A yr in the past, Bob Sternfels was handed one of many enterprise world’s most coveted jobs and one in every of its least enviable challenges; how you can lead a community of impartial, opinionated professionals whose job it’s to inform different executives how you can run their organisations.
The circumstances during which the Californian Rhodes scholar turned McKinsey’s senior managing associate have been ominous. His predecessor, Kevin Sneader, had develop into the consultancy’s first chief because the Seventies to not win a second three-year time period, after a series of occasions that raised questions in regards to the “McKinsey mystique” that had lengthy underpinned its capability to cost a premium.
Sneader had taken the job when “the firm” was already embroiled in a corruption scandal in South Africa and the reputational crises stored piling up whilst he pushed to make the consultancy choosier about which shoppers it took on.
Largest amongst them was the invention that McKinsey had helped US opioid producers “turbocharge” gross sales within the midst of a lethal opioid dependancy disaster. McKinsey settled the lawsuits introduced by all 50 states with out admitting wrongdoing, however at a value of greater than $600mn — a sum which got here out of the companions’ revenue pool. Insiders described a partnership break up between those that thought Sneader’s reforms had not gone far sufficient and people who thought he had conceded an excessive amount of.
Sternfels, a 28-year McKinsey veteran who was akin to a chief working officer beneath Sneader, is just not pitching a radical break with the previous.
Last week was the primary in-person assembly of most of McKinsey’s 2,700-plus companions since 2019 and Sternfels got here with a message about placing a stability between continuity and alter. He talks about constructing a tradition of “humility” about its errors, but additionally speaks of “sisu”, a phrase he learnt from his Finnish grandmother that he interprets as “grit”.
McKinsey wanted to create extra rigorous shopper choice processes to keep away from a repeat of the opioid scandal, Sternfels admits, however provides that he’s “enormously grateful” for Sneader’s “courage” in doing so despite the fact that he needs it had occurred 15 years earlier.
“Although we didn’t do anything illegal in this process, we didn’t take into account the broader context of what was going on,” he says, including that the agency might have dragged out the fallout for 10 years as a substitute of recognising its “mistake”.
“The other part, though, is how do we build . . . a thicker skin for separating that scrutiny from scrutiny that we want to push back against?” he asks. “Look, the world is a critical place. We’re going to do things that have outsized impact, and we’re OK if you don’t agree with us.”
Sternfels, now 52, has already proven an urge for food for pushing again. Hauled earlier than a Washington listening to at which one congresswoman likened McKinsey to a drug trafficker, he assailed the “speculative leaps” the committee’s investigation had taken in alleging that McKinsey’s work for opioid corporations and the physique that regulates them represented a critical battle of curiosity.
Similarly, when greater than 1,100 McKinsey staff accused the consultancy of doing too little to curb shoppers’ carbon emissions, Sternfels was fast with a riposte, arguing publicly that it wanted to have interaction with “brown” corporations to assist make them greener.
He says now that inner polling confirmed that 90 per cent of his 38,000 colleagues agreed along with his place, however he provides matter-of-factly: “There’s a lot of choice in this world, so if that doesn’t appeal to you, you don’t have to stay with us or come to us.”
The thickness of his pores and skin could but be examined additional. McKinsey — and Sternfels personally — face a federal racketeering declare introduced by Jay Alix, founding father of the restructuring consultancy AlixCompanions, who alleges that McKinsey hid conflicts of curiosity to win profitable chapter mandates. (McKinsey calls the lawsuit meritless.)
About 150 US cities, counties and different teams have in the meantime introduced their very own opioid lawsuits in opposition to McKinsey (which says these claims duplicate these already settled with the states.) And simply final month its places of work have been raided by French police investigating suspected tax fraud (although Sternfels says McKinsey has complied with all legal guidelines in France.)
Can he see any finish in sight for the run of damaging headlines? “You know, who knows?” he shrugs, earlier than providing a response that once more mixes compromise and pushback. “If we’re making mistakes, we will fix that,” he says: “But we need to separate out ‘where are we making mistakes?’ from ‘where are we meeting the tough problems?’”
McKinsey has invested $600mn in danger, authorized and compliance capabilities since 2018, Sternfels notes. “It doesn’t mean that future mistakes won’t happen — I can’t guarantee that — but we have a self-correcting mechanism,” he argues.
He spent a lot of McKinsey’s final “values day” reminding colleagues of the agency’s longstanding “obligation to dissent”, he provides, which inspires even junior staff to talk up in the event that they disagree with a choice.
Sternfels is eager to clarify that his agenda is just not all about reacting to crises, nonetheless. McKinsey must be “bold and not busy”, he says, explaining the distinction as a query of whether or not it’s actually serving to shoppers do greater than they’d have executed alone.
McKinsey should ship not simply insights however affect, he says. It already has “impact contracts” with a few quarter of its shoppers which attempt to measure how its recommendation strikes the needle. Sternfels would really like them for each engagement.
Pointing once more to the case for change, he voices a associated ambition: to pivot from a agency that is considered elite, to at least one that’s distinctive. His definition of McKinsey’s distinctiveness — an obsession with shoppers’ success and a deep “knowledge culture” — is one which some rivals won’t agree is exclusive, however his concern about elitism goes to the query of its warfare for expertise with the likes of Boston Consulting Group and Bain.
McKinsey is attracting file numbers of candidates, he says — about 1mn prior to now yr for the ten,000 job gives it makes — however till just lately they got here from simply 500 sources. It now attracts from twice that variety of universities and different employers because it seeks a extra numerous workforce, he says, however “I’d like to take it up 10 times”.
McKinsey’s development has divided its companions and alumni. Some nonetheless blame an innovation agenda during which Sternfels was concerned beneath Sneader’s predecessor for taking it into controversial new areas comparable to restructuring recommendation.
Sternfels insists he sees development as an consequence moderately than a objective, and rejects the notion that McKinsey might need grown too massive to handle, saying that comparable fears have been voiced in 1932 when James McKinsey’s Chicago agency proposed opening a New York department.
The problem, he thinks, is “how do we create more delegated autonomy, while having stronger compliance and backbone for all partners?”
Three questions for Bob Sternfels
Who is your management hero?
Nelson Mandela. I moved to South Africa in 1995 to assist open McKinsey’s first workplace within the nation, and noticed up shut Mandela’s bravery, tolerance and expansiveness of imaginative and prescient. I used to be impressed by him then and proceed to be amazed at the moment.
What was the primary management lesson you learnt?
The want at all times to stability braveness and humility: how can I act decisively, in a manner that evokes confidence in others, whereas additionally being open to development and recognising my very own limitations? This is a lesson I’m nonetheless studying each day.
What would you be if you weren’t operating McKinsey?
A college professor. I actually get pleasure from educating.
While EY is planning to separate its audit and advisory enterprise after years of criticism over perceived conflicts of curiosity between them, Sternfels guidelines out any comparable break-up at McKinsey. Despite comparable allegations of conflicts between McKinsey’s work for corporations and governments, he defends the “magic” in bringing insights from its non-public sector work to its extra scrutinised public sector contracts.
McKinsey expects to have a good time its centenary in 2026 and Sternfels clearly hopes to be there when it does, saying he has requested companions the way it can design “a second century firm” to final for one more 100 years.
But some companions have requested him a special query: after such relentlessly harsh scrutiny of a as soon as fiercely non-public agency, “will it ever go back to how it was?” That would solely occur if McKinsey had much less ambition to vary the societies it really works in, he argues, and “we don’t want to back away from that”.
So with two years left earlier than companions resolve whether or not he has earned a second time period, Sternfels is steeling himself for extra assaults. “I suspect for the rest of the time of our firm,” he says, “there will be stuff that’s critical.”