A McKinsey or BCG partner, or consulting partner of any other firm, must question and challenge a client in a professional manner. The basis of the relationship must be one where the client allows the partner to be candid about what he/she thinks. The best partners build relationships where this is expected of them. The worst partners pander to the client.
There is no point claiming to be the advisor to a client when you are afraid to tell him/her the painful truth.
External parties reading the phrase “the client always comes first” routinely misinterpret this to mean the client must be given whatever they want and must be always happy. That could not be further from the truth. Putting the client first routinely means putting the client needs first, even if that upsets the client.
Sometimes, the client’s needs and the client’s wants do not sync, so while their needs are met they end up being bitter or angry from the process. That happens far more often than you would think.
The best clients are mature and professional. They are seasoned and understand a consulting recommendation is just that – a recommendation that does not need to be followed. Therefore, they do not overreact if the recommendation does not support their expected answer.
In an earlier piece I discussed taking a huge risk in a proposal that paid off when I was a management consultant. This piece, in some ways, discusses a risk I took as a consulting partner that did not pay off. In fact, the fall out was pretty big.
That is the inherent nature of taking risks and being creative. When it works, the payoff is significant, but when it fails the crevasse is equally deep. And it is pretty dark down there.
This piece explores a topic you will rarely find anywhere since consulting partners rarely discuss the dynamics at play between equity partners. How do BCG partners support each other? How do McKinsey partners react to crises that can hurt a relationship, and ultimately a firm’s revenue? Who pays the price for this impact? Do heads roll?
The context to the failure of a Consulting Partner
The client in question was an energy company ranked in the top 5 of companies in their sub-sector by market capitalization. They were a rapidly expanding behemoth.
Given the number of acquisitions they were driving and the scale of their capital projects they were an ideal choice for a strategy firm. There was just one problem. The CEO did not like management consultants and had forbidden the divisions from using any consulting firms for studies.
The head office in the US was relatively much smaller than peers, and the CEO wanted as much of a decentralized structure as possible. The operating divisions carried as much of the costs as possible and corporate overhead was a mere fraction of the total expenses.
The executive team was unique in that they were truly involved in strategy. Most companies say they are like that, but they have bloated head offices getting involved in all manner of operating issues. There were only 3 assistants in the entire head office. One for the CEO and 2 shared between the other executive officers.
This company believed in efficiency.
The CEO therefore appointed very analytic teams to run each division. He wanted the divisions to have the skills to run themselves versus running back to the head office for direction.
If someone with 20 years of operating experience ran a division, he was paired up with an MBA from the corporate office who had about 5 to 10 years experience in the M&A team. In this way, each division had an operator and a dealmaker at the top. Though the dealmaker was not doing any deals, he was just a numbers person who knew how this operation fit within the broader strategy.
This meant the banks tended to be locked out to a large extent. They would meet the MBA from the operating division and present to him, assuming he could open a door to head office, but head office never took meetings through this route. The same thing happened to consulting firms.
It was almost a diversionary tactic. All services firms congregated around the operating divisions, but the operating divisions did not have the power to hire anyone. Well, probably they could do it anyway but they were too scared to do it.
Ironically, since everything was so decentralized, the only services firms making inroads were Deloitte, Accenture and E&Y. The reason had to do with the decentralized structure and wave of acquisitions.
During the wave of acquisitions a lot of firms with different accounting, payroll and management IT systems had been gobbled up. To ensure efficiencies were extracted post acquisition, a significant amount of SAP, risk review and IT strategy work was being done.
The head office allowed this to happen at the divisional level and did not seem to need oversight over this provided the IT-related consulting studies led to actual savings. So, in many ways these firms were able to operate independently of corporate oversight because the value they created could be measured.
They were doing a good job.
Despite this, at a sector conference we had presented an idea of how a number of different players in the energy sector could work together to unlock a major energy basin in South America. It was a clever idea and we had built a crude model to show how about 6 different stakeholders could bring different skills at different times to undertake a fairly complicated capital project.
We met the team from the Brazilian division at the conference and they expressed interest in learning more about the work we had done. Since the work was still fairly crude, and needed substantially more data to be completed, we though meeting them could would help us plug up some of our assumptions.
So I, along with another partner and an engagement manager, went along to talk them through our idea, where we were in our thinking and what more was needed to prove our hypothesis. The meeting went well, about 6 people attended from the client’s side and they clearly thought the idea was compelling.
We left and heard nothing from them until a week later when they asked us if we could meet an executive from the Canadian operations who looked after business development for this commodity. We went ahead and that meeting went even better. The executive liked the idea and concurred with the need to explore this further.
In our 3rd meeting the local team asked if we would consider completing the study on their behalf. This was quite significant for the firm since none of our offices anywhere in the world, even the large mining offices like Moscow, Perth and Calgary had found a way in to do business strategy work for this client.
So this was an exciting time for us to get involved with a client on one of their most important growth initiatives.
The study began in early October and concluded around early December. It was a good clean study with a very engaged and competent client. Putting this M&A/Operations combination in to jointly head each division was a very effective move and our case team was able to test ideas quickly.
I was surprised at how quickly the client made decisions and obtained data. They also have a very lean structure that meant we could easily work our way up and down the operating teams to confirm hypothesis and test ideas.
In many ways, they were the perfect client.
The final presentation was also very well received and the division convened a planning session of the operating heads to see how they could take this forward. What surprised us just a little about that meeting was that no one from head office was present.
If this project went ahead, it would be a $20B capital investment and that could only be decided at the head office. So, when we were preparing to run this planning session I remember thinking that the outcome of the session was odd.
What were they trying to achieve?
Were they trying to get the operating heads of the division aligned? Why was that necessary? They had no say in the matter.
What would happen if all the operating division heads agreed? Probably nothing.
Anyway, we went ahead and managed the session, which went very well. But as predicted, nothing concrete could come out of this.
A week after the planning session, we went back to wrap up the study and basically hand-over all the material. At this session, the client asked if we could prepare a 1-page summary of the findings and recommendations and send it to him. He would like to share it at a more senior planning session.
That is a normal request and we were more than happy to oblige. In fact, the client even provided us the names of the executives to whom we should send the letter. Again, a normal request.
I emailed that letter at 10am on a Wednesday. By 5pm on that very same Wednesday, a rumor started circulating around the office that the CEO had summoned a very senior partner in the New York office to complain that we had done the work and bypassed his planning team.
What had happened?
Any time we enter a new client we have little understanding of the background mechanics and politics at the client. We have to learn as we go along and while we hit some problems, rarely do they derail us.
To understand what was happening here, you need to understand the unique culture of this company. The culture had driven certain behaviors that led to the misunderstanding.
Given the fact that head office was so small, only the top lieutenants to the CEO had access to him: his M&A team and the heads of his energy division. Therefore, to get any face time with the CEO, regional and divisional employees would have to go through this team of lieutenants.
Moreover, the deal making culture of the company meant that many felt that if they just did enough to bring together a landmark energy deal, they could vault into this inner circle. In fact, the M&A leader in the Latin American office was probably thinking just this. He alluded to it in some of his comments.
We later found out that when he had the Canadian business development executive officer meet us, while the executive was pleased with the work and found it interesting, he had asked the local division to shut it down. Such work was not under the purview of the local division. He asked the work be sent to head office.
I can only speculate why the local division did not transfer the study. They probably wanted credit for it and felt a more completed version would allow the CEO to see the brilliant value they could bring to the organization.
Should they have immediately complied with the business development executive? It is hard to say. The company is structured by operating divisions so the business development executive can only make suggestions but cannot control an operating division. Also, was his request an order or a suggestion?
As you can see, it is hard to know if the Brazilian unit merely implemented the suggestion at their own pace, or blatantly ignored orders.
In fact, if the business development executive did not agree with the work being done by the operating division, he probably should not have attended the meeting in the first place. That said, we were not involved in any of these internal maneuverings.
In essence, the Brazilian office was allegedly running a rogue study. At least now we knew why the Moscow, Perth and Calgary offices were not doing any work at this client.
There was another issue at stake here. As mentioned earlier, the company was organized by divisions and not regions. Therefore, the executive whom was responsible for this office commissioning the study was not based in the office and had not commissioned this study.
He was based in Calgary and several offices reported to him: all those offices involved in the production of an energy product.
You can imagine his surprise when he finds out about this major strategy piece advocating a big change in the direction of his group and he knows nothing about it?
To the CEO, it looks like that executive does not have a handle on his own people.
Had we been played by the client?
I sincerely believe the divisional executives who commissioned this study felt they were not doing anything wrong, nor do I think they were using us. I believed they wanted the study to come from us since it was seen as an unbiased and credible source.
There is also the corporate culture to blame for this.
Surely these divisional executives must have felt that this behavior would be rewarded in the right situation. They must have seen something similar done in the past and saw what happened if it was done right. So while the CEO was up in arms, I suspect he bore some of the blame for allowing his employees to think this was acceptable.
Was the CEO really up in arms?
That is hard to say. The meeting with the senior partner from the New York office touched on the study but it seemed the CEO ended up discussing other things during the bulk of that meeting.
In hindsight there seems to have been tension between the CEO and executive running this division and this study merely allowed that tension to surface. In fact, it was possible the CEO was using this study as an opportunity to create the impression of lack of control in the executives division.
Although, based on what was happening, there was a lack of control.
Dead man walking
You will find that impression matters far more than reality.
All of this was happening during the festive period so no one was in the office. The senior partner met the CEO but there did not seem to be any major issues from that meeting. Yet, he had not had the opportunity to widely discuss this with the other partners. So the original rumors dominated the discussion.
The main problem with these events is that the uncertainty creates more trauma than anything else.
My first day back at the office involved a big dinner for the partners in that office. You will notice partners have a lot of dinners. So all the partners were back but they had not gotten together since the initial rumors. So all they were able to discuss WAS the supposed fall out from this event, but with no new information of what had happened since.
I was a principal at this stage but fairly senior because I led a practice group and also some key client relations. Generally principals would not have that responsibility. It would be fair to say some other principals and directors felt my extra responsibility was not deserved. Maybe they were right. Maybe they were wrong. You will learn in life that no group is ever in 100% agreement.
So I was concerned this event would be used as an opportunity to curtail my responsibility and trajectory through the firm.
When I arrived at the dinner, there was a definite change in the behavior of some partners. Many avoided me, because they assumed I had done something pretty bad and being seen around me would not help their careers.
In fact, the group of partners I generally associated with was fairly distant. At this dinner were 3 senior partners who were my sponsors in the firm. One was clearly upset about what happened and while he did not say anything to me directly, once he had a little to drink, he made sufficient crude comments, as a joke, to let me know what he thought of things.
While he was the only person who publicly made those comments, I let them stand because I believe this senior partner meant well and it was his way of communicating that I needed to be more careful. We had and continue to have a great relationship.
My main sponsor, another senior partner, basically said hello and left, as did my other sponsor.
Overall, it was not a great start to the year.
I was taken off the client relationship. I did not agree with this decision because my role across the firm was a trouble-shooter and I had a reputation for going and fixing problems, even those that emanated from my own study teams.
I did not fight the decision. I let it happen and simply moved on to other clients. There were enough of them.
The question remains: was being taken off the client relationship a punishment?
The answer is both yes and no.
The senior partner, who wanted me off the study, probably did not have a great relationship with me and saw this as an opportunity to manage the account differently. Different is not necessarily bad so I did not worry too much about this.
One senior partner, on the executive committee of the firm, was trying to protect me.
At the first partner planning session, the events at the client over Christmas obviously came up for discussion. Partners are always collegial. There is no screaming, finger pointing or kicking. The mere fact the event is being discussed is bad enough for you, even if it was done in a polite way.
Everyone is smiling and talking about how this is just a chance to learn. Velvet death.
So everyone goes around the room offering their insights on what had happened and how it could be prevented in the future. I, of course, said nothing because my views would be seen as a defensive gesture. So, I let everyone continue speaking.
The senior partner, on the executive committee, let it continue. I suspect he thought it would just die out. It did not. The discussion was moving towards a motion to change the way clients were being managed.
This is when the senior partner made a crucial observation. I am paraphrasing here.
“We had done nothing wrong as a firm. The misunderstanding and angst created at the client was due to the way the client had managed the situation. We just happened to have been the trigger. Moreover, we had not lost anything with this client. We managed to meet the CEO, open a dialogue and had agreed to continue speaking on these issues further. If anything, we ended up better off.”
It was not a long statement delivered with brilliant wit or charm. The guy was not a great speaker. Yet, he was senior, did not play politics and was right.
So any discussion of my lynching ended in that meeting. Thankfully, since tar and feathers do not go well with my skin color.
Was the senior partner being sincere? I believe so because shortly thereafter I was offered to become a director of the firm: a senior partner.
One of the biggest lessons is the answer to this question: what is strategy?
When I left management consulting several rival firms approached me to join and help build their capabilities. The discussions were always sincere and interesting. They would show their work which was very analytic, data-intensive, seemingly hypotheses driven and, I would assume, creative.
The thing that nagged me a lot was the clients they were serving for these studies. In every case the client was a manager or mid-level executive who wanted a decision made. There are many definitions of strategy work, but a key one is that it must be done for the most senior executive of the client who can act on the recommendation.
If you are doing work for a mid-level executive, it does not matter how good the work is, it is not strategy work. It is a plan or interesting analyses because he or she cannot act on it.
Linked to this, I hear the word “strategic” thrown in a lot into these discussions. “Strategic” and “Strategy” are worlds apart. When the city of London was trying to improve its status in the world, the mayor of London pushed through a strategic plan to install a sewer system.
I think we can all agree that installing a sewer system may be “strategic” imperative but installing the system is an engineering problem. Therefore, to do “strategic” work does not always imply the use of strategy skills.
By the same note, installing a new ERP system may be of paramount strategic importance to increase efficiencies. However, doing the business case is not strategy, nor is the implementation work.
My lesson from this is to be very careful of complex strategy projects when the supposed decision maker is curiously not involved. In fact, this was the only time I made this mistake. A rookie mistake.
Some general rules of thumb to follow here:
1) It is not strategy work unless you are reporting to the most senior executive who can act on the study.
2) Strategic is not the same as strategy.
3) Important work is not confined to strategy. So do not be obsessed about being a strategy consultant. The majority of McKinsey consultants have never done corporate strategy work reporting to the CEO. They just create the impression they did because it sounds cooler.
My role with the client did not end. The senior partner encouraged me to not give up the relationships I had built, but slowly get back to being involved with the client. He had a discussion with me and mentioned that I had always being a creative consultant who tried risky things. Sometimes it worked and sometimes it did not.
While this time things where not my fault, I should view it as an example of when a risky strategy failed.
I invited the divisional leaders to attend a 3-day conference in Rio de Janeiro as our guests, which they did. In those 3-days I said nothing about the event. It did come up once as a joke but they really felt it was nothing to worry about.
It was actually a very successful conference because we were the firm hosting a client who had a reputation for never hiring consultants. We did not have to say anything to potential clients. The message was quite clear through our association with the client.
There is another very valuable lesson in all of this.
Things are never what they seem.
When I first received word that the CEO had summoned a senior partner to “complain” I think we let our imaginations run a little wild. Everything we were hearing was hearsay and rumor. In fact, if you are doing well, the rumor mill goes into overdrive to paint a salacious picture.
There are numerous moving parts behind the scene, egos within the client, egos within the firm, all pushing and pulling to use the event to end up looking slightly better than they did before. Therefore, when anything happens, it is best to calmly evaluate the mechanics of the situation before reacting.
We had also naturally assumed that since the CEO and Divisional Executive Vice-President was supposedly upset, the divisional leaders who had hired us were in a lot of trouble. For about 3 weeks we limited our communication with them lest our association hurt them even more. But that is not what happened.
No one in the division was reprimanded, no one was fired and certainly no one was told they had stepped out of line. In fact, these guys just continued plowing along. Therefore in crises it is crucial not to isolate oneself from the supposed issues, but to find out what is really happening on the ground.
The other lesson is to as much as possible work for the decision maker. Now, at McKinsey and BCG this is an age-old tradition. Consultants work for the CEO. However, it is not always like that. A lot of work is done for divisional leaders and operations executives. So, consultants cannot always work for the CEO.
However, for the issue we are studying, we should have been more careful about understanding the decision-making structure within the organization, and reported to the executive who had purview for that decision. That was a major mistake we made in this study. A stupid mistake as well.
If there was one thing we did wrong in the study, it was this.
This incident taught me the importance of image management. One needs to carefully cultivate and manage one’s image. I allowed the rumors and incorrect facts to become the basis of discussions within the firm. That certainly damaged my career. My directorship was pushed back by about 6 months.
I should have been more active in using this incident as a teaching moment within the firm rather than simply trying to survive and get past it. I certainly had several senior partners who would have backed such a move.
In fact it took another client to remind me of this. She had close relationships with partners within this firm and told me that my decision to not openly discuss what had happened had hurt me. I did not end up looking good. By choosing not to discuss what had happened, I had let other people build its own narrative.
Moreover, she was upset that I had withdrawn from the client and team “managing” things from the fallout. She felt the other partners, while not necessarily vindictive, were going to protect the firm and not me. She rightly pointed out that withdrawing made it look to the client like we were wrong, and it created that impression within the firm.
So rather than trying to get past troubling situations, I have since focused on using them as a moment to teach others. It serves the dual purpose of mentoring and ensuring rumors do not displace the facts.
The other lesson was not to treat the client CEO as more than a human being. For making this mistake, I should kick myself. Even as a young associate, I had always been excellent at understanding and building relationships with senior executives. For some reason, I failed to apply that rational lens to this situation.
Was the CEO so illogical in his thinking that he was going to berate the firm? Almost certainly not! If I think back to when I first heard he had summoned the senior partner from New York, the message was actually from my assistant who had been tipped off by the senior partner’s assistant and neither of them had heard the actual conversation. The senior partner’s assistant simply saw his reaction and assumed it was a tough call.
That took on it’s own life.
The words “upset” were never used in the conversation. Much later I found out that the actual discussion was more along the lines of the CEO had heard about a study we had done and was “very concerned about that type of work being done at the operating division.” He was not concerned about us at all.
This feedback came straight from the senior partner in the call.
I can understand why the actual conversation happened as it did between the senior partner and CEO. When the CEO first heard of the study, he would have had to have a serious lack of confidence if this was to have upset him.
On the other hand, if the cost upset him, then that was also troubling. A $3MM study for a multi-billion behemoth was a mere decimal point on its ledger.
All roads therefore point to the relationship between the CEO and the executive running that division. And we were not at all involved in that dynamic.
Finally, I would say having a solid internal compass matters. These kinds of incidents can make or break a career. It stalled mine a little. However, in grand scheme of things it does not have any impact at all.
I took solace in the fact that every single senior partner I knew had a similar story to recount. They seemed to have done fine. Heck, Dominic Barton had to move from Canada to South Korea to kick-start his career.
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Image from Trey Ratcliff under cc.