| Topic Name: |
McKinsey in decline? |
| Message Name: |
wine friend |
| Date Posted: |
12/28/2005 |
| In Reply To: |
It seems we agree, but there are thing I do not understand in your comment / you do not explain well enough.
Contrarily to the first impression, McK's clients are not companies: the clients are the CEOs! They have a view on how to conduct their business and McK (just like any other MC firm) is there to help them articulte / implement it.
This is why you will see a McK team sometime provide a "biased" opinion to a company: if the client (the CEO) asks "how do I do THIS?", then the team ill not work on the broadere issue "Should the Company do THIS?"... We would give the CEO the help he asks for, not the "best" advice.
Maybe, maybe, Shareholder representatives at board level should hire McK (or others) to do the work... But then how would the CEO react, and how closely would we be able to work with mid-level managers? If you do have a good answer, please let me (and my buddy Ian D. know ;o) ).
Finally, two quick comments of 2 of your recurring rants about McK:
- Asset-light is not necessarily a bad thing. (I think we already exchanges a few thoughts on that topic ages ago.) A company should have on its books only the assets it needs to keep operations going, and trying to decrease the value / importance of these assets is a good managerial decision (ROCE going up, among many other things). The trap is to enter "virtual" business that has no "asset-backed" reality... Enron is, fro my point of view, much more about fraud than bad advice... (I am not saying that some bad advice were not given occasionally: I don't know enough).
- I've reaf a few PDs / articles by L. Bryant. Thought I question how applicable the ideas are in the real world, I see nohing wrong with the frameworks / concepts he describes. If nothing else, they give a ne perspective on some business concepts are helped me gain a little bit more unerstanding of some issues... No rocket science, no ready-to-use solution, but a nice intellectual complement (at par with a good espresso after a meal, or something like that).
s. |
| Message: |
Are CEOs the clients? What if you get hired by an up and coming VPGM? Is he the client now? Are your clients the execs who hire you.
Also, regardless of the CEO being your client (and so therefore it is ok to help him with agency effect shenanigans to the shareholder's detriment), it is still not ok to be tendentious. Being tendentious is dishonest. Is your job to assemble an argument or to solve problems? I've seen a McK work product to stave off a hostile takeover that was clearly tendentious. It was an argument to the shareholders that the takeover was not best for them...and it was repleted with skewed graph axes and faulty logic in one direction. At the end of the day, are you a hired gun like a lawyer or a PR firm?
WRT asset-lite:
a. there is nothing magical about asset-lite. you could be asset-too-lite. I'm currently in a business that underinvested for instance. Of course wasted capital is an issue--but that's trivial. So debating the phrase is trite.
b. In any case, what I have an issue with is asset lite as practiced and as tauted. One of my issues is that the phrase and it's key showcase, Enron corp, were never clearly described in a sense that one could react to (the falsifiable hypothesis). I find that slippery. Also, the amount of people running around tauting it as an innovation when they didn't even understand subtleties in conventional finance (for example the sidebars in Brealey and Myers) is a problem. I remember pushing for a ground truth answer on value creation and being unsatisfied by the Houston office proponents descriptions.
c. It was not just Enron who had problems but a whole slew of energy companies that were engaging in games of hedging and not appropriately understanding/accounting for it. (And I remember "Ted" disagreeing with my slams on Enron and saying...look all the rest of the energy companies doing this kind of stuff are fine...then Dynegy and the rest of the lot imploded.
d. Additionally, I do not see Enron as purely an accounting fraud. In many cases the accounting fraud was done to continue the perception that the strategy was working.
e. Also, I remain concerned (although I have no evidence) that the obvious connection of Skilling's involvement in the initial strategy development and then his ability to fund studies affected the type of work product that McK came up with. How well do you think I'd have fared on a Houston office team, had I questioned the smoke and mirrors? Yet that would have been the most value creating thing for the client...unless the client is a CEO, who sells his stock in time.
WRT Lowell Bryant:
I've talked with him in person and I think that he has a tendancy for faddishness and not thinking things through to ground truth. Look at his advocating of the "stock market value gap" that was used to argue for greater risk behavior by CEOs pre-bubble bust. My issue is not so much his having been wrong, but that the argument is childish and skewed by not taking into account at least the POSSIBILTY that the difference between DCF-NPV and a stock price might be market error.
|
|
