The firm was founded in 1926 by university of Chicago professor, James (“Mac”) McKinsey, it was called “accounting and engineering advisors”. Mac started recruiting experienced executives and training them in the integrated approach he called his General Survey outline. In Saturday morning sessions he would lead consultants through an undeviating sequence of analysis – goals, strategy, policies, organisation, facilities, procedures and personnel – while still encouraging them to synthesize data and think for themselves. McKinsey’s mission was to help clients make positive, lasting, and substantial improvements in their performance and to build a great firm that is able to attract, develop, excite, and retain exceptional people.
Bower’s vision of the firm was: “one focused on issues of importance and top-level management, adhering to the highest standards of integrity, professional ethics, and technical excellence, able to attract and develop young men of outstanding qualifications, and committed to continually raising its stature and influence. Above all, it was to be a firm dedicated to the mission of serving its clients superbly well. Bower also articulated a policy that every assignment should bring the firm something more than revenue – experience or prestige for example. Bower and his colleagues believed that well-trained, highly intelligent generalists could quickly grasp the issue, and through disciplined analysis find its solution.
The firm grew extraordinarily domestically in the 1950’s which provided a basis for international expansion that accelerated the rate of growth in the 1960’s. Offices opened in London, Geneva, Amsterdam, Düsseldorf and Paris. McKinsey was now a well established and highly respected presence in Europe and North America.
To Gupta the task of knowledge development had become much more complex over the past decade or so due to three intersecting forces:
• In an increasingly information and knowledge driven age, the sheer volume and rate of change of new knowledge made the task much more complex
• Clients expectations of and need for leading edge expertise were constantly increasing
• The firm’s own success had made it much more difficult to link and leverage the knowledge and expertise represented by 3800 consultants in 69 offices worldwide.
Gupta believed that knowledge is the lifeblood of McKinsey.
How does knowledge create value for McKinsey and Company?
Creating value for a firm means performing activities that increase the value of goods or services to consumers. McKinsey does this by trying not only to ‘serve its clients but also to develop its consultants’. Bower and his colleagues believed that well-trained, highly intelligent generalists could quickly grasp the issue, and through disciplined analysis find its solution. Because of the use of knowledge management one of McKinsey’s clients managing director reflected on a certain outcome that “their value added was in their access to knowledge, the intellectual rigor they bring, and their ability to build understanding and consensus among a diverse management group.”
In 1980 when Gluck joined the central small group that comprised the firm office he proposed that “knowledge development had to be central, not a peripheral firm activity; that it needed to be ongoing and institutionalised, not temporary and project based; and that it had to be the responsibility of everyone, not just a few”. Gluck was trying to build a shared body of knowledge throughout the firm. Even though doing this may be costly Gluck was hoping the benefits would outweigh the expenses.
Knowledge had created value for McKinsey and Company through that its client’s impact studies indicated that the new knowledge structure led to a longer-term focus on deeper understanding of issues.
McKinsey and Company’s use of knowledge throughout the firm helped build long lasting client relationships. Gupta believed that knowledge was the core factor in being successful in the long run. Knowledge is a fundamental value for the McKinsey and Company. Even though focusing on developing knowledge throughout the firm may lead to less client work Gupta argued that it was still worth it and would increase value for the firm in the long term.
Critically evaluate the company’s soft knowledge management strategy. I.e people.
Soft knowledge management is “less quantifiable and cannot be captured codified and stored easily” (Kidd, 1994; Skyrme, 1998) Tacit knowledge is an example of soft knowledge. Tacit knowledge “cannot be easily communicated and shared, is highly personal, deep rooted in action and in an individual’s involvement within a specific context. It is commonly referred to as ‘the knowledge in people’s heads”. “Soft knowledge becomes accepted by virtue of informal authority and consensus within the group.”(Hildreth, Wright and Kimble, 2005). Gluck felt that there was a need to adjust the firm’s knowledge development focus.
He believed that “knowledge is only valuable when it is between the ears of consultants and applied to clients problems.” Knowledge is less effectively developed through the disciplined work a few than through the spontaneous interaction of many. He changed the more structured “discover-codify-disseminate” model to an “engage-explore-apply-share” approach. Which is, a more loose approach. Even though McKinsey had adopted hard knowledge approaches, it still relied heavily on soft knowledge components, such as personal networks, old practices like cross-office transfers and strong ‘one firm’ norms like helping other consultants when they called. Unlike the hard knowledge approach the transfer of knowledge with the soft approach is not through databases and ‘Knowledge Resource Directory’s” it is a more informal method. It is when the older staff of the firm helps and teaches the new comers by sharing their experience and knowledge.