I readWhen McKinsey comes to townbyWalt Bogadanish & Michael ForsytheonFeb 17th, 2024

I came across McKinsey during a career seminar at Shanghai Jiao Tong University, Haiyin Tan, a co-founder of EachNet also an alumina, joined McKinsey after graduation. This experience advanced her career to senior leadership. This book shattered the rosy, lofty, idealistic notion of making the world a better place, revealed how McKinsey shaped the global business and politics in the shadow and the the dark aspects of greed, self-interest, interest conflicts, corruption.

McKinsey & Company is a prestigious strategical consulting power house. Its business span 65 countries, served most of Fortune 500 companies and more than a hundred government agencies. Each year, the form attracts 200,000 applicant with 1 to 2 percent hired. These young men are attracted and inspired by the missions and values.

Put client interests ahead of our firm’s

This is topmost value above all, though McKinsey is never shy of interest conflicts. The firm advised Big Pharma, health insurance companies, and also provided consulting services to their regulator, FDA.

In the mid-1990s, McKinsey worked with a formal partner, Gary MacDougal in pro bono for the poverty study in the Illinois, and later won sole-source consulting contracts with $75 million. Also Felicia Norwood arranged to pay $63 billion to seven managed care companies for expanded Medicaid program without legislative oversight. Four of the seven companies were later acquired by McKinsey clients. Six months later, Norwood left her state job and joined Anthem, a McKinsey client.

Observe high ethical standards

If the clients adopt unethical business practice, or enforce oppressing public policy, would McKinsey be obliged to cut the tie off? I think McKinsey took a much more pragmatic approach when working for tobacco industry, authoritarian regimes, and demonstrated its choice in the opioid epidemic.

McKinsey’s extensive work for Big Tobacco can be traced back to 1956. Its report recommended study on “the physiological effects of cigarette smoking”. In 1985, it suggested Philip Morris to improve “merchandising and display programs”. In 2009, McKinsey was awarded contract to reorganize the tobacco office by FDA, and the office sat idle for six years to step into the vaping epidemic. Juul could deliver high nicotine, equivalent 20 cigarets in single pod without a harsh taste. It was reported that more than 20% children under the age of 18 used e-cigarettes compared 3% of adults. Juul’s sale exceeded $1 billion in 2018, and paid McKinsey between $15 million to $17 million in two years for consulting work.

In 2009, Purdue Pharmacy was under government investigations, the future CEO Craig Landu sought advices from McKinsey, one possible solution was to encourage the OxyContin users to speak out in favor of the drug. With the help of McKinsey, the newly reformulated OxyContin got FDA approval. McKinsey also advised Purdue pay more attention to the nurse- practitioners and physician assistants, and leveraged the big data to incentivize prescriptions. The sale of OxyContin continued in decline thanks to Purdue’s sketchy reputation. On July 18 2013, McKinsey presented the Purdue Pharma board a turbocharge plan, such as lobbying the retail pharmacies to loosen up and fight back the influential group. In 2021, McKinsey reached a settlement with forty-nine states, and paid $641 million to settle claims from states.

McKinsey acquired Elixir on April 2017 to wedge itself into the royal family of Riyadh. The firm executed sentimental analysis in the social media to identify the influencer with different political views. This led to the oppression against social activities, such as Omar Abdulaziz, and contributed to the assassination of Jamal Khashoggi.

Preserve client confidences

Who are McKinsey’s clients, the company, the stakeholder, or the C-suite? I guess it depends on who pay the consulting bill.

In 1950, Arch Patton, a consultant in McKinsey conducted a compensation study, and published a report in Harvard Business Review, claiming that the pay for senior leadership increased in a slower rate than the regular employees. This research has since been cited to justify the RSU grants, stock options, and other incentive packages for CEOs. However, the consequences of such practices have contributed to significant wealth inequality: CEOs earned 20 times the wage of an average worker, but by 2020, this ratio had surged to 351 times.

Closing thoughts

Should we uphold the high ethical standards of the for-profit companies? From the company’s point of view, does adhering to high ethical standards incur a competitive disadvantage? For example, Google dropped the “Don’t be evil” silently in 2015 in favor of “Do the right thing”.

I feel the lofty missions are not only powerful recruiting tactics, but also appeal to the customer, partners and regulators as the foundation of public relationships. The companies are held accountable to walk the walk.