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Why Taxpayers Pay McKinsey $3M a Year for a Recent College Graduate Contractor

mattstoller.substack.com

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Re: Why Taxpayers Pay McKinsey $3M a Year for a Recent College Graduate Contractor

#161

Post by mdorazio »

jshaqaw wrote: post #95

Former McKinseyite here (and one reasonably skeptical of the firm as a whole)... nobody hires McKinsey for fresh college grads. That’s just something they tell fresh top of class Ivy League college grads to make them feel important. Clients hire Directors to give them peer level strategic counsel. How they technically allocate payment for time across consultants is just backfillling to get to a number already agreed…

This is slightly twisting what you actually get, though. You want the Director-level time (and that's what is advertised during the sales process), but realistically you get a team of largely inexperienced kids supported by the person you actually want, who gives you a few hours while billing for the whole team to meet their blended rate target. In a lot of cases it's become a bit of a weird situation where the strategic guidance is almost free if you sign up to pay for a team of 20-somethings to follow a playbook and make some decks.

Re: Why Taxpayers Pay McKinsey $3M a Year for a Recent College Graduate Contractor

#162

Post by speby »

throwaways66722 wrote: post #118
jshaqaw wrote: post #108

Earlier quoted context omitted.

By the way, this is not to denigrate the analysts at McKinsey who were in my time typically very smart, nice, hardworking, etc... They performed an important data gathering function. But the bill for their time has the sort of relationship you get when a Legal Assistant at Cravath photocopies stuff in your file. No they aren’t “worth” $500k/hour or whatever rate they bill at these days to photocopy but that isn’t the…

McKinsey does flat fees. The flat fees are driven by a rate card estimate, but there's no marginal cost to an extra hour... fwiw

Thats because there is 0 additional marginal cost for their salaried consultants' time, too. Like many in the workforce, they are a paid a salary, and it's the same amount whether working 40 hours or 80 hours.

Re: Why Taxpayers Pay McKinsey $3M a Year for a Recent College Graduate Contractor

#163

Post by mayneack »

cafard wrote: post #123

I don't remember seeing HN articles about McKinsey before this month or last. Now there are three articles about McKinsey on HN, including one that says that the Houston Astros' sign-stealing exemplifies the decline of a McKinsified America. (Or maybe it's the Astros that are M'd.) How did it become the flavor of the month?

McKinsey has been generally in the news of late as Pete Buttigieg has gotten more traction in the polls because that's that he credits for much of his experience. Its probably not HN specific.

Re: Why Taxpayers Pay McKinsey $3M a Year for a Recent College Graduate Contractor

#164

Post by potta_coffee »

kube-system wrote: post #149
sjg007 wrote: post #132

Earlier quoted context omitted.

I don't subscribe to this viewpoint. You have to have the clout to bring in the consultant in the first place. Now it may be a buy vs build decision and you are looking for advice on the buy side but I don't see it being about political cover when your "reputation" would be tied up with the consultant.

There are many projects where the build vs buy decision itself is politicized. Political rifts between business and IT is a story that is just as old as business software itself. Super common scenario: * The business thinks IT is too slow to implement, and doesn't understand business needs * IT thinks the business changes priority too much and doesn't even understand their own business processes, and it's leading to…

Two years later, the outsourced work is half-finished and what has been delivered is near-total garbage. All the best engineers have left the team and the business is scrambling to hire someone competent to cleanup the mess.

Re: Why Taxpayers Pay McKinsey $3M a Year for a Recent College Graduate Contractor

#165

Post by kevinconaway »

cafard wrote: post #123

I don't remember seeing HN articles about McKinsey before this month or last. Now there are three articles about McKinsey on HN, including one that says that the Houston Astros' sign-stealing exemplifies the decline of a McKinsified America. (Or maybe it's the Astros that are M'd.) How did it become the flavor of the month?

Likely due to the recent NYT article that detailed how McKinsey helped the Trump administration carry out its immigration policies[0].

[0] https://www.nytimes.com/2019/12/03/us/mckinsey-ICE-immigrati...

Re: Why Taxpayers Pay McKinsey $3M a Year for a Recent College Graduate Contractor

#166

Post by wiseleo »

codesforhugs wrote: post #88
hwbehrens wrote: post #5

The IFF referenced in the article seems like a great example of how good-intentioned changes to incentive structures can have very warped outcomes, potentially years later. These kinds of effects keep popping up for me, even in industry contexts (e.g. stack ranking). Are there accepted mechanisms for systematically identifying these knock-on effects, and if so, what are they and how can they be more broadly applied?…

The fundamental problem with incentives is that they're asymmetric in nature: The incentivee has a lot more time (and direct motivation) to come up with a way to game the incentive than the incentivizer can spend when setting it. The only real way to address that is to revise incentives on a frequent and regular basis — but who wants to do that? Certainly not legislatures.

That's true. I found a lucrative opportunity recently and identified and removed the bottlenecks that were throttling my earnings through bad processes on the client's side. As a software and network engineer, I found much faster ways to get things done. I am working on an app to make it even faster.

That is what flat rates do - the side willing to work for a flat rate optimizes the processes to make that rate work for them.

Now everything gets resolved in one service call, but my effective hourly rate is high enough to work around every inefficiency. I have an incentive to find everything that is wrong with that location and fix it regardless of what the original service call description says. That is just a starting point as far as I am concerned.

If that company invested a small amount in producing technical training for field technicians and bolstering staffing at their inexpensive offshore call center, I would have had meaningful competition. I imagine if they hired consultants, they would see that as a report.

I hold unique institutional knowledge like undocumented direct phone numbers to relevant people at client organizations that I have a very big incentive not to share.

Re: Why Taxpayers Pay McKinsey $3M a Year for a Recent College Graduate Contractor

#167

Post by alistairSH »

underdown wrote: post #117
slg wrote: post #107

Earlier quoted context omitted.

>Also, this lets the CEO appear unbiased to all the people who "lost". So they can get on board with the new policy but not feel like the CEO shot them down personally, which is bad for morale, can lead them to quit, etc. The flip side is that it is also bad for morale for someone to be recommending a solution for some time, the recommendation is ignored, a consultant is hired, the consultant recommends the same solu…

Wouldn't one enjoy some benefits from being proven right?

Right up until you realize the 23 year old snot who made the recommendation billed ~$3 million against your ~$100k salary.

Re: Why Taxpayers Pay McKinsey $3M a Year for a Recent College Graduate Contractor

#168

Post by mdorazio »

cafard wrote: post #123

I don't remember seeing HN articles about McKinsey before this month or last. Now there are three articles about McKinsey on HN, including one that says that the Houston Astros' sign-stealing exemplifies the decline of a McKinsified America. (Or maybe it's the Astros that are M'd.) How did it become the flavor of the month?

Really? I see McKinsey posts come up at least once a quarter. Just do a google site search on HN for "mckinsey".

Re: Why Taxpayers Pay McKinsey $3M a Year for a Recent College Graduate Contractor

#170

Post by jrochkind1 »

crazygringo wrote: post #66
z3ugma wrote: post #21

I was a technical project management consultant for a long time. The value that most orgs get from a consultant isn't really in the advice the consultant gives them, it's the political cover to make changes they knew they should make all along, but didn't have the social capital or the focus to make those changes until they had a person in a chair across from them.

It's exactly this. Within any organization, you can have 3 or 6 important people pushing in completely different strategic directions. And it can be clear to any unbiased observer that there's only one good, responsible choice, but within your org that gets met with essentially "but that's just your opinion , man". So you call in a consulting firm and they deliver what most of the people already know. The consultants…

> Within any organization, you can have 3 or 6 important people pushing in completely different strategic directions. And it can be clear to any unbiased observer that there's only one good, responsible choice,

Or, there ISN'T a clear exactly one good responsible choice, it really is a matter of judgement and/or choice of priorities/values... and then whoever can exert the most control over the contractor can still get their way by getting the contractor to pick their side.

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