwait and Adrian Wooldridge in their 1997 book on management consultants, The Witch Doctors. “Indeed students from the latter jostle to get into the former.”

McKinsey has produced Marius Kloppers, current CEO of BHP Billiton, but also Jeffrey Skilling, one of the many McKinseyites who dragged Enron into ignominy. Malcolm Gladwell has written: “The one Enron partner that has escaped largely unscathed is McKinsey, which is odd, given that it essentially created the blueprint for the Enron culture.”

McKinsey now boasts 94 offices, employing 8700 consultants in 52 countries, and makes around US$6 billion per year. But what do its consultants actually do? The company literature speaks – in the expected weaselese – of strategy, leadership, governance, organisation, values and so on. And much of the material promotes McKinsey as a kind of simultaneous corporation and university, publishing McKinsey Quarterly, a management journal claiming to have 2 million readers. The McKinsey Global Institute spends up to US$100 million annually on research, and the company hypes its “alumni”, an 18,000-strong global network of former consultants.

Indeed, much of what consultants do is ‘study’. Saxon Hill, who worked for two years for Bain & Company, another of the world’s largest consultancies, says teams of junior consultants research an industry or a company, to distil their findings and produce reports. “That’s why I find the term ‘implementation’ [in the NBNCo study] ironic,” Hill says. “Consultants don’t implement anything, and that’s why they’re viewed with suspicion. When I was a consultant, I felt embarrassed as a kid who can barely tie their own shoelaces to be telling experienced line managers how to run their businesses. It takes a particular personality type to be able to do that.”

That personality type is sought after in consultancy recruitment. Hill was a university medallist in history, a typical consultancy target, according to the Sydney journalist Lisa Pryor. In her 2008 book, The Pinstriped Prison, Pryor commented that consultancy firms “are the driftnet fishermen of the intellectual seas”. Unrestricted by the professional requirements of legal or finance firms, consultancies “catch future physicists, lawyers, engineers, palaeontologists, entrepreneurs, neurologists and doctors”.

They “catch” them by appealing to their competitive insecurities. Georgia Lee, a Harvard biochemistry student at the time of her recruitment, told Pryor: “It’s part of being that rat which runs the rat race – it’s not a very conscious or thoughtful part of me but it’s the part of me that wants to win.” The work is mostly a grinding, number-crunching insult to the recruits’ intelligence, but, says Hill, an ‘up or out’ ethos prevails: you either move up swiftly or you’re out the door.

Questions about the social good of all this can’t go unasked. Noting the high number of Rhodes scholars recruited by McKinsey, Pryor asked the registrar of the Rhodes program in New South Wales if applicants expressed a desire to become management consultants. No, he said: they want to make the world a better place.

Of Tom Peters’ 43 “excellent” companies, two-thirds were either in trouble or defunct within five years of the publication of In Search of Excellence. But the criticism – that consultants don’t hang around long enough to cope with the consequences of their advice – is also their main attraction; by outsourcing the hard decisions, firms are paying consultants to take the heat.

No such transference of responsibility will be available to Senator Conroy. In March, he was forced to deny “a conspiracy [that] kicked around there for a while that McKinsey was taking over the world”. But this denial only emphasised how publicly he has hitched his wagon to the firm.

Malcolm Knox

Malcolm Knox is a former literary editor of the Sydney Morning Herald, and has won three Walkley awards for journalism. His books include Jamaica and The Life, and his new novel, Bluebird, will be published in September 2020.

Cover: June 2010

June 2010

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