After a series of scandals, yet more of McKinsey’s dirty laundry is getting aired. It’s bad enough that, to name a few of the rash of well-deserved critical stories, that the storied consulting firm is implicated in criminal fraud in South Africa, or that its work for the Saudi government resulted in the persecution of Twitter dissidents that McKinsey identified, or that a contract in Mongolia served as a vehicle for three officials to take illegal payments.
But with the US intelligence apparatus, McKinsey looks to have committed a cardinal sin: doing work that was so shoddy that not only is the client complaining about it, but it can actually show that the engagement did harm.
Mind you, it’s not as if poor quality consulting studies are unusual. Consulting often winds up being a lot like therapy, so the hired guns may not be providing the greatest advice, but the client executives come to rely on them anyhow, turing the advisors into enablers. As one fellow McKinsey consultant observed, “The problem with consulting is you are hired by the problem” and “The most profitable clients are the most diseased.”
So it is not at all good to see McKinsey take organizations that are pretty competent, namely the CIA, NSA, and other intelligence, and make them worse off. From Politico:
For the past four years, the powerhouse firm McKinsey and Co., has helped restructure the country’s spying bureaucracy, aiming to improve response time and smooth communication.
Instead, according to nearly a dozen current and former officials who either witnessed the restructuring firsthand or are familiar with the project, the multimillion dollar overhaul has left many within the country’s intelligence agencies demoralized and less effective.
These insiders said the efforts have hindered decision-making at key agencies — including the CIA, National Security Agency and the Office of the Director of National Intelligence.
They said McKinsey helped complicate a well-established linear chain of command, slowing down projects and turnaround time, and applied cookie-cutter solutions to agencies with unique cultures. In the process, numerous employees have become dismayed, saying the efforts have at best been a waste of money and, at worst, made their jobs more difficult. It’s unclear how much McKinsey was paid in that stretch, but according to news reports and people familiar with the effort, the total exceeded $10 million.
In each case, bureaucratic changes that slow response time or hamper intelligence collection capabilities could cause the loss of company secrets, private government data, the democratic process and even American lives. Already, some projects at the NSA have been cut or delayed as a result of disgruntled employees leaving the agency.
Let’s stop here. $10+ million, for a project that spanned four years? That’s couch lint. It’s been well over a decade, maybe even two decades, that McKinsey would not get out of bed for at least a million in fees. And that million would buy you a three to four month engagement.
In other words, if the firm was working regularly with the spy services over four years (as opposed to in fits and starts), the burn rate looks to be close to the bare minimum needed to hold McKinsey’s attention. Thus if you know the firm’s billing practices, it comes off as amusing that there are also complaints about the lack of competitive bidding. In fact, McKinsey may have cut the intelligence agencies a price break as a concession so as not to be subject to the indignity of a competitive process. But getting McKinsey at a bargain price is no bargain. The article describes how McKinsey went “seamlessly” from agency to agency, with no bidding each time, even when there wasn’t even a clear need for its services:
A lot of people at the agencies involved think McKinsey dialed in its work:
“At CIA, they shattered longstanding structural constructs that people had invested their whole careers in,” said Larry Pfeiffer, a 32-year intelligence veteran who now serves as the director of the Michael V. Hayden Center for Intelligence, Policy and International Security at George Mason University. It resulted in “a coordination nightmare” widely considered to be “very heavy-handed,” added Pfeiffer, who left government before the restructuring but remains in close contact with current officials.
Pfeiffer said he doesn’t know “a soul at CIA or NSA who would tell you that the reorganizations have made things better.”
“That’s exactly what happened,” a former CIA operations officer said…the former senior intelligence official who witnessed CIA’s reorganization said McKinsey “usually comes in with a goddamned formula.”
“They claim to customize, but they don’t,” the former official said. “They are extremely formulaic. You can tell that they’re following a script.”
Indeed, reading between the lines of the article, McKinsey appears to have installed “mission centers” at each agency. That does sound like McKinsey was force-fitting at least some of its recommendations.
One failed initiative, launched by the NSA in 2016, was to combine offensive and defensive cyberthreat teams. Politico reports that the project “muddled” focus and stalled other efforts to increase efficiency. The new NSA director is unwinding some of the McKinsey changes. Even though the CIA is apparently not happy with the McKinsey work, Gina Haspel isn’t about to reverse it any time soon so as not to give the organization whiplash. Similarly:
One person who witnessed the changes at ODNI said “there’s a lot of people inside these organizations asking, ‘Why did we need to hire a consulting firm to conduct a reorganization when there was no problem to solve?’”
Now admittedly the Politico piece also includes some sources claiming McKinsey didn’t do much, that officials at various agencies were leading these projects. But this is classic McKinsey. The firm only gives advice and does not do implementation. You wouldn’t expect McKinsey employees to be visible save to the top brass and to the “client team” of mid and lower level staffers tasked to work with the consultants.
Politico says the House Intelligence Committee is looking into complaints about the studies. Pass the popcorn.