Free The Firm: The Story of McKinsey and Its Secret Influence on American Business by Duff McDonald Page A

to leave for big positions elsewhere. Among others, Facebook chief operating officer Sheryl Sandberg is a McKinsey alumnus, as is Google chief financial officer Patrick Pichette. McKinsey may be a career firm for some, but it tends to lose its best people.
    In Fortune magazine’s best companies to work for in 2010, all of McKinsey’s main competitors showed up—Boston Consulting Group (number 8), Ernst & Young (44), Deloitte (70), PricewaterhouseCoopers (71), Accenture (74), and KPMG (88). McKinsey didn’t make the list. The firm claims that the acceptance rate for offers made by it hovers around 95 percent. But an alumnus who worked at McKinsey for nearly three decades has said that, at least at Harvard Business School, that number is nowhere near accurate. Recent acceptance rates at Harvard, he argued, have fallen precipitously. Whereas in 1973 the firm made offers to 5 percent of the MBA class and had an acceptance rate of about 80 percent, in more recent years McKinsey made offers to about 30 percent of the class and enjoyed only about 50 percent acceptance.
    Though the firm still invests more in its people than does any of its rivals, McKinsey is at risk of becoming a mere pit stop for talent, a place that trains young people for more exciting careers elsewhere. That presents a shocking disparity with the McKinsey of half a century ago. “Are they in the swiftest stream or not?” asked former McKinsey consultant Bill MacCormack. “What are they learning? In our day, we got to work at the very highest levels. It was an intellectual high. Is it still?” 3
    Winners don’t win forever, no matter who they are. Goldman Sachs, long the gold standard in finance, has been outmatched recently by its much larger and better-capitalized competitor, JPMorgan Chase. Microsoft, lazy and dull after decades of dominance, was utterly outflanked by Apple after the return of Steve Jobs. And McKinsey? The firm has been winning at the game so long that one can only wonder if it will realize when it’s lost what made it a winner in the first place.
    The firm’s centrality in the management process is also more difficult to see with the abstraction of the economy. While many assumethat the growth of consulting is a direct result of the benefits it provides, there is an alternative view. “The world does not owe consultancies a living,” Stefan Stern wrote in the Financial Times in April 2010. “After all, there was a time, not so long ago, when people ran their business without the help of strategy consulting firms.” 4 In many cases, that is also true today: McKinsey alumni may have infiltrated the ranks of Google or eBay, but the fleetest young companies that are changing the face of business today don’t have the time for McKinsey to establish a “trust-based relationship.”
    McKinsey is now large enough that it tends to reflect the consulting cycle, which waxes and wanes with the global economy. As a result, McKinsey has not seen meaningful growth in the United States for many years and is seeing dramatically slower growth in Europe, where it prospered in the 1990s. Like the Roman army, McKinsey needs to keep moving just to forage for food to sustain itself. Chinese executives and bureaucrats, naturally, find themselves enjoying a disproportionate amount of attention from the consultants. Burgeoning demand in Asia for McKinsey’s services is due at least in part to the firm’s sterling brand reputation in the West. But that demand won’t last long if all McKinsey does is try to sell old formulas in new packages.
    The firm’s business is also so global that the revenue breakdown generally mirrors that of world GDP. The United States, for example, which accounts for about 25 to 30 percent of global GDP, also represents 25 to 30 percent of McKinsey’s revenues. Europe and Africa? About 30 percent combined. And Asia and Latin America make up the balance. If the debt crisis takes down the European economy, more than a