Why Taxpayers Pay McKinsey $3M a Year for a Recent College Graduate Contractor • Hacker News Board

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

#211

Post by taude » Thu, Dec 05, 2019, 9:28 PM UTC

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.

Yeup, this. I worked at a former company who paid 7 figures for a re-org (lay-offs), and it was run mostly by 25 year olds, with the occasionally pre-recorded video by a big-co partner. Was really interesting dynamic that felt more like "Up in the Air". But it was obvious they did it for liability reasons and so they wouldn't have to take the blame for the lay-offs since it was the consultants who told them findings.

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

#212

Post by underdown » Thu, Dec 05, 2019, 9:30 PM UTC

spamizbad wrote: post #135

underdown wrote: post #117

Earlier quoted context omitted.

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

I've been in this position. The feeling of satisfaction wears off in a few minutes. My resume was updated later that week and I was on to the next adventure within two months. And this was with a DR who stuck up for me and mentioned to the CEO directly that we paid a consultancy big bucks to tell us something a chorus of engineering team members have been saying for years.

Sorry to hear that. Hope things worked out.

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

#213

Post by LameRubberDucky » Thu, Dec 05, 2019, 9:30 PM UTC

alistairSH wrote: post #167

underdown wrote: post #117

Earlier quoted context omitted.

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.

The person billed that for the consulting company, but I doubt they got that much. Consulting companies burn both ends.

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

#214

Post by heartbreak » Thu, Dec 05, 2019, 9:30 PM UTC

luma wrote: post #207

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…

As a consultant I like to flip this situation around, and let the internal staff who are already advocating for the direction I feel is best to be my biggest cheerleaders. Engage them early, let them know you're there to help them personally, and they'll help you do a better job when presenting your shared ideas to the brass.

Meta, but this comment reads exactly like it was written by a consultant.

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

#215

Post by LameRubberDucky » Thu, Dec 05, 2019, 9:33 PM UTC

jkestner wrote: post #141

crazygringo wrote: post #66

Earlier quoted context omitted.

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…

I know y’all want to repeat the whole thing about consultants we've all heard before, which sure, is “exactly this”, but the article goes much deeper, and is specific to the government. Here, consultants are ripping off taxpayers because a Clinton-era rule financially incentivized the government to outsource work to “entrepreneurs”. This department is literally given a percentage of the money it gives to consultants.

Isn't this the definition of a kickback?

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

#216

Post by bumby » Thu, Dec 05, 2019, 9:36 PM UTC

ndarwincorn wrote: post #208

bumby wrote: post #194

Earlier quoted context omitted.

Thanks, what I'm not quite getting is that the other contractors are listed. What seems to get lost is that the GSA doesn't select the contractors, they just list them. The connecting dot that's missing is why agencies choose the more expensive option when it benefits the GSA, not the agency using their schedule. For the perverse IFF incentive structure logic to hold true, it seems like GSA would be incentivized to a…

This is reading more and more like you're begging the question. One of the sibling replies that predates this comment by a quarter of an hour already addresses your specific missing connecting dot here. Not to mention the article itself, which is also well cited. It's good. I suggest you read it. Interrogating my two sentence oversimplification of the forest is not a useful way to learn about this.

I get the impression some of the commenters don't really have experience with government contracts on either the public or private side.

The IG report points out real problems, but I think people are extrapolating too far because they don't truly understand how contracts are awarded via the GSA schedule. I think people are confusing being awarded a listing on a GSA schedule with an actual order. Being on the GSA schedule just means is there is an agreed upon price for a product or service. An agency still needs to chose that product or service before any money changes hands.

The GSA essentially produces a catalogue of products and services. Like the article mentions, it seems like the GSA allowed McKinsey to name their price and that is, as the article says, "honest graft". The article also implies other contractors are also listed, although they don't get similar preferential price treatment. So the GSA isn't down-selecting the number of "items" listed in the "catalogue" to force agencies into selecting the expensive McKinsey. It's just inflating the price of one item. What isn't covered is why agencies are selecting the more expensive item. To me, that is where the real corruption would be.

To play devil's advocate, the whole IG issue could potentially be attributed to a bad contracting supervisor who reassigned the contracting officer who was fighting against the price increase. The fact that the other companies were denied similar price increases indicates to me that it's not a cultural issue of "honest graft".

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

#217

Post by crazygringo » Thu, Dec 05, 2019, 9:37 PM UTC

alistairSH wrote: post #167

underdown wrote: post #117

Earlier quoted context omitted.

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.

If you look at entry-level consultant salaries at McKinsey and then divide by the fact that they're often working 7-day, 100-hour workweeks... you'll quickly discover that your "23 year old snot" is actually making around minimum wage on an hourly basis. They could be flipping burgers instead with a lot less stress.

The consultants aren't the ones taking the money home, the firm is. So don't blame the 23 year old. He or she is honestly just doing their insane best to pay off their huge student loans.

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

#218

Post by tedsanders » Thu, Dec 05, 2019, 9:38 PM UTC

abeppu wrote: post #145

On glassdoor it seems like that recent grad business analyst is taking home ~100k [1]. One of the articles earlier this week about McKinsey as "Capital's Willing Executioners" [2] talked about how the firm spreads a specific capitalist ideology. Given that (in this instance), the company is charging a 30x markup for the labor of that recent grad business analyst ... should we be thinking of McKinsey analysts as misgu…

I worked as a management consultant. When my firm billed my time out at ~$10K/day and paid me ~$150K/yr (a ratio of ~20:1), I didn't feel exploited. That ~$10K/day covered way more than just my time.

Here's what that billing had to cover:

* My normal work hours [the thing we billed for]

* My overtime hours

* My annual bonus

* My benefits & retirement savings & overhead & employer-side taxes

* My time spent on business development & sales (most of which don't pan out)

* My time spent on discounted or free projects performed to seed future sales

* My time spent in training & development (probably ~4 weeks in the first year)

* The time of managers spent training & developing me

* My support staff (industry analysts, Powerpoint designers, internal experts)

* Multi-million-dollar IT investments to build tools and databases to support me in my work

* A couple first-class flights a week

* A few nights a week at expensive hotels

* Lyfts & Ubers everywhere

* All meals expensed

* The firm's partners working the case

* New employees for whom we don't bill

* Fees for market reports

* Fees for expert interviews with industry executives (in some cases we'd do dozens of interviews a week, paying ~$1K/hr each)

* Office overhead (rent, power, insurance, etc.)

* Office support staff (HR, finance, janitors, etc.)

* Profits for the firm's equity holders

(Now a few of these expenses were billed separately I believe, but it shows the wide breadth of costs that a firm has to cover.)

None of this opportunity would have existed without the firm, the network, the brand, and the partners. It's amazing to think that all I had to do was show up and work, and in exchange, I would get paid a high salary, get experience working with senior executives, get a prestigious brand on my resume, and accelerate my career relative to most career tracks. I don't regret the job, nor do I think it's surprising that there are crowds knocking on the door trying to get in.

Looking at other industries, I wouldn't be surprised if a cashier at a grocery store made less than 5% of what they put in the register each day. And I wouldn't be surprised if a oil driller got paid 5% of oil that they extracted each day. Even if we're the ones touching the revenue, we're still a small part of what it takes to run a big business.

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

#219

Post by sailfast » Thu, Dec 05, 2019, 9:40 PM UTC

luma wrote: post #207

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…

As a consultant I like to flip this situation around, and let the internal staff who are already advocating for the direction I feel is best to be my biggest cheerleaders. Engage them early, let them know you're there to help them personally, and they'll help you do a better job when presenting your shared ideas to the brass.

But... it’s not your shared idea.

It’s their idea, and the company didn’t have a process in place to let them present it except through your consulting engagement. Sure, if it’s a good outcome for the employee to work with you to get things implemented fine, but it still stings a bit that someone from the outside was trusted more than an invested employee before any traction occurred.

See also: “let’s hire a consulting firm to recommend an operating model to us.” (Often before we’ve asked our own employees)

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

#220

Post by jshaqaw » Thu, Dec 05, 2019, 9:41 PM UTC

iudqnolq wrote: post #113

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…

I'm trying to parse the phrase "peer level strategic counsel". Does it mean advice as good as the advice we're giving other firms like you?

I meant that C suite folks see McKinsey Directors as people at their level of judgement and skill who they can talk to in an open and honest manner to get advice. I’m not saying this is good/bad or right/wrong. Lots of CEOs want a consigliere with good advice who is on their side and that’s what they pay to get with a Director.