When McKinsey Comes to Town

In the gleaming conference rooms of corporate America, a peculiar ritual has played out for nearly a century. When companies face their most challenging moments, when governments need to modernize, when entire industries require transformation, they make the same call. They summon the consultants from the world's most prestigious management consulting firm, armed with PowerPoint presentations and promises of scientific solutions to complex problems.

Yet behind this veneer of respectability lies a more troubling story. These consultants' fingerprints can be found on some of the most controversial business decisions of our time, from the opioid crisis that claimed hundreds of thousands of lives to the rise of income inequality that has torn at America's social fabric. This hidden history reveals how one consulting firm became both architect and enabler of modern corporate power, shaping not just individual companies but entire economic systems in ways that continue to reverberate through society today.

In 1926, a former accounting professor from the Ozarks named James O. McKinsey founded what would become the world's most influential consulting firm. McKinsey believed that businesses could be run more efficiently through scientific management principles, applying rigorous analysis to solve complex organizational problems. His timing was perfect as American corporations were growing larger and more complex, and executives needed help navigating this new landscape.

The firm's early years were marked by both innovation and controversy. McKinsey pioneered the concept of professional management consulting, establishing standards that persist today. However, the firm's methods could be ruthless. When McKinsey took over as CEO of the department store Marshall Field's in the 1930s, he implemented what became known as "McKinsey's Purge," eliminating nearly twelve hundred jobs. The public backlash was severe, with the traditionally paternalistic company suddenly viewed as just another heartless Depression-era corporation.

The real transformation came when Marvin Bower joined the firm in 1933. A Harvard Law School graduate, Bower reimagined McKinsey as a professional service firm modeled after prestigious law practices. He insisted on calling it a "firm" rather than a "company," emphasized client confidentiality, and established the principle that would define McKinsey for decades: "client first." Bower's vision elevated consulting from mere advice-giving to strategic partnership with America's corporate elite.

During World War II and its aftermath, McKinsey cemented its position as the consigliere of American business. The firm advised major corporations on post-war reorganization and helped establish the management structures that would dominate corporate America for generations. By the 1950s, McKinsey had created a new profession and positioned itself at its apex, setting the stage for unprecedented influence over American economic life.

The 1980s marked McKinsey's emergence as a true power broker in American business transformation. The firm's consultants were no longer just advisors but architects of corporate strategy, pioneering new organizational concepts and helping companies navigate the complexities of an increasingly financialized economy. McKinsey's influence extended beyond individual companies to shape entire industries and business practices during this pivotal era.

A crucial moment came with McKinsey's groundbreaking work on executive compensation that would have far-reaching consequences. The firm discovered that worker wages were rising faster than executive pay, a finding that sparked what became known as the "race to the top" in CEO compensation. McKinsey's Arch Patton became the godfather of executive compensation consulting, creating benchmarking studies that justified ever-higher pay packages for corporate leaders. This work laid the foundation for the dramatic income inequality that would define later decades.

The firm's growing influence coincided with fundamental changes in American corporate culture. The stable, long-term thinking that had characterized post-war business began giving way to a more aggressive, profit-focused approach. McKinsey consultants championed new management theories that emphasized shareholder value above all else. They helped popularize concepts like "downsizing" and "rightsizing," euphemisms for mass layoffs that became standard corporate practice.

Simultaneously, McKinsey became a leading advocate for deregulation and financial innovation. The firm helped banks and investment companies develop complex new products like mortgage-backed securities, arguing that these innovations would make the financial system more efficient and stable. McKinsey's intellectual framework for understanding risk and return would prove tragically flawed, but the firm's prestige gave credibility to financial innovations that would later contribute to systemic instability.

By the 2000s, McKinsey had successfully positioned itself not just as a consulting firm but as the intellectual architect of modern capitalism, with all the power and responsibility that role entailed. The firm's alumni occupied top positions at major companies, creating a vast network of influence that extended throughout American business and government.

The fall of the Berlin Wall and the end of the Cold War opened new frontiers for McKinsey's expansion. The firm aggressively pursued opportunities in emerging markets, particularly in China and Russia, where newly capitalist economies needed Western expertise. McKinsey's consultants helped privatize state-owned enterprises, restructure entire industries, and introduce market mechanisms to command economies. This global expansion transformed McKinsey from an American consulting firm into a truly international powerhouse.

The firm's work in China exemplified these new relationships, as McKinsey advised both the Chinese Communist Party and state-owned companies while simultaneously consulting for the U.S. military and American corporations competing with Chinese firms. This dual loyalty created obvious conflicts of interest and contributed to the transfer of Western business expertise to an increasingly aggressive authoritarian regime. McKinsey's relationship building with Chinese officials would later raise questions about the firm's role in legitimizing undemocratic governance.

Perhaps most controversial was McKinsey's deepening relationship with Saudi Arabia. The firm worked closely with Crown Prince Mohammed bin Salman's government, helping to modernize the kingdom's economy while turning a blind eye to its human rights abuses. McKinsey consultants prepared reports identifying influential critics of the Saudi government on social media, information that was allegedly used to target dissidents for persecution. When journalist Jamal Khashoggi was murdered by Saudi agents in 2018, McKinsey faced intense criticism for its continued work with the regime.

Simultaneously, McKinsey discovered the lucrative potential of government consulting in democratic countries. The firm established dedicated public sector practices, advising everyone from federal agencies to local governments on modernization efforts. McKinsey's reputation for analytical rigor and private sector efficiency made it an attractive partner for cash-strapped governments seeking to "run like a business." However, this created troubling conflicts as the firm often worked simultaneously for government agencies and the private companies they regulated.

The 2010s brought unprecedented scrutiny to McKinsey's client relationships and business practices as investigative journalism revealed the firm's extensive work with authoritarian governments and controversial clients. The revelation that McKinsey hosted a corporate retreat just miles from Chinese detention camps holding Uyghur Muslims became a symbol of the firm's moral blind spots and willingness to overlook human rights abuses in pursuit of profitable relationships.

Perhaps most damaging was the exposure of McKinsey's role in the opioid crisis. For fifteen years, the firm had advised Purdue Pharma and other opioid manufacturers on strategies to "turbocharge" sales of addictive painkillers. McKinsey consultants recommended targeting high-risk patients, suggested rebates for overdoses, and helped companies navigate regulatory challenges. When the extent of this work became public, McKinsey faced its greatest reputational crisis, ultimately paying over $600 million in settlements while maintaining it had done nothing illegal.

The firm's work with Immigration and Customs Enforcement under the Trump administration sparked internal revolt. Young consultants, many drawn to McKinsey by promises of doing good in the world, discovered their colleagues were helping design policies that separated families at the border and reduced spending on detainee care. The disconnect between McKinsey's public values and private client work became impossible to ignore, leading to unprecedented internal dissent and external criticism.

Climate change emerged as another area of controversy. While McKinsey published extensive research on the urgent need to reduce carbon emissions, the firm simultaneously advised some of the world's largest polluters on expanding production and improving efficiency. Internal documents revealed that McKinsey had helped coal companies increase output by millions of tons, directly contradicting the firm's public stance on environmental protection. This hypocrisy sparked a rebellion among younger consultants who demanded the firm align its actions with its stated values.

The cascade of controversies forced McKinsey to confront fundamental questions about its identity and purpose. The firm that had long prided itself on being "values-driven" found those values under intense scrutiny. Critics argued that McKinsey's primary value, "client first," had become a license to work with anyone willing to pay, regardless of the broader social consequences. The firm's traditional defense that it merely provided advice, not policy, rang hollow when that advice enabled harmful practices.

McKinsey's response revealed both the depth of the crisis and the challenges of reform. The firm implemented new client screening procedures, established ethics committees, and promised greater selectivity in choosing engagements. However, these changes came after decades of problematic work and faced skepticism from both current employees and external observers. The firm's decentralized structure, which gave individual partners significant autonomy in client selection, made comprehensive reform particularly difficult.

The human cost of McKinsey's work became impossible to ignore. From steelworkers killed in accidents at plants where McKinsey had recommended maintenance cuts to families destroyed by opioid addiction that McKinsey had helped fuel, the firm's pursuit of efficiency and profit had real-world consequences. The disconnect between McKinsey's elite consultants, insulated by spreadsheets and PowerPoint presentations, and the people affected by their recommendations highlighted broader questions about corporate responsibility and accountability.

The reckoning also exposed tensions within McKinsey between different generations and worldviews. Younger consultants, facing a lifetime of climate change and social instability, demanded that the firm take stands on important issues. Older partners, steeped in the tradition of client service above all else, resisted what they saw as the politicization of consulting. This internal struggle reflected broader debates about the role of corporations in society and the responsibilities that come with power and influence.

The story of this consulting giant reveals a fundamental tension at the heart of modern capitalism: the conflict between expertise and accountability, between efficiency and humanity. For nearly a century, the firm has embodied the promise that complex problems can be solved through rigorous analysis and professional management. Yet this history also demonstrates how the pursuit of client service and profit, unconstrained by broader social responsibility, can enable and amplify harmful practices across entire industries and societies.

The firm's influence extends far beyond individual consulting engagements through its role in shaping corporate governance, executive compensation, and business education. Its alumni occupy positions of power throughout government and industry, carrying these methods and mindset into new contexts. The challenge moving forward is not to abandon analytical rigor but to embed it within frameworks that prioritize human welfare and democratic values. This requires greater transparency in consulting relationships, stronger regulatory oversight of the consulting industry, and a renewed commitment to the idea that with great influence comes great responsibility.