The Firm: The Story of McKinsey and Its Secret Influence on American Business (6 page)

Bower’s own reminiscences of the time are rife with damning critiques of his colleagues. A run-in with partner Walter Vieh on the Savoy-Plaza had resulted in Vieh’s being sent back from New York to Chicago. “I soon discovered that he approached problems like an accountant,”
⁵²
Bower later wrote, a damning indictment from the self-styled big thinker. He also stuck a shiv in both Oliver Wellington and Tom Kearney when contemplating just who would take the mantle from James McKinsey: “Oliver could not lead . . . [and] . . . Tom was not a natural leader.”
⁵³

Crockett and another partner, Dick Fletcher, each kicked in $28,000, enabling McKinsey & Company to stand on its own feet; Crockett became the managing partner. “I was too young,” explained Bower, as if that were all there was to it. Too young, and too poor: Bower’s ante was a mere $3,700, an amount that clearly made him subordinate to Crockett. Ewing “Zip” Reilly, a friend of Bower’s from the Harvard Business School Club of New York, loaned the fledgling firm $10,000, a favor that Bower never forgot. The firm restated its purpose as “management consulting” as opposed to “management engineering.”

While New York and Chicago were separate legal entities, the plan was for them to be loose affiliates, exchanging pieces of business they might land in the other’s backyard (for a 15 percent finder’s fee) and jointly maintaining the integrity of the McKinsey brand. In the meantime, the partners of the two firms committed to buy McKinsey’s widow out of her 21 percent stake over the next two years, for a total of $141,796—more than $2.2 million in 2012 dollars.

Bower and his contemporaries carried Mac McKinsey’s torch in some ways but not in others. With McKinsey gone, Bower was free to act on his distaste for accounting and banish it from the firm’s offerings. A profile in
Consulting
magazine after Bower’s death summed it up neatly: “It is perhaps an ironic footnote that what may have been
McKinsey’s greatest contribution to business is seemingly at odds with the contribution of the man who has most influenced the makeup of the firm that bears the McKinsey name. For while few people did more to unshackle accounting professionals than James O. McKinsey, few people worked harder than Bower in the coming years to put the shackles back on. Or at least, keep the accountants out of the boardroom.”
⁵⁴
James McKinsey was an accountant; Marvin Bower was not. Under Bower’s direction, McKinsey & Company employees used accounting tools, but they were no mere accountants. They were
consultants
.

While Guy Crockett nominally led the consultancy over the next decade-plus, it became Marvin Bower’s firm. It is said of some things that they refer to someone “in name only.” By the time Bower was done at McKinsey, it was just the opposite: While the firm did not bear his name, everything else about it screamed Marvin. First and foremost: Everything was sacrificed at the altar of the client. The client, the client, the client. Bower saw himself as little more than a servant to client interests. In building a firm of like-minded individuals, he also built a paradox of remarkable proportions: Marvin Bower and his colleagues were going to become the most successful and influential servants in history.

If James McKinsey invented the idea of strategic planning, his successor, Marvin Bower, perfected it by turning the idea into a profession. Bower was obsessed about making sure he and his peers would not be dismissed as corporate parasites and would enjoy a respect similar to other early twentieth-century professionals like doctors, lawyers, engineers, and ministers. But for that to happen, he needed to come up with the rules, protocols, language, and codes of behavior—the whole culture—of the American consultant. As it happens, this was exactly what Bower was born to do. He had the focus, discipline, and fastidiousness that made it possible for him to give birth to the unique and enduring institution that McKinsey remains today. The military has the Marines; the Catholic Church has the Jesuits. Consulting, thanks to Bower, has McKinsey.

The main reason for his success is a quality often overlooked in the corporate world: a willingness to repeat himself. He spent fifty years of his life saying the same things over and over again. “He never deviated from his message,” said Lou Gerstner, a former McKinsey consultant who went on to acclaim at RJR Nabisco and IBM. “Being a
great leader is often less a matter of eloquence and more a matter of repetition and consistency.” Asked about that very trait in 2011, James Gorman, a former McKinsey consultant and current CEO of Morgan Stanley, was blunt. “What a great quality. I wish I had more of it.”
¹

First, Bower had to invent the McKinsey persona: The McKinsey consultant would be selfless, be prepared to sacrifice money and personal glory for the sake of building a stronger firm, never look for public credit, and always be confident and discreet. British foreign secretary William Hague, a former McKinsey consultant, put it this way: “You are encouraged to believe that you belong to a special club of elite people.”
²

When it came to sacrifice, Bower himself set the example. When the firm opened a San Francisco office in 1944 in partnership with Kearney’s Chicago contingent, it was Bower and his wife, Helen, who moved to Palo Alto for the summer of 1945 to stand the office on its feet. But it wasn’t until 1963 that Bower made a decision that, journalist John Huey correctly concluded, “permanently set him—and McKinsey—apart from its competitors.”
³

Bower and his partners could have sold their firm at market value at the end of their careers as a way of cashing out, thereby personally reaping the rewards of their efforts. After all, at any successful firm, market value exceeds book value by a significant margin. Their contemporaries did it—the founders of George Fry & Associates and Barrington Associates both cashed out in the 1950s. McKinsey’s competitor Cresap, McCormick and Paget actually managed to sell itself twice in twelve years—first to Citicorp in 1970, and then to Towers Perrin in 1982 after having bought the firm back from Citi in 1977.

Instead, Bower sold his shares back to the firm at book value. In doing so, he demonstrated precisely the kind of allegiance to the cause he expected of anyone wishing to be successful at McKinsey: He forsook considerable riches for the good of the institution, in the process
giving young consultants the ability to buy their way into the partnership without mortgaging their houses to do so. His McKinsey would be self-perpetuating, and he gave up a fortune to make it so. But he also sent the message that working for McKinsey was like joining a special order of men willing to put the higher cause of the firm ahead of self-interest.

Bower’s decision came as a surprise to many, including his own family. “Let me just say there was shock on people’s faces when he told us that he was selling his shares back to McKinsey at book value,” said his son Dick Bower. “It felt unbelievable, to tell you the truth. But that was Marvin for you.”
⁴

Before Bower came along, any huckster could call himself a consultant, and many did. So Bower came up with a version of the job that drew from other real twentieth-century professions: The consultant would comport himself as a lawyer, with discretion and integrity; he would bring scientific, fact-based rigor and precision to the task, like an engineer or accountant. Like a doctor, he would dispense advice to unhealthy companies on how to get better and to healthy companies on how to stay that way. And, like a priest, he would serve his clients.

Because Bower had a background in law, his desire to be just like a law firm was perhaps the most explicit of all. Historian Christopher McKenna wrote of a 1940 brochure in which the firm explained: “We serve business concerns on management problems in much the same way that the larger law firms serve them on legal problems.”
⁵
Another way of looking at it: It’s hard to get any business done in the United States without hiring a lawyer. If Bower could achieve a similar result for McKinsey, the firm could entrench itself in the economy.

What’s more, Bower was already trying to move away from the idea of consultants as “business doctors” and to position the firm as a resource used by the best companies more than by the worst. “Those who use us the most, need us the least,” he told
Fortune
in 1954.
⁶

In his 1997 book
The Will to Lead
, Bower outlined the five primary responsibilities of the professional consultant; some of them overlap, but as we know, Bower was prone to repeating himself. First, the consultant must put his client’s interests ahead of the firm’s interests. If a McKinsey consultant thinks a study is not in the interests of a client—a waste of money, or a misguided investigation—he must tell the client so. Second, he must adhere to the highest standards of truthfulness, integrity, and trustworthiness. Third, he must keep to himself the client’s private and proprietary information. Fourth, he must maintain an independent position and tell the client the truth as he sees it. And fifth, he must provide only services that have real value.

On the surface, there seems nothing controversial about this set of rules. Do your best for your clients, they say, and try not to screw them over in any way. But Bower’s idea of the professional was more nuanced than that. Part of the reason for his split in 1947 with Tom Kearney, he wrote, was that his partner was satisfied with “ethical” standards instead of “professional” ones.
⁷
To act ethically means acting within the bounds of morality, which any honest person should be able to do. To act professionally means to take on a whole additional set of responsibilities. If that seems like an impossibly fine distinction, well, it was clear as day to Bower. To him, the
purpose
of the enterprise was to serve clients; profits were a byproduct.

Can an adviser to a business really claim he’s not engaging in a commercial act? It’s practically an absurd notion on its face—helping to increase profits as a selfless exercise—but that’s the line Bower chose to take, and thousands of McKinseyites have absorbed his view. “I still run to work—figuratively of course,” said Ron Daniel, the venerated
former managing director of McKinsey, in 2010. “[It] may sound like motherhood, [but this] is a life of service. It’s not the same as being a doctor or part of the clergy, but in our own way, we are here because we serve our clients, and that idea of service just happens to be important to me.”
⁸

Bower carried out this service approach by mandating an all-for-one-and-one-for-all approach to moneymaking. He directed that all consultants share in one big pool of company earnings, not just the earnings of their office. This boosted the entrepreneurial spirit within the firm, spreading risks associated with opening a new office and encouraging talent to move freely throughout the company. The policy also sent a clear signal to potential clients—that when you enlist the services of McKinsey & Company, you have the full resources of the firm at your disposal.

To go along with this philosophy, Bower came up with a new language. McKinsey had
clients
, not customers. Its consultants played a
role
rather than worked at a job. It had a
practice
and
firm members
, not a business and employees. It didn’t sell, nor did it have products or markets. The firm did not
negotiate
with clients, that being far too adversarial a term. It merely
made arrangements
. It didn’t have rules. It had
values
. And, perhaps most important, McKinsey was not a company; it was
The Firm.

There were occasions when Bower’s McKinsey didn’t behave like a secular priesthood. Though he stipulated that the firm never solicit work or advertise its services, McKinsey did produce 2,600 copies of a 42-page booklet titled
Supplementing Successful Management
, the majority of which ended up in the hands of current and prospective clients. In 1966 the company advertised in
Time
magazine under the guise of looking for recruits. “What does it take to succeed at McKinsey?” the headline asked in one ad. The answer: “Outstanding mental equipment finely honed by a first-rate education, coupled with the
imagination to solve complex problems; the self-confidence, skill in expression, and sensitivity to other people that lead to high personal effectiveness; and, of course, good character and high standards.”

The message was clearly aimed at potential clients as much as potential hires. But the firm denied any advertising motivation once again.
⁹
McKinsey’s insistence that it did not engage in a PR strategy was simply false; in the 1960s, the firm contracted with PR pioneer Pendleton Dudley. It later used the services of Murden and Co., a consulting firm even more behind the scenes than McKinsey. Murden was an early force in the Bilderberg conferences, the secretive annual meeting of Western influencers.

Bower’s insistence that the firm avoid traditional advertising for professional reasons also made a virtue of obvious necessity. For what could McKinsey advertise even if it wanted to? Certainly not its client list. “Management consulting is too complex an art to be explained effectively in the limited space of an advertisement,” wrote journalist Hal Higdon in
The Business Healers
. “About all a consulting firm can talk about effectively is the extremely high competence of its personnel. The effect might be somewhat similar to the Roman Catholic Church’s taking two pages of
Life
to advertise God.”
¹⁰

So what made a McKinsey consultant successful? Bower dedicated his life to defining him. First, said Bower, “the successful consultant has a personality that causes most people to like him.”
¹¹
And with that likable personality, the McKinsey consultant should make his way into his community’s establishment: He was expected to join local boards, get involved in charities, and even attend church. This was community relations as business strategy, another manifestation of Bower’s pragmatic idealism. (There was an ugly side to McKinsey’s caste system: Henry Golightly, a New York–based consultant, was run out of the firm when it was discovered that he was homosexual. Truman Capote, a friend who at times stayed over at Golightly’s
Hamptons beach house, named his
Breakfast at Tiffany’s
heroine after the consultant, who was placed on “medical leave” when the details of his private life became known.)