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Bain & Company

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Bain & Company
Company typeIncorporated Partnership
IndustryManagement consulting
Founded1973
Headquarters Boston, Massachusetts
39 offices in 26 countries
Key people
Orit Gadiesh, Chairman
Steve Ellis, Worldwide Managing Director
ProductsManagement consulting services, including strategy, private equity, operations, mergers & acquisitions, technology and organization
RevenueUS$ 1.9 billion (est. 2007)
Number of employees
4,300 employees worldwide
Websitewww.bain.com

Bain & Company is a management consulting firm headquartered in Boston, Massachusetts.

History

1970s

Bain & Company was established in 1973 by seven former partners from the Boston Consulting Group headed by Bill Bain.

Under Bain’s direction, the firm implemented a number of unconventional practices, by traditional consulting standards, in its early years. Notably, Bain would only work with one client per industry to avoid potential conflicts of interest[1]. Partners did not carry business cards and clients were referred to only in code names, further demonstrating its reputation for enforcing client confidentiality. And the company preferred to win work by boardroom referrals rather than marketing itself, sometimes landing clients by offering several weeks of work at no cost until proving the results of its services.[citation needed] Bain consultants preferred to work on increasing a company’s market value rather than simply handing clients a list of recommendations[2]. To win business, Bain showed clients the increase in stock price of Bain clients relative to the Dow Jones industrial average[3]

The firm’s founding was followed by a period of growth in the late 1970s and early 1980s, and the firm opened offices in London, Munich, San Francisco and Tokyo.

Another innovative consulting approach that Bain pioneered was aligning its incentives with its clients’ results and occasionally taking equity in lieu of fees. An estimated 10% of revenue is from equity or success fees. This model proved successful for both Bain and its clients. For example, the firm took an ownership stake in fruit processor Del Monte Foods while working to revamp the company’s strategy.[4] "Coming into a leveraged buyout situation is never easy," says Del Monte CEO Richard Wolford. "Knowing Bain and their desire to deliver results, they probably would have provided ongoing support regardless. But the fact they own a stake doesn't hurt."[citation needed]

Bain & Company should not be confused with but has affiliations with Bain Capital, a private equity firm founded in 1984 by former Bain & Company partners, including former Massachusetts governor and 2008 U.S. Presidential Candidate Mitt Romney, T. Coleman Andrews III, and Eric Kriss. [5]

1980s

After a successful start, the company found itself facing a growing list of challenges in the late 1980s. In the midst of sluggish business conditions and overstaffing, Bain also faced the dilemma of having to turn away business due to its one-client-per-industry restriction. Competition increased as other firms copied Bain’s implementation-focused strategy.

However daunting these external challenges were, it was internal infighting that threatened to tear the firm apart. Bain was incorporated in 1985 and over the course of two years, the Employee Stock Ownership Plan (ESOP) was established, after which senior executives borrowed against their equity for cash, leaving the firm with a heavy load of debt[6].

As business slowed, the debt load began to squeeze the firm.

1990s to present

Facing financial duress, former Bain Capital partner and former candidate for the Republican nomination for the 2008 US presidential election, Mitt Romney was asked to rejoin the firm as interim CEO. Bringing along two lieutenants from Bain Capital, Romney began traveling to all the Bain offices to rally employees.

The Boston Globe points out that “Over several weeks, Romney managed negotiations with the banks and among the partners,” and that “The moment came when negotiations produced a package in which [Bill] Bain and the founding partners would give up control of the firm, turning back $30 million they had taken from the ESOP and $100 million in notes they held against the firm.”

Romney’s plan involved "a complicated restructuring of the firm’s stock-ownership plan, real-estate deals, bank loans, and money still owed to partners"[7]. To avoid the financial crisis that a buyout would have triggered, the group of founding partners agreed to return about $100M cash and forgive outstanding debt.[8].

Although in the role for just one year before returning to Bain Capital, Romney’s work had three profound impacts on the firm. First, ownership was officially shifted from the owners to the firm’s 70 general partners. Second, transparency in the firm’s finances increased dramatically (e.g., partners were able to know each other’s salaries[9]). And finally, Bill Bain relinquished ownership in the firm that carried his name.

Orit Gadiesh at the World Economic Forum in Davos, Switzerland, 2007.

Within a year, Bain bounced back to profitability without major partner defections[10], and the groundwork was laid for a period of steady growth. In 1993 the head position was split into two roles – a Managing Director and a “non-executive” chairman of the board. Orit Gadiesh, named Bain’s first chairman in 1993, was fundamental in maintaining Bain’s culture. After spending two years in military intelligence for the Israeli army and earning a degree in psychology from Hebrew University, Gadiesh enrolled in the Harvard Business School and graduated as a Baker Scholar. As a junior partner during the turnaround she had been instrumental in keeping senior partners from leaving the firm, and as chairman she became the first female to lead one of the major consulting firms. Gadiesh was known throughout the firm for her passionate leadership and "True North" philosophy, which the firm still embraces. For the past several years, she has landed among Forbes' list of the "100 Most Powerful Women in Business" and is on the board of several organizations, including the World Economic Forum[11].

Under Gadiesh and MD Tom Tierney, Bain simultaneously loosened its restrictions around the one-client-per-industry policy, by assuring clients that the firm's strict internal Professional Standards prohibited the circulation of client data internally, and expanded its presence worldwide throughout the 1990s. The firm grew by 25 percent per year, expanded its number of offices from 12 to 26, and increased partnership from about 70 to nearly 200[12].

In 1997, the consulting firm Value Partners brought a suit against Bain regarding the defection of its Brazilian partners and office. The case went to trial in federal court in Boston. After a five-week trial, the jury found Bain liable for unfair competition and tortious interference, and awarded Value Partners $10 million in compensatory damages (the full award requested). The trial court, after awarding another $2.5 million of interest, denied all of Bain’s post-trial motions.

The 2000s began with Bain guiding its clients through the “New Economy” of e-commerce. The collapse of the dotcom, coupled with a general slowdown in the economy as had been faced in the early 1990s. The slowdown was painful on all of the major consulting players; however, Bain’s previous experiences with contraction left the firm zealous in avoiding layoffs. The firm weathered the economic downturn and emerged from it in a position of strength by investing in its leadership ranks with internal promotions and key external hires. Subsequently, the economic recovery has been followed by another period of sustained growth. In 2007, the firm expanded its number of worldwide offices to 37, with the opening of offices in Kyiv, Moscow, Helsinki, and Frankfurt in Europe, and worldwide consulting staff increased to approximately 2,700.

The new millennium also brought changes to Bain’s traditional “generalist” approach to solving clients’ business issues. The firm developed areas of specialization with its deep industry “Practice Areas” in order to better serve the varying needs of its increasingly diverse multinational and local client base. Through targeted industry hires, Bain added industry experts to each of these new Practice Areas, significantly raising its profile in fields such as Financial Services, Healthcare, IT and Media and Entertainment industries.

Competitors

Bain's primary competitors are McKinsey & Company and Boston Consulting Group.

Recruiting

In a Financial Times interview, Bain partner Bill Neuenfeldt identified the desired qualities in potential hires as “intelligence, integrity, passion and the ambition to make a difference.”[13] In addition to these basic requirements, an entry-level "associate consultant" is typically a recent college graduate with an enthusiasm for problem solving and an analytical skill-set. No specific major is required, though a demonstrated interest in economics and business can be valuable. The AC role lasts for two years, after which outstanding ACs are promoted to senior associate consultants and can either work in a Bain office abroad or for a client.

Bain is innovative in that they recruit online via podcasts and Second Life, which includes a “virtual recruitment center," complete with networking areas, auditorium and information stands where visitors can watch videos and slide shows and download information.”[14]

Notable current and former employees

Business

Politics and public service

Other

See also

Notes

  1. ^ Naficy, Mariam. "The Fast Track", 1997.
  2. ^ Sweeney, Jack. "Raising Bain." [1]Consulting Magazine, retrieved May 21, 2007.
  3. ^ "Counselor To The King," [2] New York Times, September 24, 1989 (retrieved December 13, 2007)
  4. ^ Del Monte Foods S-1 Registration [3] July 24, 1998 (retrieved December 13, 2007)
  5. ^ "Counselor To The King," [4] New York Times, September 24, 1989 (retrieved December 13, 2007)
  6. ^ Naficy, Mariam. "The Fast Track", 1997.
  7. ^ Rees, Matthew. "Mister Powerpoint Goes to Washington".[5]American.com, retrieved May 21, 2007.
  8. ^ Sweeney, Jack. "Raising Bain." [6]Consulting Magazine, retrieved May 21, 2007.
  9. ^ Rees, Matthew. "Mister Powerpoint Goes to Washington".[7]American.com, retrieved May 21, 2007.
  10. ^ Rees, Matthew. "Mister Powerpoint Goes to Washington".[8]American.com, retrieved May 21, 2007.
  11. ^ Sweeney, Jack. "Raising Bain." [9]Consulting Magazine, retrieved May 21, 2007.
  12. ^ Sweeney, Jack. "Raising Bain." [10]Consulting Magazine, retrieved May 21, 2007.
  13. ^ "Ask the experts: MBAs," [11] FT.com, January 26 2007 (retrieved December 12, 2007)
  14. ^ "A Job Interview You Don't Have to Show Up For," [12] The Wall Street Journal, June 20, 2007 (retrieved December 12, 2007)
  15. ^ http://www.hbsclubchicago.org/article.html?aid=173 brief profile
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