| Topic Name: |
McKinsey in decline? |
| Message Name: |
Going way back in History |
| Date Posted: |
12/29/2005 |
| In Reply To: |
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.
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| Message: |
To take your expression, I do believe the client is "the execs who hire you." My previous CEO example was too restrictive.
IIRC, M. Bower modelled McK on a law firm, with similar ehtics. It is the duty of a lawyer to defend his client as well as possbile, and the same holds true for te consultant. To me, this means that BEFORE accepting an engagement, the Partner in charge should make sure the subject of the study is in line with the best interests of its client (i.e. not only the individual who pays the fees but also the company that employs him).
So, I think we are back to the fact that Partners (most?) often lack the nerves to say "No" to their clients.
At the end of the day, we ARE hired guns, like lawyers. The relevant question is how the hired gun chooses which contracts to accepts and which one to reject...
So far my conscience is clear (and I have asked to be removed from 1 study so far, with no visible damage...).
s.
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