How McKinsey is ruining the world
The hidden influence of the world's most powerful consulting firm
On August 17th, 2023, the Mckinsey name exploded in the tech world. They published ‘Yes, you can measure software developer productivity’, which took the software world by storm.
After reading that article, I had to understand WHO THE HELL WROTE IT, and I dove deeper into the history of McKinsey.
Today I’m going to cover:
Why were people so worried about the article?
Their principles as I see them
Famous Mckinsey scandals
A small caveat - the article is based solely on the book and the article. I never worked with McKinsey.
What does it mean for the Tech world
Tell me what do you understand from this quote:
Assessing contributions by individuals to a team’s backlog can help surface trends that inhibit the optimization of that team’s capacity.
Or this one:
Talent capability score - based on industry standard capability maps, this score is a summary of the individual knowledge, skills, and abilities of a specific organization.
To me, this smells like an obsession with numbers. And what happens when you try to optimize for numbers?
“At Facebook we [Kent Beck here] instituted the sorts of surveys McKinsey recommends. That was good for about a year. The surveys provided valuable feedback about the current state of developer sentiment.
Then folks decided that they wanted to make the survey results more legible so they could track trends over time. They computed an overall score from the survey. Very reasonable thing to do.
Then those scores started cropping up in performance reviews, just as a "and they are doing such a good job that their score is 4.5". That was good for another year.
Then those scores started getting rolled up. A manager’s score was the average of their reports’ scores. A director's score would be the average of their reporting managers’ scores.
Now things started getting unhinged. Directors put pressure on managers for better scores. Managers started negotiating with individual contributors for better survey scores. “Give me a 5 & I’ll make sure you get an ‘exceeds expectations’.” Directors started cutting managers & teams with poor scores, whether those cuts made organizational sense or not.”
This is a quote from the response article
and wrote. I highly recommend reading both parts:So what am I afraid of?
I understand the need to measure developer productivity - we get paid a lot of money, and it’s tough being blind to the effectiveness of the R&D department.
But engineering is complex. In every company and industry, it looks a bit different. You can have some guiding principles, but I don’t think we will ever have a golden number.
If non-engineer CEOs will fixate on specific metrics, we will be screwed.
The McKinsey’s principles
Ok, back to the company that published the article.
I noticed 3 themes that kept coming up throughout the book:
1. Revenue > Customer’s needs
Have you ever tried to get money from an insurance company? Do you know why it’s so hard? McKinsey!
Here’s how Maureen Reed, an attorney for Allstate (the US insurance giant) from 1992 to 2003, described a meeting on the topic with senior Allstate executives:
“We were told at this meeting that McKinsey had concluded that Allstate was “paying too much for claims”. This was presented as a bad thing. McKinsey advised Allstate that to increase profits, Allstate needed to pay less on claims.”
Isn’t it crazy?? They created a culture where the goal was to screw the customer to increase revenue.
Imagine how it would look at a tech company:
An interface that makes it very hard to cancel a subscription
Software salespeople screwing you up for (great article by
!)Vague user agreements, which allow you to sell the data of customers
An awful world.
2. Revenue for McKinsey > McKinsey customer’s needs
McKinsey took the rule above to the extreme in their own business.
A senior partner told young recruits that when he started at the firm, a McKinsey manager helped him by offering tips on building client relationships. “Wedge yourself in and spread like an amoeba,” he said. “Once in, you should spread yourself in the organization and do everything.” In other words, he said, act like “a Trojan horse.”
Verizon Communications paid McKinsey at least $120 million in 2018 and 2019. Nearly two hundred (!!) McKinsey consultants - two hundred!!! - worked on the Verizon account, with as many consultants as Verizon employees.
3. Fancy language > people
Quoted from the book:
I’ll never forget when a young punk from McKinsey came into my office at the New York Public Service Commission and enthusiastically explained how they were rightsizing one of the state’s utilities that was in financial trouble. I said, “You mean lay people off?” He responded that they were not laying people off, but rightsizing. I told him I hope he’ll have the pleasure of being rightsized one day.
With layoffs impacting almost every tech company, it makes me wonder. Why CEOs didn't take responsibility for the reckless hiring? It was clear in 2020 and 2021 that there will be consequences for all the COVID-related money printing.
If 10,000 people can just be laid off without a second thought, something feels fucked-up.
McKinsey Scandals
Do you think I’m exaggerating? Let’s go over a few famous scandals:
In the Enron scandal (2001), McKinsey supported shady practices by Enron's CEO (a former McKinsey consultant) which led to the company's collapse.
During the 2008 financial crisis, McKinsey promoted the securitization of mortgage assets (bundling individual mortgage loans together into a single pool) and advised banks to increase leverage, contributing to the huge risks that caused the huge mess we experienced.
In 2012, Rajat Gupta, a former McKinsey managing director, was convicted for insider trading after passing confidential information to a hedge fund manager.
Around 2017, McKinsey advised ICE (US immigration) on cost-cutting measures that included reducing spending on food and medical care, leading to concerns about the detainees' health and human rights.
In the 2010s, McKinsey advised Purdue Pharma on strategies to "turbocharge" sales of the addictive drug OxyContin, which deepened the opioid epidemic in the United States (they had to pay nearly $600 million in lawsuit settlements).
If it was just a couple of scandals, during specific years, you could blame circumstances or the management team. Here you have 3 CEOs, spread across 20 years.
This means there is something very wrong in the company’s culture.
Final words
If you work with consultants, ALWAYS think about incentives. Since reading
’s article, I find incentives everywhere :)Do you pay them hourly? They’ll probably try to create more work for themselves.
Do you pay them based on the costs saved for you (like many ‘AWS consultants’)? Don’t be surprised if you end up with a less stable production environment.
Do you hire them for a fixed timeframe? They won’t care what happens 1 year after they leave.
I’m not saying all consultants are out to screw you, but I think that most people are motivated by the incentives they have, even if unconsciously.
What I enjoyed reading this week
How software salespeople screw you over by
in , one of my favorite newsletters! This one is on sales people and not consultants, but I still feel it’s connected to the same theme.Writing Cold Emails to Get Referrals, Interviews, and Jobs by
.How I give the right amount of context (in any situation) by