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When McKinsey Comes to Town: The Hidden Influence of the World’s Most Powerful Consulting Firm – review

New York Times reporters Walt Bogdanich and Michael Forsythe’s devastating investigation into the consulting firm uncovers a story of secrecy, delusion and untold harm

T wo hundred thousand of the world’s brightest graduates apply for jobs at McKinsey & Company every year. Each of them, perhaps, does so in the belief that not only will a successful application guarantee a shed-load of cash – those with MBAs might earn $195,000 in their first year – it will also allow them to create, as the PowerPoint slides declare, “change that matters”.

The world’s original and most successful management consultancy has, for a century, wanted to sell itself to clients and employees as a “values-driven organisation”. This detailed account of the firm’s activities – the result of a five-year investigation by two senior New York Times reporters – provides an often devastating insiders’ story of the ways in which McKinsey fails in that mission.

James O McKinsey, an accountant from the Ozarks, was an evangelist of the new management science of efficiency. From the beginning, his company operated with a high-minded, somewhat delusional sense of its own integrity, as if the advice it gave was on a higher plane than bottom lines. “The very word commercial, when spoken about anyone at McKinsey, is akin to profanity,” one consultant suggested.

To this end, the company quickly created a lexicon to describe its operations. It was a practice, not a firm; it engaged with clients, rather than worked for them. Over the years, reflexive euphemism became very lucrative. Suggesting an ill-advised revision to a maintenance regime in Disney theme parks, one partner is quoted here as saying: “Change of this magnitude is not managed – it is led… and leaders must inspire and develop a bench of true change champions.” Savage cost-cutting became “optimising”; brutal redundancy programmes, “rightsizing”.

A great deal of this work was done in secrecy. McKinsey’s claims to ethical purity have never extended as far as transparency. To this day, the firm won’t identify clients or disclose the advice it gives. As a result, the authors suggest, “Americans and, increasingly, people the world over are largely unaware of the profound influence McKinsey exerts over their lives, from the cost and quality of their medical care [or] their children’s education”. There are so many McKinsey alumni at the top of public and private client organisations that conflicts of interest are priced in. For example, the authors’ search of internal records shows that “the firm has advised virtually every major pharmaceutical company – and their government regulators…”

They identify several key ways in which McKinsey has been directly responsible for a corporate culture that works for the benefit of the elite 1% rather than the wider workforce. One occurred in 1950, when a partner at McKinsey, Arch Patton, published comparative details of executive pay, and proposed ways in which chief executives – his clients – could be better rewarded by incentivising their remuneration against profit. His consultancy was soon in enormous demand. In 1950, directors of Fortune 500 companies were paid 20 times that of production workers. In 2021, that differential was 351 times. Late in life, Patton was asked by a reporter how he felt about the impact of his work. He gave a one-word reply: “Guilty.”

That shift enabled other neoliberal orthodoxies. Tom Peters , the business writer and former McKinsey partner, suggests here that McKinsey strategies of outsourcing and rationalisation really meant “disinvestment in people” to ensure bigger profits. “I really think the shareholder value maximisation thing has done more harm than any single thing in the country. It is the father of inequality, and inequality is the father of Trump.”

The authors reveal how this erosion of McKinsey core values, not least the eye-watering remuneration of its own executives, has led the company into many morally bankrupt places. For many years, the firm promoted Enron – run by McKinsey alumnus Jeff Skilling with the help of a raft of McKinsey consultants – as the new model of corporate innovation. Immediately before Enron became the biggest corporate bankruptcy in US history, its top five executives took nearly $300m in wages in one year alone.

No doubt McKinsey does a great deal of ethical and effective “engagement” – it has released a statement suggesting that this book does not represent its values – but that record is seriously undermined in successive chapters here. Witness, for example, the $83.7m in fees McKinsey received for marketing advice from the pharmaceutical company Purdue to “turbocharge” the sale of the painkilling drug OxyContin, which in turn fuelled the opioid crisis , related to half a million deaths. Or its consultancy to ICE, the US federal agency for expelling illegal immigrants from the US, which included cost-cutting proposals relating to the care of detainees that were so extreme they drew complaints even from Trump’s border force. Or read the detailed accounts of work undertaken under authoritarian regimes, including China, Saudi Arabia and Putin’s Russia.

Given this is a book largely targeted and focused on the American operation of the firm, it is dispiriting to note that the concluding chapter is an account of how “with startling speed, McKinsey conquered Britain. By the early 1970s, it had helped restructure 25 of Britain’s top 100 companies.” During the Thatcher privatisations and ever since, this lucrative influence has become endemic. The authors end their investigation with a brief deconstruction of the staggering cost and failure of the UK’s Covid test and trace programme led by Dido Harding, a former McKinsey consultant (for which McKinsey charged £563,400 to provide “vision, purpose and narrative”). In this, as in the other cases studied, the book’s scrutiny – and measured sense of outrage – is overdue and, you hope, only the beginning.

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When McKinsey Comes to Town

Walt bogdanich.

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From the publisher

**A TIMES AND NEW YORK TIMES BOOK OF THE YEAR 2022** An explosive expose of a firm whose work has made your world more unequal, more corrupt and more dangerous. McKinsey & Company have earned billions consulting for almost every major corporation in the world - and countless governments, including yours. Shielded by NDAs, their practices have remained hidden - until now. In this propulsive investigation, prize-winning journalists Walt Bogdanich and Michael Forsythe reveal the disturbing reality. McKinsey's work includes ruthless cuts to the NHS, troubleshooting for Big Oil, incentivising the prescription of opioids, executing Trump's immigration policies (the ones that put children in cages) as well as advising some of the world's most unsavoury despots. 'A story of secrecy, delusion and untold harm' OBSERVER 'Makes you so angry...the evidence the authors winkle out is astonishing' SUNDAY TIMES 'Panoramic, meticulously reported and ultimately devastating' PATRICK RADDEN KEEFE 'A harrowing account of decades of dishonourable exploits' ECONOMIST

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WHEN MCKINSEY COMES TO TOWN: The Hidden Influence of the World’s Most Powerful Consulting Firm, by Walt Bogdanich and Michael Forsythe

In 2002, Martin Elling, along with three colleagues at the global consulting firm McKinsey & Company, published an article in the firm’s quarterly journal intended to gin up more business from the pharmaceutical industry. Elling’s article argued that drug companies were missing an opportunity by not tracking how often individual physicians were prescribing certain drugs. By aggregating such data, pharmaceutical salespeople could target their marketing pitches to the doctors most likely to become heavy prescribers, and the sales reps themselves could also be better evaluated by their companies. Soon enough, a relatively unknown drug company called Purdue Pharma came calling, retaining McKinsey in 2004 to help increase sales of its opioid pain killer OxyContin — which had already topped $1 billion annually. In the face of a worsening national opioid addiction crisis and multiple state and federal investigations, prescriptions of higher-strength OxyContin pills had begun to level off. Among other recommendations, McKinsey, led by Elling and his team, suggested “turbocharging” sales through more innovative and aggressive marketing tactics. Between 2004 and 2019, Purdue paid McKinsey $83.7 million in fees.

For decades, McKinsey was associated with professionalism and prestige. By inviting the firm’s high-priced consultants into a company’s decision-making sanctum, C.E.O.s telegraphed that they wanted the smartest, most market-tested advice. The firm was founded in 1926 by an accounting professor named James O. McKinsey, but it was Marvin Bower, a Harvard law and business school graduate, who helped transform the firm into a global powerhouse. Bower joined the company in 1933 and infused its culture with a sense of excellence and purpose: McKinsey ran a “practice,” as opposed to a “business,” and work for a client was “an engagement” rather than a “project” or a “job.”

The firm recruited new consultants from the very best schools — Harvard Business School is a favorite hunting ground — and now receives as many as 200,000 applicants each year, often hiring only 1 or 2 percent of them. Starting salaries are as much as $195,000 with bonuses, but part of the reason so many bright young graduates want to work at the firm is its purported “values.” Ethics are said to be embedded in its culture. Recently, McKinsey has begun telling new recruits that they would be working to solve some of the world’s most intractable problems, targeting issues like poverty and climate change.

Over the last several years, however, the press and the public started to pay more attention to McKinsey and its influence, and the firm underwent a reputational reversal. As Walt Bogdanich and Michael Forsythe, reporters for The New York Times, document in their deeply reported book, “When McKinsey Comes to Town: The Hidden Influence of the World’s Most Powerful Consulting Firm,” McKinsey has worked with opioid makers, hostile autocratic governments, cigarette companies and U.S. immigration authorities responsible for the family separation policy at the southern border. Reading Bogdanich and Forsythe’s account, one has a hard time imagining any paying client the firm would turn away. Many of the company’s recommendations follow a predictable Milton Friedman-inspired playbook, centering on “right-sizing,” an absurdist euphemism for laying off workers, and other forms of cutting costs, such as reducing expenditures on food, medical care and the supervision of detainees at the border.

All of this work has earned McKinsey’s top partners enormous personal wealth, while the firm has consolidated an inordinate amount of influence, most of it hidden. The company’s august alumni include Senator Tom Cotton of Arkansas, Transportation Secretary Pete Buttigieg and Sheryl Sandberg, the former C.O.O. of Meta. (In general, former employees are forbidden from discussing their work there, though during the 2020 presidential campaign, Buttigieg was granted permission to talk about his time at the firm.) “Because the firm won’t identify clients or disclose the advice it gives,” the authors write, “Americans and, increasingly, people the world over are largely unaware of the profound influence McKinsey exerts over their lives, from the cost and quality of their medical care to the jobs that pay for their children’s education.”

With chapter titles like “Guarding the Gates of Hades: Tobacco and Vaping,” “Toxic Debt: McKinsey on Wall Street” and “‘Clubbing Seals’: The South Africa Debacle,” the authors of “When McKinsey Comes to Town” are not subtle about their views. The portrait this book creates is one of a company chasing profits, spreading the gospel of downsizing and offshoring, its leaders virtually unmoored from any guiding principles or moral code. If there is a pro-McKinsey case to be made — one imagines it would be based on arguments about promoting “efficiency” in the economy — it won’t be found here.

Yet laying out McKinsey’s most morally compromised assignments, like a series of damning Harvard Business School case studies, creates a clear and devastating picture of the management philosophy that helped drive the decline of a stable American middle class over the last 50 years. In 1950, when the average C.E.O. made about 20 times the income of an average production worker, McKinsey helped set off exploding executive compensation by arguing that workers’ wages were rising more quickly than their bosses’. (In 2020, the average C.E.O. made at least 350 times as much as an average worker.)

In the 1990s, the firm promoted layoffs and the shipping of jobs to cheaper, foreign countries, such as India, where McKinsey advised major outsourcing firms like Infosys, as well as American companies that were sending jobs their way. In 2005, McKinsey advised Walmart, which paid such low salaries to its retail employees that a significant proportion of them and their children were on public assistance. A task force led by McKinsey consultants recommended that in order to raise profitability Walmart should increase its number of part-time employees, keep salaries and health-plan costs low, and reduce contributions to workers’ 401(k)s. Duff McDonald, in his 2013 book about McKinsey, “ The Firm: The Story of McKinsey and Its Secret Influence on American Business ,” wrote that McKinsey may be “the single greatest legitimizer of mass layoffs than anyone, anywhere, at any time in modern history.”

In addition to Purdue Pharma, McKinsey has advised nearly every other major pharmaceutical company, as well as the government regulators who monitored them. As the opioid crisis grew and Purdue’s liability increased, McKinsey got more creative about the ideas it put forth to amplify OxyContin sales. As Bogdanich and Forsythe reported in The Times , in 2017, the same year an estimated 47,000 people died from opioid-related overdoses in America, McKinsey suggested that Purdue consider offering “rebates” to drug distributors for every customer of theirs who overdosed. (CVS, which was also a McKinsey client, would have gotten an estimated $36.8 million in 2019.) By August 2021, a year after Purdue had filed for bankruptcy protection amid a swirl of lawsuits, McKinsey had agreed to pay about $641 million to settle legal claims from U.S. states and territories over its role in the opioid crisis. (Litigation at the federal and local level continues.)

One college graduate clarified for Bogdanich and Forsythe the differences between McKinsey and the investment bank Goldman Sachs, which is often competing to hire the same top-performing business school graduates with less of the “values” nonsense. At Goldman, “There was never ever, ever an attempt to be anything other than what they were — ‘We are the sharks and that’s why we are the best and everyone wants to work here because we are the sharks,’” the graduate said. “And that’s refreshing. No one was lying to themselves at night.”

Sheelah Kolhatkar is a staff writer at The New Yorker and the author of “Black Edge: Inside Information, Dirty Money and the Quest to Bring Down the Most Wanted Man on Wall Street.”

WHEN MCKINSEY COMES TO TOWN: The Hidden Influence of the World’s Most Powerful Consulting Firm | By Walt Bogdanich and Michael Forsythe | 368 pp. | Doubleday | $32.50

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