DEALBOOK NEWSLETTER
More tough headlines for the consulting firm.
By Andrew Ross Sorkin, Jason Karaian, Michael J. de la Merced, Lauren Hirsch and Ephrat Livni
- Feb. 25, 2021, 8:03 a.m. ET
What went wrong at McKinsey
Partners at McKinsey yesterday voted out their leader, Kevin Sneader, as the company deals with blowback over its role in the U.S. opioid crisis. It was the latest tough headline for the consulting firm, which may face growing threats to its status as a trusted adviser to companies and governments — and as a magnet for top talent.
Mr. Sneader was denied a second three-year term as global managing partner, weeks after McKinsey agreed to pay nearly $600 million to settle investigations by 49 states into sales advice it gave drug makers about opioid sales. It was the first time since 1976 that a McKinsey leader had failed to win a follow-on term. The candidates to replace Mr. Sneader are Bob Sternfels, based in San Francisco, and Sven Smit, based in Amsterdam.
McKinsey’s reputation has taken a hit in recent years. Beyond the opioid crisis, the firm has been criticized for some high-profile missteps:
- Days after taking on the top role in July 2018, Mr. Sneader had to apologize for the consulting firm’s work with a state-owned power provider in South Africa, which was enmeshed in a corruption scandal that brought down the country’s president.
- That same month, he had to defend McKinsey over its work with U.S. Immigration and Customs Enforcement amid the Trump administration’s harsh deportation policies. (The firm ended its work soon after.)
- In 2019, McKinsey paid $15 million to settle a Justice Department investigation into its failure to disclose potential conflicts of interest in its corporate bankruptcy practice.
One big question: Will graduates think twice about McKinsey? A huge challenge facing Mr. Sneader, and soon his successor, was rebuilding trust in the white-shoe firm. Concerns about the firm’s culture could hurt its status as a premier destination for elite M.B.A. graduates, just as more budding business tycoons are favoring tech companies — whether for money, prestige or more progressive social cultures — over consulting and banking. Mr. Sneader told The Financial Times, which first reported his election loss, that McKinsey was coming off its “best recruiting year ever.” It plans to to hire more new employees this year than ever before.
- There’s reason to think that McKinsey can recover. “Franchises such as McKinsey are incredibly robust,” the FT’s Lex column noted, while adding that the firm needed to make sure it was not seen as “representing an old elite order.” At Harvard Business School last year, 24 percent of graduates went into consulting, down from … 25 percent in 2016.