Nothing McKinsey Does Has Any Measurable Benefits

So, we have another headline that states the obvious, "McKinsey wonders how to sell AI with no measurable benefits.

McKinsey is not in the business of creating things with measurable benefits.

McKinsey is in the business of generating numbers of dubious provenance to justify the inevitable, whether it be layoffs to boost senior management stock options, helping Purdue Pharma get America hooked on opioids, or helping politically connected people loot taxpayer funds.

Software vendors keen to monetize AI should tread cautiously, since they risk inflating costs for their customers without delivering any promised benefits such as reducing employee head count.

The latest report from McKinsey & Company mulls what software-as-a-service (SaaS) vendors need to do to navigate the minefield of hype that surrounds AI and successfully fold such capabilities into their offerings.

According to the consultancy, there are three main challenges it identifies as holding back broader growth in AI software monetization in the report "Upgrading software business models to thrive in the AI era."

One of these is simply the inability to show any savings that can be expected. Many software firms trumpet potential use cases for AI, but only 30 percent have published quantifiable return on investment from real customer deployments.

 

No Sympathy

It appears that the big consultancies has a sad over losing contracts as a results of Trump spending cuts.

Executives at some of the biggest U.S. consulting firms are meeting with Trump administration officials to defend their projects ahead of this coming week’s deadline for government agencies to justify major consulting contracts.

In recent days, top executives at professional services firms including Ernst & Young and Guidehouse have met with officials including Josh Gruenbaum, the Federal Acquisition Service commissioner within the General Services Administration, according to people familiar with the discussions. A Booz Allen MMBAHMM executive has also been in touch with Gruenbaum, who is a former director at the private-equity firm KKR.

The flurry of meetings comes amid a Trump administration review of consultants and government contracts as part of a push to rein in federal spending. The General Services Administration, or GSA, has asked procurement officials at federal agencies to list and justify consulting contracts from 10 companies—including Booz Allen, Accenture, MMACNMM Guidehouse and others—that the agencies intend to keep. The responses are due on Friday.

Won't someone please think of the consultants?

Amid all the carnage raining down on the government and society it is inevitable that some of the casualties would actually be deserving of such a fate.

 

Finally

It appears that some members of the  Democratic Party establishment (There is no Democratic Party establishment) are beginning to realize that the consultants who have been running the party's political operations are not working for the party, they are working for themselves.

Well, knock me over with a  GBU-57A/B Massive Ordnance Penetrator bomb.

After spending well over a billion dollars, and a significant chunk of that change ending up in consultants pockets, you are just now noticing?

Candidates vying to lead the Democratic National Committee have found a common enemy: the D.C. consultant.

In the first DNC-sanctioned forum in the body’s low-profile race for chair on Saturday, DNC candidates channeled their frustration at the “D.C. insiders,” whom New York state Sen. James Skoufis vowed to “kick to the curb.” Minnesota Democratic-Farmer-Labor Party Chair Ken Martin pledged the “D.C. consultants” will “be gone when I’m there.” And Wisconsin Democratic Party Chair Ben Wikler promised he’d go into 2025 “with no commitments to anyone who’s been on a campaign payroll before.”

It’s a sign of the times for a party that burned through some $1.5 billion in the final months of the campaign, only to come up short against President-elect Donald Trump. As the party still searches for answers to its devastating losses in 2024, consultants became the punching bag while the DNC candidates largely avoided sparring with one another. They all agreed that the party needed to reground its identity with the working class and commit to a permanent campaign infrastructure across the country. But any light attacks — of which there were a few — came without names attached.

That $1.5 billion was spent in about 15 weeks, and as near as I can figure (unsurprisingly the numbers are incomplete and confusing) a least ⅕ of that went to various consulting firms.

This happens again, and again, and again, and nothing seems to be done about it.

One does hope that the Democratic Party establishment (There is no Democratic Party establishment) will finally do something about fixing this problem.

Seriously, Just Shut Them Down

Another day, another centimillion dollar settlement paid by McKinsey & Company for corruption, this one for rat-f%$#ery with Purdue Pharma in furtherance of addiction to opioids.

Enough already.

McKinsey & Company has agreed to pay $650 million to settle a Justice Department investigation of its work with the opioid maker Purdue Pharma. A former senior partner has also agreed to plead guilty to obstruction of justice for destroying internal company records in connection with that work.

At the center of the government’s case was the global consulting giant’s recommendation that Purdue Pharma “turbocharge” sales of Purdue’s flagship OxyContin painkiller in the midst of an opioid addiction epidemic that was killing hundreds of thousands of Americans.

The settlement and the government’s findings were presented at a news conference in Boston on Friday. According to prosecutors, McKinsey “knew the risks and dangers associated with OxyContin,” as well as the fact that top Purdue Pharma executives had pleaded guilty to federal crimes relating to sales of the drug. Yet the consulting company chose to continue working with the drugmaker to boost sales of the opioid.

………

McKinsey is widely regarded as the world’s most prestigious management consulting firm, with offices around the globe from which it advises most of the Fortune 500 companies as well as government agencies, including those in authoritarian nations such as China and Saudi Arabia.

That they are not a corporate pariah is an indictment of our society in general.

In recent years, McKinsey has settled government investigations in the United States and overseas by paying hundreds of millions of dollars while not admitting any wrongdoing. That is no longer true.

McKinsey issued a statement on Friday apologizing for its work with the opioid maker.

Oh my, they apologized.  How about throwing executives in jail?

………

In court papers released on Friday, federal prosecutors traced the arc of McKinsey’s work with the opioid maker.

In July 2009, McKinsey wrote that Purdue Pharma’s “top priority” should be “driving a more impactful OxyContin franchise.”

In subsequent years, as the opioid crisis grew, McKinsey continued to formulate new ways for the drugmaker to increase profits, including targeting “opioid naïve” patients, a term used to describe individuals not currently using the drug or those who had used it only once.

You know, before they are jailed, the people who did this should be publicly horsewhipped as well.

………

Congress held hearings in 2022 focusing on the firm’s simultaneous work with opioid makers and the Food and Drug Administration after reports in The Times and elsewhere. A congressional report found that since 2010 at least 22 of the firm’s consultants had worked for both Purdue and the F.D.A., sometimes at the same time.

And they still are hired as consultants by the US government.

No.  Just no. 

My bad, they prosecuted one guy:

………

The guilty plea by the former senior partner, Martin Elling, stems from internal communications in 2018, after Massachusetts sued Purdue over its opioid marketing. Two of the firm’s leading partners who oversaw the Purdue account, Mr. Elling and Arnab Ghatak, discussed how to handle it.

OK, they prosecuted two guys:

………

The plea follows an announcement this month by federal prosecutors that another former McKinsey senior partner, Vikas Sagar, pleaded guilty to conspiring to violate the Foreign Corrupt Practices Act in connection with paying bribes to secure South African government contracts for the firm. McKinsey had earlier fired Mr. Sagar.

How about a corporate death penalty for McKinsey.  They should be destroyed just as Arthur Andersen was.

Just Shut Them Down

So, once again, we see McKinsey & Company having to pay significant fines for facilitating corruption, this time in South Africa.

It is increasingly clear that this is not a few bad apples, this is their core business model.

They need to go the way of Arthur Andersen:

A McKinsey & Co. subsidiary agreed to pay more than $122 million to resolve allegations it paid bribes to officials at two South African state-owned companies to help the firm win millions of dollars of consulting work.

McKinsey Africa was charged with one count of conspiracy to violate the Foreign Corrupt Practices Act and as part of the settlement, the subsidiary entered into a three-year deferred prosecution agreement, according to prosecutors in Manhattan.

Vikas Sagar, a former McKinsey senior partner in the consulting firm’s Johannesburg office who participated in the bribery scheme, pleaded guilty in December 2022 to one count of conspiracy to violate the FCPA, according to the Justice Department. Sagar’s guilty plea was unsealed on Thursday. Attempts to reach Sagar weren’t immediately successful.

McKinsey in a statement said it conducted an investigation into the conduct of Sagar and terminated his employment more than seven years ago, adding that it has “zero tolerance” for such conduct. The firm added that it was “deeply remorseful” that an employee of the firm engaged in such conduct, and that it had made a full repayment of fees to the state-owned companies and would continue to cooperate with U.S. and South African authorities.

Unethical behavior is at the core of their business.

Just shut them down.

File Under, "Well Duh"

Well, knock me over with a sledgehammer,it appears that Kamala Harris' Presidential campaign was an orgy of looting by consultants and campaign members.

This sort of behavior has been one of my primary complaints about the Democratic Party establishment (There is no Democratic Party establishment) is the extreme corruption of its professional political apparatus.

After Harris's catastrophic flame-out, other people are noticing:

In the wake of Vice President Kamala Harris’ defeat, recriminations have flourished inside the Democratic Party with different factions blaming different policies or groups to explain the loss. Critics, however, describe a deeper structural problem with how the modern Democratic Party runs campaigns, which lines the pockets of party insiders, bloats campaign budgets and boxes out influences from outside party elites.

The Harris campaign broke campaign finance records, raising nearly a billion dollars, but ending the race $20 million in debt, spending millions on consultants and hundreds of millions of dollars on paid media.

While most political strategists agree that some spending on paid media is necessary to win a campaign in 2024, Faiz Shakir, a senior advisor to Sen. Bernie Sanders, I-Vt., told Salon that the Harris campaign's spending profile is indicative of a structural issue with how the Democratic Party approaches paid media and political strategy.

Snipping the bit where Mr. Shakir talks about how political consultants see the 30 second ad as the Alpha and Omega for campaign communications, because that is what the consultants themselves say, and because it's really not the core problem.

Consultants get a percentage of media buys, and so extract a personal financial benefit from this strategy.

………

Shakir summed up the issue saying that “there is often a product problem and not a sales problem” with Democratic campaigns. However, there is another side to the problem with paid media, in Shakir’s view. At every step in the process of making an ad, everyone is taking their cut.

“The opportunity to make money off of the firm that has created 30-second ads and the person who has placed the ads is ripe for abuse because there are hundreds of millions of dollars going into it and everyone is taking their skim,” Shakir said. “There’s a huge escalation every step of the way because of a skim at every level.” 

According to Shakir, it doesn’t have to work this way but media firms and campaigns often push for more expensive production strategies like more shoots, or oversaturating airwaves, because it’s an opportunity for everyone to get paid. In some cases, Shakir said, even senior campaign staff will get a cut of ad spending.

(emphasis mine)

Yeah, that's a level of self dealing that surprises me, 

Once again, reality trumps (pun not intended) my worst imaginings.

………

Reviewing the ad spending from the Harris campaign, it’s clear that the bulk of the money was funneled through firms run or owned by Democratic Party insiders. For example, Media Buying and Analytics LLC, received upwards of $281 million for media production and ad buys from the Harris campaign in the 2024 cycle and is owned by Canal Media Partners, according to Business Insider, a firm that has worked with hundreds of Democratic campaigns and was founded by Bobby Khan, who has been in and out of Democratic politics since the early 1990s. 

………

According to Shakir, however, the problems with the Democratic Party’s structure and the way it runs campaigns go beyond just media consultants and the party’s love of paid ads. The core issue, as Shakir puts it, is that the party political operations are a closed loop with well-off consultants, politicians and donors all taking advice from each other with little outside input.

So the problem with the Democratic Party establishment (There is no Democratic Party establishment) is a pervasive culture of corruption among the Democratic Party establishment (There is no Democratic Party establishment)?  Say it isn't so!

This is a feature, not a bug.

This is a racket, and it is a well functioning racket whose goal is to separate political donors from their money.

Winning or losing is irrelevant to this.

This is just a fact of Iron Law of Institutions which is, as I have noted many times, "The people who control institutions care first and foremost about their power within the institution rather than the power of the institution itself. Thus, they would rather the institution "fail" while they remain in power within the institution than for the institution to "succeed" if that requires them to lose power within the institution." (Not my idea or term, this term was coined by Jon Schwarz)

 

Not Enough

The criminal organization/consultancy McKinsey & Company will pay at least $½ billion to settle charges that it was a criminal co-conspirator with big pharma drug pushers.

Of course, they are denying wrongdoing.  (Of course, they are lying about that)

McKinsey & Co. is nearing a deal with US prosecutors to pay at least $500 million to settle federal probes into its past work helping opioid makers boost sales, according to people familiar with the matter.

A settlement, which could be announced in the coming weeks, would resolve criminal and civil investigations by the Justice Department, said the people, who asked not to be identified discussing a confidential matter. The terms haven’t been finalized and could still change.

………

The settlement would add to penalties that McKinsey has already paid US states for its past work with drug companies that produced highly-addictive painkillers. The privately held firm, which said it generated a record $16 billion in revenue last year, agreed in 2021 to pay hundreds of millions of dollars to settle claims by states that it helped fuel the country’s opioid epidemic by providing sales analysis and marketing advice.

Note that they were doing this while they were consulting with (among others) the FDA, a clear conflict of interest.

Considering the company's long record of aiding and abetting corruption, one has to wonder why they are accredited to consult with the government.

McKinsey is to business ethics what Ebola is to French kissing.

Today in Student Journalism

Students at the University of Florida Independent Florida Alligator engaged in some magnificent shoe leather journalism, and discovered that Former UF president Ben Sasse spent like a drunken sailor, throwing money at friends and political allies:

In his 17-month stint as UF president, Ben Sasse more than tripled his office’s spending, directing millions in university funds into secretive consulting contracts and high-paying positions for his GOP allies.

Sasse ballooned spending under the president’s office to $17.3 million in his first year in office — up from $5.6 million in former UF President Kent Fuchs’ last year, according to publicly available administrative budget data.

A majority of the spending surge was driven by lucrative contracts with big-name consulting firms and high-salaried, remote positions for Sasse’s former U.S. Senate staff and Republican officials.

Sasse’s consulting contracts have been kept largely under wraps, leaving the public in the dark about what the contracted firms did to earn their fees. The university also declined to clarify specific duties carried out by Sasse’s ex-Senate staff, several of whom were salaried as presidential advisers.

The university said Sasse’s budget expansion went through the “appropriate approval process” but did not answer questions about how Sasse bankrolled his splurges, where the funds originated or who authorized the spending. 

………

But the senator-turned-university president quietly broke that promise in his 17-month term at the university’s helm, hiring six ex-Senate staffers and two former Republican officials to high-paying, remote jobs at the university. 

………

Citing his wife’s recent epilepsy diagnosis, Sasse abruptly resigned from his post in July — leaving the future of his UF inner circle unclear. The university did not respond to questions about whether his political appointees were fired, non-renewed or resigned following his departure.

Fuchs, who began as interim president Aug. 1, kept a relatively small staff of less than 10, compared to Sasse who employed more than 30 in his office. 

………

Citing his wife’s recent epilepsy diagnosis, Sasse abruptly resigned from his post in July — leaving the future of his UF inner circle unclear. The university did not respond to questions about whether his political appointees were fired, non-renewed or resigned following his departure.

Fuchs, who began as interim president Aug. 1, kept a relatively small staff of less than 10, compared to Sasse who employed more than 30 in his office.

"Abruptly resigned," usually means got caught with his hand in the till.

And who could have helped him if he were corrupt?  Maybe these guys:

………

During his presidency, Sasse spent $7.2 million in university funds to consultants for advice on his strategic planning and to fill leadership gaps — over 40 times more than Fuchs’ total consulting expenses over his eight-year term.

Sasse paid nearly two-thirds of the $7.2 million to McKinsey & Company, where he once worked as an adviser on an hourly contract. The firm carries prestige as one of the “big three” management consulting giants, but is notoriously secretive about its dealings and shielded its work from public view using records laws protecting trade secrets.

I have come to the conclusion that the hiring of  McKinsey & Company is an indicator that an organization is corrupt, or that people in that organization are incompetent, or both.

This is what McKinsey did with Purdue Pharma, where they advised the world's largest drug pusher on how to better hook their customers, while they were consulting with various US agencies to fight the opioid crisis.

Jail, please?

Apart from That Mrs. Lincoln, How Was the Play?

New York State has passed a bill mandating the construction of publicly owned renewable power generation.

This sounds good, because what's not to love about renewable energy or publicly owned utilities?

They both just work.  Ask the people who get their power from the TVA.

But there is a fly in the ointment, the New York Power Authority, which is charged with developing this generation capacity, was NOT a fan of the idea, at least this was the case when the bill was making its way through the legislature.

This attitude has changed, and appears that this is at least in part because of the consultant that they are bringing in,  McKinsey & Company.

Well, we now know why they changed their tune.  Now senior officials see the opportunity for corruption, fraud, waste, and inefficiency to be introduced in the program, which will both enrich their political allies, and kill public power in New York for a generation.

In 2022, Justin Driscoll, the then-interim head of the New York Power Authority, was no fan of the Build Public Renewables Act, which would empower the organization to build renewable energy projects to help the state to meet its climate goals. At a hearing, Driscoll told lawmakers that New York state was unable to undertake its own renewable power buildout, calling it "simply unworkable." Which is why it was surprising when, this past March, Driscoll was seemingly ebullient about the new "expanded authority" that the passage of the BPRA in last year's budget had given NYPA.

At a New York Power Authority board meeting last month, he talked about the "excitement we're seeing around the organization to be involved in this." He discussed how well-positioned the authority was to begin delivering clean, cheap energy to New Yorkers: "It's an opportunity for NYPA to make a big impact on the state's energy infrastructure and footprint."

What changed his mind in the intervening 18 months? For one, Governor Kathy Hochul, his boss, got on board with the BPRA. But a second clue came during that board meeting, when he shared who exactly would be helping to plan the buildout of NYPA's ability to once again build, own, and possibly operate new renewable energy infrastructure—the global consulting firm McKinsey & Company.

Investor owned utilities provide for both bribery and campaign donations (but I repeat myself), and Mr. Driscoll, as well as his ally the honorable (I joke) Kathy Hochul, Governor of the State of New York, see the appointment of McKinsey as an opportunity to turn this into yet another source for patronage and campaign donations.

"[We're] closely with McKinsey, as I previously discussed with you," Driscoll said. "They're helping us ensure our operating model internally and our internal governance around the buildout of renewables for the state, and with that support, we're finalizing a target operating model that leverages our strength and development, ownership, and commercialization to quickly deploy renewable projects for the benefit of the state and its residents."

Buried within that consultant-speak was insight into what exactly McKinsey was going to be working on with NYPA—essentially, forming the operating model for a buildout of public renewables that Driscoll had spent years fighting, but is now implementing at the behest of the governor.

In a statement, NYPA spokesperson Paul DeMichele told Hell Gate that McKinsey would be helping NYPA identify how they could better help the private sector develop renewable energy projects.

So, we won't see publicly owned power, we will see public private partnerships (PPP's) where the energy will be expensive, and profits accrue to the private side of the PPP, while the public bears the cost of cost overruns and the occasional disaster brought on by penny pinching.

………

The contract with McKinsey immediately rang alarm bells for environmental advocates, who had pushed for NYPA to begin building publicly owned renewable energy infrastructure as it became clear that the state would miss hitting its clean energy targets, which relied almost entirely on the private sector. They pointed to Driscoll's opposition to the BPRA, NYPA's own backtracking on climate goals, and the secretive nature of the rollout of NYPA's "expanded authority" as reasons to be worried that just a year after its passage, the BPRA is already in peril.

The BPRA was meant to fast-track a cleaner, publicly owned power grid—and passed after a concerted push by environmental groups and the Democratic Socialists of America, when New York included the first-in-the-nation climate measure as part of the state budget in 2023. The BPRA gives NYPA the ability to build out renewable energy infrastructure—wind, solar, battery storage, and more—if it found the private sector was unable to meet the state's legislated goal of 70 percent clean energy in its grid by 2030, and 100 percent clean energy by 2040.

McKinsey, known for aggressively advocating for privatization and market-oriented solutions, most recently made headlines in New York for its botched report on the danger posed to nursing homes by COVID-19. When it comes to its work in the energy industry, McKinsey has been implicated in everything from the Enron scandal, to rolling blackouts in South Africa, to undermining United Nations climate talks on behalf of the fossil fuel industry.

………

Driscoll told the board that while NYPA was ramping up staffing to fulfill its new mission, it would take years to get the right kind of expertise in-house to help run a renewable energy buildout.

This is, of course, a lie.  The NYPA could get up to speed quickly and hire trained and experienced people in a few months, but then all the records regarding how the decisions wold be made would be a matter of public record, whereas McKinsey's process is proprietary "Secret Sauce" and not open for public scrutiny.

"Horrified" is how Eleanor Stein, a long-time former member of the New York Public Service Commission, which regulates and oversees the electric power industry in New York, described her reaction when she found out that McKinsey would be helping to shape New York's renewable buildout. "To me, it signaled they're not actually serious about building anything—they're more interested in partnerships, in contracting out the work," she said.

Stein worries that by once again offloading the work to private actors, much of the spirit of the BPRA would be gutted, and that the BPRA's goal of providing cheap, clean energy to communities that need it the most won't be achieved.

That is the goal.  This is why Hochul used a loophole to appoint investor owned utility shill Justin Driscoll to head the NYPA.

They are both opposed to publicly owned power and publicly owned utilities.

Gee, Ya Think?

The Department of Justice has announced that McKinsey & Company is under criminal investigation for its role in the marketing of opioids.

This is not a surprise.  The information from the Sackler/Purdue Pharma lawsuits makes it clear that they were aggressively conspiring to maximize sales by maximizing addiction and suppressing adverse reports.

McKinsey has left a trail of destruction wherever it has been called in, corruption, addiction, mass layoffs and closings, etc.

They are a particularly destructive breed of parasites:

The Justice Department is conducting a criminal investigation into consulting firm McKinsey related to its past role in advising some of the nation’s largest opioid manufacturers on how to boost sales.

Federal prosecutors are also probing whether McKinsey or any of its employees may have obstructed justice in relation to records of its consulting services for opioid producers, according to people familiar with the investigation, which has been ongoing for several years. 

A grand jury has been empaneled in Virginia as part of the federal investigation into McKinsey’s opioid-related consulting, some of the people said. The U.S. attorney’s offices in the Western District of Virginia and the District of Massachusetts are jointly conducting the investigation, the people said. 

………

The criminal probe centers on consulting advice McKinsey gave to drugmaker clients including Purdue, Endo International and Mallinckrodt that previously sparked mass civil litigation against the firm. Government and private plaintiffs filed hundreds of civil lawsuits in recent years accusing the consulting firm of exacerbating opioid addiction, an allegation that McKinsey has denied. 

In 2021, McKinsey reached a settlement with all 50 states, five U.S. territories, and Washington, D.C., to pay $642 million to resolve civil opioid-related litigation against the firm, without admitting wrongdoing. The firm in 2023 reached separate deals totaling $347 million with Native American tribes, public school districts, insurance companies and municipal governments, also without admitting wrongdoing.

Yeah, they paid out almost a billion dollars in the above cases, and there was no admission of wrongdoing.

I know that litigating these cases is expensive, but those costs are WAY less than a billion dollars.

So what did McKinsey do?

It did what it always does:

………

McKinsey’s former clients Purdue, Endo, and Mallinckrodt filed for chapter 11 bankruptcy while facing mass lawsuits alleging they sold drugs through misleading marketing practices and fueled addiction. McKinsey helped Purdue, the closely held maker of the painkiller OxyContin, develop an initiative to boost drug sales and marketing, according to records released after Purdue went bankrupt in 2019.

McKinsey consultants advised the company on how to increase sales of its flagship drug, including suggesting that Purdue’s sales team make more calls to healthcare providers it knew wrote high volumes of OxyContin prescriptions and spend less time on doctors who prescribed the opioid medication the least, the records showed.

………

McKinsey previously said it stopped doing work on opioid-specific businesses in 2019 and that its work for Purdue was intended to support the legal use of opioids and patients with legitimate medical needs. 

Yeah, "Legitimate needs," that's the ticket!

McKinsey also advised Purdue and Endo on how to target the U.S. Department of Veterans Affairs for sales of their products, according to documents made public through the firm’s settlements with state and local governments. This advisory work occurred while McKinsey was simultaneously working as a consultant for the VA itself. McKinsey has said that it advised the VA on matters unrelated to opioid procurement.

We need to march McKinsey senior executives out of their offices in handcuffs.

Of Course They Did

EY is Ernst & Young

Is anyone surprised that McKinsey & Company was advising Silicon Valley Bank on how to enter the banking big leagues at the time of their implosion.

This is classic McKinsey:

Three years before its epic collapse, highflying Silicon Valley Bank was preparing to join the big boys of the banking world as it neared $100 billion in assets. But SVB needed help to make the leap.

“Immediately they decided to hire consultants,” one former SVB employee recalled, speaking on the condition of anonymity to describe internal decision-making. “Plug the gap with consultants.”

Among the consultants that SVB turned to was McKinsey & Co., the blue-chip management consulting group with a global roster of corporate and government clients. McKinsey was hired to identify gaps in SVB’s capital and risk management programs — a job that might have spotted problems with the bank’s investment strategy long before the bank’s failure.

But it didn’t work out that way.

Actually, it did.  You don't hire McKinsey to fix your problems, you hire McKinsey to justify papering over your problems.

McKinsey’s work for SVB in 2020 and 2021 — which has not been previously reported — was sharply criticized by the Federal Reserve in its sweeping report on what caused the second-largest U.S. bank collapse since 2008. The Fed found that McKinsey had “failed to design an effective program” for assessing SVB’s problems and produced a report filled with “weaknesses.”

………

After SVB’s failure in early March, the bank was taken over by the Federal Deposit Insurance Corporation and sold to First Citizens Bank & Trust. The Post detailed how SVB executives pushed ahead with a strategy of relying on longer-term investments in 2020 even as it ran afoul of a key risk metric and then changed its internal models to downplay the devastating impact of higher interest rates on those investments — decisions that foreshadowed the bank’s crash.

The Fed published a 102-page report on what went wrong at SVB. The review, conducted by Michael Barr, the Fed’s vice chair for supervision, placed the bulk of the blame for the bank’s crash on lax oversight by regulators and mismanagement by executives.

But the Fed report also noted the outsize role of consultants at the Santa Clara, Calif.-based bank.

………

In August 2020, McKinsey was given the task of completing an “EPS gap assessment” — a measure of the bank’s ability to meet the “enhanced prudential standards” for capital reserves, liquidity and risk management faced by the nation’s largest financial institutions, according to the consulting firm and the government official.

With McKinsey, SVB was seeking out expertise from one of the most influential consulting firms in the world — and a company that has come under increasing scrutiny for the advice it provides.

………

After SVB filed for bankruptcy in March, McKinsey found itself among the bank’s many unsecured creditors.

According to a court filing, McKinsey was still owed $2,397,491 for its advice.

I don't want to imply that McKinsey does not do its job, it's just that its job is to provide justification for unethical and destructive practices at the companies that hire it.

Tweet of the Day

I think it's unfair to say McKinsey is cutting jobs and laying people off, when what they are really doing is rightsizing their firm to match sector growth opportunities and external economic factors, which will allow them to maximize their long term value impact. https://t.co/OKJMFdUja1

— Senior PowerPoint Engineer (@ryxcommar) February 21, 2023

This is a supernova level burn.

Why Does Anyone Hire These Criminals?

EY is Ernst & Young

In testimony before Congress, representatives of McKinsey & Company declare that even theough they worked for Perdue Pharma to maximize addiction, they were completely ethical when they were consulting with the FDA at the same time.

Yeah, sure.

That's why they have already paid $600,000,000.00 to settle claims of wrongdoing.

Meanwhile McKinsey has also:

• Facilitated bribery in South Africa.
• Conflicts of interests with its in house hedge funds.
• Enron.
• Advising insurance companies to make low-ball offers.
• Price gouging by the pharmaceutical company Valeant.
• Data falsification at Rikers Island jail.
• Consulting for ICE and telling them to make their detention facilities worse.
• Fingering Saudi dissidents to Saudi despot Mohammed bin Bonesaw.

McKinsey's job is to justify the unethical.  It's their specialty, and they launder (Ivy League Wash?) their image by hiring graduates from the most prestigious schools.

They need to be Arthur Andersoned:

McKinsey & Co managing partner Bob Sternfels told a congressional committee Wednesday that his consulting firm did not have a conflict of interest when it gave advice both to Oxycontin manufacturer Purdue Pharma LP and the government agency charged with regulating opioid sales.

McKinsey gave consulting advice to both Purdue and the Food and Drug Administration from 2008 to 2019, and 22 of its consultants worked for both clients, according to a report published by the House Oversight Committee, which hosted the hearing. During that period, McKinsey offered to "turbocharge" Purdue's opioid sales while also working with the FDA division overseeing the development and marketing of drugs.

That work did not create a conflict because McKinsey advised the FDA on topics such as technology upgrades and organizational efficiency, Sternfels said.

………

Democratic Representative Katie Porter of California pointed out the omission allowed McKinsey to avoid a government review of potential conflicts of interest.

"Your scheme worked really well," Porter said. "McKinsey got contracts, Purdue got rich, and America got addicted."

Why this organization is tolerated in polite society is beyond me,

The "Gold Stadard" of Consultants

While working for The FDA to help them deal with the opioid crisis, McKinsey was also working for the Sacklers and the rest of the drug pushers.

Maybe I am being naive, but it seems to me that this is a bit of a conflict of interest:

Since 2008, McKinsey & Company has regularly advised the Food and Drug Administration’s drug-regulation division, according to agency records. The consulting giant has had its hand in a range of important FDA projects, from revamping drug-approval processes to implementing new tools for monitoring the pharmaceutical industry.

During that same decade-plus span, as emerged in 2019, McKinsey counted among its clients many of the country’s biggest drug companies — not least those responsible for making, distributing and selling the opioids that have ravaged communities across the United States, such as Purdue Pharma and Johnson & Johnson. At times, McKinsey consultants helped those drugmaker clients fend off costly FDA oversight — even as McKinsey colleagues assigned to the FDA were working to bolster the agency’s regulation of the pharmaceutical market. In one instance, for example, McKinsey consultants helped Purdue and other opioid producers push the FDA to water down a proposed opioid-safety program. The opioid producer ultimately succeeded in weakening the program, even as overdose deaths mounted nationwide.

Yet McKinsey, which is famously secretive about its clientele, never disclosed its pharmaceutical company clients to the FDA, according to the agency. This year ProPublica submitted a Freedom of Information Act request to the FDA seeking records showing that McKinsey had disclosed possible conflicts of interest to the agency’s drug-regulation division as part of contracts spanning more than a decade and worth tens of millions of dollars. The agency responded recently that “after a diligent search of our files, we were unable to locate any records responsive to your request.”

Federal procurement rules require U.S. government agencies to determine whether a contractor has any conflicts of interest. If serious enough, a conflict can disqualify the contractor from working on a given project. McKinsey’s contracts with the FDA, which ProPublica obtained after filing a FOIA lawsuit, contained a standard provision obligating the firm to disclose to agency officials any possible organizational conflicts. One passage reads: “the Contractor agrees it shall make an immediate and full disclosure, in writing, to the Contracting Officer of any potential or actual organizational conflict of interest or the existence of any facts that may cause a reasonably prudent person to question the contractor’s impartiality because of the appearance or existence of bias.” 

Surely I cannot be the only one who realizes that McKinsey is as corrupt as f%$#, even if their staff are assiduously selected from the cream of the Ivy League.  (Or maybe they are as corrupt as f%$#, BECAUSE their staff are assiduously selected from the cream of the Ivy League.)

We've seen this sort of sh%$ with McKinsey time and time again, whether it be Enron, self dealing with its hedge fund, the Rikers Island debacle, helping the House of Saud pursue dissidents, etc.

They are a nasty bit of work.

Gee, Ya Think?

After billions of dollars (or ₤ in this case) wasted, and surprise, government relying expensive private consultants is less useful than tits on a bull.

This is encapsulated in a quote from Taavi Kotka, former CIO of Estonia, who, when asked how he created such an effective IT infrastructure for such a low cost, "If you don’t use Accenture or McKinsey, you’d be amazed at what you can get done." 

The privatization of core government services, what Bill Clinton and Al Gore called, "Reinventing Government," has been an miserable failure:

When he was leader of the opposition, David Cameron did not mince his criticism of the Labour government’s dependency on consultancy companies. Speaking in 2008, he lambasted how, “for the last decade or so, in the name of modernisation, rationalisation and efficiency, we have been living under a regime of government by management consultant and policy by PowerPoint.”

Fast forward 13 years, and those words could have been said by any politician about the decisions of Conservative governments since. As one Tory minister put it last year, Whitehall has been “infantilised” by an “unacceptable” reliance on expensive management consultants.

Lord Agnew’s comments came in the wake of revelations that the government was spending tens of millions of pounds on private sector consultants to deliver England’s test and trace system. Rather than see the challenge of developing this as an opportunity for public sector and NHS employees to put their expertise to use, ministers and civil servants relied on companies including Deloitte and Boston Consulting Group. The approach led to test result delays, IT system bugs and laboratory bottlenecks.

………

The UK state’s spending on consultancy has ballooned, notably in the past five years: Brexit and the pandemic have proved to be incredibly lucrative. Between 2017 and 2020, approximately £450m was spent on consulting fees related to Brexit by government departments, with the receipts for Covid-19 contracts coming in at over £600m. These figures alone could pay the salaries of more than 10,000 civil servants for three years – and total spending on consultants across the public sector is much higher. The bulk of this money has gone to large multinational firms, including the big four accounting consultancies – Deloitte, PwC, EY and KPMG.

………

The consulting industry has its roots in the late 19th century and the electrochemical revolution in the United States, but it was only in the postwar decades that the large, multinational firms characterising consulting today emerged. The rise of multidivisional companies and then the “shareholder revolution” of the 1980s created ample opportunities for management advice.

For much of the 20th century, consultants working for government did just that: consulted. All this began to change with the advent of neoliberalism in the 1980s and its public sector surrogate, new public management. The liberalising and privatising reforms of politicians in the UK and the United States during this time were premised on an assumption that governments are, at best, “market fixers”, which should take up as little space as possible in the economy. The idea that government failure is even worse than market failure made states fear risk taking, and thus pass responsibility on to others. Under Margaret Thatcher, government spending on consulting services soared from around £6m annually in 1979 to £246m, with companies even contracted to help deliver the privatisation of state-owned enterprises.

………

What we do discover about the activities of these companies is nonetheless often cause for alarm. Barely a week goes by without some reporting of a new consulting car crash, whether it’s BCG and Deloitte’s involvement in the test and trace programme; KPMG signing off on Carillion’s accounts months before its collapse; or McKinsey advising the manufacturer of OxyContin how to increase its sales of the opioid now at the heart of the US overdose crisis.

………

The pandemic has highlighted just how important it is to have governments that are adaptable, capable and accountable. The more we rely on the consulting industry to deliver critical policy and service functions, the less our democratic system is able to maintain the dynamic capabilities and capacity that will enable us to confront the challenges of the future – from climate breakdown to health emergencies. It is time to put an end to today’s “regime of government by management consultant and policy by PowerPoint” – and instead invest inside our public sector, building an economy that serves the common good.

That last sentence should be placed on a branding iron, and burnt into the ass of any bureaucrat who wants to hire private consultants to do core government functions.

The incentives for private industry, and private charities, are generally antithetical to good governance.

Headline of the Day

The War in Afghanistan Is What Happens When McKinsey Types Run Everything

—Matt Stoller

It's a very nice metaphor for the privatization of core functions at the Pentagon that began under then Secretary of Defense Dick Cheney.

It's death by 1000 consultants.

Of Course They Are

US mercenary operation CACI, and its pet "think" tank, are noting that the Afghanistan withdrawal is bad for profits.

Of all the toxic legacies of Dick Cheney, the worst is the outsourcing of core military functions to contractors.

It creates a political dynamic, reinforced by an army of contractors, that is antithetical to the safety and security of the United States of America:

On August 12, the military contractor CACI International Inc. told its investors that the U.S. withdrawal from Afghanistan is hurting its profits. The same contractor is also funding a think tank that is concurrently arguing against the withdrawal. This case is worth examining both because it is routine, and because it highlights the venality of our ​“expert”-military contractor feedback loop, in which private companies use think tanks to rally support for wars they’ll profit from.

The contractor is notorious to those who have followed the scandal of U.S.-led torture in Iraq. CACI International was sued by three Iraqis formerly detained in Abu Ghraib prison who charge that the company’s employees are responsible for directing their torture, including sexual assault and electric shocks. (The suit was brought in 2008 and the case is still ongoing.)

In 2019, CACI International was awarded a nearly $907 million, five-year contract to provide ​“intelligence operations and analytic support” for the U.S. Army in Afghanistan.

………

Despite CACI International’s clear economic interest in continuing the war, on the August 12 call, company officials were careful not to editorialize about the Biden administration’s decision. The closest they came was a cautious statement from Mengucci: ​“At least as of today we’ve watched the administration make the decision to completely exit Afghanistan by 9 – 11 and all I can say is they’re executing on that decision.”

But CACI International does not have to broadcast its positions on the war: Instead, it is funding a think tank that has been actively urging the Biden administration not to leave Afghanistan.

Our privatized military contracting system is profoundly, and completely dysfunctional.

We need to shut this down.

This:

Matt Stoller Makes a very good point, "Keep McKinsey Away from Biden's Infrastructure Push."

They are corrupt, and will make a dogs breakfast of everything that they touch: 

If there’s one striking feature of the Biden administration so far, it’s the rejection of Barack Obama’s policy framework by his own party. It is now the consensus that Obama’s lack of ambition led to Trump’s election. For instance, party leader Senator Chuck Schumer recently called the Obama stimulus a “mistake” and “a small measly proposal” on CNN, as a way of selling Biden’s much larger proposals.

Biden’s goal, and that of the Democratic Party that controls both houses, is to break from recent politics, and be “more like Franklin Delano Roosevelt (FDR) and the Congress of 1933, and less like Barack Obama and the Congress of 2009.” Biden wants to spend a lot, to go big, instead of the go small vision of Obama.

………

It’s a bold vision. One important question is whether it’s actually possible to spend that amount of money on so many things without immense amounts of corruption or waste. The difference between FDR and Obama, after all, was not just spending amounts. Obama didn’t spend enough, but he did spend a lot. FDR, however, actually built things, whereas Obama’s stimulus money for, say, California’s high-speed rail, evaporated into a cloud of consultants. (A particularly mean joke was that FDR won WWII in less time than it took Obama to build Obamacare web sites that didn’t work.) 

This might be the best business meme of 2019 so far. pic.twitter.com/hTXul3Muy3

— ArtkoCapital (@ArtkoCapital) March 5, 2019

The McKinsey Way

There is an important difference between Joe Biden and Barack Obama, Biden went to the University of Delaware and then Syracuse for law, and Obama went to Columbia University and then Harvard Law School, both of which are Ivy League institutions.

Obama spent his formative years at colleges where McKinsey was actively recruiting, and his fellow students, and likely many of his friends, were eager at the chance to get their start there.

As such, Obama placed a lot of trust in those consultants, because they were his people, a part of the "Clan of the Ivys," and we got less than stellar results when the consultants were called in on California rail, or Obamacare.

This is what normally happens when you bring in McKinsey:

Skipped an aside about mismanaging Puerto Rico.

………

So what has McKinsey been doing, if it hasn’t been running Puerto Rico? The answer is, McKinsey has been looking out for McKinsey. It has ensured that Puerto Rico will spend the mind-bogglingly large sum of $1.5 billion on professional services, meaning lawyers, bankers, and consultants (including McKinsey), which is five times what Detroit paid in services for its bankruptcy. I don’t know how much the firm will make, but according to the GSA schedule, just one recent college graduate working at McKinsey costs around $3 million a year. Beyond the straight fee extraction, the conflicts of interest are comical; McKinsey’s internal hedge fund actually owns Puerto Rican bonds.

Far from an anomaly, such a situation for McKinsey is common. McKinsey helped ruin the U.S. spying apparatus with a bloated, failed contract. They helped run Trump’s U.S. Immigration and Customs Enforcement; ICE even hired McKinsey to write its own contract. McKinsey structured France’s terrible coronavirus response, and that of New York state. McKinsey is so brazen that it was caught by the GSA Inspector General for cheating the government out of $65 million. It didn’t seem to matter. In 2019, McKinsey worked for more than 15 federal agencies and departments, and 25 states.

Unfortunately, the government has continued down this path for many decades, removing government capabilities, and even capability for government oversight, and turning it over the private sector. 

That was my experience working for over 2 years on a project run under a "Lead Systems Integrator" model that was so dysfunctional that future LSI contracts were banned by Congress.

………

Roosevelt’s first major infrastructure battle was over Muscle Shoals in Alabama, the great hydroelectric resource. The Morgan interests and the electric utility magnates wanted that resource privatized for their use. Roosevelt said no, and had the government directly build the Tennessee Valley Authority, a publicly owned and operated electric utility for much of Appalachia. TVA was part of a package of reforms to constrain and control Wall Street, to end what FDR called the ‘informal economic government of the United States.’

Over the rest of the New Deal, FDR transformed the physical plant of the country, and spent a lot of money on infrastructure. But Roosevelt first made sure Wall Street had little say over how public money or public resources were spent. Public institutions got bigger and more competent, and the financiers and monopolists lost power. One key result is that the government could do big things. During World War II, military procurement officers had immense capacity and power, imposing tight control over contractors, and ensuring that there were at least a dozen competitors for each major weapon system. They could peer into the books of contractors, and even claw back excessive profits.

America used this governing capacity for decades, constructing the national highway system, winning the space race, deploying the polio vaccine, landing on the moon and building the internet, and running the project Sematech in the 1980s to address foreign threats to semiconductors.

In the 1990s, however, Bill Clinton’s “Reinventing Government” initiative killed the public capacity Roosevelt had constructed. Clinton encouraged the big prime defense contractors to merge, shrinking them from over 100 to just 5 firms. Clinton’s procurement initiative, led by Steve Kelman, invented a whole new vocabulary for ways to let contractors steal. The details get complex, but the gist was a ‘light touch’ approach to negotiating by the government. Procurement officers stopped making hard-nosed demands for better prices, and were stripped of the ability to look at the books of the contractors to make sure there weren’t excess profits.

It actually started under Reagan, and then SecDef Dick Cheney massively expanded this at the Pentagon under GHW Bush, but Clinton took the idea, and ran with it in a way that no administration has before or since. (I will leave the determination of their motives as an exercise to my reader(s)).

We need to return core competencies to government, or will continue to be unable to efficiently do the business of government.

They Should down the Whole Corrupt Sh%$-Show

Following the payment of massive fines for unethical, and quite possible illegal benavior, the global managing partner (basically CEO) of the consulting firm McKinsey & Company has been given his walking papers. 

The proximate cause is the $600 million settlement that the consulting firm had to pay out over their truly heinous recommendations to the manufacturers of opioids, where (among other things) they suggested that pharmacies be paid a bounty for drug overdoses to boost sales.^* (They called it, "Rebates," but it was a bounty for overdoses.)

McKinsey & Co. is, and has been for as long as I have been aware of it, an evil and corrupt organization.

The sole reason for its existence is to assist overpaid executives engaging in short sighted and destructive policies for the person enrichment of said overpaid executives. (And McKinsey & Co. partners, but that goes without saying)

When one considers the long litany of evil that they have been associated with, mass layoffs, excessive CEO pay, facilitating corruption in South Africa, assisting in setting up Trumps immigration gulags, looting Puerto Rico, facilitating the House of Saud's frequently murderous campaigns against its critics, etc.

McKinsey is a cancer on society, and if it goes the way of Arthur Andersen tomorrow, it will not be a moment too soon:

Partners at McKinsey & Company voted out the consulting firm’s top executive, Kevin Sneader, this week as it continues to face blowback over its role in fueling the opioid crisis.

The decision to deny Mr. Sneader a second three-year term as global managing partner came in a vote by more than 600 senior partners, according to a company executive. Earlier this month, McKinsey had agreed to pay 49 states a historic settlement of almost $600 million because of sales advice the company had given to drugmakers.

It is highly unusual for a sitting managing partner at McKinsey to be refused a follow-on term. The last time a firm leader was denied a second term was in 1976, according to the company’s internal history book.

Mr. Sneader, 54, did not even make it to the final round of balloting, according to the company executive, who spoke on the condition of anonymity. The final candidates for Mr. Sneader’s replacement are Bob Sternfels, based in San Francisco, and Sven Smit, based in Amsterdam. The shake-up at the prestigious consulting firm was first reported by The Financial Times.

It should be noted that McKinsey is as much a symptom as it is a cause of the ills that it is associated with, and the solution in the long run is greater accountability for businesses, managers, and consultants for the actions that they take.

As I noted over 2 years ago, studies have shown that when managers and holders of capital are allowed to skirt responsibility, whether through bankruptcies, corporate indemnity, or (as is the case of my earlier post) through changes in marital property laws, bad things happen. 

If the mantra of, "Personal responsibility," and, "Real consequences," held so dear by Republicans needs to be applied anywhere, it is to the boardroom.

^*As Anna Russel would say, "I'm not making this up, you know,

Our Own Marketing Department of the Sirius Cybernetics Corporation*

I am referring of course, to the "White Shoe" consultancy firm McKinsey & Company, which has increasingly made justifying the illegal and immoral, and whose latest bit of evil was a proposal for Perdue Pharma to pay distributors a bounty for overdose deaths, because, like any good dope dealer, it's all about the Benjamins.

The short version is that in order to convince distributors not to share their concerns about how Oxycontin was resulting in an explosion of deaths with regulators, or ending their relationship with Perdue, McKinsey & Company proposed a $14,810.00 payment for death or hospitalization.

It's blood money, and it is a criminal conspiracy to bribe those distributors not to take actions that would harm the bottom line.

Even if the Sacklers and their Evil Minions^™ never took up this suggestion, it is a felony to even discuss this, and McKinsey is guilty.

They really need to get the Arthur Anderson treatment.

Their name, and memory, should be effaced:

When Purdue Pharma agreed last month to plead guilty to criminal charges involving OxyContin, the Justice Department noted the role an unidentified consulting company had played in driving sales of the addictive painkiller even as public outrage grew over widespread overdoses.

Documents released last week in a federal bankruptcy court in New York show that the adviser was McKinsey & Company, the world’s most prestigious consulting firm. The 160 pages include emails and slides revealing new details about McKinsey’s advice to the Sackler family, Purdue’s billionaire owners, and the firm’s now notorious plan to “turbocharge” OxyContin sales at a time when opioid abuse had already killed hundreds of thousands of Americans.

In a 2017 presentation, according to the records, which were filed in court on behalf of multiple state attorneys general, McKinsey laid out several options to shore up sales. One was to give Purdue’s distributors a rebate for every OxyContin overdose attributable to pills they sold.

The presentation estimated how many customers of companies including CVS and Anthem might overdose. It projected that in 2019, for example, 2,484 CVS customers would either have an overdose or develop an opioid use disorder. A rebate of $14,810 per “event” meant that Purdue would pay CVS $36.8 million that year.

………

Though McKinsey has not been charged by the federal government or sued, it began to worry about legal repercussions in 2018, according to the documents. After Massachusetts filed a lawsuit against Purdue, Martin Elling, a leader for McKinsey’s North American pharmaceutical practice, wrote to another senior partner, Arnab Ghatak: “It probably makes sense to have a quick conversation with the risk committee to see if we should be doing anything” other than “eliminating all our documents and emails. Suspect not but as things get tougher there someone might turn to us.”

Why the F%$# haven't they been charged? 

They not only engaged in a criminal conspiracy which would include bribery and other racketeering, they initiated the proposal to do so.

Mr. Ghatak, who also advised Purdue, replied: “Thanks for the heads up. Will do.”

It is not known whether consultants at the firm went on to destroy any records.

The two men were among the highest-ranking consultants at McKinsey. Five years earlier, the documents show, they emailed colleagues about a meeting in which McKinsey persuaded the Sacklers to aggressively market OxyContin.

The meeting “went very well — the room was filled with only family, including the elder statesman Dr. Raymond,” wrote Mr. Ghatak, referring to Purdue’s co-founder, the physician Raymond Sackler, who would die in 2017.

Mr. Elling concurred. “By the end of the meeting,” he wrote, “the findings were crystal clear to everyone and they gave a ringing endorsement of moving forward fast.”

………

McKinsey’s involvement in the opioid crisis came to light early last year, with the release of documents from Massachusetts, which is among the states suing Purdue. Those records show that McKinsey was helping Purdue find a way “to counter the emotional messages from mothers with teenagers that overdosed” from OxyContin.

………

“This is the banality of evil, M.B.A. edition,” Anand Giridharadas, a former McKinsey consultant who reviewed the documents, said of the firm’s work with Purdue. “They knew what was going on. And they found a way to look past it, through it, around it, so as to answer the only questions they cared about: how to make the client money and, when the walls closed in, how to protect themselves.”

………

McKinsey put together briefing materials that anticipated questions Purdue would receive. [At an FDA oversight hearing] One possible question: “Who at Purdue takes personal responsibility for these deaths?”

The proposed answer: “We all feel responsible.

Shut them down, and shame and jail anyone associated with McKinsey and Company.

They are ineluctably evil.

^*Immortalized by Douglas Adams as, "A bunch of mindless jerks who'll be the first against the wall when the revolution comes."