Sunday, December 7, 2008

Spinning clients – the McKinsey effect

Some time ago I was having lunch with three McKinsey consultants and they started talking about how different all the people in their organisation were. I was watching them during this conversation and couldn’t help but notice that they even looked alike... They spoke alike, dressed alike and, clearly, thought alike. What seem like huge differences within a group may be miniscule (or even non-existent) if you’re an outsider looking in.

It actually reminded me of a scene in Monty Python’s “Life of Brian”, in which Brian looks out of his window and sees this huge crowd gathered in front of his house waiting for him to speak. And he shouts “you are all different!” After which they dutifully reply in chorus “yes, we are all different”.

[Brian] “You are all individuals!” [Chorus] “Yes! We are all individuals!”
(I particularly like the guy who subsequently says “I’m not”...)

Anyway, McKinsey, like many highly successful individuals and organisations – my great colleague Professor Dominic Houlder tends to call them the most successful religious order since the Jesuits – attracts scorn and admiration in equal measure. And I too believe they do many things right. One of them is that although the average person only stays with McKinsey for barely three years, when you join, you pretty much become a McKinsey person for life. If you "leave", you become an alumnus.

And that is a great feeling to foster if you, as an organisation, lose most of your employees to your customers. Because those people become great advocates for The Firm. McKinsey, for instance, proudly showcases them as alumni (although they have been able to keep remarkably quiet the fact that Enron’s Jeff Skilling was among their most high-rising offspring…). Importantly, what do these alumni do, as soon as they start to work in the real world? Yep, they hire McKinsey consultants…

And these type of beneficial effects do not only accrue to McKinsey; mere mortal organisations can reap them too. Professors Deepak Somaya, Ian Williamson and Natalia Lorinkova, for example, examined the movement of patent attorneys between 123 US law firms and 109 Fortune 500 companies from a variety of industries. Indeed, they found that if one of those Fortune 500 firms recruited a patent attorney from a law firm, subsequently that law firm would start to get significantly more business from that company. And I am sure it works that way for many other types of companies too.

In addition, by the way, Deepak, Ian and Natalia also found the reverse: if the law firm would hire a person from one of the Fortune 500 firms, the business it received from that company tended to go up too! Moreover, if the law firm would poach an attorney from one of its competitors, it would see business go up from the companies that were on the books of that attorney’s previous employer. Apparently, customers often follow a job-hopping attorney to his new law firm.

Therefore, like McKinsey, perhaps you shouldn't be too frightened of people moving. You want to hire people from your competitors and your clients, but you may also want your clients to hire yours. Rather than vilify them for leaving and cut all strings, keep them on the books as alumni, and actively cultivate relationships with them, in the form of clubs, Christmas cards and summer-evening barbeques if necessary! The only thing you don’t want is for your people to move to your competitors… They too may take business with them.

Hence, people will move; if they do, just make sure it is to a (potential) client – that’s the McKinsey way. And, of course, make sure to keep it quiet if they mess it up over there (like alumnus Skilling did at Enron) – that’s also the McKinsey way.