After major scandals driven by ex-McKinsey employees like Jeff Skilling (Enron debacle), Rajat Gupta (former 3x McKinsey managing director) and Anil Kumar, McKinsey is on their toes trying to prevent another disgrace. The ethical standards of prospective candidates and employees has never been under a more searing spotlight.
Other top consulting firms have a similar mindset, as their success depends on an unimpeachable reputation for integrity. Will you measure up?
I recently put out a note about a trend around the world where candidates record their telephone-based case interviews with McKinsey, BCG and Bain. They doing it knowing full well it is wrong to do so. Moreover, they are sharing it with us and their network, and asking for comments.
We believe that you should not do this, since it is illegal to record someone without his or her permission. A few people wrote back to me and said they did not know it was illegal or it is not illegal in their country, that’s why they did it.
This highlighted a great misunderstanding some candidates have about what is ethics, how to approach ethical decisions and how to determine if you measure up to be considered a person with high ethical standards, the kind of person McKinsey and other leading consulting firms seek.
My concern is, as it stands now, some of you will not measure up unless you spend sufficient time understanding what is ethics, how to think about ethics, how to make ethical decisions and what changes you need to make to build an unquestioned reputation for high ethical standards.
However, I believe ethics can be taught and mistakes can be fixed with the appropriate guidance.
First, it is important to understand that ethics usually applies to three types of actions. Actions not covered by law, actions for which the law is not enforced or actions for which the law is clearly wrong.
Therefore, when someone tells me, “Michael, I made this recording because it is legal in my country”, what I hear is that the individual is very unethical. This is because even though the person would not like to be recorded without permission and knows it is wrong, they have gone ahead and done it.
Ethics generally covers actions which are not covered by law. For this act where the law does exist, but is not appropriate and we rely on our ethical judgment, the person has demonstrated poor ethical judgement.
This does not make the person evil or bad. Wonderful people sometimes do unethical things.
Many people believe that ethics is an absolute concept, that you know what is ethical with absolute certainty, you know what is not ethical with the same certainty, it is clear as night and day.
In the West we have a tendency to think with absolute certainty that our beliefs are ethical and correct. However, the best way to think about ethics is that it is evolving, what is ethical is often a hypothesis and sometimes there is no right answer.
Judging people for ethical breaches
When judging people for ethical breaches, we have to understand the context. Depending on the person you are analyzing you have to apply more severe or less severe definition of ethics. Imagine someone who grew up in a challenging part of central Africa, surrounded by warlords. The social construct they are part of is obviously not as ethical as that of someone who grew up in Vancouver, the home of Greenpeace. For someone growing up in the strife-torn context in central Africa, we would expect him or her to not be as ethically conscious as someone who was raised in Vancouver.
If both people breach the same ethical value, we should look at the situation and ask, what were their unique circumstances, what was normal for them and did they do what was abnormal for them. That is why our legal system allows judges to apply discretion when casting judgement. It recognizes the importance of context.
A lot of times when we judge people for ethical breaches, we put them on the same level. We think that a person who was raised by a loving family in the United States and went to a great school should have the same punishment as someone who was an orphan in a rural northern China and hardly had exposure to anything good his entire life.
You cannot measure people this way because their actions are shaped by their social network and their environment. We must compensate for this context.
Ethical dilemmas & trade-offs
I will now give you some examples of different ways to think about ethics.
Let’s assume you are walking down a street and you see a burning building. You see a baby in that building and you want to save that baby. The only way to save that baby is to jump on the car parked on the street and put some kind of garbage can on a car to reach the window where baby is, but to do this you will need to damage the car. Would you damage the car to save the baby? Most people would.
Would it change your mind if I told you that the car belonged to someone who needed a very important treatment for a life threatening illness and they needed the car because they were going to sell the car next morning to pay for the treatment?
Clearly, that is a tough decision to make. Do you save the baby now knowing full well that you could kill this person because they won’t get the money for treatment? A lot of people will choose to save the baby. Not because they know with any certainty that they can find an alternative means to pay for the treatment without the car, they may not even be committed to look for one, but because if they don’t save the baby they appear to be evil or unethical in the present moment.
A lot of times when people do things that are ethical, they are not doing it because it is ethical, they are doing it because they are trying to avoid being labeled as being evil or unethical. The flip-side of this is that a lot of actions that we see as being unethical, we see without context.
Just because something looks unethical does not mean it is. You can only make that judgement call when you know the trade-off.
We need to think about trade-offs. There is always a trade-off. A lot of discussions about ethics do not consider trade-offs. That is the problem with an absolute view of ethics.
This is typically a western view. We assume we know with absolute certainty what is right and wrong. We like lecturing other nations. We assume that if we decided that x was the “right thing” to do in 2014, then every other nation who does not come to that same conclusion at the same time as us is wrong. To lecture others is to assume your rate of development in testing and accepting ethical concepts is the norm. Other nations may take longer to get there but who is to say the speed of arrival is the main issue. Is it not the quality of the implementation when it does arrive that matters?
Knowledge of the trade-off will help you make better decisions. A lot of times we hide the trade-off so that when we are judged for the action publicly, saving the baby for example, we end up looking better. No one knows about the guy who was trying to sell his car to get treatment, so we end up not looking bad.
If they knew, they may end up judging us less positively. A lot of times we make ethical decisions because there is an incentive attached to it. This is one example of a way to rethink ethics.
Let’s look at another example. Let’s assume that you run a company and you have a supplier who lost all other clients and is now totally dependent on you. You want to lower your purchasing price from the supplier. You are buying chairs for $200 and you want to lower the price to $150. The supplier proved to you that if he lowers the price to $150 he goes out of business, but on the other hand if he does not lower the price you need to lay off employees to pay for the chairs.
What would you do in this situation? Would you say, “I will do the right thing and lay off people. I will not put someone out of business”? What if you knew that the reason this supplier will go out of business if prices go to $150 is because he hires mostly family members and he overpays them. What would you do knowing this new information?
There is no right answer. But there is a rule. Do things ethically provided it does not put you in a situation where you will cause harm to yourself or anyone else. When I say harm, I mean what the average person will consider being sufficiently harmful to justify sacrificing your values, such as putting yourself or your family in physical danger.
Now let’s look at example of an extreme situation of being too ethical, whereby being too ethical can be damaging to you and others. Let’s look at the massive, and justifiable, debate taking place in the United States about raising minimum wage. Let’s further assume we wanted to do the ethical thing – generously raise the minimum wage.
Economics will dictate that is wrong for a couple of reasons, including the following:
- First, by increasing money supply inflation will spike. The price of goods will eventually go up because there is more money in the system. Even though people are getting paid more, things will end up costing them more to buy, therefore, cancelling the impact of the salary increase. Therefore, in the medium term, the salary increase will not really matter. The system will adjust itself.
- Second, what does it do to the system on which capitalism is built? You should reward people not only for how hard they work but for skills they bring to the job.
If you raised the minimum wage across the United States, you will undertake what is called populist economic measure. You will do something to make people happy because the social construct to which you belong dictates that it is an ethical thing to do. Yet, you are going to cause extreme damage to the system, because you just giving away money without any return. Therefore, you can take extreme ethical stances that actually cause more harm than good.
Personally, I would like to see the minimum wage raised. However, I know this would not solve the problem since the minimum wage is driven by many factors which need to be fixed.
Lastly, here is an example of an ethical decision where there is no right answer.
Let’s assume you are a mother of two sons. Let’s further assume you are from the middle of India. There are a lot of kids in your community and your family is very poor. You’ve got one child who is incredibly promising academically. He is truly brilliant. He aces all the exams. He will probably end up at McKinsey and then as a CEO of some Fortune 500 company. You are almost certain he is going to change the world and take family out of poverty. You have another child who is probably not going to end up at any college anywhere in the world.
Both need a kidney, but only one can get it. Which one will you give it to, assuming you are the only available donor?
This is an extreme ethical situation whereby you know on the one hand the child who is probably not going to go to some good university is not going to have financial resources in the future to take care of himself so you should probably give the kidney to him. The one who is going to make it in the world probably will have financial resources but it is likely he will not make it unless he gets a kidney from you.
If you give the academically weaker child a kidney, the rest of the family will most likely suffer. If you give academically stronger child a kidney, the entire family will most likely be better off, but the academically weaker child will suffer.
There is no right answer. You have to determine what is acceptable.
Addressing 3 myths about ethics
Let us conclude our discussion with addressing 3 myths about ethics.
Myth #1: It is ethical as long as it is legal. These are different concepts. When someone says I did not know it is unethical since it is legal in my country, it is clear they misunderstand ethics. Ethical decisions are required when the legal system fails or there are no laws covering action in question, or related laws are wrong. When legal system is not there, not enforced or wrong you should be guided by your ethical standards.
You can be grossly unethical while obeying the law. You can be extremely ethical while disobeying the law.
Myth #2: If you are ethical, you are by default a nice person and usually a pushover. Being ethical does not mean you are a pushover. People can be tough and demanding, and yet still be values driven in every possible way. Being ethical does not mean you have to be nice to people. Personality and your value system are completely different concepts.
Myth #3: Following the rule the softest pillow is a clear conscience is a sure path to ensure high ethical standards. It only matters if you have a clear conscience if your conscience is attuned to what is actually right. If it is calibrated to things that are incredibly cruel, you will have fundamental problems making judgement calls.
The social construct you belong to determines what you consider to be a clear conscious. You are your friends. When you are deciding whether you are ethical, or not, look no further than at your friends and all those dumb things they do that you find acceptable. By condoning their behavior you are desensitizing yourself to those elements you know to be wrong. You should think twice about whether those are things you should be a part of.
The social network you choose to belong to shapes your values, or lack thereof. When clients ask me if they are ethical I usually tell them I cannot answer this with any certainty. I say this if I do not know their significant others well enough. Your significant other is the most influential member of your social network. At the end of the day, when it really comes down to it, your decisions will be heavily driven by what your significant other considers right. Never ever forget that.
I say this because 95% of people who breach ethical values almost always cite personal circumstances. Here are few examples:
- “I would not normally do this but my husband and I discussed this and…”
- “My partner recently lost his job and we decided…”
- “I would normally never do this, but due to personal reasons…”
You can fill in the rest. The last one is very telling. Somehow, many assume that a personal reason is a license to be unethical. It never was and never will be. Let’s hope you chose your significant other well.
QUESTION(S) OF THE DAY: What is your advice to readers who realize that their social network negatively impacts how ethical they choose to be or even could be? Please let us know in the comments.
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In light of major scandals driven by ex-McKinsey employees (e.g. Jeff Skilling, Rajat Gupta and Anil Kumar) and consequent sharper focus on ethics by top consulting firms, lets continue our discussion about ethics and delve deeper into how to think about ethics, and what shapes ethics.
Ethics is required when the law is not written, not enforced or wrong
To think about ethics, let’s picture a bar chart running vertically. The entire bar represents all the actions you could undertake in your country. It is obviously a hypothetical bar since we could not list every action we could take. Yet, we know we can do countless things.
The bar chart goes from one all the way to the one billion things you could do. The bar is split into two parts. Twenty percent of the bar is dark blue and eighty percent of the bar is white.
Everything that is dark blue depicts every action you can undertake in your country that is covered by the legal system. Therefore, for the dark blue part there is a law that determines if what you are doing is legal or illegal.
Everything in the white section depicts actions not covered by laws in your country.
When we talk about ethics we are most of the time talking about the actions within the white space, where the laws have not been written to cover your actions. If there was a law telling you how to behave in a situation, would it be an ethical debate given the law instructed you what to do? In most cases it will not be.
However, the world is not perfect.
There are times when the law is wrong. For example, when black people were not allowed to attend universities in South Africa or parts of United States. There are laws like that, unjust laws, right now in parts of the world. Therefore, in situations where the law is wrong, ethics should dictate your actions.
That is one example where ethics does not just apply to the white space but also applies to the blue space.
There are other situations where ethics applies to the blue space as well.
Think of countries that have exceptional constitutions. Their constitutions are so amazing that other legal systems around the world quote from these country’s constitutions and higher court opinions. For example, South Africa’s constitutional court rulings are highly referenced internationally.
However, there are parts of that country that are lawless. Clearly the law is not enough if there is no enforcement. If there is no enforcement people will misbehave unless they are ethically bound to behave themselves. Therefore, there are two situations where we need to apply ethics to actions governed by law, when the laws are wrong and when the laws are not enforced.
To summarize, ethics is required when the law is not written, not enforced or wrong.
The application of ethical principles is inversely proportional to the correctness of the law, the reach of the law and the enforcement of the law. If there are no laws, or the law is weak, or the law is wrong, or the law cannot be enforced, you are reliant on your personal judgment to make decisions.
The question is, how good is your judgment.
If ethics is about judgment, what drives our judgement?
We established that ethics is about judgment. Now I will give you 4 situations and I will show you what drives our judgment.
Imagine it is 1940 and you are a brilliant engineering student in Germany – blue eyes, blond hair, handsome but a bit naive. All you know is what is told to you, and you just happened to be a member of the armed forces. You are sitting at a hip Berlin bar. You are in a situation where everyone thinks it is just fine to persecute the Jewish and Slavic nations. Not only is this the kind of group you belong to, it is also aligned with the law in your country.
Let’s take another situation. Let’s assume it is 1910 in Canada. You are going out with your buddies, upstanding gentlemen who don’t agree that women should have the right to vote. That is all you see in the press. That is what people talk about. That is accepted.
How do you break away from that, when it is the only thing you know to be right?
Some of you will say, “Well, we actually know that’s wrong”. However, the reality is, to a large degree, we are defined by our circumstances. It is easy to apply a higher ethical standard in hindsight. We can prove this.
In the first two examples I have presented scenarios that today, in hindsight, we know to be wrong. In the next two examples I will give you things that we don’t necessarily know to be wrong today.
Think about eating animals. Human beings consume millions of tons, may be tens of millions of tons, of animal carcasses every year. It is completely acceptable to do this. It is acceptable to make jokes about it. In a hundred years people may look back at us and think we were animals for doing this.
We think it is acceptable because the network we belong to thinks it is acceptable. If you belonged to a social network whereby your friends thought it was horrible and distasteful to eat animals, you would probably not do it.
If your reaction to this was, it is not so bad so I am going to do it, then remember this is how unethical behavior becomes acceptable. We justify it based on what we see as being commonplace.
Let’s look at another example. Something that I notice every single time I am in a group of people – sexist comments. It is remarkable how much we tolerate sexist comments on television and in social settings. In fact social settings reinforce this behavior. Comments like “you are acting like a girl”, “you throw like a girl” or “only girls do that” are basically accepted discriminatory banter.
Just about every major comedy show in the United States has made some off-hand sexist comments. Some thrive on it and their ratings are directly proportional to this behavior.
One of the most popular shows in United States, “How I Met Your Mother”, actually has a scene whereby the main antagonist, Barney Stinson, talks about how he may have sold a woman into slavery. That show went on to have one of the highest ratings in prime time television for United States. It was a joke, obviously, but the fact is we find those things funny.
This happens right now. We think it is acceptable to belittle half of the human race. So why do we do that?
We do it because everyone else is doing it.
The social group you belong to shapes your ethics
In conclusion, the social group you belong to (your friends, the people from whom you seek acceptance, the people you spend time trying to impress, the people with whom you socialize, engage with, build relationships with etc.) shapes your values, or lack thereof.
The social network you choose to belong to will determine how ethical or unethical you choose to be, want to be or even could be.
So ask yourself: “How do the groups I choose to belong to shape my career and my life?”. If you are not happy with an answer to this question, make the necessary changes.
QUESTION(S) OF THE DAY: Which behaviours or beliefs currently acceptable in Western culture will, in your opinion, not be socially acceptable 100 years from now? Please let us know in the comments.
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Storyboard matters in studies because useful insights mean very little unless they can be woven into a compelling story. Critical insights which are not presented as a story, generally fail to get any traction at a client. In fact, that is one reason strategy studies collect dust on a client’s desk: they did not present a clear message.
When I was a corporate strategy partner, I pretty much drove teams a little crazy to constantly refine the story. I still do that. If you are following the US Retail Banking Study you would have seen us push for a crisp and compelling story. We do the same on the current power sector study. We just push and push for the best story out of the data. A great storyboard will get the client to act.
And that is what you want at the end of the day.
Where a storyboard fits in a strategy study
Boiled down to the basics, the strategy engagement structure can be explained as follows. First the key question team needs to answer in the engagement is determined. The key question has to be split into smaller questions in a logical format. This allows the team to develop a decision tree.
The decision tree has to meet two criteria. It has to be mutually exclusive and collectively exhaustive (MECE). There are two other criteria to be met and that is taught in our online strategy training program, though if you stick to the MECE rule that will be fine. Based on the decision tree, the hypotheses are developed.
The storyboard is the message engagement team delivers to the client, using the decision tree and hypotheses that has been developed, and it is based on the anticipated results of the study.
Next the team develops analyses to test each hypothesis. Based on the results of the analyses the hypotheses are proved or disproved and the storyboard is refined.
The diagram below shows a structure of a strategy study and a point at which the rough storyboard is developed. Although this diagram helps to understand how strategy engagements are conducted from the structural perspective, keep in mind that a strategy engagement is an iterative process and can be messy. In fact, it is usually messy.
Finally, the idea of using an objective function works in almost all types of strategy and operations engagements, but does not work in corporate strategy. In corporate strategy a very different approach is used because those engagements are different. That will be covered in a different article since corporate strategy studies are so rare.
What is a storyboard
To explain the management consulting storyboard concept, lets use an example from the animation industry. Before producing detailed animations and more, the animation team must first agree on the story.
The animation team gathers together in a room and takes blank pieces of A4 paper, they write out a short 10-word description of a scene on the top of the page and produce a rough 15-second pencil sketch to outline the animation which could go into this part of the movie.
In all, they can produce about 30 to 120 such A4 pages, stick them on a wall in sequence and everyone will be able to follow the story. This allows the animation team to debate the story and messaging without expensive animation work which would definitely change as the story changes.
To extend this analogy to a management consulting storyboard, the team needs to prepare a story of their message so that everyone in the team can understand their thinking and provide feedback. The management consulting storyboard is basically the headlines of the presentation which summarize the anticipated results from the work stream or from the entire strategy study.
Question from a reader about developing a storyboard
To dig deeper into the concept of developing a storyboard, I will answer a question we received from a reader, lets call him Henry.
Henry was avidly following the life blog on a study we did in the United States, where we were helping one of the largest Latin American banks to put together a strategy to enter the profitable, large and rapidly growing US financial services market. The study was focused around providing financing to low income entrepreneurs, either immigrants or US citizens.
We had been live blogging the study so everything we did you could follow it in real time and we spent a lot of time discussing what we were putting together. Fascinating work. It is definitely a new way to teach strategy consulting and tends to be very popular.
“Michael, what you are doing is very interesting but one thing I don’t understand is how is it that you are able to come up with a storyboard for the client only in the beginning of your 3rd week of a 8 to 10 week strategy study?
This kind of seems to me as if you are giving a client a solution that you already have versus relying on the analysis to tell you what the answer will be. And isn’t that the criticism that consultants get that they don’t really develop new ideas for clients but put out what they already know? It does not make any sense to me so I am not sure how it can be right. “
I can understand the reader’s confusion but he is wrong and I want to explain why he is wrong.
Piece of advice on how to communicate
First I want to point out one thing about this guy’s communication style. And, to be fair, many people have this style of communicating so it is worthwhile to address it here.
Henry is basically saying, “I don’t understand something. And because I don’t understand it, it must be wrong“. This is a really bad way to communicate.
It is extremely naïve or egotistical, or arrogant, you pick, to assume that if there is something you don’t understand then it must be wrong. For all you know, it may make perfect sense but you don’t have the necessary mindset or the necessary prerequisite knowledge to understand it.
If you don’t understand, it is better to say, “Look, I am sure it makes sense. I don’t actually get it so I will let you try it out and maybe I will get it later.” But don’t make it sound that if you don’t understand it then there is something wrong with the actual work.
It is just not appropriate. It sounds really bad to clients, superiors and colleagues when you do it. You sound like a 5 year old child.
How we could come up with a storyboard in such a short time
Besides that piece of advice on how to communicate, lets get into how we were able to write a storyboard in such a short time.
Note that anything that I will be able to teach you here will be at a high level. You can learn these concepts in depth as you go through our strategy training. How to develop a storyboard and other strategy capabilities is also taught in our book “Succeeding as a Management Consultant“.
Now lets address how we were able to come up with the storyboard so early.
Think about the logic here. We are not doing analysis just because we have to do it. We are doing analysis because we are trying to answer some questions.
If you just doing the analysis because this is the analysis you always do in a strategy study (e.g. market segmentation, cost effectiveness and revenue analysis), then yes, you have to wait for the analysis to be done to see what the analysis will tell you.
But this is not the way we do things at elite strategy firms. We do the analysis for a reason and that is the fundamental mind shift you have to make.
We start off with the objective function. What is the problem we are trying to solve for the client? We then break that objective function into the direct drivers of the problem. We then continue breaking down those drivers until we get what looks like a Christmas tree, that is actually a decision tree.
The objective function is the apex of the tree and the tree breaks out. We then prioritize the branches that are most important in the decision tree to help us figure out where to spend most of our time (refer to the exhibit below for an example).
For each of those prioritized branches we then say, “Ok, what is the hypothesis to explain why this is the issue impacting the objective function?”.
Once we have the hypotheses, we can then say, “Hey, if this is the hypotheses, what tests do we need to do to prove or disprove the hypotheses?”.
Those tests then become the analyses.
We do the analysis which directly help us answer the hypotheses, which directly helps us determine if each of the prioritized branches should in fact be prioritized and, therefore, what drives the objective function.
So even before we finish the analysis, because we know why we doing the analysis, we can say, “Ok, if the analysis turns out to be this, what is the message we will give to the client?”.
For each analysis you probably will have one or two, at most 3, possible outcomes. Rather than writing a storyboard for each outcome, we write a storyboard for what we think is the most likely outcome. And then, if the analyses turn out to be a little bit different than we expected, obviously the storyboard will be revised.
But more or less we don’t turn out to be wrong. We turn out to be right most of the time because of the logic we apply and because we are attacking the problem from so many angles that this allows us to cross reference and cross check things.
And that is the crucial point here. We don’t just do analysis for the sake of doing it. And, therefore, we don’t have to wait to see what the analysis is telling us. The analysis is being done to check certain hypotheses that we developed at the start of the study. And the hypotheses are not random. They are built off the decision tree, which is also not random because the decision tree is actually brainstorming the issues which are driving the objective function.
And this is the important difference in which elite firms do analysis. We don’t just decide, “Ok, this is the checklist of analysis we need to do, lets do it”.
We say, “Hey, hold on a second, why are we doing the analysis? What purpose does it serve?”. In our mind we are developing the storyboard which states if these are the issues and this is the way the issues turn out in the analysis, then this is the recommendation we give to the client.
We can write that storyboard in the first, second or third week. And once we complete the analysis, we can go back and check if the storyboard we wrote out, based on what we thought the analysis will turn out to be, makes sense.
And if it does not, we will revise the storyboard. But I can tell you right now, 80-90% of the storyboard usually turns out to be correct. The more and more you think about it, even 95% of it could turn out to be correct.
By the 3rd week of the study, the storyboard is more or less there. Yes, few things will change. The data will definitely change. For example, we may know that certain segment of the market is unprofitable, but likely will not know why it is unprofitable or by how much it is unprofitable. But we more or less will be able to figure out it is unprofitable.
So that explains how we are able to come up with the storyboard so early. Because we are not doing analysis for the sake of doing it but because we have a reason for doing it, and the reason allows us to structure the storyboard.
QUESTION(S) OF THE DAY: What challenges will you face in applying this technique in a corporate or tier-2 firm? Please let us know in the comments.
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