Expectations for business have changed dramatically in recent years and McKinsey needs to change too.
I vividly remember my first “Values Day” at McKinsey and Company. Partners from across our firm came together to talk about the principles that guide us as consultants.
One partner talked passionately about how he gained the “courage” to tell his client to make cuts so that the company could be more profitable. Another shared his commitment to having frank conversations with clients “no matter the consequences.”
What struck me most about that day was the ardor that surrounded it. I had always interpreted McKinsey’s value of putting clients’ interests first as a business imperative. But Values Day infused that imperative with a moral purpose: what made us ethical consultants was our relentless commitment to our clients.
Some of us junior consultants had questions. At that time in 2008, our client list included oil and tobacco companies. Would having the courage to tell an underperforming tobacco company to pursue more ambitious marketing tactics be an example of our values in action? If so, are these really values at all?
After two years at McKinsey and a decade of following the firm since, here’s my personal takeaway: McKinsey is filled with good people and problematic values.
As individuals, my colleagues at McKinsey cared deeply about making the world a better place. Most served on nonprofit boards and gave generously to philanthropic causes. They treated others around them with sincere respect—especially those who had less money or power. And, when given the chance, colleagues jumped at the opportunity to serve on projects that had a social or environmental dimension, even when it meant their career growth at the firm might be slightly slower.
But when we served traditional clients in the secrecy of our confidential relationships, one value prevailed: the client’s interests. In recent months, we have seen the human toll of this strict adherence to clients’ interests, as numerous investigative news stories have shown how these interests compelled the firm to recommend rationing food for migrants and accelerate the sales of opioids.
These investigative stories should lead to a reckoning at McKinsey. Expectations for business have changed dramatically in recent years and McKinsey needs to change too. The Great Recession, the rise of the millennial generation, and the decline of faith in government’s ability to solve society’s biggest challenges have dramatically raised our expectations for businesses to deliver positive social and environmental impacts alongside financial returns.
Indeed, research from Edelman indicates that two in three employees now expect their employers to “join them in taking action on societal issues.” Meanwhile, research from Deloitte indicates that more than three in four business executives now see “social impact” as “important or very important” to their company strategy. Even the Business Roundtable—a collection of America’s foremost CEOs—recently redefined the purpose of corporations from serving shareholders to building “an economy that serves all.”
All of this recent research affirms what I’ve seen in my own classrooms. Teaching future business leaders at Loyola University Chicago and Northwestern over the last six years, I’ve found that my students are more likely to ask about a company’s corporate social responsibility report than about its annual report. In a time of declining religious faith, later family development, and plummeting trust in government, millennials are less likely to find their purpose in “God, family, and country.” More than ever, they intend to find their purpose at work.
In this new environment, McKinsey’s stated mission “to help our clients make distinctive, lasting, and substantial improvements in their performance” feels especially hollow. Why would such an extraordinary firm have such an ordinary mission?
What is most striking about McKinsey’s current situation is that it need not be this way. The vast majority of the cases I observed at the firm added significant social and environmental value alongside financial value for our clients. And on many of the most important issues of our time—from gender equity to climate change—the firm’s research and client work has led to significant progress.
McKinsey could place a shared purpose above its clients’ interests and still be a highly successful firm. Indeed, extensive academic research now shows that higher purpose companies are dramatically higher performing over the long term because they have higher loyalty among their stakeholders, especially employees and customers.
To its credit, McKinsey appears to be taking steps forward. On December 9, 2019, McKinsey gave Mayor Pete Buttigieg permission to publicly share his clients at the firm, offering important transparency and appropriately putting our democracy’s needs above the firm’s standard policy. And as an alum of the firm, I have received heartfelt emails on how the firm seeks to learn from the investigative stories about it.
But I still worry that McKinsey’s pride in all it does right may lessen the sense of urgency to correct what is wrong. Earlier last year, I received an alumni update regarding the firm’s response to the investigations that opened by calling us “the most esteemed alumni group of any institution, by any measure.” Such language suggested that our firm’s leadership was still more focused on our greatness than on our goodness. Hopefully the current scrutiny can help persuade McKinsey’s leaders that—in this new era where business is expected to have social purpose—only firms committed to doing good can truly be great.
Seth Green is the Founding Director of the Baumhart Center for Social Enterprise and Responsibility at Loyola University Chicago.