McKinsey’s Bob Sternfels: ‘We’re OK if you don’t agree with us’
A year ago, Bob Sternfels was handed one of the business world’s most coveted jobs and one of its least enviable challenges; how to lead a network of independent, opinionated professionals whose job it is to tell other executives how to run their organisations.
The circumstances in which the Californian Rhodes scholar became McKinsey’s senior managing partner were ominous. His predecessor, Kevin Sneader, had become the consultancy’s first leader since the 1970s not to win a second three-year term, after a chain of events that raised questions about the “McKinsey mystique” that had long underpinned its ability to charge a premium.
Sneader had taken the job when “the firm” was already embroiled in a corruption scandal in South Africa and the reputational crises kept piling up even as he pushed to make the consultancy choosier about which clients it took on.
Largest among them was the discovery that McKinsey had helped US opioid manufacturers “turbocharge” sales in the midst of a deadly opioid addiction crisis. McKinsey settled the lawsuits brought by all 50 states without admitting wrongdoing, but at a cost of more than $600mn — a sum which came out of the partners’ profit pool. Insiders described a partnership split between those who thought Sneader’s reforms had not gone far enough and those who thought he had conceded too much.
Sternfels, a 28-year McKinsey veteran who was akin to a chief operating officer under Sneader, is not pitching a radical break with the past.
Last week was the first in-person meeting of most of McKinsey’s 2,700-plus partners since 2019 and Sternfels came with a message about striking a balance between continuity and change. He talks about building a culture of “humility” about its mistakes, but also speaks of “sisu”, a word he learnt from his Finnish grandmother that he translates as “grit”.
McKinsey needed to create more rigorous client selection processes to avoid a repeat of the opioid scandal, Sternfels admits, but adds that he is “enormously grateful” for Sneader’s “courage” in doing so even though he wishes it had happened 15 years earlier.
“Although we didn’t do anything illegal in this process, we didn’t take into account the broader context of what was going on,” he says, adding that the firm could have dragged out the fallout for 10 years instead of recognising its “mistake”.
“The other part, though, is how do we build . . . a thicker skin for separating that scrutiny from scrutiny that we want to push back against?” he asks. “Look, the world is a critical place. We’re going to do things that have outsized impact, and we’re OK if you don’t agree with us.”
Sternfels, now 52, has already shown an appetite for pushing back. Hauled before a Washington hearing at which one congresswoman likened McKinsey to a drug trafficker, he assailed the “speculative leaps” the committee’s investigation had taken in alleging that McKinsey’s work for opioid companies and the body that regulates them represented a serious conflict of interest.
Similarly, when more than 1,100 McKinsey employees accused the consultancy of doing too little to curb clients’ carbon emissions, Sternfels was quick with a riposte, arguing publicly that it needed to engage with “brown” companies to help make them greener.
He says now that internal polling showed that 90 per cent of his 38,000 colleagues agreed with his position, but he adds matter-of-factly: “There’s a lot of choice in this world, so if that doesn’t appeal to you, you don’t have to stay with us or come to us.”
The thickness of his skin may yet be tested further. McKinsey — and Sternfels personally — face a federal racketeering claim brought by Jay Alix, founder of the restructuring consultancy AlixPartners, who alleges that McKinsey hid conflicts of interest to win lucrative bankruptcy mandates. (McKinsey calls the lawsuit meritless.)
About 150 US cities, counties and other groups have meanwhile brought their own opioid lawsuits against McKinsey (which says these claims duplicate those already settled with the states.) And just last month its offices were raided by French police investigating suspected tax fraud (though Sternfels says McKinsey has complied with all laws in France.)
Can he see any end in sight for the run of damaging headlines? “You know, who knows?” he shrugs, before offering a response that again mixes compromise and pushback. “If we’re making mistakes, we will fix that,” he says: “But we need to separate out ‘where are we making mistakes?’ from ‘where are we meeting the tough problems?’”
McKinsey has invested $600mn in risk, legal and compliance functions since 2018, Sternfels notes. “It doesn’t mean that future mistakes won’t happen — I can’t guarantee that — but we have a self-correcting mechanism,” he argues.
He spent much of McKinsey’s last “values day” reminding colleagues of the firm’s longstanding “obligation to dissent”, he adds, which encourages even junior employees to speak up if they disagree with a decision.
Sternfels is keen to make clear that his agenda is not all about reacting to crises, however. McKinsey needs to be “bold and not busy”, he says, explaining the difference as a question of whether it is really helping clients do more than they would have done alone.
McKinsey must deliver not just insights but impact, he says. It already has “impact contracts” with about a quarter of its clients which try to measure how its advice moves the needle. Sternfels would like them for every engagement.
Pointing again to the case for change, he voices a related ambition: to pivot from a firm that is thought of as elite, to one that is distinctive. His definition of McKinsey’s distinctiveness — an obsession with clients’ success and a deep “knowledge culture” — is one that some rivals might not agree is unique, but his concern about elitism goes to the question of its war for talent with the likes of Boston Consulting Group and Bain.
McKinsey is attracting record numbers of applicants, he says — about 1mn in the past year for the 10,000 job offers it makes — but until recently they came from just 500 sources. It now draws from twice that number of universities and other employers as it seeks a more diverse workforce, he says, but “I’d like to take it up 10 times”.
McKinsey’s growth has divided its partners and alumni. Some still blame an innovation agenda in which Sternfels was involved under Sneader’s predecessor for taking it into controversial new areas such as restructuring advice.
Sternfels insists he sees growth as an outcome rather than a goal, and rejects the notion that McKinsey might have grown too big to manage, saying that similar fears were voiced in 1932 when James McKinsey’s Chicago firm proposed opening a New York branch.
The challenge, he thinks, is “how do we create more delegated autonomy, while having stronger compliance and backbone for all partners?”
Three questions for Bob Sternfels
Who is your leadership hero?
Nelson Mandela. I moved to South Africa in 1995 to help open McKinsey’s first office in the country, and saw up close Mandela’s bravery, tolerance and expansiveness of vision. I was inspired by him then and continue to be amazed today.
What was the first leadership lesson you learnt?
The need always to balance courage and humility: how can I act decisively, in a way that inspires confidence in others, while also being open to growth and recognising my own limitations? This is a lesson I am still learning every day.
What would you be if you were not running McKinsey?
A university professor. I really enjoy teaching.
While EY is planning to separate its audit and advisory business after years of criticism over perceived conflicts of interest between them, Sternfels rules out any similar break-up at McKinsey. Despite similar allegations of conflicts between McKinsey’s work for companies and governments, he defends the “magic” in bringing insights from its private sector work to its more scrutinised public sector contracts.
McKinsey expects to celebrate its centenary in 2026 and Sternfels clearly hopes to be there when it does, saying he has asked partners how it can design “a second century firm” to last for another 100 years.
But some partners have asked him a different question: after such relentlessly harsh scrutiny of a once fiercely private firm, “will it ever go back to how it was?” That would only happen if McKinsey had less ambition to change the societies it works in, he argues, and “we don’t want to back away from that”.
So with two years left before partners decide whether he has earned a second term, Sternfels is steeling himself for more attacks. “I suspect for the rest of the time of our firm,” he says, “there will be stuff that’s critical.”