McKinsey & Company

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McKinsey & Company
Type Incorporated partnership
Industry Management consulting
Founded 1926
Founder(s) James O. McKinsey
Headquarters New York City, U.S.
Number of locations 90 offices[1]
Area served Global
Key people

Dominic Barton (MD)

Marvin Bower, spiritual founder
Revenue $7.8 billion (2013)[2]
Employees 17,000[2]

McKinsey & Company, Inc. is an American global management consulting firm headquartered in the U.S. The firm serves as an adviser to businesses, governments, and institutions. It was founded in 1926 in Chicago by James McKinsey as James O. McKinsey & Company and is now headquartered in New York City.

Many chief executive officers of large companies have worked at the firm. There were over 100 McKinsey offices in 60 countries as of September 2013.[3]


Early history[edit]

McKinsey & Company was founded in 1926 in Chicago under the name James O. McKinsey & Company by James McKinsey,[4] a professor of accounting at the University of Chicago.[5][6]:3 The firm called itself a team of "management engineers" and started out giving consulting on using accounting principles to make management decisions.[7][8][9]:3 Mr. McKinsey's first hires were partners Tom Kearney in 1929[10] and Marvin Bower in 1933.[11]:133 The firm's second office was opened in New York City in 1932.[7]

In 1935 Mr. McKinsey left the firm temporarily to serve as the Chairman and CEO of client Marshall Field's as they implemented the restructuring plan created by James O. McKinsey & Company.[11]:133 McKinsey was merged with accounting firm Scovell, Wellington & Company that same year, creating McKinsey, Wellington & Co.[12]:7 A Wellington project that accounted for 55 percent of McKinsey, Wellington & Company's billings was about to expire[12] and Tom Kearney and Marvin Bower had disagreements about how to run the firm.[13] Additionally, in 1937 James O. McKinsey passed away after catching pneumonia.[9][14] This led to the division of McKinsey, Wellington & Company in 1939.[14] The accounting practice returned to Scovell, Wellington & Company, while the management engineering practice was split into McKinsey & Company and McKinsey, Kearney & Company.[12] Guy Crockett became the Managing Partner of the new McKinsey & Company, while Marvin Bower is credited with founding the firm's principles and strategy as his deputy.[12] The New York office purchased exclusive rights to the McKinsey name in 1946.[15]:25


McKinsey & Company grew quickly in the 1940s and 50s, especially in Europe.[8][13] It had 88 staff in 1951[16] and more than 200 by the 1960s,[15] including 37 in London by 1966.[16] It established an office in Australia in the early 1960s.[17] By the end of the decade, more than one-third of the firm's revenues were from six European offices.[15] Guy Grockett stepped down as managing director in 1950, and Marvin Bower was elected in his place.[12] McKinsey's profit-sharing, executive and planning committees were formed in 1951.[12] The organization's client base expanded especially among governments, defense contractors, bluechip companies and military organizations in the post-World War II era.[18] After seven years of deliberation, McKinsey became a private corporation with shares exclusive to McKinsey employees in 1956. A plan for international expansion was developed and an office in London was established in 1959.[12]

After Bower stepped down in 1967, the firm's revenues declined. New competitors like the Boston Consulting Group and Bain & Company stiffened competition for McKinsey by marketing specific branded products, such as the Growth-Share Matrix, and by selling their industry expertise.[8][17][19] In 1971 McKinsey created the Commission on Firm Aims and Goals, which found that McKinsey had become too focused on geographic expansion and lacked adequate industry knowledge. The commission advised that McKinsey slow its growth and develop industry specialties.[8][13]:14 In 1976, Ron Daniel was elected managing director, serving until 1988.[20] Daniel and Fred Gluck helped shift the firm away from its generalist approach by developing 15 specialized working groups within McKinsey called Centers of Competence and by developing practice areas called Strategy, Operations and Organization. Daniel also began McKinsey's knowledge management efforts in 1987. By the end of his tenure in 1988 the firm was growing again and had opened new offices in Rome, Helsinki, São Paulo and Minneapolis.[8][13]

Fred Gluck served as McKinsey’s managing director from 1988 to 1994.[21] The firm's revenues doubled during his tenure.[19] He organized McKinsey into 72 sectors, centers, working groups, and projects.[13] Over two decades McKinsey & Company grew eightfold.[22] In 1989 the firm attempted to make a talent acquisition in IT services through a $10 million purchase of the Information Consulting Group (ICG),[23] but a culture clash caused 151 out of the 254 ICG staff members to leave by 1993.[21]

Recent history[edit]

The burst of the dot-com bubble led to a reduction in utilization rates of McKinsey's consultants from 64 to 52 percent; although, McKinsey avoided dismissing any personnel following the decline.[24] In 1994, Rajat Gupta became the first non-American-born partner to be elected as the firm’s managing director.[25] By the end of his tenure, McKinsey had grown from 2,900 to 7,000 consultants.[24][26] In the 1990s, McKinsey set up “accelerators,” where the firm accepted stock-based reimbursement to help internet startups.[24][27] In 2001, McKinsey launched several practices that focused on the public and social sector. It took on many public sector or non profit clients on a pro bono basis.[18] By 2002 McKinsey had invested a $35.8 million budget on knowledge management, up from $8.3 million in 1999.[18]:1

In 2003 Ian Davis, the head of the London, U.K. office, was elected to the position of managing director.[28] Davis promised a return to the company’s core values, after a period in which the firm had expanded rapidly, a development that, according to some people related to McKinsey, was a departure from the company's heritage.[29] Also in 2003, the firm established a headquarters for the Asia-Pacific region in Shanghai, China. By 2004, more than 60 percent of McKinsey's revenues were generated outside the U.S.[18]



McKinsey & Company was originally organized as a partnership[30] before being legally restructured as a private corporation with shares owned by its Partners in 1956.[12][31] It mimics the structure of a partnership and employees are called "partners".[30][32] The company has a flat hierarchy and each member is assigned a mentor.[33] Since the 1960s, McKinsey's Managing Director has been elected by a vote of senior directors to serve up to three, three-year terms[34] or until they reach the mandatory retirement age of 60.[19] The firm is also managed by a series of committees that each have their own area of responsibility.[35]

McKinsey has a de-centralized structure, whereby different offices operate similarly, but independently. Each office is expected to put the overall organization's best interest before the office's, which McKinsey refers to as the "one firm" principle. Consultants and engagements are often shared across offices.[7][34] Revenues from all offices are pooled and an individual office's revenue does not directly affect it financially.[36] The company's budgeting is centralized, but individual consultants are given a large degree of autonomy.[37]

McKinsey consultants are either industry experts, functional experts, or a generalist that covers a geographic region.[38] The firm has 23 Industry Practices focused on individual industries, 9 Functional Practices that work in areas like finance, marketing or risk, and 5 Capabilities and Solutions areas related to technology consulting.[34][39] It started a Social Sector Office (SSO) in 2008. The SSO is divided into three practices: Global Public Health, Economic Development and Opportunity Creation (EDHOC) and Philanthropy. McKinsey also does much of its pro-bono work through the SSO. A Business Technology Office (BTO), founded in 1997, provides consulting on technology strategy.[34]


Former McKinsey & Company partner Marvin Bower created the firm's strategy of only working with their clients' CEOs, which was later expanded to CEOs of subsidiaries and divisions, and of choosing to only work with clients the firm felt would take action on its advice.[7][36] This was reinforced in 1945, when McKinsey & Company published its New Engagement and Executive Relations Guide, which emphasized the need to persuade clients to take action based on McKinsey's recommendations.[12] Bower also established the firm's language.[35] It calls itself “The Firm” and its employees “members”.[7][19] McKinsey claims its consultants are not motivated by money.[19]

McKinsey & Company tries to keep a “very low profile public image.”[40] The firm has a policy against discussing specific client situations.[36][41] It says it does not advertise, though it did advertise allegedly for recruitment purposes in TIME Magazine in 1966.[7] Members are not supposed to “sell” their services, a tradition based in the early 1900s, when it was considered beneath the dignity of a lawyer or accountant to advertise.[33][42] McKinsey's consultants are also expected to become a part of the community and recruit clients through church, charitable foundations, board positions and other community involvements.[7]


Many of McKinsey's alumni become CEOs of major corporations or hold important government positions.[40] In doing so, they spread McKinsey's values and culture to other organizations and often become McKinsey clients.[36][40][43] McKinsey's alumni have been appointed as CEOs or high-level executives at American Express, IBM, Westinghouse Electric[31][43] Sears, AT&T, PepsiCo[36] and Enron.[44] Some McKinsey alumni have held positions with Tony Blair's office.[45] Citicorp and Merrill Lynch have also hired many McKinsey alumni.[31] As of 2008, McKinsey alumni held CEO positions with 16 corporations that have more than $2 billion in revenue. The firm was ranked by USA Today as the most likely company to work for and become a future CEO of a major corporation, with odds of 1 out of 690.[46] McKinsey's consulting work has also been influential in establishing many of the norms of how governments and corporations are run.[7][36]


A 1993 profile story in Fortune Magazine said McKinsey & Company was “the most well-known, most secretive, most high-priced, most prestigious, most consistently successful, most envied, most trusted, most disliked management consulting firm on earth.”[19] According to BusinessWeek the Firm is "ridiculed, reviled, or revered depending on one's perspective."[47]

McKinsey's culture has often been compared to religion, because of the influence, loyalty and zeal of its members.[36][43] Fortune Magazine said partners talk to each other with "a sense of personal affection and admiration."[19] The Wall Street Journal said McKinsey is seen as “elite, loyal and secretive.”[38] According to Reuters it has a “button-down culture” focused on “playing by the rules”.[48] According to BusinessWeek, “some observers” say that McKinsey has started to lose touch with its founding principles and become less personal as its size has increased.[49]

The Guardian said at McKinsey “hours are long, expectations high and failure not acceptable.”[45] Fortune and USA Today have both noted that the majority of McKinsey's consultants are white men.[19][31] An article in The News Observer said McKinsey's internal culture was “collegiate and ruthlessly competitive” and is sometimes described as arrogant.[35]

Consulting services[edit]

McKinsey provides management consulting services, such as providing advice on an acquisition, developing a plan to restructure a sales force, creating a new business strategy or providing advice on downsizing.[7][33][38] Its consultants design and implement studies to evaluate management decisions using data and interviews to test hypotheses.[33][36] Conclusions of the study are presented to senior management, typically in a PowerPoint presentation and a booklet.[33][36] McKinsey is one of “The Big Three” management consulting services along with Bain & Company and The Boston Consulting Group.[50] According to McKinsey, it serves more than 80 percent of the world's largest organizations and more than 80 percent of Fortune Magazine's Most Admired Companies List.[51]

McKinsey is considered one of the most prestigious and most expensive management consulting firms.[19][31][52] In “Dangerous Company” journalists James O'Shea and Charles Madigan said McKinsey is the most influential, most reputable management consulting firm in the industry and that it carried the most weight with corporate boards.[36] The News Observer said McKinsey is the “creme de la creme” and the “Rolls Royce” of management consulting.[19][35] However, it has traditionally charged approximately 25 percent more than competing firms[34] with an average project of one million dollars.[38] Prices were reduced in the economic slump following the Dot-com bubble.[32] According to the Wall Street Journal, McKinsey clients estimate that the firm's advice turns out to be poor in retrospect about 10 to 20 percent of the time.[38]

A typical McKinsey engagement can last between two and twelve months and involves three to six McKinsey consultants.[34] An engagement is usually managed by a generalist that covers the region the client's headquarters are located in and specialists that have either an industry or functional expertise.[19] Unlike some competing consulting firms, McKinsey does not hold a policy against a consultant working for two competing companies. This has sometimes lead to accusations of sharing confidential information[38] or re-packaging a competitor's practices as best practices.[7]

Recruiting and compensation[edit]

McKinsey & Company was the first management consultancy to hire fresh graduates instead of experienced business managers,[40] when it started doing so in 1953.[53] Many of its recruits are Baker Scholars, Rhodes scholars, Marshall Scholars or White House Fellows.[19][54] Less than half of the firm's recruits are from business majors,[34]:7 while others have advanced degrees in science, medicine, engineering or law.[33][54][55] Some colleges have a team of McKinsey consultants assigned to cultivating relationships with upcoming graduates.[33]:158

According to The Observer, McKinsey recruits fresh graduates and "imbues them with a religious conviction" in the firm, then culls through them with its "up-or-out" policy.[35] The "up or out" policy, which was established in 1951, means that consultants that are not being promoted within the firm are asked to leave.[16]:208[56] About one-fifth of McKinsey's consultants depart under the up or out policy each year.[35][37] McKinsey's practice of hiring fresh graduates and the "up-or-out" philosophy, were originally based on Marvin Bower's experiences at the law firm Jones Day in the 1930s, as well as the "Cravath system" used at the law firm Cravath, Swaine and Moore.[16]:206

According to Financial Times journalist Duff McDonald, as of September 2013, the firm receives 225,000 employment applications annually and about one percent—or 2,200—of the applicants are hired.[3] There is an ongoing debate within the firm on how fast it should grow.[57]

According to a report by WetFeet, McKinsey "offers some of the best experience, opportunity and professional development in the industry" and it is prestigious to have McKinsey on a resume. However, the work environment is demanding, involves extensive travel and long hours.[31][34] Consulting Magazine's 2007 list of "Best Consulting Firms to Work For" ranked McKinsey as number 3.[34] New undergraduate McKinsey recruits are paid $80,000 a year.[55]

Knowledge management system[edit]

McKinsey has used a knowledge management system to support field consultants. It was created and chaired by former senior partner Anil Kumar as an early example of knowledge process outsourcing.[58] By 2009, the firm consisted of 400 directors (senior partners), up from 151 in 1993,[19][59] and Dominic Barton was elected as Managing Director, a role he was re-elected for in 2012.[59] The system includes generalist researchers, industry-experts, librarians and function-specific experts and includes access to journals and databases. McKinsey maintains an organisation called the McKinsey Knowledge Centre (McKC) to provide rapid access to specialized expertise and business information.[60]

Research & Publishing[edit]

McKinsey & Company consultants regularly publish books, research and articles about business and management.[33]:51[61]:55 The firm spends $50–$100 million a year on research.[61]:54 McKinsey was one of the first organizations to fund management research, when it founded the Foundation for Management Research in 1955.[9] The firm began publishing a business magazine,The McKinsey Quarterly, in 1964.[62] It funds the McKinsey Global Institute, which studies global economic trends and was founded in 1990.[18][43] Many consultants are contributors to the Harvard Business Review.[43] McKinsey consultants published only two books from 1960-1980, then more than 50 from 1980 to 1996.[61]:55 McKinsey's publications and research give the firm a "quasi-academic" image.[61]

A McKinsey book, “In Search of Excellence”, was published in 1982.[63] It featured eight characteristics of successful businesses based on an analysis of 43 top performing companies.[61]:87-89[63]:348 It became one of the most influential and highly read management books[63]:348 and marked the beginning of McKinsey's shift from accounting to "softer" aspects of management, like skills and culture.[63]:359 In Search of Excellence's distribution prompted others, including McKinsey consultants, to write more management books.[61] According to David Guest from King's College In Search of Excellence became popular among business managers because it was easy to read, well-marketed and some of its core messages were valid. However, it was disliked by academics because of flaws in its methodology. Additionally, a 1984 analysis by BusinessWeek found that many of those companies identified as "excellent" in the book no longer met the criteria only two years later.[63]

A 1997 article and a book published in 2001 on “The War for Talent”[64] prompted academics and the business community to start focusing more on talent management.[65]:163 The authors found that the best-performing companies were "obsessed" with acquiring and managing the best talent.[66] They advocated that companies rank employees by their performance and promote “stars”, while targeting under-performers for improvement or layoffs.[4][66] After the book was published, the Enron scandal led to the bankruptcy of a company that followed many of the principles in the book.[66] In May 2001, a Stanford professor wrote a paper critical of the "War on Talent" arguing that it prioritized individuals at the expense of the larger organization.[64]

McKinsey consultants published Creative Destruction in 2001.[7]:247 The book suggested that CEOs need to be willing to change or rebuild a company, rather than protect what they've created.[67] It found that out of the first S&P 500 list from 1957, only 74 were still in business by 1998.[67][68] The New York Times said it “makes a cogent argument that in times of rampant, uncertain change... established companies are handcuffed by success.”[69] In 2009, McKinsey consultants published “The Alchemy of Growth”, which established three “horizons” for growth: core enhancements, new growth platforms and options. Its three horizons became adopted widely, because it gave executives a practical and simple vocabulary for thinking about growth.[70]

In February 2011, McKinsey surveyed 1,300 US private-sector employers on their expected response to the Affordable Care Act (ACA).[71][72] 30 percent of respondents said they anticipated they would probably or definitely stop offering employer sponsored health coverage after the ACA went into effect in 2014.[73][74] These results, published in June 2011 in the McKinsey e-Quarterly,[71] became "a useful tool for critics of the ACA and a deep annoyance for defenders of the law" according to an article in TIME Magazine.[75] Supporters of healthcare reform argued the survey far surpassed estimates by the Congressional Budget Office and insisted that McKinsey disclose the survey's methodology.[76][77][78][79] Two weeks after publishing the survey results,[75] McKinsey released the contents of the survey including the questionnaire and 206-pages of survey data.[80] In its accompanying statement,[81] McKinsey said the survey should not be compared with other estimates that use different methodologies[76][82] and that it was intended to capture the attitude of employers at a certain point in time rather than make a prediction.[83][84] A subsequent article in TIME Magazine called McKinsey’s disclaimer that the survey was not predictive "rather absurd," but said the survey methodology was sound.[75] Some supporters of the Affordable Care Act criticized the survey's methodology, arguing it used slanted questions, cherry-picked information and had uninformed recipients.[76][85]

Awards and industry rankings[edit]

Between 2002 and 2014, McKinsey has been ranked in the number one position of the "The Best Consulting Firms: Prestige" list of the career intelligence website and was cited as the "most prestigious consulting firm of all" in a 2011 New York Times article.[86][87][88][89]


Criticism of management advice[edit]

The recommendation in 1980 to AT&T Corporation that cellular phones would be a niche market.[90]

Failures of McKinsey—according to Adam Sternbergh writing in Bloomberg Businessweek[91]—include its massive reorganization of General Motors in the early 1980s[92] "that's widely judged as disastrous," its close relationship with Enron,[37] and its vigorous support for the Time Warner merger with AOL.[91]

Another notably troubled company associated with McKinsey is Swissair, which entered bankruptcy twelve years after McKinsey recommended the Hunter Strategy.[93]

Environmental considerations[edit]

Marginal abatement cost curves attempt to compare the financial costs of different options for reducing pollution in a region and are used in emissions trading, policy discussions and incentive programs.[94] McKinsey & Company released its first marginal abatement cost (MAC) curve for greenhouse gas emissions in February 2007, which was updated with version two in January 2009.[95][96] McKinsey's curve became the most widely used[97] and the basis for McKinsey’s consulting on climate change and sustainability.[98]

McKinsey's curve predicts negative cost abatement strategies, which has been controversial among economists.[99] The International Association for Energy Economics said in The Energy Journal that McKinsey's cost-curve was popular among policymakers, because it suggests they can take “bold action towards improving energy efficiency without imposing costs on society.”[100] The Brookings Institution said the negative-cost projections were “peculiar”,[101] while Paul Krugman, a professor from Princeton, said that there was already a body of academic literature establishing that there are missed opportunities for reducing costs while also reducing pollution.[102]

In a 2010 report, the Rainforest Foundation UK said McKinsey's cost curve methodology was misleading for policy decisions regarding the Reduced Emissions from Deforestation and Forest Degradation (REDD) program. The report argued that McKinsey's calculations exclude certain implementation and governance costs, which makes it favor industrial uses of forests while discouraging subsistence projects.[103] In April 2011, Greenpeace UK commissioned a report by the UCL Energy Institute that urged for caution in using McKinsey's curve. It criticized McKinsey for not disclosing the assumptions behind the cost-curve's calculations.[97] Greenpeace also said the curve has allowed Indonesia and Guyana to win financial incentives from the United Nations by creating inflated estimates of current deforestation so they could demonstrate reductions in comparison.[71][104][105] McKinsey said they had made it clear in the cost-curve publications that cost curves do not translate “mechanically” into policy implications and that policymakers should consider “many other factors” before introducing new laws.[71][104] The UCL report also noted McKinsey had published the curve with “suitable caveats” and disclosed some of the shortcomings of using MAC curves itself.[97]


Enron was headed by McKinsey alumni and was one of the firm's biggest clients before Enron's collapse.[106] In particular, McKinsey's "deep-seated belief that having better talent at all levels is how you outperform your competitors", a HR program implemented at Enron with McKinsey's knowledge, resulted, in the opinion of one author, in a workplace culture of prima donnas that "took more credit for success than was legitimate, that did not acknowledge responsibility for its failures, that shrewdly sold the rest of us on its genius, and that substituted self-nomination for disciplined management."[107] Jeff Skilling, sentenced to 24 years in federal prison as the CEO of Enron, was formerly a partner at McKinsey and "loyal alum."


Several civil suits have been filed against home insurance and vehicle insurance companies after the insurers were advised by McKinsey, and allegedly paid the insured parties significantly less than the actual value of the damage.[108] McKinsey was cited in a February 2007 CNN article with developing controversial car insurance practices used by State Farm and Allstate in the mid-1990s to avoid paying claims involving soft tissue injury.[109]

Galleon insider trading scandal[edit]

FBI wiretap from July 28, 2008 of McKinsey senior partner emeritus Rajat Gupta speaking to Galleon Group founder Raj Rajaratnam about Goldman Sachs, senior partner Anil Kumar, Galleon International and Kohlberg Kravis Roberts

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McKinsey senior executives Rajat Gupta and Anil Kumar were among those convicted in an ongoing government investigation into insider trading for sharing inside information with Galleon Group hedge fund owner Raj Rajaratnam. Gupta and Kumar were close friends of each other and of Rajaratnam, as well as the co-founders of the Indian School of Business and (with Rajaratnam) of New Silk Route.[110][111] Though McKinsey was not accused of any wrongdoing, the convictions were embarrassing for the firm, for which integrity and client confidentiality are a major premise of its business.[112][113][114] Following the initial allegations McKinsey no longer maintains a relationship with either senior partner,[115][116] though the manner in which it severed ties attracted controversy.[117]

Senior partner Anil Kumar, described as Gupta's protégé,[118] left the firm after the allegations in 2009 and pleaded guilty in January 2010.[119][120] While he and other partners had been pitching McKinsey's consulting services to the Galleon Group, Kumar and Rajaratnam reached a private consulting agreement violating McKinsey's policies on confidentiality.[121] He testified in criminal trials against both Gupta and Rajaratnam.

During Undertaker's trial, a wiretap recording showed Rajaratnam and his brother had also contacted McKinsey junior partner and Kumar protégé David Palecek, saying he was "a little dirty."[26][122] Palecek's widow claimed he had been approached but refused to be a part of the incident.[26]

Former managing director (CEO) Rajat Gupta was convicted in June 2012 of four counts of conspiracy and securities fraud, and acquitted on two counts, resulting from his board memberships at Goldman Sachs and Procter & Gamble while a senior partner emeritus of McKinsey.[123] In October 2011, he was arrested by the FBI on criminal charges of sharing insider information from these confidential board meetings with Rajaratnam.[41][49] Gupta was convicted, among other crimes, of passing information to Rajaratnam within 4 minutes of the completion of a special Goldman Sachs board meeting to approve a capital injection by Warren Buffett during the height of the financial crisis in 2008. He stood to profit as the chairman of Galleon International and as the chairman of New Silk Route.[124] At least twice, Gupta used a McKinsey phone to call Rajaratnam and retained other perks — an office, assistant, and $6 million retirement salary that year[125] — as a senior partner emeritus.[126]

After the scandal McKinsey reviewed of its policies and procedures, including investigating other partners' ties to Gupta.[127][128] There is no evidence of any damage to McKinsey's brand, though some controversy has been leveled at the firm for having former leading senior partners (Gupta and Kumar) as well as a junior partner (Palecek) all implicated with the Galleon Group and insider trading.[129] The firm's revenues grew 10% during the same period, though its long term impact remains unknown.[41][122]


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