Consultants get a bad rap. Some may argue unfairly so. But when you pause to consider what McKinsey & Company has been up to recently, it seems this negativity might be well-earned.

From offering bad advice to working with corrupt entities, the consulting powerhouse has been embroiled in scandals around everything from corporate culture complaints to big pharma cuddling and conflicts of interests.

However, McKinsey’s largest scandal came last month when the company agreed to pay $574 million dollars to US authorities as part of a settlement for its role in America’s raging opioid crisis which killed almost half a million Americans between 1999 and 2018, and is still ongoing.

McKinsey had to pay these reparations after working with pharmaceutical companies like Purdue Pharma to push OxyContin – a now ubiquitous opiate-derived painkiller – onto the US market.

Prosecutors investigating McKinsey’s role in the crisis found that the consultancy company had “turbocharged” the sale of addictive opioids, including advising its pharma clients on how to aggressively sell the addictive drugs – including marketing the drugs through doctors who were more likely to prescribe them.

“Few firms have ever paid this large a penalty, for anything. As for scrutiny, McKinsey is clearly facing more than it used to,” Duff McDonald, author of The Firm: The Story of McKinsey and Its Secret Influence on American Business, told TRT World.

The fallout has shaken McKinsey internally; managing partner Kevin Sneader, 54, was voted down in February to be replaced by Bob Sternfels.

Sneader’s ousting was set in motion in February when Sternfels and another hopeful, Sven Smit each won enough votes to jettison Sneader who had led the firm since 2018. When Sneader officially steps down on July 1st, will become the first managing partner to serve only one three-year term since 1976. Sternfels, 51, will be the 13th partner to lead the troubled consultancy firm since its inception in 1926.

The Financial Times reports that Sternfels’ current role is “akin to a chief operating officer” and in his new role as global managing partner he will be given the challenge of “stabilising a consultancy shaken by reputational crises that have raised questions about its culture, growth strategy and governance.”

“I am determined to use this moment to make our partnership stronger, more inclusive and better able to help our clients thrive in a fast-changing world,” Sternfels said in a press release. “I am also committed to build on the important changes that Kevin helped launch and our partnership embraced — and on the good work our firm does with our clients and in society.”

Following a string of historic scandals (which we’ll touch on shortly) replacing the top dog is unlikely to be enough to wipe McKinley’s slate clean. Which begs the question: aren’t these people meant to be on top of these things? In other words, how does a reputation manager and strategist do such a terrible job on itself?

We have James O. McKinsey, a professor of accounting at the University of Chicago, to thank for McKinsey & Company. After working with the U.S. Army Ordnance Department during WW1, McKinsey thought he could help the army overcome inefficiencies in its suppliers and formed a new type of company to advise on strategic management.

McKinsey & Company quickly expanded into Europe during the 1940s and 1950s, listing corporations, governments, and other organisations as its clients. By the 1970s it was leading thought on business culture.

But what, exactly does a management consultant actually do?

“Management consultants advise managers on how to run companies; McKinsey alone serves management at 90 of the world’s 100 largest corporations,” explains The Atlantic’s Daniel Markovits in an article titled 

“Managers do not produce goods or deliver services. Instead, they plan what goods and services a company will provide, and they coordinate the production workers who make the output,” Markovits continues. “Because complex goods and services require much planning and coordination, management (even though it is only indirectly productive) adds a great deal of value.”

Through its manipulation of the management landscape, and partly through the influence of its own business magazine the McKinsey Quarterly, McKinsey emerged as one of America’s most prestigious employers, and was listed as the most prestigious consulting firm in the world by Vault earlier this year.

How McKinsey could top such a list after its recent scandals is intriguing.

Not au fait with the controversies? Allow us to summarise a few: McKinsey recently fired some of its consultants after their former employer, Standard & Poor’s, complained that they had taken private information from one of its businesses; in 2020 McKinsey had to repay 650 million rand (about £31 million) after a judicial inquiry in South Africa into allegations of systematic corruption in the country; in 2019, The New York Times revealed the many ways in which McKinsey bent the rules to win government contracts, and “gave preference to profits over ethical conduct.”

Part of the New York Times investigation (which was compiled alongside ProPublica) found that after receiving a $20 million consulting fee for work with the US Immigration and Customs Enforcement (ICE), McKinsey advised ICE on how to save money on food served to detainees, or by sending them to rural areas to minimise expenditure. According to ProPublica, these recommendations even made ICE officials uncomfortable, and McKinsey faced scrutiny over concerns that migrants were being mistreated.

(Take a minute to catch your breath here…)

Then, in 2018 McKinsey apologised and returned 1 billion rand after one of its clients was accused of winning government contracts through corruption and bribery; and, in the US, McKinsey had to strike a $15 million with the Department of Justice after it was alleged the company had failed to disclose conflicts of interest in bankruptcy cases.

Wind the clock back even further and two of McKinsey’s former partners were convicted of insider trading in 2012, while the company was criticised as a well-paid cheerleader of the US energy firm Enron which imploded under the weight of its own internal scandal in 2001 – a scandal which saw its boss Jeff Skilling – who had worked for McKinsey for two decades – sentenced to 24 years.

The list of scandals goes on, but arguably McKinsey’s long-term involvement in the US opioid crisis is its most shameful work yet.

“We deeply regret that we did not adequately acknowledge the tragic consequences of the epidemic unfolding in our communities,” said Sneader,

What Sneader words as an oversight has cost hundreds of thousands of lives, and ruined millions more. Can McKinsey come back? And should it?

What does the future hold for McKinsey & Company?

McKinsey’s 650 senior partners will certainly be hoping that the appointment of Bob Sternfels will offer a new chance for the century-old company. But is Sneader’s ousting and Sternfels’ appointment a signifier of meaningful change, or simply a public relations exercise?

So far, Sternfels has allegedly looked at strengthening internal risk controls, making the company more selective about which clients the firms takes on. Allegedly, some senior partners “bridled at the greater oversight Sneader imposed, while others felt his changes had not gone far enough.”

Speaking to the FT, a former partner at McKinsey explained that Sternfels’ new role is less akin to a traditional chief exec’s job, and “much more analogous to running a political party. There are a lot of backbenchers who don’t like having a boss.”

Sternfels, then will have to play a delicate game, working to appease the more outspoken partners while working to impose a series of checks and balances that at least look like they’re addressing the vital concerns raised around the company. How far these reforms go, only time will tell.

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