What I am not seeing in this discussion is any calculations showing how much of these outcomes are down to dumb luck, sample bias and correlation.
For example:
> Furthermore, research using our CEO database found that the top decile of high performing CEOs are 35 percent more likely to dynamically reallocate capital than average performers.
Maybe they stumbled into an opportunity that the rest didn't. That's luck.
> To move “boldly” is to shift at least 30 percent more than the industry median. Making one or two bold moves more than doubles the likelihood of rising from the middle quintiles of economic profit to the top quintile, and making three or more bold moves makes such a rise six times more likely.
So if your random walk takes you upwards, you wind up having walked upwards. Brilliant.
> In the largest research effort of its kind, McKinsey found that CEOs who insist on rigorously measuring and managing all cultural elements that drive performance more than double the odds that their strategies will be executed.
Measured number rises, unmeasured number remains unmeasured. Scientists baffled.
Remember: these are the best and the brightest. They are taken extremely seriously.
Edit: they do give a source for their 45%-explained-by-CEO claim ... and it's a pop-business book written by the same authors. Oh well.
Considering McKinsey’s business model (“hey CEOs, if you hire us we’ll make you excellent”), there’s nothing surprising in the content of this article (“coincidentally, the vague list of things that we consider to make CEOs excellent is the same as the list of things that we have experience promoting”).
I've seen nothing to convince me that most C-level management "experts" care about confounders, selection bias or, generally, the quality of any data they come up with. Nor have I seen evidence that others in a position to call them on it care to. They either do not care, or do not know, how to reasonably use data to support a point or to make a decision. To include folks from the big-3 management consultants.
Though to be fair, it's not like people down the org chart are usually much better at it.
I can second this. Everybody wants to be “data driven”, but hardly anybody wants to adhere to the rigorous standards necessary for sound data analysis.
I think it’s a bit unfair to point the finger at “C-level management” in particular though. The same kind of thinking can be observed in government agencies, in the legal system, even in academia. Statistics is just hard, and a lot of people are simply not interested and cognitively capable enough to get it right, sadly.
> a lot of people are simply not interested and cognitively capable enough to get it right, sadly.
This is how executives discredit engineers. Someone who believes themself to be intellectually superior to others and is socially inept enough to say so is an easy target to discredit. This is how you become a code monkey.
I don’t know, is it? I used to be a “code monkey”. To be honest I think the main reason I ended up in that position was that I saw myself as socially inept and thought that there was some kind of “big picture” that the mgmt/power focused people saw and I couldn’t see. I don’t any more, and my latest title is C-level (for a 100 person startup though - so nothing fancy).
People love to set social norms that limit how much use others can make of their talents and abilities. But that’s usually not in the company’s best interest, and those norms seldom have the backing of senior management.
With that said, of course you should be tactful and show your coworkers respect. People deserve respect not because they are smart, but because they are people.
(1) Long periods of success lead to raises for the incumbent CEO and then the long period of success ends
(2) The company is failing and needs a turnaround. No external person is willing to take the job for normal CEO pay for the company’s size because they know they’ll likely fail and that makes getting another CEO job substantially harder.
It seems worth noting that Anders Ericcson's handbook on expertise has chapters studying business expertise (though I get the feeling C level management gurus aren't reading it; there's an interesting chapter on entrepreneurs though!).
> Of the 50 most value-creating roles in any given organization, only 10 percent normally report to the CEO directly. Sixty percent are two levels below, and 10 percent sit farther down. Most surprising of all is that the remaining 10 percent are roles that don’t even exist.
This is very insightful analysis, using the method called "I made up all the numbers".
And somehow we're supposed to trust the rest of the article?!
In other words, the parts of a company that do work create value. A vapid conclusion even by management consultant standards.
A smart CEO or board understands where value can be destroyed. That’s always the existential threat facing an organization who gives a shit about McKinsey.
The source they're referencing was talking about asking companies to prioritize roles by value creation. Ten percent ended up being roles that didn't exist in the organization, but should. Also, the source said 20% were three levels below the CEO (as opposed to the quote above, which says 10% "sit farther down").
It's still what I like to call "lie with statistics". Take a topic that is pretty much inherently unmeasurable ("roles by value creation"), and then assign numbers to it in a pseudoscientific attempt to sound like you've done your research.
Well, yeah, I didn't check the original source, which might as well be right (or at least less wrong), but this article is definitely plain wrong. Typo? Maybe, but this is really simple math. I'd be ashamed to publish an article like this...
> What the CEO controls—the company’s biggest moves—accounts for 45 percent of a company’s performance.
What do executives think numbers are for? Why does the author find this metric meaningful? How does this number have any meaning at all? The fact that a CEO is important was not one that I questioned until I read this.
Had a lot of experience with McKinsey doing projects at my company at different levels I’ve been in throughout it the years. When it’s highly technical things like implementing a new technology or creat8!( a new manufacturing footprint, they do really good work. Anything “Strategic” or fluffy like this I find a waste of time. They are excellent salespeople and do a lot to calm the C-suite but I rarely see these fluffy items like this article driving employee happiness or the bottom line after spending millions.
Agree but many of the issues at the top of the food chain are like solving Family Dysfunction. Dad is the problem. Dad doesn't listen to anyone. Dad pays the bills.
I'm sympathetic to the CEO position.Not because of the overly glamorised picture of what it entails but because of how lonely it can feel sometimes. Most people can make decisions knowing that there's someone above them who can advise/change or cancel it all together.For CEOs that's often not the case and whatever you decide,you have to live with it.
Current McKinsey, not associated with this report but kind of close. Yes, this one is very fluffy. There’s a few high level things that are important though around Org. Lots of companies just don’t have a good strategy for org, and there’s a lot of low hanging fruit for things like talent, culture, etc.
I would say every business and the vast majority of individual people occasionally act as fluffers (as I believe I am to interpret that term) so sure.
My point is not to reveal a gotcha that McKinsey is not the word of God. You will find nobody at the firm thinks this way.
Many people have strongly negative perceptions of consulting firms, and I’m sure some people have strong anecdotes to justify their beliefs. Yet I’m brought in to address certain problems and it’s very clear that help is needed. Sometimes the solution is something that could have come from someone inside, or is perhaps something that someone on the inside is already saying beforehand, but the consultant gets communicated better to leadership because they have more political capital and credibility on the issue. If this happens, then you’re already experiencing some of the problems highlighted in this article. Political and organizational friction is real. If that is the “only” thing preventing an organization from solving a problem, then they are still incapable of solving the problem on their own. I think a lot of people would benefit from seeing how things are from the consultants point of view.
My wife's company (large pharma in SSF starting with G) consulted with Mckinsey for "strategy and innovation". Mckinsey recommended
a) the company G move to Agile except that they didn't say how. So now every meeting/townhall/1:1 is filled with buzzwords. It is clear from the way she describes it, no one in the company understands what Agile means. Everybody talks about collaboration but they don't do any of the Agile rituals.
b) All of G's employees should move to an open office plan with non dedicated seats. You come in the morning and have to hunt around for a desk. If you have to go for a meeting in a conference room, you have to pack up all your stuff in your bag and go. When your meeting is over, it is time to start hunting again.
Did the Mck guys handle any of the implementation? Because that sounds like the client took potentially valid recommendations and half-assed the implementation. Plus if the name ends with g, well, morale was already kinda low from what I heard from ex employees.
Implementation of strategy. I.e. change management, strategy program management, follow on work from original strategic planning, etc. They do it all the time. But should have clarified between system implementation.
Also McKinsey, Bain and I think BCG have actual system implementation or at least integration offerings now.
> All of G's employees should move to an open office plan with non dedicated seats.
I've heard about this being discussed at one other large org. It sounds very concerning to me, is there any proven benefit to having non-dedicated seats?
The proven benefit is cost reduction. You can reduce total desks and therefore office space required by estimating how many people are actually in the office on average and then having that many desks + communal working spaces and conference rooms. When I’ve seen the calculations done it’s normally at least a 10% desk count reduction.
Please don't take this as defending Mckinsey, but I think there was a good chance this is a decision that G wanted to take, and they just used Mckinsey as a blame sink.
Similar story. McKinsey was brought in to a company I was working with. Their purpose was to improve management efficiency and morale, which were both quite poor because the CEO had no actual industry experience and had brought his friends on as senior executives, who similarly had no idea what they were doing. McKinsey interviewed everyone for three months, literally reading questions from a playbook, had their junior staff write up some recommendations, and then promptly disappeared while effecting zero actual change. The company went bankrupt shortly thereafter.
This is why management consulting has such a bad reputation in the tech community. On the other hand, McKinsey does do a pretty decent job of research and case studies since they’re able to work with so many prominent companies.
In my experience, this stems from the shocking number of "Agile Coaches" lacking practical experience in any of the three main disciplines within a functioning product team (software engineering, product management, or design).
So while they can introduce the high-level rituals -- standups, retrospectives, and the like -- they are unable to teach battle magic: building code that can cope with changing user requirements, writing specifications that make sense to both stakeholders and engineers, and figuring out what problems we acutally need to solve to get people to buy and use the product.
Moreover, they undersell just how much an organization needs to adapt to actually leverage any of this.
The end result is exactly as you describe.
In my experience, companies that succeed with Agile practices are the ones that (a) constantly invest in their people; (b) delegate problems, not solutions; and (c) are ruthlessly rational, requiring that each new practice or idea pays its own rent.
I truly despair for the world. The "advice" offered is just so devoid of content.
What if some things can't be learned, packaged into a Powerpoint, and then taught and instantly absorbed?
It is like the economist who spends his whole life ensconced in his little office telling investors how to invest, or policy makers how to manage an economy...despite having no actual experience of those things himself.
After a number of years in the space I’ve come to the sad conclusion that many (not all) companies succeed despite their leadership rather than because of it. There are often a large number of true believers involved in keeping the ship sailing straight and they often get little credit for it.
McKinsey’s advice on what makes a great CEO is like my advice for making it through menopause. They know absolutely nothing about it and their expertise is mainly in creating CYA documents for executives and assisting corrupt governments and regimes.
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[ 6.0 ms ] story [ 159 ms ] threadMost enterprise don't know how to write content people like to read for some reason
For example:
> Furthermore, research using our CEO database found that the top decile of high performing CEOs are 35 percent more likely to dynamically reallocate capital than average performers.
Maybe they stumbled into an opportunity that the rest didn't. That's luck.
> To move “boldly” is to shift at least 30 percent more than the industry median. Making one or two bold moves more than doubles the likelihood of rising from the middle quintiles of economic profit to the top quintile, and making three or more bold moves makes such a rise six times more likely.
So if your random walk takes you upwards, you wind up having walked upwards. Brilliant.
> In the largest research effort of its kind, McKinsey found that CEOs who insist on rigorously measuring and managing all cultural elements that drive performance more than double the odds that their strategies will be executed.
Measured number rises, unmeasured number remains unmeasured. Scientists baffled.
Remember: these are the best and the brightest. They are taken extremely seriously.
Edit: they do give a source for their 45%-explained-by-CEO claim ... and it's a pop-business book written by the same authors. Oh well.
Though to be fair, it's not like people down the org chart are usually much better at it.
I think it’s a bit unfair to point the finger at “C-level management” in particular though. The same kind of thinking can be observed in government agencies, in the legal system, even in academia. Statistics is just hard, and a lot of people are simply not interested and cognitively capable enough to get it right, sadly.
This is how executives discredit engineers. Someone who believes themself to be intellectually superior to others and is socially inept enough to say so is an easy target to discredit. This is how you become a code monkey.
People love to set social norms that limit how much use others can make of their talents and abilities. But that’s usually not in the company’s best interest, and those norms seldom have the backing of senior management.
With that said, of course you should be tactful and show your coworkers respect. People deserve respect not because they are smart, but because they are people.
(1) Long periods of success lead to raises for the incumbent CEO and then the long period of success ends
(2) The company is failing and needs a turnaround. No external person is willing to take the job for normal CEO pay for the company’s size because they know they’ll likely fail and that makes getting another CEO job substantially harder.
https://www.cato-unbound.org/2011/07/13/robin-hanson/who-car...
https://www.amazon.com/Cambridge-Expertise-Performance-Handb...
This is very insightful analysis, using the method called "I made up all the numbers".
And somehow we're supposed to trust the rest of the article?!
A smart CEO or board understands where value can be destroyed. That’s always the existential threat facing an organization who gives a shit about McKinsey.
I agree this is pretty sloppy writing.
What do executives think numbers are for? Why does the author find this metric meaningful? How does this number have any meaning at all? The fact that a CEO is important was not one that I questioned until I read this.
I am not sure if the statistics I heard had any basis whatsoever though.
My point is not to reveal a gotcha that McKinsey is not the word of God. You will find nobody at the firm thinks this way.
Many people have strongly negative perceptions of consulting firms, and I’m sure some people have strong anecdotes to justify their beliefs. Yet I’m brought in to address certain problems and it’s very clear that help is needed. Sometimes the solution is something that could have come from someone inside, or is perhaps something that someone on the inside is already saying beforehand, but the consultant gets communicated better to leadership because they have more political capital and credibility on the issue. If this happens, then you’re already experiencing some of the problems highlighted in this article. Political and organizational friction is real. If that is the “only” thing preventing an organization from solving a problem, then they are still incapable of solving the problem on their own. I think a lot of people would benefit from seeing how things are from the consultants point of view.
a) the company G move to Agile except that they didn't say how. So now every meeting/townhall/1:1 is filled with buzzwords. It is clear from the way she describes it, no one in the company understands what Agile means. Everybody talks about collaboration but they don't do any of the Agile rituals.
b) All of G's employees should move to an open office plan with non dedicated seats. You come in the morning and have to hunt around for a desk. If you have to go for a meeting in a conference room, you have to pack up all your stuff in your bag and go. When your meeting is over, it is time to start hunting again.
Morale amongst the rank-and-file is quite low.
Also McKinsey, Bain and I think BCG have actual system implementation or at least integration offerings now.
I've heard about this being discussed at one other large org. It sounds very concerning to me, is there any proven benefit to having non-dedicated seats?
This is why management consulting has such a bad reputation in the tech community. On the other hand, McKinsey does do a pretty decent job of research and case studies since they’re able to work with so many prominent companies.
In my experience, this stems from the shocking number of "Agile Coaches" lacking practical experience in any of the three main disciplines within a functioning product team (software engineering, product management, or design).
So while they can introduce the high-level rituals -- standups, retrospectives, and the like -- they are unable to teach battle magic: building code that can cope with changing user requirements, writing specifications that make sense to both stakeholders and engineers, and figuring out what problems we acutally need to solve to get people to buy and use the product.
Moreover, they undersell just how much an organization needs to adapt to actually leverage any of this.
The end result is exactly as you describe.
In my experience, companies that succeed with Agile practices are the ones that (a) constantly invest in their people; (b) delegate problems, not solutions; and (c) are ruthlessly rational, requiring that each new practice or idea pays its own rent.
What if some things can't be learned, packaged into a Powerpoint, and then taught and instantly absorbed?
It is like the economist who spends his whole life ensconced in his little office telling investors how to invest, or policy makers how to manage an economy...despite having no actual experience of those things himself.
I don't know how we got to this point.
And never, never hires McKinsey.