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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

#251

Post by unreal37 »

ndarwincorn wrote: post #116
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.

This entirely misses the forest for the trees. And granted the author's bias gets in the way of his attempt to point out that forest. Their bias aligns with mine, but with less editorialization IMO the following would be more clear: It's not that the work is or isn't valuable, or where that value is. It's that McKinsey charges 72% more than a competitor for the same consulting, and that there's a massive perverse inc…

One could argue that $3 million per year for a university undergrad with no experience is not merely "72%" overpriced, but is in fact 1000%-3000% overpriced.

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

#252

Post by throwaways66722 »

speby wrote: post #162
throwaways66722 wrote: post #118

Earlier quoted context omitted.

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.

No... that's not a good explanation. While it is true they're salaried, there are plenty of professions that bill by the hour for the time of salaried employees. How you bill doesn't need to match how you pay salaries. It could also be billed per day of work regardless of the number of hours and the issues mentioned above would still be pertinent.

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

#253

Post by iudqnolq »

jshaqaw wrote: post #220
iudqnolq wrote: post #113

Earlier quoted context omitted.

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.

Thanks for the clarification. I think my mistake was interpreting what you said as the perspective of a hypothetical company and thus assuming you meant a peer-level company. It seems in general McKinsey is rather targeted at the C-Level.

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

#254

Post by [deleted] »

excursionist wrote: post #180
speby wrote: post #162

Earlier quoted context omitted.

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.

Isn't unpaid overtime illegal?

[deleted]

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

#255

Post by drawkbox »

theslurmmustflo wrote: post #181
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?

Pete Buttigieg is surging, McKinsey is in the air. https://www.huffpost.com/entry/pete-buttigieg-secret-work-mc...

Sundar Pichai is also McKinsey alum, so in a way McKinsey has Google now.

People are also starting to take note of some of the bad things McKinsey have been involved in like their role in Enron (CEO was McKinsey and it was their 'sandbox'), role in U.S. Immigration and Customs Enforcement (ICE), role in Saudi clampdown on dissidents, support of authoritarian regimes and the Great Recession 2008 financial crisis and many, many more scandals or questionable actions. [1][2]

> McKinsey is said to have played a significant role in the 2008 financial crisis by promoting the securitization of mortgage assets and encouraged the banks to fund their balance sheets with debt, driving up risk, which 'poisoned the global financial system and precipitated the 2008 credit meltdown'...

Overall, like the other management consulting firms, McKinsey and the like can be used to justify some anti-competitive/anti-consumer/anti-employee but pro-board/executive or authoritarian policies and introduce plausible deniability for the directors that employ McKinsey.

Some have said McKinsey is a "culture of corruption". [1]

> McKinsey's fingerprints can be found at the scene of some of the most spectacular corporate and financial debacles of recent decades. — Ben Chu, The Independent (2014)

> Defenders of McKinsey claim that the firm merely advises, and is not a decision-maker.

Plausible deniability on both the company and consulting firm, they deny liability for all parties involved in a McKinsey action.

> Nevertheless, since the end of the 20th century, McKinsey has been either directly involved in, or closely associated with, a number of notable scandals. Reuters describes these incidents as indicating "not bad apples, [but] a culture of corruption".

[1] https://en.wikipedia.org/wiki/McKinsey_%26_Company#Role_in_c...

[2] https://en.wikipedia.org/wiki/McKinsey_%26_Company#2008_fina...

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

#256

Post by throwaways66722 »

mips_avatar wrote: post #232
throwaways66722 wrote: post #112

Earlier quoted context omitted.

McKinsey data scientist (basically a consultant who codes). Can answer this after following some colleagues who have left and seen many technical teams at clients for my general role. Most data scientists... don't know what to do. And most clients... don't know what to do with them. So they do little data science projects and build dashboards that few people use. Coming out of McKinsey you can quite confidently say y…

I feel like I do data investigations pretty often in my role as a PM at a tech company, how does this differ as a consultant?

This only really applies to really large companies mind you, but I would say:

1) You don't need to work your way up the approval chain. Your idea is already going to people with the authority to act on it.

2) You have significant ability to just call people and get them to share their data and domain knowledge

3) You have little risk of long term problems from saying something that someone doesn't like, so long as its not the person who hired you.

4) The pace is probably very very fast relative to the speed of most large orgs. Probably not sustainably fast tbh. It's fine because it's several weeks of hard focus and then a bit of a break.

If you feel like you're doing fine and are answering important questions then you probably are doing just fine and your company's data culture is healthy. IMO people who build analyses that few people want or need are acutely aware of it.

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

#257

Post by wil421 »

CobrastanJorji wrote: post #189
wil421 wrote: post #152

Earlier quoted context omitted.

McKinsey comes up because they are an elitist consulting firm and HN is somewhat of an elitist forum. I am using elitist in a good way, although there’s certainly elitist attitudes on here. As someone who might join a Big 4 in IT consulting soon it’s nice to see what McKinsey is up to. It’s much nicer to see accountability for one’s actions.

> I am using elitist in a good way, although there’s certainly elitist attitudes on here. Wait, that last time you said elitist, did you also mean it as a good thing?

Only if I was part of the elite. ;-)

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

#258

Post by abbadadda »

> In other words, the agency of the government in charge of bulk buying isn’t paid for saving money, but for spending too much of it.

I'm shocked SHOCKED to learn the U.S. government is not a well oiled machine free from fucked-up incentives or outright corruption.

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

#259

Post by iudqnolq »

sailfast wrote: post #223
jkestner wrote: post #141

Earlier quoted context omitted.

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.

GSA gets a cut of contract purchases that go through them but this makes sense because it incentivized them to be better alternatives than an agency’s own contract shops. Typically working through a GSA schedule like this can lead to faster turnaround and lower prices - nobody can charge the government more than their best commercial customer, legally, under this framework. If you don’t get value, put your own RFP on…

Thanks for providing the background on how this came about, it makes a bit more sense now.

Could we get the same result by allocating the GSA a flat amount based on what they need and then penalize them by cutting the budget if no one uses their services, just like we do for other agencies?

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

#260

Post by abbadadda »

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…

> "but that's just your opinion, man".

TIL The Dude is a phenomenal businessman.

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