Over the Xmas break, I had fun by reading Elizabeth Edersheim’s “McKinsey’s Marvin Bower”, a biography of the de-facto founder of “McKinsey & Co.”. He not only co-founded McKinsey & Co., but also arguably founded “Management Consultancy” as a profession. The book argues that McKinsey’s success is based on putting Clients first.
Bower, originally trained as a lawyer (in the late 1930s?) and joined a legal firm in his home town. Unusually, he had taken a postgraduate year at Harvard Business School. Management science was in its infancy at the time, but Bower’s law firm found use for his business skills. Bower’s personal apprenticeship in business practice was in a truly professional partnership organisation.
It fascinated me to learn that Bower bought McKinsey & Co. back out of a merger in order to set it on its path. The author argues that the founding principles were for long term success and a professional commitment to client integrity. McKinsey always call their customers Clients. It is the need to defend professional integrity that led to governance policies of restricting share ownership to senior staff ( like partnerships) and restricting the proportion a single ‘partner’ could own. These two reforms were designed to ensure that any conflict of interest between McKinsey & Co.’s clients and owners was minimised, and that the leadership scalability of partner led organisations remained available to the firm. These governance structures cost Bower a lot of money, but despite this, it is what happened.
The McKinsey policy in the early days was to only undertake work on a fixed price basis. At the time, this is what professional organisations (including lawyers) did but it had the additional advantage that while discussing terms, both client and consultant discussed value. The minute the terms of the discussion move to day (or hourly) rates, clients, customers and prospects want to discuss effort and margin.
Also, Bower insisted that all engagements were sponsored by the client CEO. Today, those of us not in the McKinsey ecosphere might like to believe this is/was arrogance and a need to put excessive consulting fees in a strategic perspective. However Edersheim argues that it was a desire to build a reputation of success. The nature of management consultancy advice is such that unless the CEO is listening and engaged, it won’t be acted on. Management Consultancy success is based on giving advice that is accepted and seen to work. Its about making “Every Client, a reference”.
For more detail, and the words and belief of someone who saw it from the inside you should read this book yourself. “McKinsey’s Marvin Bower”, Edersheim, John Wiley & Sons, Inc ISBN 0-471-65285-7