McKinsey: Last Week Tonight with John Oliver (HBO)

♪ ("LAST WEEK TONIGHT" THEME PLAYS) ♪ Our main story tonight concerns business. A word that somehow describes the front part of a mullet, the second nicest seat on an airplane, and the single saddest room in any hotel. (AUDIENCE LAUGHS) Specifically, we're gonna talk about the businesses that make other business's business their business. Management consultants. There are three big firms. And tonight, we're gonna focus on the oldest and largest one, McKinsey & Company. It's been around for nearly a century advising both big companies and government agencies on how to fix their most complex and urgent problems. NARRATOR: McKinsey was founded in 1926 by James O. McKinsey. He was a professor at the University of Chicago and an expert in management accounting. By the 1950s, the firm was assisting the White House with staffing organization. Which, according to the company, would lead to the creation of the Chief of Staff role. In 1970, McKinsey helped create the barcode. -(BEEPS) -Yes, that barcode. That's actually true. McKinsey did help invent the barcode. And I know that's a little disappointing. Maybe you thought it was invented by a grocer in the '60s who dreamt of a way for computers to taste fruit. Maybe you thought the beeps were just how the program says "yum." But I'm afraid that you're imagining a better world than the one we actually live in. But it's not just barcode innovation. Firms like McKinsey sell themselves as can-do experts who can come in, provide an outside perspective, and fix whatever ails a company. Whether it's reengineering an organizational chart, working on digital strategies, or deciding whether to sell off part of their business. You name it, they'll advise you on what to do. And McKinsey's worked with everyone, from companies like Coca-Cola, Best Buy, and AT&T to government agencies like the Department of Defense, and ICE. McKinsey is massive, and it's ubiquitous. It has offices in at least 65 countries and an annual revenue estimated at 15 billion dollars. But McKinsey doesn't see itself as just a bunch of PowerPoint slinging, power suit wearing micro managers. As you can tell from their recruitment videos, they see themselves as operating as a force for good in the world. Our purpose is to create positive, enduring change in the world. The work you do with McKinsey will matter. What we are doing on a day-to-day basis is really impacting the lives of thousands of people, sometimes more. What's really great about McKinsey is it provides you with an opportunity to work on really hard problems that are also really interesting and also really actually matter. Right. McKinsey consultants are encouraged to see themselves as world changers. As a humble McKinsey partner once put it... (AUDIENCE GROANS) Which is a hell of a group to put yourself in. Look, there's just three cool guys left in the world now, Henry Kissinger, Kevin Spacey, and me! (AUDIENCE LAUGHS) And the truth is, McKinsey's reputation has taken a bit of a knock in recent years. It's found itself under scrutiny for everything, from exacerbating income inequality, to helping market dangerous products, to enabling authoritarian regimes. And former employees have pointed out that for all its talk of making the world "a better place," it's worked for some of the planet's biggest polluters while getting hundreds of millions of dollars in return. In fact, one of those disillusioned employees paints a pretty damning portrait of what the company is at its core. They serve a lot of clients with really harmful effects. They know exactly what the repercussions are going to be. And then they say, "We're gonna do it anyway." And that tells you all you need to know about the firm. Right. That's an inherently alarming thing to hear about a business, isn't it? Generally, you want companies to mitigate harm, not actively seek it out. It's what LEGO has a choking hazard warning on its packaging, instead of one that says, "Now with blue raspberry flavor!" (AUDIENCE LAUGHS) So if it's that influential, that ubiquitous, and is behind so much harm, tonight, let's take a look at McKinsey. And if this is the first time you are hearing McKinsey's name, don't be embarrassed. Because for a company with so much reach, it's gone out of its way to try and keep a low profile. It doesn't publicize its client list and even its offices can be hard to spot. AMNA NAWAZ: We stopped by McKinsey's headquarters at 3 World Trade Center in lower Manhattan. Well, it's such a powerful company, and yet you'd never know they were here. There's not a single McKinsey sign anywhere. Why is that? They don't want anyone to know anything about 'em. They want everything done in secret. And if that includes where they work, then so be it. Well, that's not innately suspicious at all, is it? You've sealed yourselves inside an expensive, glass-fronted, nameless lair that is completely invisible to anyone, unless, that is, they simply type "McKinsey" into Google Maps or happen to hear that journalist say, "3 World Trade Center," while she literally showed you their address. Kudos, by the way. That was a dick move, and I genuinely appreciate it. (AUDIENCE LAUGHS) But discretion is only part of McKinsey's brand. They've also cultivated a reputation for hiring the best and brightest, fresh out of elite colleges and MBA programs. And young, high-achieving types often use a stint at McKinsey's as a springboard to bigger things. Former employees include Pete Buttigieg, Senator Tom Cotton, Facebook's Sheryl Sandberg, and Google CEO Sundar Pichai. And McKinsey picks its consultants through a notoriously rigorous interview process, asking candidates challenging and slightly unconventional questions. One of the interview questions I was asked in my final rounds was how many pigs are in China. Which sounds like a very silly question, but it's a really good question to test how you think. Because it's not only-- The answer doesn't matter. It's can you structure a problem. Can you take a very nebulous situation, and put structure around it in a way that makes sense, and then logically deduce things in order to get to an answer that's meaningful? I mean, sure. That is one way to describe it. Another way might be to say that they're just trying to see how good you are at bullshitting your way to a plausible sounding answer. Because if a business really needs to know how many pigs are in China, there are ways to find that out. Like call Chinese port magnate, Qin Yinglin, or just Google... Or if you're on your phone, just Google... ...because that's still enough for it to go on. What do I have to do? Draw it a map? I'm in a hurry, my thumbs are fat, and I got places to be." But once they are hired, McKinsey consultants work insanely long hours while being schooled in the McKinsey way of doing things. Something that the firm itself can be pretty insufferable about. A partner once said... A sentence so smug that even if you just read it, you'd have automatically heard my accent in your head. (AUDIENCE LAUGHS) 'Cause that's not just smug, that is British Empire smug. And the thing is, that level of swagger might make some sense if McKinsey's advice was consistently novel and brilliant. But it's had some big misses. Famously... And McKinsey... ...which persuaded AT&T to pull out of the market for a while. And to be fair, McKinsey were only off by around 739 million, or 82,000 percent. But even when they are troubleshooting existing problems, their bespoke solutions can be blindingly obvious. Just watch as one McKinseyite brags in a promotional video about the firm's ability to come up with unique solutions. We were serving an energy client, and their problem was that they have offshore drilling rigs and they had stacks and stacks of paper invoices that they would fly out to these rigs in the middle of the Gulf Coast in hurricane weather to have to get somebody to sign off and then helicopter back to headquarters. We brought in a team that had partners who were experts in the energy sector, we had partners who were experts in procurement as a function. And they were able to get together with our digital team and say, "Actually, we don't know if signatures are really required for this." -Yeah. -(AUDIENCE LAUGHS) No shit! I'm not sure it speaks that well of you that you needed the digital team and experts in the energy sector and "procurement as a function," whatever the fuck that means, to get to the conclusion, "Why not send an e-mail instead of a fucking helicopter?" (AUDIENCE LAUGHS) And that's not a one-off. Over the years, there've repeatedly been grumbles that McKinsey oversells its brilliance. In the words of one Fortune story, while... And those are just obvious, first-thought ideas. Essentially, McKinsey is a firm that projects a huge amount of confidence to sell a frequently unremarkable product at sky-high prices, making them truly the Salt Bae of companies. "You've had salt before. But have you ever had it from a douche?" (AUDIENCE LAUGHS) And let's-- Let's talk for a minute about downsizing. 'Cause there is a long history of companies bringing in consulting firms like McKinsey and very soon after, aggressively cutting costs. This gets dressed up with fancy terms like "finding efficiencies" and "organizational streamlining." But what that often amounts to is mass layoffs. And look, layoffs are sometimes necessary, but they're always painful. And much more painful than some mid-20s Ivy Leaguer who fancies himself a business genius might realize. Twenty-four years ago, McKinsey allowed a documentary crew rare access to film a training session for young consultants going through an exercise where they role-played advising a real-life client. Here they are joking about how they would break the news that layoffs were gonna be necessary. We've got a very simple strategy. Just... (SINGING) ♪ Bum, bum, bum, bum ♪ ♪ Bum, bum, bum, bum ♪ ♪ Hit the road, Jack ♪ ♪ And don't you come back No more, no more ♪ ♪ No more, no more ♪ ♪ Hit the road, Jack ♪ ♪ And don't you come back No more ♪ ♪ What do you say? ♪ ♪ Hit the road, Jack ♪ That's not our communication strategy. Hmm. Look, um, I'm not a violent person but if all those dickheads exploded, I would absolutely spin around singing, "It's Raining Men." (AUDIENCE LAUGHS) But that is emblematic of a major role that consultants like McKinsey play. Essentially allowing executives to say, "I know job cuts are bad news, but it's what McKinsey told us to do." As one book on the company put it... Though there is one area where McKinsey's historically advised the exact opposite of cost cutting, and that is executive pay. Starting in 1950, a consultant of theirs named Arch Patton started advising corporate leaders that they were underpaid. Writing books like... His advice was so wildly popular that for a time... ...and later came to be seen as a... In fact, when he was... And while it's hard to gauge tone from that, I'm just gonna hope that it was a sober, reflective "Guilty," and not, as seems much more likely, a naughty, mischievous "Guilty!" Like you'd use to respond to, "Who spiked the punch?" So, to recap, McKinsey's advice can be expensive but obvious, its predictions can be deeply flawed, and it's arguably helped supercharge economic inequality in this country. All of which is pretty striking coming from a company whose leader you've already seen sum up its fundamental mission like this. Our purpose is to create positive, enduring change in the world. Yeah, but is it though? Because let's talk about that. A quick look at McKinsey's client list shows a bunch of companies going out of their way to do the exact opposite of "positive, enduring change." 'Cause it's not just those oil and gas companies that I mentioned earlier. ...well after we knew smoking caused cancer. And you might be thinking, "Well, come on, John, it was the '50s, lots of people were okay with smoking back then." But you should know... (AUDIENCE GROANS) Which is, and this is true, too late! (AUDIENCE LAUGHS) That'd be like finding out that Subway dropped Jared's contract today. "Wait! He was still in commercials from prison? How could anyone think that this was okay?" And if you think that was damaging, McKinsey's also worked with Purdue Pharma. They actually made nearly 84 million dollars in fees from Purdue for advice on how to, quote... "turbocharge" sales of OxyContin. In fact, listen to the AG of Massachusetts explain just how intimately McKinsey was involved in Purdue's sales process. McKinsey consultants actually rode along with, went with Purdue sales reps to doctors' offices here in Massachusetts to critique them on how effective they were on selling OxyContin. It's true. They did ride-alongs. And honestly, I didn't think I could have any sympathy for Purdue sales reps until I learned that they were trapped in a car with a McKinsey consultant for hours. "Yeah, you-- you mentioned that you went to Harvard. Can we please just be quiet and go sell some poison?" (AUDIENCE LAUGHS) But it's not just private companies. Remember, McKinsey's frequently hired by government agencies too. Where, again, their advice has not brought universally positive change. For instance, in 2014, New York City brought McKinsey in to figure out how to reduce violence at Rikers. A project whose cost ballooned to 27 million dollars. People asked questions at the time about whether that was a good use of money. But the head of the city's corrections back then insisted that McKinsey was worth every penny. If we made any progress, it was because of McKinsey's help in areas that we needed help in. Wow, that is some high praise there. To claim that McKinsey was the sole reason for any progress made at Rikers would be a pretty impressive compliment if you didn't know anything about the state of Rikers. So what imaginative strategies did McKinsey try to implement? Oh, I don't know, just fun things like... It's some very outside-the-box thinking for people literally trapped inside boxes. But its big project was an anti-violence program called Restart. And it claimed that... Which sounds great. Unfortunately, it turned out that... Because... ...in the first place. And while McKinsey, to this day, defends that program and denies skewing the results, it is notable that when ProPublica later crunched the numbers for Rikers overall, they found that jailhouse violence there had actually risen nearly 50 percent since McKinsey began its assignment. And honestly, you kinda gotta hand it to McKinsey there. Not many firms can get paid 27 million dollars of taxpayer money to leave Rikers somehow even worse. And it's not just jails. McKinsey's government clients also include regulators, which can get a little weird when you consider that McKinsey also represents corporate clients. For instance, remember how it worked with Purdue Pharma? While it was working for them, it was also working with the FDA. That sure seems like a clear conflict of interest. And it was one that even Mr. Positive and Enduring Change here found a little hard to explain to Congress after the fact. KATIE PORTER: Okay, so let me ask you. Did you disclose to the FDA your-- McKinsey's work at the same time... Did you disclose to the FDA that McKinsey was working at the same time it was working for the FDA that it was working for Purdue? Did you disclose that to the FDA? We made clear in multiple instances that the individuals involved had experience in both pharmaceutical and opioids-- PORTER: Reclaiming my time. Mr. Sternfels, they didn't have experience, they were the identical humans working for both at the same time. Exactly, and there is a big difference between having experience working for both and actively working for both at the same time. It's the same difference between telling your wife about your ex-girlfriend and telling your wife about your current girlfriend. One is dramatically worse than the other. And Katie Porter was right there. There were multiple instances of McKinsey consultants working for both Purdue and the FDA at the same time. At one point... (AUDIENCE GROANS) One project even had them... (AUDIENCE GROANS) Pediatric Oxy! Oxy for kids! You know, just like in that episode of Dora the Explorer when Backpack is getting a bit too heavy, and Boots gives her a little something to take the edge off. (AUDIENCE LAUGHS) Now, McKinsey claims there was no conflict there and that the nature of their work for the FDA and Purdue was different. Which is a little hard to take, considering that they sold themselves to Purdue at the time with the notion that they had special insights into the FDA. They told Purdue in 2014 that they... Including the... So, hold on, McKinsey. Which is it, then? Was the work you did for the FDA totally different, or did it help you bring in unequaled capability to Purdue? 'Cause it can't be both. This isn't Schrodinger's contract. (AUDIENCE LAUGHS) You don't get to claim it's both relevant and unrelated depending on who the fuck you're talking to. And at this point, I could stop. Tobacco, opioids, Rikers. Those are already some pretty unpleasant stains on a company's record. But here's the thing. All the examples so far are just from the US. Remember, McKinsey now has offices all over the world. And from them, they have cozied up to some truly terrible clients. They've worked for a Russian defense contractor and are so deeply entrenched in the government of Saudi Arabia that Saudi Arabia's Planning Ministry has been dubbed... (AUDIENCE GROANS) And it will loudly defend its work there, say that it feels its making the country a better place. But that feat of mental gymnastics got a little trickier after Jamal Khashoggi was assassinated. Just a few months later, McKinsey's head at the time was on CNBC trying to defend its work in the country and reassuring everyone it had a strict moral code. The work that we do here, and we think very hard about the work that we do, needs to be work that does make a positive difference. -WILFRED FROST: Sure. -And that's what I'm focused on. ANDREW ROSS SORKIN: But straight up and down, doing business with a murderer is okay by you? No, it's absolutely not. Okay, and when you find out that your client is a murderer, you do what? -KEVIN SNEADER: You walk. -SORKIN: You walk? Oh! You walk, do you? That sounds good, except here's the thing, they didn't walk. Their client killed and dismembered a journalist, and McKinsey responded by participating in a major Saudi investment conference that same month, even as other companies pulled out. So, unless "you walk" is short for "You walk to the front of the line and pick up your lanyard for another fun weekend at the journalist-choppin' business jamboree," you are full of shit. But wait, wait. 'Cause it gets even worse. 'Cause it later emerged that in one of McKinsey's reports, it highlighted three people who drove negative conversation on Twitter about Saudi government policies. This is that slide, featuring names, pictures, criticisms and follower counts. And subsequently, some of those people were, and you're not going to believe this, targeted by the Saudi government. In fact, one of their phones was hacked, revealing communications with, you guessed it, Jamal Khashoggi. Now, at this point, I have to tell you, McKinsey insists... And that the deck wasn't prepared for the Saudi government. In fact, when this story initially came to light, they said the report's "intended primary audience was internal" and that they were "horrified by the possibility, however remote, that it could have been misused in any way." But come on! It's Saudi Arabia. Even if that report didn't fall into their hands, and please, what part of the way Saudi Arabia operates made you think that a McKinsey-curated list of shit taking dissidents would be a good thing to put together. You're working in one of the rootinest, tootinest, journalist-shootinest regimes in the Middle East. (AUDIENCE LAUGHS) And you figured it was completely fine to drop a list like this because the potential for misuse was "remote"? What are you talking about?! This is a government led by Mohammed bin Salman, a man who, and this is true, once... (AUDIENCE GASPS) Did you think that if MBS were to stumble across a list of his haters, he'd just send them a big "No hard feelings about all the dissident stuff" edible arrangement? The fuck is wrong with you?! And for what it's worth, a former McKinsey consultant has called that whole internal document excuse... And look, McKinsey will claim that all of the examples I've given you tonight are just isolated cases. Not representative of their work overall. What's more, they'll say that they've revamped their policies on client selection and that... Although they are still working in Saudi Arabia, so their standards seem, at best, fucking flexible. (AUDIENCE LAUGHS) They also want me to tell you that they do a lot of projects like helping clients deploy vaccines, or supporting refuges and rebuilding in Ukraine. Which is very nice, but think of it like this. How many uplifting McKinsey projects like... ...or... ...would you need to hear about to effectively counterbalance... ...and... (AUDIENCE LAUGHS) And look, it's not just McKinsey with these issues. Their main competitors have had them too. BCG was also in deep with the Saudis. And Bain was banned from state contracts in South Africa for a decade, thanks to its role in a massive corruption scandal. And I'm not even saying the consulting industry should be abolished. Getting outside feedback on best practices can make a lot of sense for an organization. We certainly need to preserve a career path for high-achieving, type-A bullshitters who don't want to commit to law school and want to spend their prime years flying business class to Dallas. (AUDIENCE LAUGHS) Companies can feel free to hire as many fresh-faced, dork sociopaths as they want to take the heat for whatever layoffs and/or atrocities they were already launching in the first place. It's a free country, or not, depending on where the McKinsey office is. (AUDIENCE LAUGHS) But if their work, as they claim, really does impact the lives of millions of people, they shouldn't get to be invisible, and they should expect much more accountability for their mistakes. And until such time as that happens, the very least they can do is be a bit more transparent with their recruiting videos going forward. Hi there. Here are McKinsey, we're an elite group of strategists, thinkers, analysts, innovators, guys named Brayden, and Delta Platinum Sky Miles Reward Members, here to drive client success in any business venture. We're proud to say McKinsey alums include many of the most powerful people on Earth. And also, Pete Buttigieg. We at McKinsey genuinely believe great consultants can come from anywhere. That's why our work force features an incredibly diverse array of graduates from all over the Ivy League. Even Cornell. So, if you're ambitious college senior, or an MBA graduate who needs to be told you're special or you will die, we'd like you to consider a career at McKinsey. The best part of my Harvard education was the look on people's faces when I said, "I go to Harvard." I'm really passionate about belonging to groups that impress people. And so, to be able to continue that at McKinsey has been very fulfilling. One of the interview questions I was asked in my final round was, "How much wood would a woodchuck chuck if a woodchuck could chuck wood?" Sounds like a silly question, but it's actually a smart way to test your approach to problems and how many billable hours you can talk for. In my case, a lot. Here at McKinsey, you'll have the opportunity to change the world by serving a surprisingly wide array of clients. But not just anyone. For instance, we proudly don't work for tobacco clients and haven't since the start of this sentence. We've got clients that appeal to every interest. Local interests, foreign interests, and even conflicts of interest. I worked for the FDA and Purdue Pharma at the same time. I can't believe I was allowed to do that. (CHUCKLES) My mom did say, "Shouldn't that be illegal?" And that made me really worried, until I remembered... she's not a consultant. Of course she wouldn't understand. (CHUCKLES) I was basically talking to an ape. (LAUGHS) We hold our employees and our clients to a higher personal and ethical standard. Core McKinsey values will always be-- Sorry. You have a phone call. Not now. It's the Saudis. I actually do have to take this. I think it might be about... the thing. You've got Brayden D! But the point is, you'll be using your big, special, early-20s brain, unencumbered by practical experience, to develop bespoke, tailored solutions to address company-specific needs. What we're recommending is finding significant efficiencies by laying off the people at the bottom of the company and paying more to the people at the top. Hey! That's me! -Yes! -With the money signs? -Yes, yes. -That's you. It's me at the top! (LAUGHS) Look, we believe there are three great institutions left in the world. The Marines, the Catholic Church, and McKinsey. That's because the mark of any good institution is matching outfits, evasion of responsibility through institutional secrecy, and the misplaced belief that you're saving the world. Because at the end of the day... we're McKinsey. We're McKinsey! We're McKinsey. We're McKinsey. And we're capable of anything. And culpable for nothing. (BOTH LAUGHING) I love that line. I mean, it's true. We can-- You know, they can't touch us. It's true. 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