Source: Consulting Magazine, 01/00
Part One: McKinsey At Crossroads
By Jack Sweeney
Nowhere has the consulting profession more gracefully withstood the test of time than behind the walls of McKinsey & Co. But nowhere is time now in shorter supply. Consulting's 73-year-old blue-chip stalwart is facing the fight of its life, as an upstart clan of digital consultancies issues a challenge that cannot be ignored.
It's a balmy autumn morning in New York City, and Roger Nelson is entering the final 48 hours of his career as head of Ernst & Young LLP's $4 billion consulting arm -and yet, all E&Y's top consultant wants to talk about is McKinsey & Co.
Somewhere, buried in this morning's Financial Times, McKinsey's managing director Rajat Gupta has disclosed that the firm is now taking equity stakes in a number of its clients, and Nelson can't resist reading between the lines.
"This is a huge departure for them. This is against the very premise of what they often refer to as independent thought, and at McKinsey, independence has always meant no equity," explains Nelson, who seems to be savoring the news as if McKinsey's disclosure was in some way a fitting final chapter to his own consulting career.
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"We have a strong desire to participate in the new economy, and there were certain requirements to doing so, and we wanted to make sure we remain responsive to those requirements," says Gupta, who estimates the number of McKinsey's consulting-for-equity clients to now be about 100.
To bolster the firm's responsiveness, a year ago McKinsey established what it calls the office of the managing director -a group of about a half-dozen senior partners who today help Gupta champion issues surrounding both people development and knowledge building. More than providing additional shepherds to keep an eye on McKinsey's stray "cats," the new office is focused on speeding up the consultancy's decision-making. Only a handful of practices today report directly to the elite group; among them is the firm's e-business unit now headed by McKinsey partner John Hagel, author of the best selling e-business books Net Worth and Net Gain. Hagel says that the office has recently been working to enhance the firm's people development practices to better attract the talent it needs to compete in the New Economy.