The CEO Factory: Ex-McKinsey Consultants Get Hired to Run the Biggest Companies

Even some they couldn’t fix in the first place

UpandDown the StreetOver the past 12 months, my 4-and-a-half year-old daughter has gone deep into Lego. And I’ve gone right along with her. When we visited the Lego store at Rockefeller Center, I found myself secretly switching pieces she’d randomly thrown into our all-you-can-jam-into-this-for-$15 cup with those that I distinctly remembered wishing I’d had more of as a child. (Flat tiles and long plates. Don’t pretend you don’t know what I’m talking about.) I even read David Robertson’s excellent Brick by Brick. I decided to take a break when I started seeing Lego everywhere, including on the belt buckle of a guy standing in front of my seat on the subway. I was clearly at risk of Lego overdose.

Having spent the past four years writing The Firm: The Story of McKinsey and Its Secret Influence on American Business, I nearly overdosed on McKinsey-related news intake as well. But it could happen to anyone. If you’re paying attention, you will notice something in the news about McKinsey nearly every day. And there’s a good chance that news will be about yet another former McKinsey consultant being appointed to a top job at one of the largest companies in the world. No, I’m not seeing McKinsey belt buckles; I’m simply pointing out a fact. McKinsey is, without a doubt, the most efficient generator of top-tier corporate executives the world has ever known.

Don’t just take my word for it. A few years ago, more than 70 past and present CEOs of Fortune 500 companies were McKinsey alumni, and in 2011 more than 150 McKinsey alumni were running companies with more than $1 billion in annual sales. A 2008 study by USA Today calculated that the odds of a McKinsey consultant becoming CEO of a public company were the best in the world, at 1 in 690. The closest rival was Deloitte & Touche, at 1 in 2,150.

Last week brought more news of high-level appointments. On Sept. 6, French satellite provider Eutelsat Communications appointed former McKinseyite Jean-Hubert Lenotte as the group’s director of strategy. On Sept. 3, Avon Products appointed long-time McKinsey consultant Brian Salsberg as SVP of global strategy. That was less than a month after it appointed one of McKinsey’s highest-profile female consultants, senior partner Nancy Killefer, to its board. And on Sept. 2, Serbian lawmakers appointed Lazar Krstic, a 29-year-old former McKinsey consultant, as finance minister.

They don’t only make news with their appointments, either. They make it with their actions. The man calling the shots on the Vodafone side of that $130 billion deal with Verizon a few weeks back? That would be CEO Vittorio Colao, also ex-McKinsey. While McKinsey is a hard place to hang onto a job—only one in six new hires stays with the firm more than five years—it does offer an incomparably bouncy springboard into plum corporate roles for those who leave of their own volition or otherwise.

Here’s the funny thing, though: Chances are, the McKinsey consultant who gets hired into a sweet corporate role was already working with that organization in the role of consultant. I’ve got no idea what work (if any) Brian Salsberg did for Avon while at McKinsey, but, as a partner serving top consumer companies in both North America and Asia, it’s a good bet that when he went to his job interview at Avon, it wasn’t the first time he’d walked through the $11 billion company’s doors. In early 2012, when long-time Avon CEO Andrea Jung was given the heave-ho for spending more time burnishing her own image than she had the company’s competitive and financial health, Avon announced that it had hired McKinsey to help it restructure its global operations. Again. One analyst pointed out that the company was a “rudderless ship” that had been in “perpetual restructuring … for the past 15 years.”

Jung had certainly gotten help from McKinsey while she’d been focused on Project Andrea Jung. When two McKinsey consultants published How Remarkable Women Lead: The Breakthrough Model for Work and Life in 2009, one of the “remarkable” women they featured in their book was Jung. You can bet they didn’t amass all of their insights about Jung’s “leadership” of Avon by reading news clippings. Call it an educated guess that McKinsey also gave Jung at least some strategic advice while she was driving the company into a wall. And then McKinsey was hired to help fix it. And now McKinsey alumni are being hired into actual jobs at the company. Hey, you’ve got to give it to them: If your job is simply to help solve problems, who’s to say that you can’t be hired to help solve one that you helped create?

It doesn’t only happen on the individual level. Consider Enron, which had McKinsey written all over it. Enron CEO-turned-convict Jeff Skilling was ex-McKinsey. Between May 2000 and December 2001, while he was driving Enron into the ground, Skilling had more than 20 meetings with two of his old buddies from McKinsey, partners Ron Hulme and Suzanne Nimocks. Then it all exploded in a violent crash. McKinsey competitor Arthur Andersen, Enron’s auditor, went out of business as a result, but despite the fact that McKinsey was pulling in more than $10 million a year from Enron at its peak, the firm wasn’t named as a civil or criminal defendant, nor were any of its consultants asked to testify at congressional hearings.

In fact, the whole Enron debacle had an arguably perverse positive effect for McKinsey. Among other things, it helped spur the creation of the Sarbanes-Oxley Act, which put executives and boards of directors more squarely in the gun sights of prosecutors. Whom have those boards hired to help shield themselves from liability? Consultants. McKinsey’s failures at Enron actually contributed, in a roundabout perverse way, to continuing demand for its services. Let the echo decide if they’re right or wrong.

You can see the same story playing out in the detritus of the credit crisis. Oliver Jenkyn, who headed McKinsey’s retail banking practice during the moment of that industry’s worst excesses—in both mortgage and credit card lending—was hired by Visa in August 2009 as its global head of strategy and corporate development. Failure to advise properly once again proved no impediment to further engagement.

In their defense, McKinsey consultants are only advisers, not decision makers. That’s up to the client. So there might not actually be anything absurd about having them advise you on the way up as well as the way down. Or on the way down and then on a hoped-for way back up. And while you’ll find a lot of criticisms of McKinsey in my book, you’ll also find a lot of awe at what a flexible and durable business model they’ve managed to build and protect over nearly a century. In short, they sell what their clients are buying. And clients are always buying something. Including questionable advice.