Company Overview: McKinsey & Company is one of the top management consulting firms in the world, with roughly 105 offices in more than 60 countries globally. Per Google Finance, “the company advises corporate enterprises, as well as government agencies, institutions, and foundations on a number of business practices.” (1)
As a management consultancy, McKinsey’s role is to provide business solutions to clients. With this in mind, it goes without saying that the firm’s greatest asset is the human capital it employs. Many of our classmates here at Harvard Business School are alums of McKinsey and are a testament to that value. With that said, I believe that McKinsey’s operating model is highly inefficient because it is actively detracting from the firm’s business model: the stated goal of providing business solutions to clients. At the heart of this operating inefficiency is the corporate structure that frames McKinsey’s daily activities.
McKinsey is very global in nature; a feature that the firm is quite proud of and certainly is a source of operational value. As mentioned above, there are over 100 offices in more than 60 countries globally. (2) However, the regional nature in which the teams are grouped can at times be a source of operational inefficiency. When a client comes to McKinsey with business, that client is assigned to a particular partner in the regionally relevant office. According to my interviews with some former McKinsey employees, part of the thinking behind this regionally driven structure is to allow for maximum in-person interaction. (3) It is far easier for a member of the New York office to travel over to Pittsburgh 4 days a week for 3 months than it would be for a member of the Dubai team. This arrangement allows McKinsey to uphold its treasured value of in-person consulting. (3) I agree that there is certainly value for in-person interaction. However, I believe that this structure creates a huge operational inefficiency.
By organizing the team structure at McKinsey regionally, the firm is depriving its clients from all of the top industry and/or functional specialists that are anchored to other regions and are thus not staffed with the client. For example, if I am a US-based McKinsey client seeking a new marketing strategy, I will more than likely work with the New York, Chicago or Boston office. The current operational structure deprives me as the client from all of the top marketing experts that McKinsey employs in Shanghai, Sao Paolo and Paris. Now with that said, further discussions with my former McKinsey classmates revealed that there are in fact designated industry experts at McKinsey, but they are rarely cross-regionally staffed if there are locals with similar expertise. (3) If I am a McKinsey client, I want the best thinking from every member of the firm with relevant subject matter expertise, regardless of region.
This structural flaw begs the question how in fact should the McKinsey teams be structured in order to maximize operational efficiency? In my opinion, the various teams should be structured upon functional and industry expertise. In this form, a media company for example would benefit from the wealth of expertise accumulated by all McKinsey consultants regardless of region. Now the obvious push-back to such a suggestion would be to point out that this could eliminate the benefit of regional and cultural expertise a Shanghai team could bring to a Chinese media company. This point is a valid one. The cultural familiarity generated by a regional team is tangible, which is why I believe the optimal structure would be an industry team fragmented regionally. For example, the media team would be fragmented across various regions around the globe. However, the commonality would be function, not region. This structure would allow for McKinsey to continue to benefit from its global culture, while simultaneously delivering the very best functional experts to each and every client regardless of regional origin. In summation, McKinsey is a global leader in the consulting space as it has continually delivered business solutions to clients. However, the regionally focused structure of the firm creates inefficiencies in the operational model. A structural reorganization along industry rather than regional lines would allow the firm to better provide clients access to the wealth of knowledge and talent brimming throughout McKinsey.
(3) Interview with a former employee of McKinsey & Co.