- 11
- MAR
- 2011
McKinsey - The Jesuits of capitalism fall from grace
Author: Ben Ngobi - Categories: Indirect Spend, Risk
McKinsey, the elite consulting company, is in a commercially and politically devastating quagmire. Key individuals at the organisation are being investigated by the Securities and Exchange Commission, and it is alleged that retired head of McKinsey Rajat Gupta passed on sensitive information to board members of Goldman Sachs and Procter & Gamble, where until recently he was a director.
The seriousness of the claim lies in the fact that it goes to the heart of the McKinsey doctrine - its policy of non-disclosure. According to the Financial Times, "McKinsey's main safeguard against sensitive information being leaked or misused is cultural - it is a serious, even dour, organisation with a pronounced sense of mission". Therefore, the investigations have shocked the internal core of the partnership such that the mood within the organisation is one of "anger, disbelief, shock, sadness and outrage", according to an insider interviewed by the Financial Times.
However, this investigation goes far beyond McKinsey. The claim will dent clients' willingness to part with sensitive information, which, inadvertently, is key to diagnosing the challenges they face. Consultants, unlike doctors, can help shape organisational strategy by identifying internal client failings relative to industry benchmarks. Companies around the world realise this and it is "one of the main reasons they hire consultants to make sure that they do not fall behind competition", the Financial Times claims. Furthermore, "the consultant is a broker who attempts to amass so much knowledge that each company has to hire him/her, no matter how uncomfortable that feels".
Procurement organisations around the world that are currently undergoing strategic transformations or implementing cost-reduction programmes with the support of major consulting organisations have opportunities to mitigate IP loss. They should take comfort in the knowledge that they may benefit from valuable external input. However, there is always a two-way knowledge transfer of information which benefits both the consultant and the patient. Companies need to make sure that periphery external information that is not core to the consultancy project is safeguarded to avoid potential IP loss through consultants to competitors.
The failing here is that McKinsey consultants are possibly "trading on price-sensitive information", which could lead to its collapse. This is a major embarrassment for the group and one would hope that the allegations are unfounded and that neither Gupta nor any other internal consultant is penalised. Generally however, there is no smoke without fire and if the investigations lead to prosecutions then this could lead to the downfall of a major gorilla in the urban consultancy jungle and a champion of capitalism.
Comments
Paul Yih
Mon 14 Mar 2011 17:38
Dumb and dumber....
Paul
Mon 14 Mar 2011 17:39
or deliberate thieving ...when Goldman 's name is mentioned.
Ben
Mon 14 Mar 2011 18:06
Rajat Gupta is the golden boy of consulting, having headed the McKinsey firm for ten years. It is inconceivable that he would risk everything for short term gain.
Tue 15 Mar 2011 09:29
A third party has also been identified in what is turning out to be a complex web of 'intimate' insider knowledge sharing/dealing between various individuals. See Financial Times article