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Where McKinsey–And Almost All Management Consulting–Came From

Surprisingly, they didn’t just fall from the sky.

Where McKinsey–And Almost All Management Consulting–Came From
[Image: Flickr user JD Hancock]

In his 2005 commencement speech at Kenyon college, David Foster Wallace, maybe the greatest author of the past 20 years, started with a kind of parable:

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There are these two young fish swimming along and they happen to meet an older fish swimming the other way, who nods at them and says “Morning, boys. How’s the water?” And the two young fish swim on for a bit, and then eventually one of them looks over at the other and goes “What the hell is water?”

The commencement speech, which has lived on the Internet for the past eight years and recently turned viral, resonates not only because Wallace is probably the best wordsmith you’ll read this week or year or (what)ever, but because his point is so simple: that this is water. That this seascape we’re all swimming through–technology, business, the Internet–came from somewhere. Including one of our primary sea monsters, consulting.

As you may know, it began with a man named McKinsey. What you may not know are the factors that allowed him–and the professional manager–to ascend.

This is water, this is consulting.

Longreads has an amazing excerpt up from The Firm, Duff McDonald’s history of McKinsey and Co. The whole post is well worth its 12-minute read, but what’s most interesting to us is the conditions that came together to enable the rise of McKinsey–and the manager.

Some strange stuff was afoot before the 20th century, hereafter known as the American Century. Railroads ran westward, with telegraph lines chasing behind them. This, McDonald says, allowed for the world’s first “mass” markets: If your ambitions went beyond your locality, there was now the infrastructure to go national, so long as you can got the business side right. For the first time, a company could scale.

These and other factors vaulted America into the economic forefront: As McDonald notes, in 1870 the country was responsible for 23% of global industrial production, but by 1913 it was at 36%, beyond Great Britain.

So by 1920, the men who would become Robber Barons–Heinz, Ford, Westinghouse, plus other names you might be familiar with–were setting out to conquer the national markets. But they still needed someone to direct the newly found fiefdoms, McDonald says:

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This (expansion) brought with it a dilemma that has preoccupied business leaders ever since: How to grow big while maintaining control over the enterprise. Moving from a single-product, owner-run enterprise into a complex and large-scale national one is a difficult task. First, you have to build production facilities massive enough to achieve the desired economies of scale. Second, you have to invest in a national marketing and distribution effort to ensure that sales have a chance of matching that scaled-up production. And third, you have to hire, train, and trust people to administer your business. Those people are called managers, and in the first half of the American Century, they were in very short supply.

In other words, the system of governance for an organization would have to shift from a unitary model to a republic. Less like France, more like Rome. And as McDonald notes, the innovators in the management structure–DuPont, General Motors–arrived at similar conclusions: “(They) moved from the centralized system to a multidivisional structure with product and geographic breakdowns.”

But beyond the geographic-logistic snafu that begat the manager, the pressures of legislators also opened up an opportunity: the Sherman Antitrust Act, the Federal Trade Commission Act, and the Glass-Steagall Act were all designed to stop business from fixing prices. But that had an unintended effect, McDonald says: the acceleration of “an informal—but legal—way of sharing information among oligopolists. Who could do that? Consultants.”

And just like that, we stepped into the water we’re now all soaking in.

Hat tip: Longreads

About the author

Drake Baer was a contributing writer at Fast Company, where he covered work culture. He's the co-author of Everything Connects, a book about how intrapersonal, interpersonal, and organizational psychology shape innovation.

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