McKinsey & Company Manage knowledge and learning

Current situation
McKinsey in 1996 is one of the biggest consulting companies in the world and is
famous for his knowledge. Within the company the revenue had more than doubled
within the past 6 years and the focus was on knowledge development next to serving its
customers.

In 1994 there were 4 new plans made to stimulate these 2 objectives further. These were
set by its current management director Rajat Gupta. The 4 key points are:

• Capitalize firm’s long term investment in practice development driven by

Clientele Industry Sectors, Functional Capability Groups, and the knowledge
infrastructure of PDNet and FPIS and through new channels.
• Use the new developed approach of the Practice Olympics throughout the entire
firm, which is focused on the development of ideas within the company and those
ideas are judged by the board of directors so there will be an internal competition
focused on knowledge.
• The launch of 6 special multi year internal assignments which were focused on
tapping into the internal and external expertise to develop “state of the art”
formulations of key issues. This was done so the firm’s functional knowledge was
improved so McKinsey could focus more on longer term, bigger commitment and
cross-functional development.
• The last idea was aimed at expanding the model of the McKinsey Global Institute.
This meant that they would try to create other pools of dedicated resources
protected from daily pressures and client demands next to being focused on long
term research agendas.

Gupta knew that it could be possible that McKinsey would loose client work
today but if it was in the best interest of the company for the future he said that they
would be willing to. So he also could leave the firm stronger than he found it, which had
been a key element for the leaders of McKinsey over the past decades.

Lisa Trubia, Daniel Sanders, Rutger van Wesel, Martijn Telderman 2

Fred van Veldhoven, Aishlinn van Nikkelen Kuijper
McKinsey & Company Manage knowledge and learning

Key Issues
McKinsey is not alone in the market for consulting. It has strong competition
from for example the Boston Consultancy Group. But there are also others. In order to
keep up with its competition McKinsey has practiced various strategies and ideas.
An important idea from McKinsey is the one firm policy, which consists of the recruiting
of employees on a world wide base, the clients to be treated as McKinsey responsibilities
and profit sharing from a firm pool as opposed to an office pool. Nowadays some feared
that the company was getting away from this policy.
Another key element from McKinsey is the fact that they are not only there to
serve the customer. They are more focused on creating knowledge (within its company
and in its employees) and also on the benefits for the company as a whole. The
employees from McKinsey are also very important. Not only the employees itself but
also the idea driven personal networks they build up throughout the company. These are
mainly built up when one department provides help to another. If it does this effectively
the others will come back which is the start of a network.
Also there is a focus on the client’s problem. Each of these problems is treated as
unique and focused on building a client relationship. Also they try not to find a solution
for the company’s current problem but moreover to find a new approach on the deeper
lying problems and strategies of the firm.
McKinsey works with an “engage-explore-apply-share” model. This is focused on
the building of individual and team capability as opposed to a focus on the development
of knowledge.
In order to stimulate its employees, McKinsey developed certain promotion plans.
By doing this there became clarity in the succession of people, which boosted the
confidence of the employees.

• There were concerns that the growth might stretch the fabric of the place.
McKinsey can’t keep on disaggregating their units to create niches for everyone
because they have exhausted the capability of their integrating mechanisms.

Lisa Trubia, Daniel Sanders, Rutger van Wesel, Martijn Telderman 3

Fred van Veldhoven, Aishlinn van Nikkelen Kuijper
McKinsey & Company Manage knowledge and learning

• To support high growth rates McKinsey must be more aggressive in using

technology. Not only to support knowledge transfer, but also in allowing partners
to mentor more young associates.
• There is also a dark side on technology; it can drive out communication and
people start believing that e-mailing someone is the same thing as talking to them.
So teams shouldn’t stop meeting and practice conferences should not be held on
discussion forums online.
• In addition, IT can sometimes lead to information overload; the more time
employees at McKinsey spend searching out the ideal framework or the best
expert, the less time they spend thinking creatively about the problem.
• One of the Commission’s central proposals (settled in 1971) was that the MGM
ratio would be reduced from 7 to 1 back to 5 or 6 to 1. But in 1995 this MGM
ratio was already 8 to 1 (Exhibit 1)
• Some experts inside McKinsey seem to be uncertain about their future at the
company. They are very uncertain about their promotion prospects.

Support systems
To handle the internal information much thought was given to building a
knowledge infrastructure. The former reluctance to document concepts had long
constrained the internal transfer of ideas and the vast majority of internally developed
knowledge was never captured. In the late 1970s, McKinsey launched the McKinsey
Staff Paper series in an attempt to deal with the problem. McKinsey increasingly
encouraged its consultants to publish their key findings.
The task of implementing focused first on the Firm Practice Information System
(FIPS). This is a computerized data base of client engagements. This FIPS needed to be
updated with new systems and procedures to make the data more complete, accurate, and
timely so that it could be accessed as a reliable information resource, not just an archival
record. More difficult was the task of capturing the knowledge that had accumulated in
the practice areas since much of it had not been formalized and none of it had been
prioritized or integrated. After a lot of begging, cajoling and challenging each practice to

Lisa Trubia, Daniel Sanders, Rutger van Wesel, Martijn Telderman 4

Fred van Veldhoven, Aishlinn van Nikkelen Kuijper
McKinsey & Company Manage knowledge and learning

develop and submit documents that represented their core knowledge, McKinsey finally
launched its Practice Development Network (PDNet).
A third and smart implementation was the Knowledge Resource Directory
(KRD). An assembly of all firm experts and key document titles by practice area
published in a small book that fitted in every employee’s briefcase. This has since been a
great resource that found almost immediate enthusiastic acceptance. The KRD became
known as the McKinsey Yellow pages.

Develop T-shaped into I-shaped consultants

The basic concept of shaping T-consultants into I-consultants deals with the
transformation of employee skills. In the past, the emphasis was on a broad based
problem solving skills and client development orientation, were deeply embedded in the
firm’s values. However McKinsey, increasingly believed that consultants should focus
more on specialized knowledge development. This would enable them to serve the
customer better with more specialized, structured strategies.

Believing that the firm’s organizational infrastructure needed major overhaul, a

Knowledge Management Project was launched in 1987, and made three
recommendations:

• The term had to make a major commitment to build a common database of

knowledge accumulated from client work and developed in the practice areas.
• To ensure that the data bases were maintained and used, they proposed that each
practice area hire a full time practice coordinator who could act as an “intelligent
switch” responsible for monitoring the quality of data ad for helping consultants
access the relevant information.
• They suggested that the firm expand its hiring practices and promotion policies to
create a career path for deep functional specialist who would become more I-
shaped than the normal profile T-shaped consultant.

Lisa Trubia, Daniel Sanders, Rutger van Wesel, Martijn Telderman 5

Fred van Veldhoven, Aishlinn van Nikkelen Kuijper
McKinsey & Company Manage knowledge and learning

Client impact committee

With responsibility for knowledge management, the manager director began to
focus on a new theme, client impact; the notion of a legitimate role as a consultant to
teams had evolved to a need for specialists to be “engagement director capable”. He also
created a Client Impact Committee. One of the most important initiatives of the
committee was to persuade the partners to redefine the firm’s key consulting unit from
the engagement team (ET) to the client service team (CTS). The traditional ET, delivered
a three of four month assignment for a client, was a highly efficient and flexible unit, but
it tended to focus on the immediate task rather than on the client’s long term need. The
CST concept was that the firm could add long-term value and increase effectiveness of
individual engagements if it could unit a core of individuals. Who were linked across
multiple ETs, and commit them to working with the client over an extended period.

International expansion
The period immediately following World War II ushered in an era of
internationalism. When a South American oil company engaged McKinsey to assess its
global operations, it seized the opportunity to test the "one firm" approach in the
laboratory of the world. Bolstered by the emergence of a more highly integrated world
economy, McKinsey established its first international office in London in 1959.
Tariff barriers tumbled in the European Common Market throughout the 1960s,
spurring many major American and European companies to reach beyond national
borders. Many of these budding multinationals sought McKinsey's advice on how to
organize as conglomerates.
The globalization of corporations helped fuel demand for McKinsey’s services
worldwide. It established offices in the Netherlands, Germany, Italy, France, and
Switzerland. It also added Canada and Australia to their international network. This all
took place during the 1960s.
The 1970s proved to be our most challenging decade. A troubled world economy
and social unrest undermined confidence. McKinsey’s growth slowed and its competitors
gained ground.

Lisa Trubia, Daniel Sanders, Rutger van Wesel, Martijn Telderman 6

Fred van Veldhoven, Aishlinn van Nikkelen Kuijper
McKinsey & Company Manage knowledge and learning

Realizing that a course correction was needed, McKinsey subjected the firm to the
trademark McKinsey in-depth analysis. It discovered that in growing too fast, it had
threatened a precious commodity: the client relationships. McKinsey fortified their
commitment to excellence in client service through more rigorous selection and
evaluation of its people, and a sharper focus on the quality of their knowledge.
A substantial investment in knowledge development – particularly in the key
areas of expertise, strategy, and organization – fueled the internal reinvention.
In the 1980s the globalization expanded and with that came the need for McKinsey to
develop deeper and broader expertise. It expanded the scope of its recruiting to increase
its diversity. McKinsey also invested heavily in codifying its knowledge and making it
accessible through an infrastructure of more than 60 areas of specialized expertise. The
clients draw on this reservoir of knowledge as a source of competitive advantage.
The unprecedented globalization of the 1990s redefined the parameters of
business. McKinsey was called upon to restructure entire industries. McKinsey flourished
in the expanding economy, entering the decade with a professional staff of nearly 2,500
and doubling that number by 1999. McKinsey also reinforced its practices through
increased recruitment of both functional and industry experts, continually extending the
depth and reach of our knowledge.
McKinsey also expanded into nearly 20 additional countries, opening offices in Taiwan,
Korea, India, Indonesia, and Russia, among others. It also began to serve clients in
Turkey, South Africa, and Southeast Asia and added new locations in Europe and in
North and South America.

Lisa Trubia, Daniel Sanders, Rutger van Wesel, Martijn Telderman 7

Fred van Veldhoven, Aishlinn van Nikkelen Kuijper
McKinsey & Company Manage knowledge and learning

Case Conclusion
The little firm of “accounting and engineering advisors” was able to grow into the
world’s most prestigious consulting firm. McKinsey was able to do this by focusing its
company business on a one firm vision. This biggest problem internally was how to
manage the information that existed in the company and let the company benefit from it.
This required efforts of people to communicate their findings. Support systems like
PDNet and FPIS were created. Consultants were encouraged to publish their work. But
one of the most important issues remained. The change of the consultant himself was a
matter that McKinsey recognized. In order to make the knowledge infrastructure work
the consultant needed to change from a T-shaped into an I-shaped consultant. Working
more specialized rather than on a broad company base. All this enabled McKinsey to gain
a unique competitive advantage. Nowadays, McKinsey goes on with this focus on sharing
information throughout the company, which helps it to maintain its advantage and grow
even further.

Lisa Trubia, Daniel Sanders, Rutger van Wesel, Martijn Telderman 8

Fred van Veldhoven, Aishlinn van Nikkelen Kuijper