Current situation

McKinsey in 1996 is one of the biggest consulting companies in the world and is famous for his knowledge. Within the company the revenue had more than doubled within the past 6 years and the focus was on knowledge development next to serving its customers.

In 1994 there were 4 new plans made to stimulate these 2 objectives further. These were set by its current management director Rajat Gupta. The 4 key points are:

∙ Capitalize firm’s long term investment in practice development driven by Clientele Industry Sectors, Functional Capability Groups, and the knowledge infrastructure of PDNet and FPIS and through new channels.

∙ Use the new developed approach of the Practice Olympics throughout the entire firm, which is focused on the development of ideas within the company and those ideas are judged by the board of directors so there will be an internal competition focused on knowledge.

∙ The launch of 6 special multi year internal assignments which were focused on tapping into the internal and external expertise to develop “state of the art” formulations of key issues. This was done so the firm’s functional knowledge was improved so McKinsey could focus more on longer term, bigger commitment and cross-functional development.

∙ The last idea was aimed at expanding the model of the McKinsey Global Institute. This meant that they would try to create other pools of dedicated resources protected from daily pressures and client demands next to being focused on long term research agendas.

Gupta knew that it could be possible that McKinsey would loose client work today but if it was in the best interest of the company for the future he said that they would be willing to. So he also could leave the firm stronger than he found it, which had been a key element for the leaders of McKinsey over the past decades.

Key Issues

McKinsey is not alone in the market for consulting. It has strong competition from for example the Boston Consultancy Group. But there are also others. In order to keep up with its competition McKinsey has practiced various strategies and ideas.

An important idea from McKinsey is the one firm policy, which consists of the recruiting of employees on a world wide base, the clients to be treated as McKinsey responsibilities and profit sharing from a firm pool as opposed to an office pool. Nowadays some feared that the company was getting away from this policy.

Another key element from McKinsey is the fact that they are not only there to serve the customer. They are more focused on creating knowledge (within its company and in its employees) and also on the benefits for the company as a whole. The employees from McKinsey are also very important. Not only the employees itself but also the idea driven personal networks they build up throughout the company. These are mainly built up when one department provides help to another. If it does this effectively the others will come back which is the start of a network.

Also there is a focus on the client’s problem. Each of these problems is treated as unique and focused on building a client relationship. Also they try not to find a solution for the company’s current problem but moreover to find a new approach on the deeper lying problems and strategies of the firm.

McKinsey works with an “engage-explore-apply-share” model. This is focused on the building of individual and team capability as opposed to a focus on the development of knowledge.

In order to stimulate its employees, McKinsey developed certain promotion plans. By doing this there became clarity in the succession of people, which boosted the confidence of the employees.

∙ There were concerns that the growth might stretch the fabric of the place. McKinsey can’t keep on disaggregating their units to create niches for everyone because they have exhausted the capability of their integrating mechanisms.

∙ To support high growth rates McKinsey must be more aggressive in using technology. Not only to support knowledge transfer, but also in allowing partners to mentor more young associates.

∙ There is also a dark side on technology; it can drive out communication and people start believing that e-mailing someone is the same thing as talking to them. So teams shouldn’t stop meeting and practice conferences should not be held on discussion forums online.

∙ In addition, IT can sometimes lead to information overload; the more time employees at McKinsey spend searching out the ideal framework or the best expert, the less time they spend thinking creatively about the problem.

∙ One of the Commission’s central proposals (settled in 1971) was that the MGM ratio would be reduced from 7 to 1 back to 5 or 6 to 1. But in 1995 this MGM ratio was already 8 to 1 (Exhibit 1)

∙ Some experts inside McKinsey seem to be uncertain about their future at the company. They are very uncertain about their promotion prospects.

Support systems

To handle the internal information much thought was given to building a knowledge infrastructure. The former reluctance to document concepts had long constrained the internal transfer of ideas and the vast majority of internally developed knowledge was never captured. In the late 1970s, McKinsey launched the McKinsey Staff Paper series in an attempt to deal with the problem. McKinsey increasingly encouraged its consultants to publish their key findings.

The task of implementing focused first on the Firm Practice Information System (FIPS). This is a computerized data base of client engagements. This FIPS needed to be updated with new systems and procedures to make the data more complete, accurate, and timely so that it could be accessed as a reliable information resource, not just an archival record. More difficult was the task of capturing the knowledge that had accumulated in the practice areas since much of it had not been formalized and none of it had been prioritized or integrated. After a lot of begging, cajoling and challenging each practice to develop and submit documents that represented their core knowledge, McKinsey finally launched its Practice Development Network (PDNet).

A third and smart implementation was the Knowledge Resource Directory (KRD). An assembly of all firm experts and key document titles by practice area published in a small book that fitted in every employee’s briefcase. This has since been a great resource that found almost immediate enthusiastic acceptance. The KRD became known as the McKinsey Yellow pages.

Develop T-shaped into I-shaped consultants

The basic concept of shaping T-consultants into I-consultants deals with the transformation of employee skills. In the past, the emphasis was on a broad based problem solving skills and client development orientation, were deeply embedded in the firm’s values. However McKinsey, increasingly believed that consultants should focus more on specialized knowledge development. This would enable them to serve the customer better with more specialized, structured strategies.

Believing that the firm’s organizational infrastructure needed major overhaul, a Knowledge Management Project was launched in 1987, and made three recommendations:

∙ The term had to make a major commitment to build a common database of knowledge accumulated from client work and developed in the practice areas.

∙ To ensure that the data bases were maintained and used, they proposed that each practice area hire a full time practice coordinator who could act as an “intelligent switch” responsible for monitoring the quality of data ad for helping consultants access the relevant information.

∙ They suggested that the firm expand its hiring practices and promotion policies to create a career path for deep functional specialist who would become more I-shaped than the normal profile T-shaped consultant.

Client impact committee

With responsibility for knowledge management, the manager director began to focus on a new theme, client impact; the notion of a legitimate role as a consultant to teams had evolved to a need for specialists to be “engagement director capable”. He also created a Client Impact Committee. One of the most important initiatives of the committee was to persuade the partners to redefine the firm’s key consulting unit from the engagement team (ET) to the client service team (CTS). The traditional ET, delivered a three of four month assignment for a client, was a highly efficient and flexible unit, but it tended to focus on the immediate task rather than on the client’s long term need. The CST concept was that the firm could add long-term value and increase effectiveness of individual engagements if it could unit a core of individuals. Who were linked across multiple ETs, and commit them to working with the client over an extended period.

International expansion

The period immediately following World War II ushered in an era of internationalism. When a South American oil company engaged McKinsey to assess its global operations, it seized the opportunity to test the "one firm" approach in the laboratory of the world. Bolstered by the emergence of a more highly integrated world economy, McKinsey established its first international office in London in 1959.

Tariff barriers tumbled in the European Common Market throughout the 1960s, spurring many major American and European companies to reach beyond national borders. Many of these budding multinationals sought McKinsey's advice on how to organize as conglomerates.

The globalization of corporations helped fuel demand for McKinsey’s services worldwide. It established offices in the Netherlands, Germany, Italy, France, and Switzerland. It also added Canada and Australia to their international network. This all took place during the 1960s.

The 1970s proved to be our most challenging decade. A troubled world economy and social unrest undermined confidence. McKinsey’s growth slowed and its competitors gained ground.

Realizing that a course correction was needed, McKinsey subjected the firm to the trademark McKinsey in-depth analysis. It discovered that in growing too fast, it had threatened a precious commodity: the client relationships. McKinsey fortified their commitment to excellence in client service through more rigorous selection and evaluation of its people, and a sharper focus on the quality of their knowledge.

A substantial investment in knowledge development – particularly in the key areas of expertise, strategy, and organization – fueled the internal reinvention.

In the 1980s the globalization expanded and with that came the need for McKinsey to develop deeper and broader expertise. It expanded the scope of its recruiting to increase its diversity. McKinsey also invested heavily in codifying its knowledge and making it accessible through an infrastructure of more than 60 areas of specialized expertise. The clients draw on this reservoir of knowledge as a source of competitive advantage.

The unprecedented globalization of the 1990s redefined the parameters of business. McKinsey was called upon to restructure entire industries. McKinsey flourished in the expanding economy, entering the decade with a professional staff of nearly 2,500 and doubling that number by 1999. McKinsey also reinforced its practices through increased recruitment of both functional and industry experts, continually extending the depth and reach of our knowledge.

McKinsey also expanded into nearly 20 additional countries, opening offices in Taiwan, Korea, India, Indonesia, and Russia, among others. It also began to serve clients in Turkey, South Africa, and Southeast Asia and added new locations in Europe and in North and South America.

Case Conclusion

The little firm of “accounting and engineering advisors” was able to grow into the world’s most prestigious consulting firm. McKinsey was able to do this by focusing its company business on a one firm vision. This biggest problem internally was how to manage the information that existed in the company and let the company benefit from it. This required efforts of people to communicate their findings. Support systems like PDNet and FPIS were created. Consultants were encouraged to publish their work. But one of the most important issues remained. The change of the consultant himself was a matter that McKinsey recognized. In order to make the knowledge infrastructure work the consultant needed to change from a T-shaped into an I-shaped consultant. Working more specialized rather than on a broad company base. All this enabled McKinsey to gain a unique competitive advantage. Nowadays, McKinsey goes on with this focus on sharing information throughout the company, which helps it to maintain its advantage and grow even further.

McKinsey