McKinsey works at the heart of government. Samuel Corum/Getty Images
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Only the most unflappable CEO or government executive can resist the siren call of a management consultant during a crisis. For about a century now, consulting firms have dangled a tantalising proposition in the face of the wretched and the weary of public and private administration: we’ll solve all your problems, make all your dreams come true, and then we’ll vanish, cradling our newfound, formerly confidential knowledge of your industry.
It’s a tempting bargain. So tempting that management consulting is now America’s biggest business-to-business service industry, with roughly $385 billion in annual revenue. But as appealing as the industry may be to business leaders, it is all the more attractive for the public sector, where managers need to achieve high levels of flexibility while confronting limited resources and medieval hiring processes. The beauty of bringing in management consultants is that you don’t have to hire or train new employees, or repurpose or lay them off when the project’s done. Consultants swoop in at the right moment with the right expertise, and then disappear.
In the US, consultants work with all levels of government. At the federal level, they play a central role in creating the intellectual capital that powers our government, earning $23.5 billion on almost 30,000 separate federal contracts in 2022. At the nucleus of this booming business is a small group of firms, which are far more significant for the consequence and sensitivity of the work they do than the number of dollars they make. These include Deloitte, Booz Allen Hamilton, and of course, McKinsey and Company.
Over the past 10 years, McKinsey has completed around $1 billion worth of contract work for the federal government, more than half of which was contracted by the Department of Defense. As a report from the Quincy Institute found: “This work has ranged from advising senior officials on developing technology for the Air Force and Space Force to evaluating the management of the F-35 program.” In the same report, we learn that McKinsey has for several years considered the Defense Department one of its top clients, and that one of President Trump’s leading assistant secretaries of defence worked for McKinsey both before and after his federal tour of duty.
The consequences of this line-blurring between public and private would be complicated enough if leading consultancies confined their work to the US. But they do not. While management consulting grew throughout the latter half of the 20th century to saturate the American private and public sectors, it was also spreading internationally on the promise of selling “American management knowhow” abroad. “Whether reorganising the Bank of England, Royal Dutch Shell, the Government of Tanzania, or even the World Bank,” writes business historian Christopher McKenna, “management consultants disseminated American management techniques throughout the world.” While management consulting had originated in the West, it came to be a valuable resource to business, organisations and governments everywhere — in East and West, market and command economies, democratic and authoritarian states.
As the consulting hydra has grown ever more colossal, with consultants embedded in most large organisations, consulting firms’ webs of allegiances have become ever more complex. Frequently, this leads to conflicts as fraught as those in George Orwell’s 1984, in which a single entity is advising both sides in an adversarial system. These conflicts are legally challengeable when a consultant shares one company’s proprietary information with another — a problem firms can avoid by assigning different teams to competing client companies. But the legal system cannot solve the broader conflict, whereby the same consulting firm stands to benefit if either team wins. It has no answer to what happens when one consulting firm advises both a regulating agency and a regulated company — to cite a recent example, McKinsey advising both the U.S. Food and Drug Administration and Purdue Pharma. Or when the same firm consults two competing companies, or two governments that are geopolitical rivals or even enemies.
One such conflict arrived in the halls of Congress a month ago, when US Senators Marco Rubio and Josh Hawley challenged McKinsey and Co. for its work with the Urban China Initiative, a think-tank based in Beijing. The Initiative published a report in 2015 entitled “The Trend and Impact of World Technological Revolution and Industrial Transformation”, a litany of recommendations for Chinese government officials and business leaders to aid in the implementation of the Chinese Communist Party’s (CCP’s) “Made in China 2025” industrial initiative. Rubio and Hawley, who obtained a copy of the report, noted that it aimed to support the CCP’s goals of “dominating other countries in cutting-edge fields”, ranging from cloud computing and big data to artificial intelligence, renewable energy and human genomic technology.
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SubscribeWill never happen. It makes way too much sense.
Here, here. The previous company I worked for routinely hired McKinsey to “consult” on problems senior management faced. In reality, senior management told McKinsey their desired outcome and, lo and behold, McKinsey wrote a report supporting that outcome.
Let’s not be in any doubt that management consulting firms exist to further the goals of their clients, not to provide independent advice.
Spot on. I was a producer for the company that publishes Consulting Magazine. As soon as I got settled in to the job, I learned what an expensive load of hot air the whole thing was. The only time it seemed to be genuinely useful was on the agricultural front, when new government regs were announced and farmers really needed to know info about, say, potash and fertilizer. The rest of the time, it seemed like a self-licking ice cream cone for Bloomberg, who bought the business.
I’ve witnessed a huge amount of taxpayer’s money wasted by NHS “management” on just such a purpose.
Agreed. The only other explanation for a company to hire management consultants is that the management are not themselves up to the job – probably true but not something they would choose to admit.
Extraordinarily well researched article, John.
Great read.
I wouldn’t worry too much – AI may well be about to turn the consulting industry on its head by putting the sort of knowledge and expertise that consultants claim to offer into everyone’s hands.
The threat here is massive. These big consulting firms are simply too bloated and sluggish to keep up with the pace of AI. Previously – they missed the boat on smartphones and cloud tech, so now they lack the essential data for AI to thrive. And let’s be honest, most of their frameworks and methodologies aren’t worth the paper they’re printed on, often cobbled together by some snake oil salesman with more unearned confidence than actual expertise.
Clients are going to catch on fast that AI can churn out those glossy PowerPoint presentations that consultants used to charge an arm and a leg for, and do it quicker and cheaper.
The consulting industry will need to undergo a dramatic overhaul in the next few years if it wants to survive. But given their history of moving at a snail’s pace, I wouldn’t hold my breath. Watching these firms try to adapt will be like watching your granddad trying to figure out TikTok – painful and oddly amusing.
If you haven’t read it, I recommend David Graeber’s book BS jobs (2018).
Well the governments and corporations will hire the consultants to analyze the reports that AI produces, especially when AI does not produce the desired outcomes, in the end AI may make everything even more complicated than it already is. At the end of the day AI will be only juggling data that already exists, it’s overrated.
This “granddad trying to figure out TikTok” is simply amazed to find that something so simplistic and childish, something so patently worthless, is occupying the minds of so many “clever” youngsters.
After a few stabs at it I was left with one thought; “is that all there is..?” I imagine AI will turn out similarly.
I worked with a large European bank a few years ago who wanted to shed about a quarter of their global workforce. Employment laws, particularly in certain EU countries (and the UK) make it very difficult to simply get rid of people. What they did was to bring McKinsey in. They devised a new performance management system that required people to do a lot more than their current management role – the aim being to weed out the less competent managers who would be unable to stick to the new task – then sack them. I was involved in the training side – how to explain and deliver the new processes. The McKinsey people I worked with were, let’s be kind, useless. Often recent top business school graduates. Very brainy, no doubt, but completely at sea when dealing with ordinary people doing ordinary jobs. I guess the bank will have pleased it’s shareholders by doing something to cuts costs and the job losses will just about offset the vast payments to McKinsey. I think it will be very difficult to oversee these consulting giants. They way they operate is opaque but smart. As mentioned elsewhere, let’s hope AI wipes the out.
Mirrors my experience dealing with management consultants brought in by the CEO of a major ‘blue chip’ country council in the UK. The management consultants charged extortionate rates for getting our managers and staff to do all the work, then packaged it up in fancy reports to the management board. Likewise, they employed ‘boys in short trousers’ (as we called them), fresh out of postgraduate business schools (preferably Oxbridge) who did not have a clue how organisations worked, how to manage people or to deal with the financial realities of public sector budgets. They were big on the latest fashionable theories, adept at putting together fancy PowerPoint presentations with dazzling graphics – but devoid of real management experience. They charged huge amounts for doing very little, sometimes including items on invoices for fictitious meetings. The only value they delivered was to provide ‘evidence’ to support the whims of the CEO and to bamboozle idiot elected politicians with their management speak and false promises of huge savings. They even had the effrontery to invite all the senior managers to a ‘thank you’ meal in a local restaurant, then charged the lot in their final invoice!
Agree but question is how. I recommend stopping the revolving door between politics.and business for a period of 5 years. That, or one term politicians.
Management consultants are nonsense, It’s often means of which executives or managers can launder an an idea they have without putting risk to themselves. If the idea works, They claim credit, and if it feels like an always blame the consult.
The old saw that:
“A management consultant is someone that borrows your watch to tell you the time then pockets it and walks away”
Seems apposite here.
The premise that ‘capitalist’ ‘democracies’ ever had strict boundaries between the public and the private is highly doubtful. Every modern state has been built on protectionism and a pretty large degree of central planning. Moreover, the neoliberal period was always notorious for its market rhetoric, while in practice facilitating widespread cronyism. In the days of quantitative easing the separation of state and big capital is more of a distant ideal than ever before. After all, the entire system is now financed by the central bank.
Besides, there is something perverse going on with this entire bureaucratic consultancy paradise in the first place. Privatization and market fundamentalism were supposed to make everything better by reducing costs and increasing efficiency. However, in practice, governments spend more and are less competent. And efficient? For every public sector specialist we were able to cut we need 10 external consultants and 20 managers who have to come back all the time because crises are now endemic. The obvious conclusion seems to be that this entire ideology was a failure.
Unless of course it was never about market fundamentalism but about the power of global capital. Mark Fisher called it capitalist realism and market Stalinism. In the ‘socialist’ states of eastern Europe everyone more or less knew that the stated goals of achieving socialism were nonsense, yet everyone kept pretending. Similarly, we all sort off know this financialized bureaucracy has nothing to do with the stated goals of free markets, profit and efficiency. But we also keep pretending. The primary goal of such a power structure is to proliferate, keep itself alive. If this is true, the problem is clear. The government cannot just turn its back on this bureaucracy, the entire system depends on it. Besides, it may be true that in China the government controls big capital but in the West big capital controls the government.
This is a really good analysis. Your last two paragraphs are basically spot on. I would just say it’s a question of degree.
You can’t eliminate cronyism but you can create a set of conditions that allow a private market to function outside of the State. Right now, that hardly exists outside of the local Farmers Market.
Consulting, much like govt, is a business. It does not work for anyone’s best interests other than its own. If a client wants result A, then result A will be delivered. It is reminiscent of Eisenhower’s famous speech, the latter half of which has mostly been forgotten. Everyone recalls the part about “the military-industrial complex” but almost no one remembers the warnings about the growing connection between research and govt funding for it.
That warning is evident in the politicizing of science, and the consulting racket is an offshoot of that. Need a research paper to support a govt initiative? For the right price, one will be delivered with the full patina of expertise to which one can appeal. Except the appeal to authority is better known as a logical fallacy than a guarantor of sober thinking.
I worked as a management consultant in the NHS for just short of 10 years. There were some successes in terms of improvements to some patient pathways and some working practices. The systemic issues were largely unsolvable because the fundamental premise of the NHS is untrue and the system inevitably degenerates to serve vested interests.
Once people get to senior positions where decisions are made, the greater good is much less of a driver than personal ambition. This tends to be true for clinical and non-clinical staff. The NHS is a sobering object lesson in the futility of humanism – if you are willing to notice.
A couple decades ago I was hired by a large insurance company to speak at their annual management conference. One of the topics I covered was how to manage the centralize vs decentralize polarity. I described how it wasn’t unusual for consulting firms to quickly conclude that a company’s problem was that it was too centralized. Five years later, the same consulting firm, represented by a different team, comes in and claims the problem now is that the company is too decentralized. Soft chuckles among the attendees soon gave way to full blown laughter. Unbeknownst to me, McKinsey had been hired by the company and ended up doing exactly what I described. The top brass in attendance was not laughing however and I was never again invited to speak.
Articles like this one by Mr Masko are why I subscribe to UnHerd. Very informative. Illuminates another stratum of the true power foundation in the U.S. and globally. The noise, conflict and color of the perpetual election cycles distract us from the reality of how little of what elected “governments” do is actually the product of nominally democratic process and how much policy is sired (or quietly aborted) by powerful interconnected entities that manifest their influence seamlessly across administrations, no matter if Democrat, Republican, Labor, or Tory. “Big Consulting” was a potent vector for rapid dissemination of the DEI mind virus in both the corporate and government administrative realms. The general public does not know enough about these shadowy worlds and believes, I think excessively, that the problems of our societies can be fixed at the ballot box by elected officials. I wonder how this iteration of trans-national extra-governmental power fits into Joel Kotkin’s thesis of Neo-feudalism.
What’s funny is being on the other side. My group, just documentation, was held as doing a good job onsite for 15+ years, via the blue collar target, for a Fortune 500. McK was brought in, they flew in recent 20 something hires to do similar work for one business unit, and most of the 10 people were on overtime plus weekly expenses to get them home. Ultimately. we had to correct all of their work. McK was billing full time and overtime plus expenses. Our rate was less than half and we had no OT or expenses and we actually understood the oil/gas service tools; our product better, and our schedule quicker than anything by McK. We’d know as we had to correct all the documentation after they left. So the client paid 50% more for what we could have given them in more than half the response time. My understanding is that this is about par for Fortune 500 companies.
I know the Canadian government uses McKinsey for alot of the consulting work. But then you have to wonder what the tens of thousands of civil servants are doing including their so called experts. You would think these people would be able to do their jobs without all the “consultants ” or are they afraid of making decisions and are covering their….. They used McKinsey for immigration policies, where they recommended an immigration surge and to increase the population to 50 million by 2050. Since then Canada has a huge immigration problem with lack of housing, skyrocketing rents in cities, and huge problems providing services to them. They are mostly untrained people with limited skills and qualifications, many of them take years to get citizenship. Many are so frustrated that about 40% of recent immigrants want to go back to their country or go elsewhere due to the cost of living and low paying jobs. Even many born Canadians, mostly young are leaving Canada because of limited opportunities and cost of living. You really have to wonder about these expert agendas.
“American management knowhow”
Such arrogance. The writer does well to use inverted commas here as there is no evidence to suggest that US management techniques are superior to those of any other country.
Management consultant is a parasite job like currency speculator and hedge fund trader. It’s a licence to print money for firms like McKinsey that claim they have the exact snake oil recipe to sell to their clients. Money for old rope. Any halfway competent in-house manager should be able to do the job themselves without recourse to these tricksters.
Ninety percent of all consultant services are absolute garbage. The term GIGO is a perfect fit. Who would hire a firm that has no real skin in the game and can spin any negative results as the CEO or company did not follow their recommendations? This has occurred far more that anyone will admit. Thanks for the article!
Part of the problem is that the public sector in many (most?) countries does not have sufficient in-house expertise to do what consultants claim they can do or does have but doesn’t realise it. The public sector needs more expertise but it also needs more self-confidence. All too often it sends for “experts” who are nothing of the sort but are smooth operators who have mastered the art of winning contracts.
Not just Washington, and not just McKinsey. The author could easily have cited the PwC scandal in Australia, wherein it was “party to internal government discussions and used this confidential information to help its clients devise tax minimisation strategies” https://theconversation.com/we-remain-concerned-senate-inquiry-into-pwc-tax-scandal-calls-for-reform-but-overuse-of-consultants-will-likely-continue-232251
The author has the completely wrong end of the stick. Considering the mayhem and destructions management consultants routinely cause, we should be promoting their hiring by our competitors and enemies to ensure that they, too, are weakened by the likes of McKinsey.
The proposals outlined here will simply have the same effect as our economic sanctions policies – weakening us while strengthening our opposites.
McKinsey and many other consultancies are just monetizing “post hoc ergo propter hoc” fallacies.
Hiring consultants is, in the main, a cop-out for management. There are few occasions where they add value. Mainly they hide weaknesses and protect lazy management, or they even subtract value.