Consulting Parlour

1. Some of you may identify a whole range of reasons why McKinsey has achieved the enviable position it has: their early commitment to consultant training, their development of a sense of professionalism, their recognition of a niche in top-management consulting, their focus on general management problems, particularly strategy and organization, their recruitment of first-class minds, the power of their "one-firm" culture, etc.
However, given the importance of the firm's culture in supporting subsequent changes, it is helpful to look in to the importance of the "One-Firm" concept to McKinsey's success.
At the heart of McKinsey's overarching cultural values and at the core of its day-to-day operating practices lies the "one-firm'" concept that Bower put in place. It is important to see its centrality to the shared belief system and the way in which this concept provided the firm with an important source of competitive advantage. Unlike many other professional service firms that tended to fragment by office and type of service (sometimes resulting in destructive internal battles over profits, clients, people, etc.), McKinsey was able to use its firm-wide integration to build a strong internal capability. Among the most important issues that may be raised are the following:
- By treating all clients as a firm-wide responsibility, it ensured that there was both a consistent consulting philosophy and a uniformly high standard of work, since there was a consciousness that one weak office could lose a worldwide client.
- By recruiting and developing consultants into the firm, not an office, it ensured uniformly high quality people who were readily transferable, a characteristic that was vital to knowledge transfer.
- By making people and profits firm-wide resources, it could ensure the most efficient utilization of its financial and human resources, two assets in short supply in the rapid expansion phase.
The important issue to highlight here is that even from its earliest days McKinsey was transferring knowledge and expertise through the informal networks it created as a by-product of its "one-firm" culture. However, the expertise was largely a methodological approach (e.g., a way of framing issues, a problem solving methodology) and, even more importantly, a set of strongly held values (e.g., a commitment to client service, and adherence to professional standards). In this way they transferred McKinsey's commitment to providing a disciplined problem-solving approach that generated unique solutions to problems faced by top management of leading companies. There was no attempt to package knowledge or transfer the specific learning from one-assignment to the next.


2. Before engaging the issue of what Daniel did to respond to the perceived problems with the old "client relationship" model McKinsey had pursued for 50 years, it is intriguing to recognize that although the Commission on Firm Aims and Goals presented its findings in 1971, significant change did not occur until Daniel became MD in 1976. One might then wonder as to why it has taken so long to make significant change to a system recognized as flawed.
In a clear case of "Physician, heal thyself," McKinsey found it hard to implement change for several reasons, including the following:
- At an individual level, most firm members—including, and perhaps especially the partners and directors-had succeeded in the system by developing their generalist consulting skills and building client relationships. To many, it must have seemed threatening to be asked to develop specialist skills and become "T-Shaped."
- At the organizational level, the power structure had always been built around local offices that were responsible for hiring and developing consultants and building their local client base. Any changes that would threaten either of these sources of power were likely to be resisted.
- At the level of basic beliefs, many-including Marvin Bower—were concerned that the changes would damage the firm's deeply embedded value of client service by promoting "one-size-fits-all" tools-based consulting driven by visiting experts without long-term client knowledge or commitment.
- Fundamentally, the proposed change to "thought leadership" consulting implied a major shift in the whole business model and organizational capabilities on which McKinsey had been built.
However, under Daniel's leadership, the change process clearly took root as he initiated many of the changes. One of the most important initiatives he undertook was to appoint one of the firm's most productive and respected directors to head internal training. The symbolism of this allocation of a highly productive "snowball thrower" to consultant development role must have been very powerful; the impact of the programs he initiated even more so.
The structural changes—creating industry-based and functional-based groups—were also powerful signals, but it is worthwhile probing what Daniel was trying to achieve with these changes. Clearly, they became McKinsey's repositories for firm expertise—in financial services, strategy or organization, for example. More importantly, they served as affiliation groups for consultants trying to develop their "knowledge spike" as required by the new firm guidelines.
Finally, Daniel oversaw the institutionalization of these changes in a formal redefinition of McKinsey's mission. While Bower was focused only on client service, the new mission now puts equal weight on building a great firm. This recognition that “attracting, developing, exciting, andretaining exceptional people” is at the heart of the McKinsey's mission represents a major step in the development of its intellectual capital.
Many of you may also immediately focus on Gluck's initiative in starting a Knowledge Management Project in 1987 through which a series of information systems were developed. FPIS provided a computerized database of client engagements and PD Net was structured to capture consultant-generated ideas and concepts. These Systems were designed to support the task of capturing knowledge that existed within the firm, and facilitating its transfer and application in other parts of the organization. In other words, it was building on the initial phase of developing "T-shaped" consultants by focusing on the task of institutionalizing the individual expertise and leveraging it across the organization.
In particular, those with strong computer backgrounds may voice strong support for Gluck's initiatives, saying that at last the firm has begun to create the infrastructure that will provide them with a sustainable source of competitive advantage. They may highlight the power of computer-based data systems that can efficiently capture and transfer knowledge throughout the system.
Some other issues to consider are:
* How much of a source of competitive advantage do FPIS and PD Net represent for McKinsey?
* What is different about the focus of cluck's actions compared with Daniel's emphasis?
* Why Is Gluck so fixated on embedding knowledge and institutionalizing the firm's intellectual capital?
* What is the difference between the “discover-codify-disseminate” model of knowledge development and the “engage-explore-apply-share” approach? Why are they keen to develop the latter?


3. It is important to focus on the activity described in the case section "Knowledge Management on the Front," so we can evaluate the effectiveness of the changes made. Each mini-case reveals both the strengths and the limitations of the structures, systems, and processes that McKinsey's leaders have developed. This would allow us to enter debates about the effectiveness of the emerging knowledge-based organization.
For example, some of you may be amazed that the Sydney office project could have been staffed by such junior and inexperienced consultants supervised by an engagement manager who did not even arrive on the scene until most of the analysis was completed. It is not surprising to them that a director John Stuckey was disappointed that the team did not come up with a breakthrough.
On the other side of the argument, you may argue that this is a perfect illustration of how the system is supposed to work. Far from being abandoned, the team was advised and supported by five experts acting as consulting directors on call, educated on firm expertise through 179 PD documents, and backed by the specialized input of more than 60 associates answering specific questions. This safety net of organizational support allowed a junior team with little personal expertise to deliver the firm's knowledge and experience to a demanding client.
Similarly, on the European telecom example, some may be impressed by the way in which McKinsey seems to be transferring and leveraging specialist knowledge through personnel transfers (Bray to Europe), documented learning (PD publications), systematic networking (practicecoordinator's role), and embedding knowledge (the evolution to team leadership of the practice).
On the other side, some may express concern about the insularity of industry practices as they turn inward for input and support. Even beyond John Stuckey's concern that the Sydney team only looked within McKinsey for expertise, it appears the telecom group prefers to look only within its own practice. With the development of a telecom intranet, some may ask whether the information technology is opening up or insulating this practice.
Finally, on the business-to-business competence center, some may see Dull's assignment as a successful redirection of a valuable firm resource to develop as a specialist. The high ranking of B to B documents on the PDnet Best Seller list (Exhibit 7) indicates he is generating valuable knowledge and the success of the conference shows he is developing the networks to develop his ideas to clients.
On the negative side, however, other students may point out that McKinsey still does not appear to have solved the problem of how to support the development of specialists and that people like Dull are constantly worried about promotion. Dull's thoughts about writing a book sounds like a plan to develop his own "brand image" to allow him to leave the firm and take his intellectual capital with him.

# posted by "The Confused Consultant" @ 28.4.05