Category Archives: McKinsey

Perhaps I Should Clarify My McKinsey Comments

So it began with a post here about McKinsey, which was picked up by blogs big, such as Canada’s Globe and Mail and smaller, the latter of which quoted me:

He doesn’t mention that Enron’s former president, Jeff Skilling, was one of the “youngest-ever” McKinsey partners.
Cara Ellison at The Enron blog doesn’t pull her punches though. In October 2009 she posted “No, Really, McKinsey Is Evil”:

I had a funny email conversation with a friend who, like approximately 88% of the Enron staff, worked at McKinsey before Enron. I thought you’d find this amusing:
Cara: After the Enron book, my next amazing trick will be…. MCKINSEY EXPOSED! Learn how this global consulting firm makes its billions of dollars. What was its relationship with Enron and Halliburton? Why do so many executives begin there? ARE THEY TRYING TO TAKE OVER THE WORLD? (Or is it just an accident???) Find out in Cara Ellison’s amazing bestseller revealing all the juicy secrets of MCKINSEY & CO!
Friend: Maybe McKinsey is like the Illuminati or the Skull & Bones Club!
Cara: I think it is! It’s craaaaaaaaaaaaaaazzzzzzzzzzzzy creepy! Like ENRON! Enron was really the Taliban and they were paying Dick Cheney. Hey, did you know that Ken Lay actually MET WITH THE PRESIDENT???????
Evil, I tells ya. And I hear McKinsey only hires, like, smart people so it’s like this club of the wealthy smart elite and they’re trying to take over the world. I shall expose them!…MORE

In July of last year she got into some of the nitty-gritty with “McKinsey at Enron”

I realize I sounded snarky, but I think that’s the result of getting so comfortable with the readers of this blog that I assume they will understand understand that I’m only kidding.

McKinsey isn’t evil. McKinsey is a great company; I love its culture. I’m very impressed with the work McKinsey does.

But the fact that somebody would read the first link and not know I’m joking has alarmed me a little bit. I think perhaps I ought to create an orientation page that will let readers know where I’m coming from. I thought the About Page did that but maybe not.

In summary, just to be clear: McKinsey is a-okay in my book.

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The McKinsey Consultant

The McKinsey consultant arrived last week. My office has both E&Y auditors and McKinsey consultants trawling the offices looking for trouble right now – but I noticed the McKinsey guy because for weeks, all anyone could talk about was The McKinsey Consultant. He’s so smart, he’s so brilliant, and he’s hot, all the girls were saying.

My boss was making the rounds with The McKinsey Consultant, and they stopped in my office. I took in The McKinsey Consultant quickly: he had a Roman face, sensual hooded eyes that were sort of liquid brown, nice looking. Yes, sort of hot. But so what?

My boss said, “And this is Cara.” Then he asked me to email The McKinsey Consultant something. Whereupon, my boss launched into an introduction thusly:

“Cara is a data hound. She just consumes massive amounts of information, distills it, and knows how to apply it. She has the bandwidth to do anything; throw an IT problem at her, she’s got it. Ask for some financial modeling, she’ll handle it. She’s extremely smart, she will pick up any inconsistency no matter how small, and she’s got the balls like I’ve never seen before. She’s very aggressive. She’ll pick up the phone and call the Chairman of Exxon to ask him about a press release she doesn’t like.”

I laughed and glanced up at the two people in my office. The McKinsey Consultant laughed. My boss was still heaping praise. But then I noticed the “manner” (for lack of a better word) of The McKinsey Consultant. There was something exceedingly deliberate about him. I realized that as he had been trawling the office with my boss for the whole day, there had been something about him that seemed to always be thinking, always processing. And that was what I detected here – that he was laughing, but he was also processing that information.

Later, I got out of a meeting and was walking to my desk from the conference room, and somebody called for me and said my boss wanted to see me. He and The McKinsey Consultant were in the hallway, and there were a few others there. We began to talk informally in the hallway, and I noticed that I kept looking at The McKinsey Consultant. And when I looked away, I was aware of his eyes on me.

It was downright odd.

So as we were talking, The McKinsey Consultant said, in this very softspoken voice, that we should solve a problem THIS way. It was an internal problem we had, and instantly he saw through the problem to how it should work.

I was dumbstruck. I had thought of something similar but not quite exactly that, and my boss loved it. The McKinsey Consultant was the only person who could convincingly tell my boss that we should do this one thing this way. The words had to come from his mouth – else he just wouldn’t have heard them the right way.

Other McKinsey Consultants I’ve known have the same ability. It is downright eerie. It made me think of Jeff Skilling and Rex Shelby and David Berberian and others who gravitate to jobs that require them to be persuasive, authoritative, and simply brilliant enough to understand all the facets and aspects of a problem almost instantly.

The group moved from the hallway to someone else’s office, and our discussion continued around someone’s computer. I glanced up, and saw The McKinsey Consultant looking at me. I didn’t flinch. I just looked back at him. And then slowly a smile moved over his face.

Then I looked away.

Back at my desk, I threw myself into work. I was busy being the go-go-go girl, and I wanted everyone to know it.

The next morning I got to my work and an IT guy came up to me. “I need your fingerprint.”

I frowned. “Pardon me?”

“I need your fingerprint. They want you to start clocking in.”

My world began to spin. The floor under my feet began to tilt. “What?” I asked.

The IT guy shrugged. “You’re on the list. McKinsey and the auditors said so.”

I rose and followed him to the fingerprint machine. My face was beating red and I felt like I was going to cry. How was this possible? My boss know that I get to work at 7 and work until 9 almost every day. He sees me there, for the love of cheese doodles. We often walk out together, when the whole building is empty and dark, and escalators aren’t even running anymore. And just yesterday he had been so enthusiastic about my performance. Was he unhappy with me?

“Is everyone doing this now?” I asked. The IT guy said nope, just a few people. I blindly went through the process of giving my fingerprint to the machine to “clock in”, and then went back to my desk.

I was going to quit. I love my job, but I hate being treated like a child. I am an adult, I want to be treated like it. I called someone in a branch office that I have been working with and who I’ve come to trust. “I’m going to quit,” I told this person.

“I don’t blame you. I have no idea what’s going on but this is really odd.”

I hung up, trying to figure out how to tell my boss that though I love my job, Cara Ellison is not working at Taco Villa, and Cara Ellison does not keep timesheets. Period.

So I got up and marched down the hallway and there, The McKinsey Consultant appeared. “What’s the deal?” I said in a blatantly confrontational tone. “You told them I should clock in?”

“Good morning, Cara.”

My eyes slit at him. “What’s going on? Why did you tell them I should clock in?”

“I told them no such thing,” he said very calmly.

I turned and walked away, and went to HR. “Why am I being asked to clock in?” I asked.

The HR lady looked perplexed. “You’re not,” she said. “Only hourly workers are.”

“I’m not hourly,” I said. “I’m salary.”

She shuffled through some papers. “Oh, somehow you got on the hourly list. McKinsey and the auditors think it would be wise if we ran a little more efficiently…”

I thanked her and left.

At my desk, I began to relax. It was just a mistake. I threw myself back into the work. My boss and The McKinsey Consultant were walking around again, and I felt a little sheepish so when they walked by my office, I tried to look “extra busy”. They stopped anyway, oblivious to my imaginary busy-ness.

My boss gave me some more tasks, and I said fine and silently shooed them out of my office. But then someone who had been in a meeting off campus came back, and my boss heard him talking to someone else and wanted to talk to him. But The McKinsey Consultant stayed right where he was. In my doorway.

“Did you get the problem straightened out?” he asked with that weirdly calm veneer.

“Yes, thank you,” I replied. I glanced away and then looked back. “Is there anything else…?”

He smiled again, slowly and like he knew some great secret about me. “Your boss is right. You’re very … aggressive. You seem determined to get what you want.”

I didn’t reply.

“You would have fit in where I used to work. Enron.”

I decided right then and there that I liked him just fine.

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McKinsey’s Valuation of Enron Broadband Services

I am not sure I ever knew this, but apparently McKinsey valued EBS at $30 billion. I’m reading Ken Rice’s 302 notes and found this:

It seems to me that those who were actually elbows-deep in EBS, including analysts, consultants, and the executives themselves, valued EBS much more than the lawyers after the collapse of Enron. Just an observation.

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McKinsey at Enron

McKinsey and Enron had a close relationship. Enron itself had many McKinsey alumni, including Jeff Skilling and Rex Shelby. (Rex Shelby has the strange fate of being involved in three associated companies: Enron Broadband Services, McKinsey, and Andersen Consulting.) The closeness of the relationship was later criticized, as the Andersen relationship was criticized, David Duncan bearing the brunt of that. But McKinsey was actually a very valuable and – during the trials – a very strange aspect of Enron.

The leadership at Enron would think nothing of dropping half a million dollars on a report to help them clarify some strategic point. And so it was when Ken Rice hired them to consult on EBS. He paid over six hundred thousand dollars for them to come in, poke around, and write a report about what could be done better. At trial, Ken Rice was asked if he restricted McKinsey in any way. He answered no. They could open any drawer, walk into any office, and look under any skirt they wished. He allowed unrestricted access to everything they needed to complete their work, and on January 26, 2000, they issued a report, giving suggestions.

In a court filing the government summed up the report thusly:

“McKinsey… outlin[ed] numerous problems at EBS including the company’s persistent inability to develop software effectively, its lack of coherent strategic plan, and its inability to support customers and products.”

For context, the government was claiming this report proved that things said at the 2000 Analyst Conference were incorrect or lies. But I want to focus more broadly on the purpose of the report.

Why do companies hire consultants? In general, consultants are hired to look for problems. That’s their job. That was McKinsey’s job. And McKinsey had to justify the fat checks that Ken Rice was constantly signing. Of course there were problems at EBS. No company is perfect. And while McKinsey might have claimed that EBS had problems with software development and strategy, it also confirmed Jeff Skilling’s assessment, given at the 2000 Analyst Conference, that EBS was a huge potential moneymaker.

But I think it’s peculiar that Ken Rice, the man who, according to the government was in on two conspiracies at Enron Corporation, would keep hiring people to look for problems at the company. If I were conspiring with someone, the last thing I would do is bring someone in to take a look around, and then write them a check for half a million dollars for the privilege.

Since McKinsey was never accused of any wrong-doing, we can only assume that the McKinsey reports were accurate and made in good faith. McKinsey never found any sign of conspiracy at EBS. They never bat an eye at Project Braveheart or the technical teams. But they were being paid to find problems, and that’s the worst they could come up with – a lack of strategy.

Exhibits: [These are a few McKinsey "discussion documents" and bills and letters between Ken Rice and McKinsey.]

Intigrating Market Value Aspirations With ECI Strategy And Performance Metrics

Perspective on ECI Strategy In Enhanced Internet Services

Building A Network Service Delivery Model

McKinsey Bill for $600,000

Bill and letter between Ken Rice and McKinsey

McKinsey bill for $154,000

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