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

#311

Post by ethbro » Fri, Dec 06, 2019, 12:06 PM UTC

bkor wrote: post #305

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've worked with various from McKinsey. The work is not that impressive. It's like having an MS Office expert, especially Excel and Powerpoint. The person is able to work long days, so after a workshop they spend a huge time to make it look nice again. Though one told me they have a separate department for quickly making presentations look "nice". Meaning, the consultant just sends it off to that other department. Re…

You don't hire strategic consultants because you don't know what to do: you hire them because you want someone else to tell your colleagues to do the thing you think you should do.

So, essentially it requires the same skillset as a fortune teller.

(In the private sector)

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

#312

Post by ethbro » Fri, Dec 06, 2019, 12:13 PM UTC

iudqnolq wrote: post #253

jshaqaw wrote: post #220

Earlier quoted context omitted.

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.

It's typically targeted at someone of sufficient seniority that the cost of McKinsey is negligible when compared to the cost of doing the wrong / less optimal thing.

Or, in other words, if a manager makes a wrong decision then it costs the company $x00,000. If an SVP or C-level screws up, it costs the company $x0,000,000+.

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

#313

Post by ethbro » Fri, Dec 06, 2019, 12:20 PM UTC

MFLoon wrote: post #274

TrackerFF wrote: post #263

Earlier quoted context omitted.

McKinsey, Bain, BCG, et. al. are all extremely close to state and industry in all countries. I'm from Norway, and every now and then someone will publish articles about the governments exorbitant use of consultants (McKinsey at that) for seemingly menial tasks which should be handled internally. Truth is, these management consulting firms have some very good advantages to keep their business model going: 1) Their alm…

Yea, I don't doubt they would remain closely entangled with the US Government even if we changed the IFF incentive structure. But even so, the present incentive structure is particularly perverse because it's creating a positive feedback loop. The GSA has ~$40 billion yearly revenue because of the profit sharing model, which it is incentivized to continually increase, and the consulting firms don't even need to lobby…

The article gives short shrift to the reason this was originally put in place: to incentivize the GSA to aggressively outsource the government.

The GSA, like the departments they're serving, are filled by government employees.

Absent an incentive structure, a radical new executive commandment like "Outsource all the things" would get a yawn, papers filed, and absolutely no mass action.

And unlike private industry, I believe performance bonuses aren't really an option for government employees.

The flip side of job security is decreased initiative.

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

#314

Post by Ntrails » Fri, Dec 06, 2019, 12:49 PM UTC

saberdancer wrote: post #309

conro1108 wrote: post #187

Earlier quoted context omitted.

Not if the position is overtime exempt.

I'm not sure if this exists in EU. Does anybody know of a similar situation in EU?

Absolutely does. Everyone just signs to opt out of the 40 hour (something like that) working week directive and contracts are clear that there is no such thing as overtime.

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

#315

Post by throwaways66722 » Fri, Dec 06, 2019, 1:08 PM UTC

b0b10101 wrote: post #277

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'm guessing your at QB then??? How do you find the split between guys like yourself and the more traditional consultants?

Nope, there's many other data science shops in McK, although the branding is beginning to merge under the QB umbrella.

I see little difference. Sometimes it's an EM + 1 or 2 data scientists. Sometimes its an EM + 1 data scientist + 1 or 2 BA/Associates. We solve similar problems, its just the data science people tend to solve it with data and the traditional consultants solve it with interviews and whatever. That's not a swipe at them either. There's a significant quantity of problems that can be easily uncovered by talking to someone who knows the answer but can't get the business to acknowledge it OR by spending a week churning through data to discover it yourself. You might feel better with the hard fact base in hand, but doing those interviews and using the traditional consultant skill set tends to make you far more targeted and efficient in scoping and planning.

"QB" I think operates a little differently, whereby they get the data and tend to do more stuff on their own with dedicated modelers, data engineers, and designers. More "I am the expert here, leave me be". (Also not intended to sound like a swipe. That's a reasonable point of view sometimes).

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

#316

Post by bumby » Fri, Dec 06, 2019, 2:12 PM UTC

alistairSH wrote: post #178

bumby wrote: post #159

Earlier quoted context omitted.

> there's a massive perverse incentive for public servants in charge of awarding contracts to pick the most expensive one. I'm not quite following your logic here, could you elaborate a bit more? There's nothing prohibiting well-funded competitors from similar GSA approval, is there? My understanding is that this method is used to streamline contract awards...being listed on a GSA schedule means you've gotten a stamp…

GSA gets paid a % of the fees charged by the consultant. Therefore, the GSA has an incentive to have a very short list of highly paid consultants. The individual agencies using the scheduled are supposed to pick the low bid, but if GSA has restricted the schedule, well, we all get ripped off.

That is the way the article reads, but I think it reaches too far in it's conclusion.

Take the example schedule used in the article:

>McKinsey asked for 10-14% price hike for its already expensive IT professional services (which is a catch-all for anything).

The IT services schedule lists over 13,000 vendors [1]. McKinsey is listed on this schedule under four categories: 132-32, 132-50, 132-51, and 70-500. The most relevant to the article is 132-51, "IT Professional Services" which has 3,872 other contractors listed besides McKinsey. I personally wouldn't consider that evidence of the GSA restricting the schedule or indicative of a monopoly. This is what led me to my previous question as to why an agency would select the more expensive McKinsey given a reasonable amount of competition.

The ghostwriting brought up is a genuine concern and I would be in favor of investigating other funding mechanisms outside of the IFF pay structure. However, the author admits they are selling a book about how politics and monopoly are intertwined. Speaking of perverse incentives, I worry that the conclusions drawn are too heavily biased to support the book thesis rather than objectively looking at the broader context.

[1] https://www.gsaelibrary.gsa.gov/ElibMain/scheduleSummary.do?...

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

#317

Post by blaser-waffle » Fri, Dec 06, 2019, 2:16 PM UTC

edelans wrote: post #303

code4tee wrote: post #146

Have been on the receiving end of several McKinsey engagements. The work itself was generally not all that good. The knowledge of “experts” brought into meetings rarely contributed more than what a reasonably intelligent person could dig up on Google search results in an hour. They were also often farmed out on random staff augmentation functions that just annoyed the hell out of people. “Hi I need you to fill out th…

CYA = Cover Your Arse (I just found about that one, sharing if it can help others)

CYA is SOP, you FNG

(Cover Your Ass is Standard Operating Procedure, you, uh, "Friendly" New Guy)

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

#318

Post by Ill_ban_myself » Fri, Dec 06, 2019, 2:44 PM UTC

sbuttgereit wrote: post #99

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.

I have been on the "client" side of consulting engagements and a consultant myself. I think you identify the central truth of consulting: that usually we're not bringing any magic knowledge to the table. However, I think there are other circumstantial values that appear alongside the one you identify. I find that consultants not only provide cover, but also provide a level of focus on non-immediate, but important, pr…

Consultants have usually seen 10-20 successful versions of what you are trying to do and 3-4 failed versions materialize over the last three years.

The difference is usually whether the companies involved had the money and focus to mostly follow the consultant’s plan or whether it gets bogged down in customizations and committees of internal stakeholders at the company.

I’ve also seen a couple stall because 3rd party vendors over promised and totally dropped the ball but it’s usually the vendors that the company was locked into before the consultant came on board or some niche product with no good vendors in the space.

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

#319

Post by cafard » Fri, Dec 06, 2019, 2:46 PM UTC

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...

Thank you. I have not been following the information about Buttigeig, and was unaware of this.

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

#320

Post by bumby » Fri, Dec 06, 2019, 3:43 PM UTC

Freestyler_3 wrote: post #173

bumby wrote: post #159

Earlier quoted context omitted.

> there's a massive perverse incentive for public servants in charge of awarding contracts to pick the most expensive one. I'm not quite following your logic here, could you elaborate a bit more? There's nothing prohibiting well-funded competitors from similar GSA approval, is there? My understanding is that this method is used to streamline contract awards...being listed on a GSA schedule means you've gotten a stamp…

They pick more expensive because they get a percentage. They get to ghost write their own assignment.

The GSA awards the contract which sets the price for the services/products. The contract just sits there until another agency decides to leverage it. (i.e., the GSA isn't spending money executing the contract or forcing other agencies to do so either).

That contract isn't executed until another agency decides to use that service or product. The end-user agency benefits from a streamlined procurement process but does not receive any percentage of the contract. They are generally de-incentivized from selecting an expensive contract from the schedule, all things being equal.

Contractors influencing an unfair price is still a problem, but much less so if there are other contractors offering comparable products/services at a better rate because agencies are forced to buy the expensive option. What I haven't seen is discussion or evidence that the price inflation is systemic across a schedule that would elevate this to a full-blown scandal.

As stated in other replies, this doesn't appear to be nearly as outrageous as the article is interpreted in this discussion unless the GSA is inflating costs across the board. In the absence of that, end-using agencies can just select the cheaper option.

What was eluded to by another comment is that the more expensive contract may be selected if it's perceived to carry other social value above competitors. (e.g., "If it's coming from the prestigous McKinsey, it must be accurate")