Management Consulting Myths

By James Kwak

Two people forwarded me Johann Hari’s Huffington Post article about management consultants, provocatively titled “The Great Management Consultancy Scam — and How it Could Be Coming for Your Job.” It seems that someone is once again bashing management consultants as witch doctors and scam artists, and I, improbably, must come to their defense. “Improbably” because I am generally critical of management consulting, and I have spent many hours with former McKinsey colleagues talking about how little we knew back when we were consultants. I am frequently asked by other students whether they should become consultants, and my general answer is, in a nutshell, “It’s a lousy job, and not nearly as exciting as the recruiting pitch makes it out to be, but it’s a good thing for your resume if you actually want to be in the business world.” (If you know me and are actually considering becoming a consultant, feel free to call me.)

Hari’s article is largely based on books by former consultants, primarily David Craig’s “brave” memoir (written five years ago; David Craig is a pseudonym). Here’s a quote from Craig: “We were proud of the way we used to make things up as we went along. . . . It’s like robbing a bank but legal. We could take somebody straight off the street, teach them a few simple tricks in a couple of hours and easily charge them out to our clients for more than £7000 per week.” According to Craig (according to Hari), all of management consulting boils down to recommending that the client lay off thirty percent of its staff, after one week of observation and analysis.

Hari also cites Matthew Stewart, for whom (according to Hari) consulting was also all about firing people: “he was taking a fortune in payments, and firing thousands of productive people.” That is not really what Stewart is about, at least according to his own article, although I don’t agree with him either.

Here’s where I need to give my disclaimers. I was only a consultant for a little less than three years, from 1997 to 2000. I only worked at one firm, and only in two offices of that firm. So my experience may not be representative. But since McKinsey is widely considered the premier management consultancy, any criticism that doesn’t apply to McKinsey somewhat misses the mark.

I worked on nine client projects during my time in consulting, and only one and a half had anything to do with cost-cutting.* In both of those cases, a large proportion of the cost savings came not from firing people, but from dealing with various systems problems. (And in neither case did the recommendations come after one week.) The other projects were a combination of strategy, mergers and acquisitions, entering new markets, and implementing new processes.

Besides the supposed focus on cost-cutting, another part of the stock criticism repeated by Hari is that consultants take untrained people right out of school and bill them out for large amounts of money. This is true, but it misses the point. Yes, it may seem shocking that new consultants cost 7000 pounds per week. (That’s Craig’s figure—if I told you the McKinsey numbers, the Firm** might send someone to kill me and make it look like an accident.***) But they get it because those people, as part of McKinsey teams (I’m not going to speak for the competition), do work that most large corporations are simply incapable of doing internally.

The fact is that first-year McKinsey associates are very smart, very ambitious, very hard-working, and very insecure people. That insecurity is crucial, because it means they will metaphorically kill themselves before they will fail to do whatever they are asked to do, even if it is typing hundreds of numbers from printed reports into a spreadsheet and averaging them, or flipping through dozens of bound reports to make sure that none of the pages was photocopied incorrectly. Plugged into a consulting team, they provide leverage—the ability to get large amounts of moderately high quality work out of a team where only a few people—the more senior members—know what they are talking about.

Now, there should be a cheaper way to get the same results than hiring McKinsey to get them for you. But most companies, for whatever reason, are incapable of doing it internally. Any company only has a finite number of smart, ambitious, hard-working, insecure people. And—here’s the problem—they are already doing the most important jobs in the company. They are running business lines, or designing products, or selling products, or keeping important customers happy—all the things a company has to do to be successful. They can’t be spared to go work on some consulting project. I’ve seen internal consulting arms of Fortune 500 companies and, believe me, you are better off paying the premium and hiring McKinsey. My old software company had a higher proportion of overachievers than any other company I have ever seen, and there is no way we could have spared four good people to work full-time on some research project for four months.

So what’s the secret to the McKinsey model? There are a few, and they are interconnected. One is that, however they did it, they created an institution that is prestigious enough to skim off some of the top people produced by our educational system—which is, at its high end, probably the best in the world. Then, having secured those people, they figured out how to resell them to ordinary Fortune 500 companies—who can’t hire them out of college, because what twenty-two-year-old wants to work for Proctor & Gamble?—at a huge premium. Sure, the clients aren’t always happy. But they don’t really have a choice. Because every now and then, a big company has an important question, like whether or not to enter a new market, and it cannot find the people internally to answer the question (again, because the best ones are too important to take away from their day-to-day jobs). And the question is so important that it dwarfs the premium that McKinsey charges relative to other consulting firms.

Is this good? Hari talks about how “the better you treat a workforce, the better they work,” and I agree with that. But McKinsey is not going around telling companies to abuse their workers (at least not the large majority of the time), unless it’s changed drastically in the past decade. Maybe the other management consulting firms really are as bad as Craig and Stewart make them out to be; I have no idea. Big companies do need people to study important questions now and then, and for many of them management consultancies are the only way to find those people. They should always read the reports carefully, understand all the assumptions, and challenge the conclusions. But if they do that, management consultants are not a bad way to get the grunt work done.

There is a more intelligent criticism to be written about management consulting. And there is a better way for companies to use management consulting services. But those will have to wait for another blog post, or for my own memoir (which is somewhere in the backlog of books I’m planning to write but probably won’t get to). If Craig’s and Stewart’s books are anything like Hari makes them out to be, though, they’ve missed the point.

* One project had two parallel components, one of which involved cost-cutting.

** Yes, (some) people at McKinsey do refer to their company as “the Firm,” with a capital “F.”

*** That was a joke. But McKinsey is very serious about confidentiality, and I see no reason to betray its confidences.

77 responses to “Management Consulting Myths

  1. Bayard Waterbury

    James, I agree that there is a clear cut positive role for good management consultants. I used to work, before retiring, for a top national legal services firm. What made us strong and kept our clients happy? Lots of smart people. But there are lots of smart people in every successful business. Why weren’t we more successful? Because management got hung up on a paradigm that worked, but only to a point. We were highly respected and could have been more successful, but, as you said, the best and brightest were busy. One of the reasons for our success was the very reason our management should have hired a consulting firm to improve us. One of the major reasons for our success was the we applied team problem solving to every problem. We knew by experience and within our successful paradigm that the best solutions to difficult problems come from a second or third set of “eyes.” We knew that fresh perspectives, even from within come when problem solving is a shared process. Thus, since our management did not have this additional perspective, most decisions on management issues got a stale dogmatic solution applied, because those at the top couldn’t go beyond “what had always worked” even if the competition was encroaching on their profits.

  2. James, thank you for your insights–do you also happen to recall the impact of McKinsey’s recommendations on those nine engagements you had worked on?

    I had been on both ends of the consulting game myself.

    When I was on the receiving end, with a large hi-tech company whose management was way over its head, McKinsey was brought in. Idiotic recommendations, made by bright young guys who knew nothing of technology, were formulaic and too much spreadsheet driven to help. In the end, if one stares long enough at those spreadsheets and cannot see round the corner, the only consistent recommendation is going to be cost cutting–that is, giving top management time/legitimacy.

    After being a consultant myself for a number of years, I blogged about “The drama of most consultants”

    http://fromabctoxyz.blogspot.com/2010/02/drama-of-most-consultants.html

  3. Michael Turner

    It occurs to me that management consulting bears an unnerving resemblance to executive headhunting. They are both inappropriate marketizations of human resources that profit handsomely through very similar strategies: creating artificial scarcities of the kinds of management skills companies need.

    Executive headhunting has counterproductively “marketized” one end of management hierarchy. It does so by selling corporate boards on the absurd idea that there’s some generic science of upper management and some magical quality of CEO leadership — when in fact both are significantly situational, very much bound to the contexts of individual companies and their markets. This creates artificial scarcity of skill at the top. What happens when you have artificial scarcity of something non-substitutable? Its price explodes. And sure enough, CEO compensation has gone through the roof, while CEO performance has become almost dartboard-random. Thus do we get a Nardelli cashing out of a Home Depot (where he never should have been CEO in the first place) with a $210 million golden parachute.

    It seems that management consulting has counterproductively marketized the lower end of management, in a somewhat different way. If management consulting firms weren’t soaking up most of the “smart, ambitious, hard-working, insecure” entry level managers, freshly graduated out of top schools, Procter & Gamble and its ilk would have a much easier time hiring out of that cohort. A company’s best interests are best served if those kinds of people come in at the bottom and learn the company-specific systems and markets in some depth, then stay on for a while. (Shedding their hobbling insecurities along the way, one would hope, assuming their performance is as good as their promising potential would indicate.)

    The number of top management consulting firms is small enough that there might be oligopoly-style price signaling going on, further amplifying the profit margins “earned” by creating artificial scarcity. With a larger number of smaller management consulting firms, any given “brand” would no longer stand out as much. The top firms probably understand that having a smaller number of “high quality” management consulting brands is better for all of their billing rates.

    Robert Townsend, in his aging-but-still-classic Up the Organization, recommended promoting from within (all the way up to the top), shutting down your entire marketing department (after all, if you can’t figure out who you should be selling to, and why, and how, you don’t really understand what your company does anyway), prizing and rewarding superior performance, “hiring the one you’d work for”, and treating people fairly. Easier said than done, to be sure. But who ever said it would be easy?

    CEO headhunting and management consulting — two market failures to which there may be no government solution. Unless, perhaps, both of these market failures stem indirectly from the unfortunate death of a very good idea (at the hands of market idolatry, needless to say): the idea that government service can be noble, and that smart and energetic people can enter it with no shame, and leave it with no shame. Back when Robert Townsend was writing, that idea still had some currency. But he probably had fresh memories of coming of age during the New Deal.

  4. One question that occurs is: how many different ways are there for the big consultancies to kick back to the exec(s) that hire them? Large companies that don’t function like government fiefdoms that funnel cash and perks have to be the exception to the rule.

  5. In both of those cases, a large proportion of the cost savings came not from firing people, but from dealing with various systems problems. (And in neither case did the recommendations come after one week.) The other projects were a combination of strategy, mergers and acquisitions, entering new markets, and implementing new processes.

    This (a few anecdotes) is ambiguous about how much of this activity and the goals beings sought are really productive at all, not to mention actually destructive.

    For example “Mergers and acquisitions” and generally destructive and rarely have any social value at all.

    How much of why consultants are hired and what they reocmmend is really all about goosing the stock price? Yves Smith and others identify this Wall Street-imposed imperative as generally worthless and malevolent, one of the worst developments of the last 30 years. The same for “offshoring”, which is not in fact anywhere near as cost-effective as its fraudulently represented to be. But Wall Street and “the markets” love it, so their will must be done…

    So yes, I’ve always pictured consultants as simply vectors of these nefarious Wall Street decrees. I’m glad to be told that’s not always the case, though I fail to understand why any reasonably intelligent high school graduate can’t be hired to do things like write down numbers and check to make sure things were photocopied correctly. He might even be able to make those copies without mistakes.

  6. Michael Turner

    “… I fail to understand why any reasonably intelligent high school graduate can’t be hired to do things like write down numbers and check to make sure things were photocopied correctly.”

    Think of what it says about you that you’re sending somebody with an MBA from Yale scurrying on menial errands. It’s conspicuous consumption of social capital! As with the peacock’s tail, it says you must really be doing something right, if doing things in such an egregiously wrong way isn’t putting you out of business.

  7. I agree that a second or third set of the right kind of “eyes” usually results in a better outcome than going it alone, even if you are the smartest guy in the room. But, you have to be very careful that you don’t simply get a weak form of consensus on what in the morning will be seen as a stupid idea. The other “eyes” have to be as committed as yours and as ego-free as possible.

  8. Luckily, no one has to break any confidentiality agreements to find out what McKinsey charges. Since McKinsey has a GSA contract, its prices (to the government) are public, and these should be close to its best prices. For a team consisting solely of an associate — someone straight out of business school — it’s over $30k a week. 7000 pounds is a quaint anachronism.

    Also, it’s important to consider who gets the lion’s share of the value in management consulting. The executives who retain McKinsey are often looking for reputational cover for a strategy they already have i mind; McKinsey provides that cover by recommending the strategy. That way, executives can put a big “McKinsey-approved” stamp on their strategy. That’s of high value to the executives, but not necessarily valuable to the shareholders, who just want the right answer, not necessarily the one the executives want.

  9. I’ve been a “management consultant” for almost 15 years now. Your posting covers most of the main reasons why consultants provide a beneficial service, but there are a few others. In no particular order:

    1. Consultants are outsiders who can say provocative things that need to be said, without having to worry about the political implications on their “career”. In some cases, the truth is that company DOES need to get rid of 30% of their workforce, but no internal person can just come out and say that. In other cases, historical baggage is preventing companies from entering a particular market or launching a particular product, and the recommendation of an outsider can provide cover for doing it.

    2. Related to #1, when something goes wrong, consultants are a convenient target for blame. “We hired Consultant X, they said to do Y, we did, it didn’t work, so we fired the consultant.” Meanwhile, the lifers get to keep their jobs and try again.

    3. The elite consulting firms provide an instant network for the people that hire them. Let’s say you’re a mid-level manager at some big firm. You went to a state school rather than an Ivy. You’ve worked for Smokestack, Inc. your entire career. You’re looking to extend your network to further your options. Bringing in an M/B/B gives you instant access to their networks, their alumni, their events, etc.

    Perhaps the most important reason of all is that they prevent all of the smart people from being drained off by the financial services industry, and instead put them into situations where they at least have a chance of doing something productive and socially useful.

  10. save_the_rustbelt

    There are really two classes of management consultants.

    There are the McKinsey-sized and Big 4 CPA groups, largely billing machines and con artists.

    Then there are a lot of smaller and boutique firms who generally have older and more experienced personnel who actually provide value, sometimes on very narrow technical matter (health care has many excellent consultants).

    As long as the Fortune 1000 firms are run by overpaid egomaniacs expect ridiculous spending on consultants to continue.

  11. When I went to Washington in the 70′s and asked what does a consultant do?” The reply was,”Discover what your client wants and prove it.”

  12. “We could take somebody straight off the street, teach them a few simple tricks in a couple of hours…”

    The reality is that most people can do most jobs in corporate America.

  13. Unless I’m missing something, that link doesn’t work, or doesn’t give the answers you referenced. I’m sure you can find it somewhere if you sniff it out though. My guess is they have a “disgruntled” employee somewhere who has shot off at the mouth or let the cat out of the bag. Court documents maybe?? Although it seems those anymore often keep under wraps.

    I don’t have any feeling to McKinsey positive or negative, though I have a strong suspicion their consultants are overpaid by multiples of what they are worth or the value they add to the system. An interesting thing I noticed is Yves Smith loves to name-drop McKinsey every other sentence on her blog. As often as she mentions it it seems she would have us believe it equates to a partnership at Goldman Sachs.

  14. That gets back to Corporate Governance (of which there is almost none now) and/or more shareholder activism. 401k plans, mutual funds, and ETFs have largely castrated shareholders in my opinion, and once people actually wake-up to that fact it will take time to correct.

  15. That’s right, it’s not what you know. It’s who you know. College is for connections.

  16. great topic and great discussion on the comments section. I have seen the issue at play in both public and private sector. My perception is that a new executive from outside the organization will use consultants(called contractors in government) as a way to obtain an instant network dependent on him or her for its survival. This allows the executive to bypass the hard work of building relationships and networks of trust inside the existing organization. I agree that in general the hiring executive has already decided what the solution is and can use the consultant to back it up on paper with a “facts based” report.

  17. I’ve often wondered what a management consultant means by “process”. Presumably it means any sequence of steps to get something done. However, when consultants talk about processes, they rarely seem to talk about anything which is so simple and concrete. It’s almost as though they wanted to think (or have the client think that they think) of an enterprise as an operating system and a process as something akin to a Unix process running under it. So management consultants can regale themselves as being systems engineers designing an OS.

  18. I always thought management consultants went downstairs and asked for suggestions and complaints, and then went upstairs and reframed these suggestions and complaints, so that the people upstairs say, “Wow. Great! Why doesn’t anyone in our outfit ever come up with such good ideas?”

  19. Per Kurowski

    There are two types of consultants. Those that listen carefully to what the client wants to hear and those who concentrate entirely on what their clients should hear. These two groups of consultants should never be compared, because they are not even apple and oranges they belong to different planetary systems.

    There are two types of consultant clients. Those who want the consultants to tell them exactly what they want to hear, so as to further their own already made up mind, and those who really want the consultant to help them out. These two groups of consultant clients should never be compared, because they are not even apple and oranges, they belong to different planetary systems.

  20. “We could take somebody straight off the street, teach them a few simple tricks in a couple of hours…”

    Impressive Discussion, humans are highly interchangeable (even at the top), it is the mythology we create that confuses us endlessly, if we could only find a way to stick to the truth we know! Shall we cooperate or compete? Survival can come only from making the proper choice.

  21. Yes. a path that needs to be explored, “integrety consultants”, but watch they gyrations of the ethics committee. Good Luck.

  22. The Management Myth

    Most of management theory is inane, writes our correspondent, the founder of a consulting firm. If you want to succeed in business, don’t get an M.B.A. Study philosophy instead

    http://www.theatlantic.com/magazine/archive/2006/06/the-management-myth/4883/

  23. Great piece. Johann Hari is a terrific writer, but he has rather bought into an oversimplified and mythological version of what consulting is about.
    Some of “David Craig”‘s criticisms are valid, but he is over the top and a little out of date. Consultancy is (rightly) under pressure, but it would not survive at all if firms were as dishonest as the critics imply. Nor are clients as stupid as they suggest. The truth is less scandalous, less exciting and more serious.

  24. “In the modern world of business, it is useless to be a creative original thinker unless you can also sell what you create. Management cannot be expected to recognize a good idea unless it is presented to them by a good salesman.”

    David M. Ogilvy

  25. Interesting proposition, but it gets us into a whole other realm. What is the quality of high school students these days?

  26. I worked for a company that an incompetent board of directors and a succession of incompetent CEO’s destroyed, “ably” assisted all the way to oblivion by McKinsey.

    Management consulting is legalized fraud and racketeering, IMHO. The management consulting firms just another group of enablers for the looting of American by the Wall Street banksters.

  27. Per Kurowski

    Anyone knows what role if any McKinsey could have played in designing that utterly silly strategic missile defense system called the financial regulations of the Basel Committee, and which concentrated mostly on the targets furthest away and allowed the closest AAA-bombs to explode right in the heart of the financial system?

  28. James, I respect your insight, syllogisms and commentary immensely. But… Here is my sampling of such consultants in my area of endeavour (BTW – I was for a single payer system for the same reasons as Paul Krugman – maybe the only effective way to control costs):

    I learned the following from a neurosurgery resident who trained at the same top 3 medical school from which I graduated. The new CEO (not a MD) called all of the residents and fellows together and announced that a new cost cutting era is now beginning and until malpractice costs significantly hurt the bottom line we will continue to cut costs/services (tacitly it was an obvious measure to boost profits at the expense of patient care). The staff was appalled by this announcement but quickly learned that they were dispensable slaves in this new paradigm of medicine run as a business.

    Many years later I was on staff at a hospital in the Midwest that hired a consulting firm to assess ways to “cut costs”. The gentleman charged with assessing the radiology department admitted to a technologist that he had never evaluated a radiology department before and it did not matter because he was switching jobs in 2 weeks. In his suit and carrying a clipboard he walked into the angiography suite and commented, “you have a nice CT scanner here” – it was not a CT scanner. He observed a fluoroscopic exam and asked, “What is this room called?” and “What is it that you do in here?”. He walked over to the ordinarily busy CT area as they were awaiting the arrival of 2 patients that were a little tardy on their way down from the wards and then he promptly left… only later to comment in his report that CT was seldom busy and was overstocked with personnel. In summary, the overall plan was to cut jobs.

    Months later, I heard on a NPR money program (Sound Money?) a former medical industry consultant confess that it did not matter what he observed. For years the mandate from above was clear. He was to recommend job cuts because that was the quickest way to improve a hospital’s bottom line and it kept his company flush with consulting requests. His conscience got the better of him and he quit after 911 prompted him to introspection. He stated that he missed the money because he was handsomely remunerated… but it was not honest work.

    I have other flagrant examples but I will spare you.

    Over a decade ago, Forbes (I think it was that magazine if memory serves me correctly) stated that the average tenure of a hospital CEO was ~ 5 years. Furthermore, there was a revolving door where they left one place and joined a former colleague at another place until it was time to leave and go somewhere else where the network of friends and colleagues kept them employed. This revolving door is no different than congress or the pentagon who become lobbyists – it is just greedy people looking for ways to fleece the system in which they swim with no real dedication to the purpose of the institution.

    As for management personnel who hire these consultants, they know if their quarterly reports portray them as money makers they stand the chance to ascend the corporate hierarchy when an opening becomes available. Hiring such a consultant is a career advancement opportunity whose allure is commensurate with one’s greed.

    And that is how the game is played and won by these ruthless subhuman scum bags. Climb the ranks on the backs of doctors, nurses, technologists, technicians, other ancillary personnel and, most importantly, patients.

    I have seen the evolution of medicine for decades now and the bean counters have made it less rewarding both professionally and financially. When a guillotine becomes a constant fixture over employee heads it makes for a miserable workplace environment. I’ve seen older good nurses and technologists placed on unpopular schedules in attempts to make them quit or even seen them fired for petty and questionable events only to be replaced by less experienced and less qualified personnel who demand a smaller salary due to their lack of experience and education. This is common cost-cutting today… and is sickening.

    It is also counter to any form of meritocracy and stands as a spectre to those who strive for higher educational goals that such efforts may not be worth it because unless you are in power, you are likely to be screwed regardless of your performance and credentials.

    Like it or not, consultants such as I have encountered are part of the problem.

  29. Henry Mintzberg (MBA prof McGill University) believes that the MBA education prepares a student in the 5 skill areas of study, accounting, marketing,etc. but do not prepare you to be a manager or VP or CEO. Management is a practice not a mere knowledge of the 5 skills picked up at university. Check out his utube at MIT Sloan School of Management.

  30. Logic, “And that is how the game is played and won by these ruthless subhuman scum bags. Climb the ranks on the backs of doctors, nurses, technologists, technicians, other ancillary personnel and, most importantly, patients.”

    It’s really awful, isn’t it? I concur…

    And when a malpractice suit is brought against a clinician who was following the cost-cutting “rules”, what do the “executives” do?

    The stories are currently ENDLESS about how bad it is to be a clinician.

    Consultants are being hired to bury data – if it already has been collected, or to “make it up as they go along” and profess that certain data does not even need to be tracked…deaths due to “mistakes” have been climbing right along with for-profit bottom lines. It takes a very special “consultant” to claim there is no correlation between the two and that’s why the big bucks go to such a “special” class.

    No wonder why the current crop of teenagers are a “vampire” pop culture, instead of something like “Star Trek”…

  31. I worked in management consulting for over 5 years, for a boutique firm that probably no one has ever heard of in this thread unless you’re in the wireless industry. I generally agree w/ James’ viewpoint.

    Everyone must remember that one’s experience w/ a consulting firm can vary widely regardless of whether you’re an employee or a client. The talent levels of Engagement Managers (the key guys) and Associates (the guys who do the dirty work) varies tremendously. The projects (often sold and defined by the guys above the EMs) can also vary greatly.

    I can see how some consultants or clients could view the industry with disdain, but I can tell you that my experience was incredibly positive. Worked harder than I wanted to, but I learned a ton from my superiors, peers, clients, and in some cases, even the grunts. I spend much of my work day now in the corporate world laughing because I’m collecting a decent paycheck and it’s incredibly easy. No one but me has any idea of what a manager is supposed to do.

  32. Nice. Thank you for the insight.

  33. That’s why I added “reasonably intelligent”.

    I probably didn’t need to add “graduate”. There’s very few formal accreditations in this kleptocracy for which I have any respect, and “college graduate”, or even “high school graduate” aren’t among them.

    College especially is, as a rule, another rentier toll booth by now. I’d say it’s almost never worth going into debt to attend, by now.

  34. That’s the case with the system as a whole. Reality including its culling mechanism was temporarily kept at bay by an artificial barrier, cheap plentiful oil (and the same across all natural resources).

  35. I am just a housecat and not a management insultant, but I understand that the secret to successful management insulting is to figure out what the client wants to hear and then tell them that, dressed up in lots of buzzwords and MBA-speak.

    That way management can go to the board/shareholders and say: “Booz/Bain/McKinsey told us that we need to fire 30% of the workforce and then pay ourselves a bonus for attracting top talent like ourselves!”

    If things go wrong, well that road leads back to #2.

  36. Ever hear of Heller’s Law – The first myth of management is that it exists.

    I was at a company that was invaded by management consultants. The whole process could be summarized thusly: you tell us what you do and how you do it and we’ll tell you how you can do it better.

    Ridiculous on the face of it.

  37. Disclosures are most welcome James. We appreciate the attempt.

    If I would tell you, “Buy when the bullets fly.”

    Y’all know what I am on about. It isn’t cockney rhyming slang though. The phrase is usually pronounced in the Queen’s English or American English with a NY-Texan twang. Fact is that this particular phrase was buzzing around during my stint at a private investment bank in the City.

    Having heard that phrase, I thought I had reached the pinnacle of investor’s wisdom. I was wrong. How could I have thought that I had reached such an advanced level of understanding about the investment world at a relative young age? Hubris.

    No, the really interesting thing that one could learn in that environment is how to teach little terrorists a lesson. One day I was looking into the prospectus of a mutual fund domiciled in Luxembourg. It stood out as it was decorated with a skull, right in the middle of the front page.

    Enfin. It appeared to be a fund in which you could invest in things such as whiskey, cigarettes, pesticides, weapons etc. Everything related to death and destruction. Hilarious don’t you think? Well my manager thought so. Honestly, he is a sweetheart, he really is. Best manager I have had, but we all get a bit delusional at times. Ego at work. Little devil.

    When I looked further into the organizations in which the fund invested, I found that there was this organization that constructed mines disguised as toys, for example, a yellow butterfly. Why would someone want to disguise a mine as a toy, you would ask? Apparently, this is the only way in which you can take revenge on those little noisy bastards who also happen to worship Santa Claus. And there is only one God and it is certainly not Santa Claus.

    Always ask yourself WHY, said Mr. E=mc2. But Albert Einstein et al. forgot to ask themselves, whom they were really working for. Do you know who you are working for?

    P.S. For a moment, you guys thought I was going to write about Skull and Bones or how the Bushes and European dynasties conspired to whack JFK on the head. No. I am not that high up in the food chain, never will. Way out of my league. Cheerio.

  38. P.P.S. I don’t take myself too seriously and neither should you. Enjoy the piano music.

  39. “since McKinsey is widely considered the premier management consultancy, any criticism that doesn’t apply to McKinsey somewhat misses the mark.”

    Huh? Isn’t it illogical to use #1 as a case study for everyone?

    James – I don’t think I ever met you but I was also at McK while you were there, and I’ve got to agree with much of what you say about the Firm, however 2 major caveats:

    1. 1997-2000 was a VERY special time. With the dot-com boom there was tons of clients with tons of cash everywhere. It made it easy to live up to lofty principles (client first!) and do the heroic, like “fire” clients who were “not ready to hear the truth”. Plus with the “war for talent” in full swing and associates (and partners!) leaving for dot coms in droves, the Firm was especially nice to the peons. Have you spoken with people who stayed after the crash, or worked in offices (particularly outside the US & Europe) with a shallower history of Firm values? Things changed rather abruptly as the client flow tightened up and the staffing supply/demand curves shifted.

    2. Evaluating the entire consulting industry based on McKinsey is like evaluating all poetry based on Shakespeare; for that matter, blanket evaluation of all poetry is pretty silly isn’t it? Sturgeon’s law applies – as in so much else, the vast majority is pretty crap, and there are some gems out there. When all goes well, you get the situations you describe, and this happened more often in that golden period when you were at McK; however as the copious horror stories in the replies attest, there are copious horror stories.

    Hope to meet you sometime in the middle-aged boy network!

  40. Annie – I hope the ENDLESS did not refer to my Russian-like length of the post – if so I apologize.

    FWIW, I heard a neurosurgeon on NPR a few months ago state that a poll revealed that 60-odd % of doctors would not do it again – count me in that lot.

    The knowledge acquired is wonderful. The journey to attain such knowledge and continue to learn is great. The patients, for the most part, are both respectful and thankful.

    The other aspects (dealing with insurance companies, hospital admin., politics, and increasing amounts of paperwork not directly tied to patient care, etc.) are what drive most of us to grow increasingly disenchanted with the field. The loss of one’s autonomy to a powerful person who has less education and demonstrates insensitive greed is almost too much to bear at times.

    I once skipped lunch on a very busy day to get a document notarized by an executive secretary. While waiting I witnessed one of the hospital executives re-arrange his CD collection on his office bookshelf, then take up a putter and practice his putting all while listening to Rush Limbaugh blare from his office. I had spent a prior weekend on call (48 hours straight) at this level one trauma center. I obtained less than 5 hours sleep over the period while remaining in the hospital the whole weekend without even a clothing change… This was not uncommon. And to think that this young executive who actually listened to Limbaugh (and his misinformation par excellence) dictated aspects of my practice. Just amazing.

  41. James, you really need to step back and rethink your consulting views in terms of your analysis of the financial crisis. Your comments about McKinsey and consulting sound like a loyal Goldman Sachs alum explaining why the major investment banks really aren’t to blame for the problems on Wall Street.
    Yes, for reasons you and others pointed out there is a potentially valuable role for consultants. But if you think about the actual sources of “value” it is a quite limited role. There is not only no link between the explosive growth in consulting and legitimate “value” creation, but the corruption inherent in this growth overwhelmed most of the legitimate “value” that was historically created. Just as the FIRE sector’s quadrupling its share of GDP was a sure danger sign, the fact that no one could explain the explosive growth of big consultancies in terms of obvious, measurable new value creation signals a destructive misallocation of resources.
    Even in the 60s and 70s, McKinsey and a handful of other “elite” consultancies paid seemingly outrageous starting salaries for green, new-hire MBAs. But in the mid 70s that meant $30k versus the $20k someone at Harvard/Wharton would have gotten to start at IBM or a New York commercial bank. A crude but successful branding tactic, signaling the market that ‘we are the elite consulting firms” without any actual evidence of superior work/results. But in those days, consultants really could add value by sending in teams of green kids, because few companies had anyone with basic MBA/project management skills. But since the MBA boom began in the early 80s, those skills are commonplace, and the skills gap between a Baker Scholar from Harvard, and middle manager at most companies is a fraction of what it used to be. Yet McKinsey fees and salaries have skyrocketed. Notice also that the “markets” did nothing to correct this problem, even though you’d think it would be simple to build large competing consultancies offering 90-100% of McKinsey skills/experiences at much lower fees. Yes there are tiny niche market groups following this model, but large companies have no interest in hiring them. Thus it should be obvious that something is rotten in the state of Denmark, and this should be especially obvious to anyone who has studied financial markets and Wall Street.
    What justified those skyrocketing McKinsey fees and salaries? Can’t go through the whole story here, but McKinsey (and the others) grew by serving as the Praetorian guard for CEOs that wanted to destroy countervailing sources of power within companies (shareholders, independent Boards, middle managers), shock troops in the battle between capital and labor over rewards from the company’s work, and in many industries, the driving force behind rent-seeking market concentration (including Too Big To Fail). McKinsey teams aren’t smart/experiences enough to figure out the cutting edge production or positioning problems in rapidly changing industries, but are smart enough to figure out short-term fixes that will goose earning, or rent-seeking opportunities based on artificial market power. CEOs will pay megabucks for consultants who will shamelessly serve those ends. CEOs will not pay megabucks for consultants who want you to face up to difficult problems in your core businesses. Not the exact same consulting sector, but notice the corruption of financial reporting by the accounting based consultants during this period. Obviously the FIRE sector was huge for all these consultancies, but (issues of systemic financial risk aside) the same management/political problems that led to the financial meltdown caused parallel problems in many other sectors.
    Of course most of the work done by most of the worker bees at McKinsey and other these firms was not “corrupt” in this sense, just as most of the work done by most of the worker bees at Citibank and Goldman Sachs were not corrupt. But McKinsey and similar firms could not have experienced their radical growth if they weren’t up to their eyeballs in this corruption.

  42. Fine statement, Mike.

  43. No, “endless” referred to the DAILY stories – there isn’t a single day where a story is not generated…

    I doubt that Patients would NOT support clinicians going on a strike now and then.

    With data collection “technology” came the layer of parasites who putter in the corner office. I think it is okay to openly disdain them. Their HUBRIS is killing people.

    Another point, why are such OBVIOUS sociopaths not removed from their “management” positions? When, and WHY, did MDs give over their professional power to sociopaths? A mystery…

  44. Sounds similar to pilot fatigue. Professionals are crashing and we’re chasing ghosts.

  45. Yes McKinsey had of course their own and their clients´ interests to serve but, if they really are such a conglomerate of hot-shots, similar to the tenured PhDs that abound, they do also have a responsibility to the world of which they are a part… and so, their incredible silence on what was cooking up as a perfect financial storm is simply shameful… in my book, they, like the regulators, are just as guilty as those intermediaries that pulled the trigger… or even more since they are so much “smarter”.

    James Kwak… where was McKinsey in all of this… and where were you?

  46. There are, as it happens, situations in which management is SO BAD that consultants are worth whatever you had to pay them — they are extreme, but they exist, at least in India.

    See this LSE event for examples.

  47. I was skeptical when I interviewed with some of the big consultancies when I came out of B School over 20 years ago. I just couldn’t believe that young MBA’s should be giving advice to seasoned senior managers. Well, my attitude has changed. I’ve now seen fist-hand how clueless most senior managers are.

  48. A group of young, tanned, well-groomed business consultants in tailored suits, walked through my workplace a few years ago.

    I asked one of the young men what his last assignment was as he walked past – without stopping or turning his head, he replied to the air, “restructuring Kuwait airlines”. (after first Gulf War).

    Since then, 75% of my co-workers have lost their jobs through restructuring, later, from work-related disease – premature death (sick-building syndrome/asbestos/cancers/heavy metals poisoning/children with birth defects – management was/is aware, considered it the cost of doing business – I hacked their email :-O ). I work for the equivalent of a Fortune 500 media corporation.

    We were assured, only fat and not muscle would be rendered when it came to financial decisions and no stone would remain unturned when addressing health concerns.

    My task is to ferry wounded souls across the River of Dread …

  49. You can’t make this stuff up.

  50. “they created an institution that is prestigious enough to skim off some of the top people produced by our educational system—which is, at its high end, probably the best in the world. Then, having secured those people, they figured out how to resell them to ordinary Fortune 500 companies—who can’t hire them out of college, because what twenty-two-year-old wants to work for Proctor & Gamble?—at a huge premium.”

    The bigger problem is that even though our military has been on war footing for 9 years, Congress would rather order soldiers and reservists to serve multiple combat tours instead of equalizing the burden with a military draft. Twenty-two-year-olds from our “high end” schools should be leading rifle platoons in Afghanistan before they come home to start working for McKinsey.

  51. Michael Turner

    Is this how important decisions are made in corporate America today?

    And to think that, back in my idealistic anarcho-syndicalist youth, I had no answer to the objection that running enterprises with elected workers councils would be too impractical, too inefficient, too prone to abuse.

  52. James, you leave what, in my experience, is one of the major reasons managers like consultants — they shift responsibility for the decisions from their own shoulders to those of supposed “experts.” Hey, it’s what the consultant recommended. In other words, you grossly underestimate, it seems, the ubiquitous role of politics and CYA.

    There’s also psychology — external must be better than internal consultants for the same reason Groucho wouldn’t want to belong to any club that would have himself as a member.

    Some commentators have noted how consultants they’ve seen offered simplistic, rote solutions ignorant of the intricacies of running the business. If their value really is, as you suggest, the willingness to perform mindless grunt work, then it’s difficult to see how it could be a bigger scam, a real non-value add proposition.

  53. Per Kurowski

    Besides, clowns can still be worth their weight in gold!

  54. just one teency weency critique of the critique. The idea that it is impossible for most comapnies to spare the few clever people that they have for internal consulting projects does not hold water. For £7000 per week I can guarantee you that every one of those clever people would work 100 hour weeks and their entire holiday entitlement for as long as the money was there.
    The reason that they do not do it is because the company does not offer to pay them.
    Companies do not work like this.
    It is ok to pay a consultant a fortune but quite impossible to pay even half of that money to an employee.

  55. I’m a consultant to small and mid-cap companies. I operate in a different universe from the MBB’s, but though my boutique firm’s focus is business development, we’re often pulled into management issues.

    The reason that we’re asked to range beyond our specialization underscores the value that smaller-company CEOs place in consultants: they are stuck in an echo chamber, and we can get them unstuck. Their perspective cramped into industry verticals, their sounding boards for ideas limited to the usual suspects in their companies. The net effect of this is that the solutions they usually adopt are ordred off the same small, mainly tactical, menu.

    What they need, and get from me, is big-picture thinking, a strategic bearing, independent analysis, best practices culled from across a range of verticals, different approaches.

    Different approach, in application, is perhaps the most useful deliverable. Breaking the “definition of insanity” axiom.

    More times than not, the work I do produces a beneficial return on the client’s financial investment. But even when the strategy developed fails to produce the result intended (increased revenue, in my specialty), the experience of taking a different approach nearly always is recognized as organizationally beneficial by company leadership.

  56. Michael Turner

    I wonder who you’d trust more to clarify the problems your business has, somebody who’d close with a paragraph like the one above, or someone who said the same in these words:

    “More times than not, the work I do helps my clients make more money. But even when my ideas don’t do that, clients usually say that just trying something new was worthwhile.”

    Anybody else want to leave a cover letter here, for their consulting company’s brochure?

  57. Dismayed – I agree. I’ll take talent over “experience” any day of the week (yes, this is a gross generalization with many excpetions).

  58. Hey, MIchael.

    Touche. My background is not Wharton MBA. It’s journalism and creative writing. So I take your point — but only so far.

    Precision is important to clarity, sometimes more so than simplicity:

    - Making more money is not the same thing as getting a return on investment. Hiring consultants costs money. If you see a revenue bump as a result, but it’s less than the cost, you have no ROI.
    - Neither are ideas and strategies the same. I have ideas all the time. Only a very few of them withstand the rigor of analysis to become strategies. A strategy justifies and effort and illuminates a path to its fruition. An idea…well, it’s just an idea.
    - Worthwhile is a value judgment. It may be worthwhile for me, or even for short-term revenues, to hire a consultant. But that consultant’s recommendations may prove disastrous to my organization.

    It’s always good to be reminded that as a business consultant one runs the risk of being subsumed culturally. However, plain speaking is valuable only when it renders more accurately than $10 words. Sometimes there’s a good reason — and good value to the buyer — in paying.

  59. Annie: Re: give over power…

    Several reasons –

    1. MDs were never in control of hospitals to begin with – the old Hospital CEOs were just less greedy and more dedicated to their institutions. In fact, a former huge health system CEO (a relative) warned me of the “new breed” of MHA/MBA emerging from B schools in the 80′s. I was told they would sell their mother to make more $. This relative tried to dissuade me from medicine because he saw the way it was heading! I was too ignorant to heed his advice.

    2. MDs, as a group, were both too busy and unaware to fight in the early days. Now the inertia is too large to fight effectively – just witness the $ spent on lobbying the past year on health reform. Where were the doctors in this debate??? Just like the Clinton Health Security Act – doctors were largely ignored because we have little political capital or clout. Employee leasing folks had more sway with Hillary than the MDs. Another source of frustration.

    3. When the 1st wave of HMOs hit, Non-hospital based MDs bought into the sales pitches about “no more worries about staff hiring, payroll, ordering office and medical supplies, etc.”… Then, when they began practice, they could only spend 15 minutes per patient, neither hire nor fire the smaller office staff they were assigned and, because of contracts, were often left staff-less because the staff had to punch-out at 5PM (will not pay for overtime). If additional supplies or new equipment were needed, requests were often slowly filled or denied respectively which negatively impacted patient care. But the contracts were binding – the MDs were trapped and the tipping point was quickly reached.

    Check out a particular Florida political candidate if you want to see what lovely people that many of made filthy rich then read “Conservatives Without Conscience” and John Dean’s comments about Bill Frist and his family.

    Medicine as a business is tragic folly.

  60. This is exactly it. The knowledge and willingness are there, but the structure of the organization prevents it from using its own resources effectively.

    _These_ are the problems that management consultants should be hired to fix – “how to _realign_ resources within the organization to solve problem X”, not “how to solve problem X”.

  61. There once was a shepherd, herding sheep in a remote location. Suddenly a brandnew Audi TT appeared in a big cloud of dust and stopped right next to him. The driver, a young man in a Brioni suit, Cerruti shoes, Ray Ban shades, and an Yves-Saint-Laurent tie gets off the car and asks him: “If I can guess how many sheep you have, would you give me one of them?” The shepherd looks at the young man, then at his herd of sheep (it was a big herd), and he agrees.

    The young man parks the Audi, connects his notebook to his mobile, goes to a NASA site on the Internet, scans the environment with the help of his GPS, opens a database and 60 spreadsheets loaded with formula. Finally he prints a 150-page report on his high-tech mini printer, turns around to the shepherd, and says: “You have exactly 1,586 sheep.” The shepherd replies: “That’s right. Pick your sheep.”

    The young man takes one animal and puts it in the passenger seat of the sports car. The shepherd watches him and asks: “If I can guess your profession, would you then give me back my sheep?” The young man replies: “Sure, why not!” The shepherd says: “You are a management consultant.” – “That’s right! How did you know?”, the young man asks.

    “That’s very simple”, replies the shepherd, “first of all, you show up without anyone having called you. Secondly, you want payment for telling me something which I’ve known already. And finally, you have no clue of my business. And now, give me back my dog!”

  62. Michael Turner

    “Make money” = ROI in any reasonable interpretation. If you promised a client they’d make more money with your plan, and it didn’t net out that way after taking your billings into account, word on the street would be: you’re a weasel.

    Yes, “worthwhile” is a “value judgement”, but so is “beneficial”, which is hardly any different from “good”. “Organizationally beneficial”, oh god, what about “made them a better company” or something like that?

    “… plain speaking is valuable only when it renders more accurately than $10 words.”

    Accuracy is always the important thing in your line of work? What about impact? What about sounding like you’re making an honest and solemn promise? These don’t trade off against accuracy?

  63. Michael, I concede points one and two. Thanks for your insistence. It’s a useful corrective.

    But point three has holes in it. Putting aside solemnity as a style issue, honesty shouldn’t trade off against anything in a consulting relationship or any other kind. Consultants I know are no less honest than any other person and in fact tend to be more so; honesty — or at least the lack of prejudice or fear of reproach that enables honesty — is why we get hired. Because honesty is the ante, there’s little to no distinction in it. Accuracy is the yardstick — and the difference between ideas and strategy — and the reason a client can appreciate having done something different even if the impact is a bit softer than expected. If you’d like to poke this topic further, I invite you to contact me through the site linked to my signature.

  64. Haha! Excellent joke!

  65. Management consultants should not accept a fee until the efficacy of their advocated solutions are proven in case-by-case bases.
    And I would ignore the claim by the author that the best and smartest people are hired by firms like McKinsey. More often than not, these firms hire from a set of select schools, and from a pool of candidates who fit a certain profile. There are brilliant graduates out there who prefer not to be seduced by the McKinsey moniker and get a real job!
    Management consultants need to be forced to take responsibility for the solutions they advocate. It is a glamorized profession, which will decay and die if it does not produce substantial results in a world that is being crippled by recession.

  66. Um, yes? Just like it continues to blow my feline mind anew each day how many business relationships are cemented in strip joints and over nasal candy.

    Not all such relationships by any means, but more than the unanointed might think.

  67. Thanks, Logic, for sharing your insight.

    There is only ONE math formula used in every “business model”:

    More misery for others = More money for ME ME ME

    It is a particularly mass psychosis-inducing math formula when applied to “health care”.

    The ongoing, “survivor” Wall Street bubble is “health care” – no doubt about it.

    Only a “strike” applies enough of an equal and opposite force against the “inertia” of pain, suffering and misery ala voodoo economics.

    Doctor Flowers was escorted out of the hearings – check out Bill Moyers archives on PBS for one source of how MDs were shut out.

    ex-CEO (an MD) of United Health Care gave himself a 1.8 billion $$$ “package” in 2005…that was a lot of “misery” for others – even War Lords and Drug Lords were jealous and went more “extreme” to catch up.

    United Health Care is now a major player in “data collection” for biotech and other “research” outfits – one of their BELIEFS is that the drug/therapy/vaccine/device will get faster approval from a regulatory agency if you stop collecting ALL “adverse event” data during a clinical trial – “just collect some of it, enough to make a decision.”

    And why would they NOT apply that kind of logic – it worked in rationalizing all the “nyets” for payment that added up to 1.8 billion for ME ME ME…

    Strike! Strikes work – Western civilization ADVANCES through strikes…

    Use strike time to volunteer at USA’s 3rd world-type free clinics…40 million is a lot of people needing basic care!

    Some might even pay you with a chicken :-)

    Mass media shoots DOWN at “We The People” – they are NOT the friends of clinicians.

    A student of media should count up how many times USA people were called “stupid” by TV yappers from 2001 on to 2012, I guess…make a good term paper…

    We will ALL back the hard-working striking clinicians NOW that we are all aware of the $$$ shenanigans.

  68. Interesting posts guys. Let me share my view:

    - Most consultants are indeed insecure, but a small minority are in fact brilliant well intended people. Remember that consulting firms have an “up or out” policy whereeas you either get promoted or get the boot. So a lot of people go in, knowing that they will only work there for a couple of years and then leave.

    - Having said this, the egos on most consultants is second only to investment bankers. But consultants at least know about different industries and functional areas. Bankers basically don’t know anything.

    - Most corporations hire consultants because although they have a pool of talented people inside, they cannot afford to put them on projects because they need an unbiased opinion. MBAs do go to work in corporations despite what Mr. Kwak says. The problem is that if you go into a corporation, you do not get the level of exposure and strategic thinking that you get in consulting.

    - A lot of times, consultants will come up with recommendations that senior management already knows about. But they can’t implement them because they are not popular. I worked for a consumer products company who was proud to serve the premium products categories. And I recommended with evidence several times that we should look into emerging markets where income is substantially lower, but offer greater growth propsects. I was shut down several times. Then the CEO hired some consultants who recommended just that. Now, we are going into emerging markets, after paying consultants more than half a million dollars. Doesn’t make sense does it.

    Best

  69. Michael Turner

    Elementary price psychology: price something high, *some* people will think it must be worth it. The more you’re seen around the place, the more people around you will think that your advice is “free” — and therefore most likely worth every penny they paid for it.

    Let’s also not forget that, in proposing any new plan of action, it’s best if

    (1) It’s a good idea
    (2) You are the best person to implement it
    (3) You are the best person to get credit for it

    If you hire a high-priced consultant team and they come up with (1), you get first dibs on (2) and (3).

    If, on the other hand, you go around recognizing promising ideas originating within the company, assembling competent internal teams to objectively evaluate them, then finding the right people in your company to implement the best ones, you might end up … actually *reporting* to one of those people someday! Ugh! So your stock doubles because better management has resulted in stellar performance? So you got “Management Team Player of the Month” a couple years in a row? So what? With CEO compensation being what it is these days, all you did was set up someone *else* to make 10x your current salary, and get 20x the number of stock options you have. How crazy is that?

    Not to mention the inevitability that, simply by promoting more objective internal evaluation of ideas solicited internally, you’ll inevitably bruise the egos of entrenched staff who *think* their ideas are superior, but who actually don’t have much of a clue. You might end up having to institute HR policies designed to help the company weed out oversensitive mediocrities, rather than tolerate those folks drifting the hallways, sniping at their detractors in meetings, and generally dragging down morale. No, no, can’t have that. Must have Happy Face.

  70. Tom Stephens

    This is an interesting parallel to draw, but based on my experience as a former consultant and recruiting leader (for McKinsey & Company – the author’s alma mater) I disagree with your characterization of consulting as a “market failure”. The scarcity of talent you describe is not the result of an artificial manipulation, but a genuine disparity in how consulting firms and operating companies reward talent.

    Consulting firms offer a very different value proposition – higher pay, more responsibility, and more rapid advancement versus the shorter hours, less frequent travel, and lower stress of equivalent level corporate jobs – talent simply selects the option which maximizes each individual’s wellbeing (this seems to me to be an excellent example of fundamental market dynamics at work). It just so happens that many talented individuals prefer Big Consulting’s offer.

    If operating companies truly suffered from a talent shortage they could alleviate it by offering more pay and responsibility. Many firms do just that – for example, management rotation programs, internal consulting groups, and certain companies (e.g. Google, Apple) each offer a value proposition closer to that of consulting firm than a traditional operating company. In my experience these programs compete reasonably well against consulting offers, despite lower pay scales.

    In reality, most operating companies (at least those for whom I consulted) have little trouble hiring the talent they need for day-to-day operations, and where they do consultants at McKinsey’s end of the industry rarely, if ever, fill the gap. As the author mentioned, they hire consultants for “exceptional” projects where their internal talent supply is insufficient (either in terms of expertise or manpower). In these situations, adding additional full-time employees would be costly and wasteful.

  71. Michael Turner

    “Fundamental market dynamics” hardly preclude market failure. Bubbles, for example, are driven by “fundamental market dynamics.” As are all market failures, by definition. No “artificial manipulation” required. They simply happen. If anything, it takes “artificial manipulation” to *prevent* market failures. Environmental regulations offset the market failure of externalizing costs onto society by polluting. Anti-trust regulations offset the market failure of a tendency toward monopoly in certain industries, where welfare is maximized by competition.

    If you worked for McKinsey, you must have gone to a good college where you took an economics course that introduced you to the concept of market failure. No?

    Well, if not, you might read up on it. After you’ve done that, maybe you can better assess whether what you just wrote above isn’t simply begging the question.

    For example, if talented new grads prefer Big Consulting’s higher salaries, couldn’t that be due, at least in part, to Big Consulting’s ability to offer higher salaries, by their oligopolistic cornering of the market for talented recent grads?

    If the training required to get company staff up to speed on the special skills required for special projects is not easily available, couldn’t it be that almost all those who might be effective teachers of those skills (and who haven’t veered off onto a B-school academic career track) have already been soaked up by Big Consulting?

    Finally, consider how my hypothesized market failure in CEO headhunting might work synergistically with my hypothesized market failure represented by Big Consulting. Maybe the two market failures I hypothesize here actually enable and reinforce each other in interesting ways? For example, to what extent is the difficulty of getting “objective advice” from within the company related to political maneuvering in the executive suite, and to what extent does our current game of CEO Musical Chairs exacerbate that sort of politics?

  72. You assume that High School graduates can write down numbers and check to make sure things were photocopied correctly. Based on my experience with many (not all) High School graduates, that is the error in your thinking.

  73. Hello.

    Im new in forum, so Im not sure if I can post this here in general..
    But to the point, what I was asking.. Im from europe and would like to buy things eg. from amazon and ebay, so is it easy and safe to buy with my credit card?
    And if you know good methods to buy things..[IMG]http://netti-kasinot.net/prkl/e3.GIF[/IMG] Pls tell me.

    Thanks in advance!

  74. Go and consult McKinsey!

  75. I have two put my two cents on consulting. I was an m&a consultant for five years, was considered very smart and successful and was told that I was going far. I got a great salary, bonus, traveled the world and learned a ton. At the end of the day I left. I didn’t feel good about myself and the work that I was doing at the end of the day. It was all lies, fixed prices to please the two sides that had agreed on price and terms long ago. We were rubber stamping to make sure that we got called back again. Once in a while, when a rookie among out ranks would stand up for an issues, he/she was quickly shown their place (not a team player, you don’t advance like that,etc.) It was not honest work. When asked by newly minted MBAs about consulting I say: it’s good work if you can shut one eye and ear and do as you are told.