Years ago, when I was an undergrad, I had the option of earning a certificate in Consulting Engineering. One of my professors was on loan from McKinsey & Company. One of our required readings was The McKinsey Mind.
What a horrible book that was.
I used to be an engineering consultant, and I’m trying my hand at it again.
My view of engineering consulting is this: an engineering consultant is an expert in a subject (mine is metallurgy). A company might not need an expert in said subject on their staff full time, but when their regular staff is stumped on a problem, the consultant is who they turn to for that unique knowledge.
I thought business consulting was the same. Boy howdy was I wrong. My professor wasn’t an engineer, he was an MBA. McKinsey consultants are not experienced experts in running a business. They are cult that runs businesses into the ground.
Based upon a comment left in one of my previous posts, I sought out an article from the Atlantic about McKinsey. I was not disappointed, although I have some minor disagreements with it.
How McKinsey Destroyed the Middle Class
Technocratic management, no matter how brilliant, cannot unwind structural inequalities.
I have a problem with the term “technocratic management.” According to Merriam-Webster, a technocracy is “management of society by technical experts.” I fundamentally disagree with the idea that McKinsey consultants are technical experts.
Management consultants advise managers on how to run companies; McKinsey alone serves management at 90 of the world’s 100 largest corporations. Managers do not produce goods or deliver services. Instead, they plan what goods and services a company will provide, and they coordinate the production workers who make the output. Because complex goods and services require much planning and coordination, management (even though it is only indirectly productive) adds a great deal of value. And managers as a class capture much of this value as pay. This makes the question of who gets to be a manager extremely consequential.
This, I believe, is an accurate assessment.
In the middle of the last century, management saturated American corporations. Every worker, from the CEO down to production personnel, served partly as a manager, participating in planning and coordination along an unbroken continuum in which each job closely resembled its nearest neighbor. Elaborately layered middle managers—or “organization men”—coordinated production among long-term employees. In turn, companies taught workers the skills they needed to rise up the ranks. At IBM, for example, a 40-year worker might spend more than four years, or 10 percent, of his work life in fully paid, IBM-provided training.
I think the problem that I have with this is that I have a very specific idea of the definition of the word “management,” which is probably why I think that the idea of technocratic management is an oxymoron.
I’ll get to that in a minute.
The mid-century corporation’s workplace training and many-layered hierarchy built a pipeline through which the top jobs might be filled. The saying “from the mail room to the corner office” captured something real, and even the most menial jobs opened pathways to promotion. In 1939, for example, all save two of the grocery chain Safeway’s division managers had started their careers behind the checkout counter. At McDonald’s, Ed Rensi worked his way up from flipping burgers in the 1960s to become CEO. More broadly, a 1952 report by Fortune magazine found that two-thirds of senior executives had more than 20 years’ service at their current companies.
I have been the line lead in a factory. For me to achieve that I had to know how to perform each step in the assembly line. I had to know it well enough to teach other people how to do it. I had to know how long each step took to plan production rates so that the line did not get bogged down in bottlenecks. Sometimes I had to work with workers to have them switch operations if they were having issues with a process and were causing slowdowns.
In my mind, based on my experience with management, management is almost universally useless.
Putt’s law is real, I have experienced it first hand. “Technology is ruled by two types of people: those who manage what they do not understand, and those who understand what they do not manage.”
The point about McDonald’s CEO, Ed Rensi, is that he knew every facet of that business. I would call him a technocrat because he knew how the burgers were made, he at one point made them.
This was a real case I actually worked on:
Tool steels need to be double or triple tempered. There is a reason for that which has to do with residual stress and retained austenite transformation.
A business and management consultant came in and thought that tempering bearings by heating them up for one hour, cooling them, then heating them up again was a waste. He order the bearings heated up and tempered for two hours. Fallout and scrap went to 100%.
We had to explain to him exactly why he was wrong and why his idea was total shit. He was not fired or reassigned.
Under no circumstances should a manager come in who knows nothing about the business, what it does, how it works, etc.
That is the McKinsey model.
In 1965 and 1966, the firm placed help-wanted ads in The New York Times and Time magazine, with the goal of generating applications that it could then reject, to establish its own eliteness. McKinsey’s competitors followed suit, as when the Boston Consulting Group’s Bruce Henderson took out ads in the Harvard Business School student newspaper seeking to hire “not just the run-of-that-mill but, instead, scholars—Rhodes Scholars, Marshall Scholars, Baker Scholars (the top 5 percent of the class).”
These consultants were not technocrats. They did not know how the burgers were made, and they most certainly had never made them.
A new ideal of shareholder primacy, powerfully championed by Milton Friedman in a 1970 New York Times Magazine article entitled “The Social Responsibility of Business is to Increase its Profits,” gave the newly ambitious management consultants a guiding purpose.
I like Milton Friedman. He never would have condoned the “quarterly profits today at the expense of bankruptcy in five years” model of current management.
According to this ideal, in language eventually adopted by the Business Roundtable, “the paramount duty of management and of boards of directors is to the corporation’s stockholders.” During the 1970s, and accelerating into the ’80s and ’90s, the upgraded management consultants pursued this duty by expressly and relentlessly taking aim at the middle managers who had dominated mid-century firms, and whose wages weighed down the bottom line.
I believe this is where the idea of the engineer as an interchangeable part comes in. There is a lot to be said for experience in design. Firing experienced engineers for new hires might look good on the books today, but it costs much more in the long run as development time increases and technical problems that experienced engineers could have avoided manifest. The problem is, it is very difficult to capture these costs versus the real and immediate “we cut payroll by 20% this year.”
I personally watched a project that was on a two-year timeline get canceled after five years as each and every experienced engineer that the project was handed to was laid off or quit after a layoff. Every time a new and inexperienced engineer inherited the project, they had to learn it and that pushed the development time out and cost up.
McKinsey framed its path to downsizing, which the firm called “overhead value analysis,” as an answer to the mid-century corporation’s excessive reliance on middle management. As McKinsey’s John Neuman admitted in an essay introducing the method, the “process, though swift, is not painless. Since overhead expenses are typically 70% to 85% people-related and most savings come from work-force reductions, cutting overhead does demand some wrenching decisions.”
You cannot fire your way to prosperity. Once layoffs begin, a company has entered the death spiral. It will only end with a bankruptcy or buyout ad reboot.
In effect, management consulting is a tool that allows corporations to replace lifetime employees with short-term, part-time, and even subcontracted workers, hired under ever more tightly controlled arrangements, who sell particular skills and even specified outputs, and who manage nothing at all.
This is the opposite of technocratic management. The McKinsey style of management means that the managers have no idea, what so ever, what is done on the factory floor. They manage what they do not understand. This is an ignorocracy. They apply their generic McKinsey principles to a company regardless of what it does.
Management consultants insist that meritocracy required the restructuring that they encouraged—that, as Kiechel put it dryly, “we are not all in this together; some pigs are smarter than other pigs and deserve more money.” Consultants seek, in this way, to legitimate both the job cuts and the explosion of elite pay. Properly understood, the corporate reorganizations were, then, not merely technocratic but ideological. Rather than simply improving management, to make American corporations lean and fit, they fostered hierarchy, making management, in David Gordon’s memorable phrase, “fat and mean.”
I am reminded of my military history of Napoleonic war tactics. Military officers came from noble families. Even in the US, a rich and well-connected family could finagle their son into getting a commission as a Major or Colonel. These officers did not fight, they sat on horseback away from the battle, commanding troops through fife, drum, and bugle call. Their soldiers hated them. Many an enlisted man died because of some order given by some high ranking officer who had never actually held a rifle and charged with a bayonet in his life.
When restructurings eradicated workplace training and purged the middle rungs of the corporate ladder, they also forced companies to look beyond their walls for managerial talent—to elite colleges, business schools, and (of course) to management-consulting firms. That is to say: The administrative techniques that management consultants invented created a huge demand for precisely the services that the consultants supply.
The “professional management class” has been an utter disaster. They manage what they do not understand.
These facts give management consulting a powerful charisma for students and recent graduates of elite colleges and universities. Today, management consulting sits beside finance as the most popular first job for graduates of Harvard, Princeton, and Yale. (Stanford graduates choose among consulting, finance, and tech.) Harvard Business School, which sent zero graduates to McKinsey prior to 1953, now regularly sends nearly a quarter of its graduating class into consulting, while Wharton graduates are 10 times more likely to work in consulting than in manufacturing.
Freshly minted graduates telling CEOs how to run companies based on a corporate ideology and a total lack of experience.
And you wonder why so many companies have the cycle of slash, bust, bankruptcy, reboot; and how “too big to fail” became a thing.
The incomes that management consultants secure renders these numbers unsurprising. McKinsey pays B.A.s nearly $100,000 and newly minted M.B.A.s nearly $200,000, and although the firm does not release information about profits, industry insiders believe that partners might command incomes in the millions. McKinsey’s charisma, however, is not just economic. The firm continues to perform its own eliteness, with the application process involving famously rigorous analytic interviews—which test formal problem-solving skills but no substantive knowledge (certainly not of any concrete industry or business)—so that getting hired has in itself become a mark of accomplishment at top colleges.
This is why I had to deal with a guy who had no idea how to temper bearings try to manage a heat treat line. He was getting paid a shit load more than the engineers, graduated from an elite university, and knew fuck-all nothing.
Buttigieg fit the McKinsey profile perfectly. “I went to work at McKinsey because I wanted to understand how the world worked,” he has said, adding that “they were willing to take a chance on me even though I didn’t have an M.B.A.” He believes that the lessons the firm teaches apply widely, not just across industries but to government as well: In an interview with The Atlantic, he said that McKinsey was “a place where I could learn as much as I could by working on interesting problems and challenges in the private sector, the public sector, in the nonprofit sector.”
A Rhode Scholar with no experience telling other people how to run their business because he was part of an elite circle-jerk of consultants who all had the same credentials and lack of experience.
These are the same fucks that bankrupted our country once before in my lifetime with the banking crisis.
People wanted to know whether Buttigieg would disclose his McKinsey client list. Buttigieg answered, “I never worked on a project inconsistent with my values, and if asked to do so, I would have left the firm rather than participate.” He probably wouldn’t have had to leave, because McKinsey allows its employees to refuse to work for particular clients that they regard as unconscionable.
I refuse to believe that anyone at McKinsey, including Buttigieg has a conscience.
Meritocrats like Buttigieg changed not just corporate strategies but also corporate values. Particular industries, and still more individual companies, may be committed to distinctive, concrete goals and ideals. GM may aspire to build good cars; IBM, to make typewriters, computers, and other business machines; and AT&T, to improve communications. Executives who rose up through these companies, on the mid-century model, were embedded in their firms and embraced these values, so that they might even have come to view profits as a salutary side effect of running their businesses well. When management consulting untethered executives from particular industries or firms and tied them instead to management in general, it also led them to embrace the one thing common to all corporations: making money for shareholders. Executives raised on the new, untethered model of management aim exclusively and directly at profit: their education, their career arc, and their professional role conspire to isolate them from other workers and train them single-mindedly on the bottom line.
This is the most important paragraph I have ever seen written on this topic.
This is a dangerous belief. Technocratic management, no matter how brilliant, cannot unwind the structural inequalities that are dismantling the American middle class. To think that it can is to be insensible of the real harms that technocratic elites, at McKinsey and other management-consulting firms, have done to America. Such obliviousness may not be malevolent; but it is clueless.
And we get to the end, and once again, I must disagree with the assessment that these consultants are technocrats. They know nothing but the narrow corporate ideology that has been fostered in their echo chamber.
You wouldn’t put a captain in charge of a submarine who has never been in the navy and has no idea how submarines operate. That would be a disaster.
Yet the McKinsey world does just that. That is the McKinsey and professional CEO model. They know nothing about the business they run, but they run them anyway. Usually into the ground.
That is not technocratic management, that is the academic version of the divine right of kings. Where being graced with a diploma that says “Harvard” or “Yale” confers the right to rule.
I would go so far as to say it’s malevolent.
This is the mentality that Buttigigeg brings to his campaign. He’s done nothing of value. He mismanaged South Bend. But he went to Harvard and Oxford so feels entitled to run the nation.
And frankly, I’d also go so far as to say, if a McKinsey consultant ever shows up on your factory floor, sometimes accidents happen.
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