3 GATHERING THE DATA

After developing your initial hypothesis and determining the

analyses you need to prove it comes the unglamorous but allimportant

task of gathering the data necessary to perform those

analyses. An unquenchable appetite for facts is one of the hallmarks

of consulting à la McKinsey, and data gathering ranks

among the most important consulting skills—just ask any new

consultant after about six months on the job. Our interviews with

McKinsey alumni suggest that this area is also one of the most significant

opportunities for improvement in other organizations. As

described in our model in the introduction of this book, we suggest

a balance between fact-based analysis and intuition. The key, however,

is balance. Our hypothesis is that much of the daily decision

making in business lacks rigorous, fact-based support, a McKinsey

imperative and obsession since the Firm’s founding in 1923.

In this chapter, we dive deep into the exciting world of data

gathering. We begin, in the first section, with an overview of

research strategies. We also share some successful techniques for

conducting meaningful research—“gathering data smart” as one of

our alumni put it. We get to the nitty-gritty with specific research

tools widely recognized as best practices in and beyond McKinsey.

Although some of these tools may sound familiar, their successful

implementation with limited resources presents a constant

challenge. The first section also identifies some of the best sources

for data gathering, many of which are available free.

The second section takes you through one of McKinsey’s most

important data collection tools, the interview. A few incisive interview

secrets can greatly improve the quality of your decision making.

Follow our tried and tested techniques, and you’ll boost your

chances of uncovering those choice nuggets of information.

Finally, we’ve included a section on knowledge management

(KM), one of the hottest current topics in business. In addition to

describing effective KM strategies and tools, we share stories of

how McKinsey alumni have successfully transformed KM efforts

in their post-McKinsey organizations.

We considered writing a section on how to make research fun

but lacked sufficient fact-based support. So we just focused on how

to conduct it as painlessly as possible.

RESEARCH STRATEGIES AND TOOLS

As with most of the ideas in this book, we suggest taking a step

back and thinking before jumping in. Let’s face it, information

availability is not the issue these days. Quite the opposite: we have

too much of it. Our alumnus at GlaxoSmithKline, Paul Kenny,

faces this problem every day:

The data-gathering process has changed. I find loads of

information on the Web, much more than even a few years

ago. In pharmaceuticals, there is no shortage of data or

information. In fact, we’re inundated by it. There’s information

on the market, in very detailed form, along with a

tremendous amount of complex scientific data. The difficulty

is pinpointing the useful bits.

Rainer Siggelkow, owner and board member of US Forty and

Bordercross Marketing, reiterates the need for strategic focus: “In

our business, it is helpful to get to the one or two really important

numbers that need to be considered. There isn’t time for more.”

We concur. When doing your research, you don’t want to get as

much information as possible, you want to get the most important

information as quickly as possible.

As illustrated by the previous two alumni quotes, McKinsey’s

dedication to strategic fact-finding has a place in other organizations

as well. Have you ever been involved in a data search

that took forever yet yielded little? That’s what we hope to avoid.

Let’s review how McKinsey gathers data and then discuss new

lessons learned as these concepts are implemented in other

organizations.

THE McKINSEY WAY

Let’s briefly review McKinsey’s principles for research:

Facts are friendly. Problem solving at McKinsey relies on facts.

Facts compensate for a consultant’s lack of experience and intuition

relative to an executive with years of business experience.

Facts also bridge the credibility gap between consultant and client;

they allow the consultant to show she knows her stuff. Despite (or

possibly because of) the power of facts, many businesspeople fear

them, but hiding from unpleasant facts will, at best, delay the

inevitable.

Don’t accept “I have no idea.” People always have an idea if

you probe a bit. Ask a few pointed questions, and you’ll be amazed

at what people know. If you ask someone a question and the person

responds, “I have no idea,” treat it as a challenge. Chances are,

the response stems from a lack of time, a feeling of insecurity, or

worst of all, sheer idleness. Your challenge is to figure out the

source of resistance and adjust accordingly.

Remember, too, that just as you shouldn’t accept “I have no

idea” from others, so you shouldn’t accept it from yourself. With a

bit of thinking and searching, you’ll usually find that you do know

something, or at least can find it out.

Specific research tips. Three high-impact techniques courtesy of

McKinsey to enhance your research are (1) start with the annual

report, (2) look for outliers, and (3) look for best practices. The

annual report offers a wealth of information about a company in

one package; be sure to read the message to the shareholders or

CEO’s report. Outliers analysis (often accomplished with the help

of a computer) is a tool to isolate key opportunities for investigation

within a firm. This method involves comparing ratios or calculating

key measures (such as sales per salesperson by region),

paying particular attention to high and low performers. Finally,

although the term best practices may be painfully familiar (as one of the business buzzwords of the 1990s), most companies can still

learn from a competitor or other top-performing organization,

even one in a different industry.

LESSONS LEARNED AND IMPLEMENTATION

ILLUSTRATIONS

How can you take the McKinsey lessons of strategic data gathering

and apply them in your organization? Our interviews with

McKinsey alumni who have worked to transfer the data orientation

and fact-finding approaches to post-McKinsey organizations

helped us identify three ways to get this done:

• Diagnose the data orientation of your organization.

• Demonstrate the power of good facts.

• Build the proper infrastructure.

Diagnose the data orientation of your organization. The cultures

of organizations vary widely, as do their “data orientations.”

McKinsey has developed a strong, fact-based culture that mandates

factual support for articulated positions, both in internal

communications to employees and in external communications to

clients. When they leave the Firm, many alumni are surprised at the

lack of concrete data analysis in their new organizations. Stevie

McNeal, vice president at Blue Cross/Blue Shield of North Carolina,

identified the absence of facts as a potential inhibitor of

effective decision making. “Certain facts and the effective communication

thereof can be intimidating,” she observes, “especially

when people are operating without a basis in facts and logic.”

A fact-oriented culture is hardly the exclusive preserve of

McKinsey, however. Other companies can and do rely on data

ahead of instinct, and some McKinsey alumni have helped their

organizations develop this attitude. The first step in advancing data collection efforts in your organization is to assess your particular

situation honestly. Is the culture in your company more or less fact

based? Do colleagues present their ideas with factual support? Do

the decision makers explain the basis of their choices with reference

to evidence? Naturally, there will be variance within the organization,

but you shouldn’t take long to diagnose the dominant

orientation, if you can’t pinpoint it already.

Once you’ve analyzed your organization, you can begin

redressing any imbalances that you discover, particularly the

aspects you can control. Start within your sphere of influence—

your direct reports and department. If necessary, take a grassroots

approach to spreading the word. Of course, if you have the luxury

of building a department or company from scratch, you can

start from a fact-based orientation. Before you can determine the

right balance for your organization, however, you need to follow

the ancient maxim “Know thyself.”

Demonstrate the power of good facts. Dan Veto left McKinsey

to form the strategic planning group of the huge conglomerate

Conseco. He used his skill at gathering, synthesizing, and communicating

facts to earn the respect of his internal clients, the division

presidents:

I was new to the organization and in charge of building credibility

for a newly created group within the company. I

wanted to make the new strategy group contribute to the

overall company’s success as quickly as possible. It took a

couple of months, but I was able to establish critical, credible

relationships with the SBU [strategic business unit] heads,

who are, in essence, our clients. My strategy, based on my

McKinsey experiences, was to have our team focus on providing

fact-based insights using information that previously

had not been shared among the business units. By devoting more thought and attention to data gathering, you

will be able to generate credible insights you might not otherwise

reach—and with the fact base, your insights will be credible. By

relying more on facts, you should be able to increase the impact

of your analyses and recommendations within your organization.

Use Dan’s example, and spread the word on the power of factbased

insights.

Build the proper infrastructure. McKinsey has the luxury of

abundant resources for data gathering. In addition to the extensive

databases that codify all studies and expertise within the Firm,

McKinsey employs information specialists, who run office libraries

and assist consultants in their data gathering. Lists of studies,

names of experts, “sanitized”* reports, industry studies, and Wall

Street analyst reports reach a consultant’s desk on the first day of a

new study. The consultant receives not just lots of information, but

the right information.

A former McKinsey-ite who is now an executive at a major

financial institution recognizes that most companies’ data support

efforts don’t reach the bar set by McKinsey:

I find that most companies do very little in this regard, and

their efforts are very spread out. We have a corporate library,

but I miss the value of conversation with an expert who

understands business and knows exactly how to point me

in the right direction.

We won’t venture an estimate of the exact budget needed for

data collection activities. Suffice it to say that you should probably

spend more than whatever you currently are spending. At

McKinsey, consultants rely on internal reports, industry reports,

To ensure confidentiality, client names are eliminated from sanitized reports, and financial

or other data are disguised.

analyst reports, census data, and the like. Identify the key data

sources for the kind of information most important to your particular

organization, and spend whatever is necessary to secure

these sources—within the constraints of your oganization’s budget,

of course.

IMPLEMENTATION GUIDANCE

Strategic data gathering can significantly improve your effectiveness

and efficiency. Perhaps a (hypothetical) nonbusiness example

will help bring the point home.

Jerry and Marilyn want to buy a new car. Jerry sees an advertisement

on TV for a new SUV from Honda. He likes the way it

looks and knows from experience that Honda makes quality automobiles.

He goes out the next day to the dealer, sees a color that he

knows Marilyn likes, and orders the car. It will arrive in two

weeks.

Marilyn has a hunch that Jerry is moving too quickly on the

car purchase as he often relies on his intuition to guide his actions.

Being a bit more fact-oriented, she ponders her situation and

decides to do a little research. She logs on to her new fast-access

Internet connection that her son helped her install the weekend

before and begins gathering data and accessing consumer reports

(see Appendix A for similar leads).

Once she has compared features and statistics for the various

models (utilizing key decision criteria such as room for grandkids,

safety, and fuel efficiency), she changes gears. She then gathers

some information about different fishing rod and reel combinations

because she knows Jerry is thinking about buying new equipment

for the annual family trip to the lake. She prints out some

excellent, brief comparison reports on different fishing sets, including

price data, from four different manufacturers. Jerry is

impressed by the rod and reel information and together they make

56 The McKinsey Mind

the purchase online. Two days later he asks whether or not Marilyn

has considered making similar comparisons for the auto purchase

they’re planning.

As you consider the potential impact of powerful facts in your

organization, try out this method, just as Marilyn did, and seek to

provide insights not previously available (the goal of effective data

gathering). Based on your company’s primary objectives, such as

profitability and sales growth, take the time to find out what is

important. Then gather the right facts and share the insights.

When it comes to building a more fact-based culture, don’t try

to go at it alone. McKinsey did not achieve its research expertise

without adequate, dedicated resources. Make the investment to

hire research specialists, and grant full authority to purchase the

right journals and reports that will prove useful to decision making

in the organization. Be selective, however. Monitor their use to

control spending, and evaluate their usefulness. This strategy will

vary with the specifics of your organization, of course. A large

multinational will have the need and ability to build a more sophisticated

support structure than a five-person start-up. Remember

that you need more than just a budget; you also need the right cultural

elements, including the incentives to increase the usage of

facts in your organization. We will discuss this issue in more detail

in the knowledge management section of this chapter.

Finally, given the importance of “good” data sources, we have

included a summary of some of the outstanding research tools currently

available to the public. Table 3-1 (pages 58–59) lists some

powerful search engines and general information guides. In addition,

Appendix A provides a long list of the most helpful data

sources we could find.* Some of these sources contain a lot of general

information (e.g., Census Bureau data), while others focus on

Note that although these sources were accurate at the time of writing, Web addresses

and contents can change rapidly.

Category Name Description Cost Location

Search engines Asianet’s Select Over 950 search engines in one place Free www.asianet.net/search.php

Search Engines

Search engines Findspot Nice search engine guide plus search assistance Free www.findspot.com

Search engines Google Easy search that claims access to over Free www.google.com

1.3 billion Web pages

Search engines Hotbot Full text of over 100 million Web pages Free www.hotbot.lycos.com

Search engines Alta Vista Power search engine—especially for Free www.altavista.com

advanced searches

Search engines FAST Search Claims access to over 575 million URLs; Free www.alltheweb.com

extensive list of sites

Search engines Yahoo One of the old standards—some Free www.yahoo.com

commercialization

Category Name Description Cost Location

General ABI/Inform Global Abstracts and some full text for articles Varies Subscription information at

information (Proquest Direct) in over 1,000 leading journals www.proquest.com

General Academic Universe General and specific industry and company Varies Subscription information at

information (Lexis/Nexis) information; major news wires www.lexis-nexis.com

General AJR NewsLink Access to over 3,400 U.S. and 2,000 non– Free ajr.newslink.org/news.php

information U.S. newspapers

General Business & Industry Facts, figures, and key events for Varies Subscription information at

information international companies www.galegroup.com/wel

come.php

General Business Wire Business news and information about Free www.businesswire.com

information industries and companies—latest news

General Dow Jones Extensive access to full-text articles from Varies Subscription information at

information Interactive newspapers, magazines, journals, and http://askdj.dowjones.com/

broadcast media

General Individual.com Free company and industry news; can be Free www.individual.com

information customized based on your input

TEAMFLY

specific subjects or industries. Experiment with them a bit, and

you’ll soon discover which sources can provide you with the

“right” information in the easiest fashion. And remember, quality

over quantity.

EXERCISES

• Conduct a data orientation audit. Obtain the material from

your last big presentation (to your board, boss, spouse,

etc.), and review the written material and notes. Summarize

the key arguments. Under each argument, jot down the

facts that support the points. How many facts do you

have? Do you make any arguments without supporting

facts? If so, this is a red flag. Depending upon the nature of

the presentation, you should have at least three good supporting

facts for each point (unless one fact is a slam

dunk).

• Develop a data-gathering plan for a current problem. What

major issue at work keeps you up at night? Analyze it.

First, develop your overall hypothesis (from Chapter 1).

Then think of at least three major arguments, and identify

the most relevant fact or two that may support the position

(or disprove it). Next, identify the potential source of the

information (document or person). You may have to get

creative here.

INTERVIEWING

We didn’t have to look far for an example to illustrate the importance

of interviewing in non-McKinsey positions. In writing this book, we used interviewing as our primary data collection method

and found the interviewing techniques we learned at the Firm

extremely helpful. In conducting interviews with dozens of

McKinsey alumni and sending E-mail questionnaires to thousands

of alumni, we focused on identifying the right people, carefully

thinking through our interview guides and questionnaires, and diligently

documenting our findings. We then summarized the content

of the interviews on spreadsheets and used our alumni’s

comments throughout the book.

The Firm relies extensively on interviews. In fact, interviewing

is part of every McKinsey engagement, as it not only generates primary

data but can also identify great sources of secondary data.

The value of interviewing also extends beyond data gathering by

serving as a mechanism to test ideas and increase buy-in (see Chapter

7). Let’s review some interviewing tips from McKinsey and

identify how you can successfully implement specific interview

techniques in your organization.

THE McKINSEY WAY

In interviewing, McKinsey emphasizes preparation and courtesy.

Be prepared: write an interview guide. An interview guide is

simply a written list of the questions you want to ask, arranged in

the order you expect to ask them. There are two reasons why you

should have such a guide. First, placing your thoughts on paper

forces you to organize them. Second, the guide helps the interviewee

to identify the topics you intend to cover in the interview and

prepare accordingly.

Your guide should be brief. Boil down your list of questions

to the three or four most important. Your goal should be to get

those answered in the limited time you have with the interviewee;

anything more is gravy. And don’t forget to close with every

Gathering the Data 61

McKinsey-ite’s favorite question: “Is there anything I forgot to

ask?” Every now and then, it hits pay dirt.

When conducting interviews, listen and guide. Conduct your

interviews in a rigorous but sensitive manner. Active listening—

acknowledging the interviewee with nods, interjections, and the

“McKinsey grunt” (“uh-huh, uh-huh”)—plays a key part in that,

but don’t overlook the value of silence. Use positive body language.

Don’t let the interviewee lead you off on tangents or, worse, the

garden path; politely but firmly keep the interviewee on track.

Seven tips for successful interviews. McKinsey consultants

have many stratagems for conducting effective interviews:

1. Have the interviewee’s boss set up the meeting.

2. Interview in pairs.

3. Listen, don’t lead.

4. Paraphrase, paraphrase, paraphrase.

5. Use the indirect approach.

6. Don’t ask for too much.

7. Adopt the Columbo tactic.

Most of these are self-explanatory, save the last one. Lieutenant

Columbo was a 1970s TV cop played by Peter Falk. He would

often finish questioning a suspect and then pause by the door to

ask one more question—usually a zinger. This tactic succeeded

because the suspects often dropped their guard and allowed the

truth to come out. You can try this approach if you think an interviewee

is holding out on you. Who knows, you just might crack

the case.

Don’t leave the interviewee naked. Some people become

uncomfortable under the stress of an interview. As the interviewer,

you are responsible for being sensitive to the fears of the interviewee.

Establish a connection with him in order to get those few bits of information you seek. Don’t squeeze the interviewee dry

and leave him regretting the process afterward. Instead, take time

to explain the positive impact the information may make and the

primary objectives of your time together, and give some good

information in return as a quid pro quo. As the interviewer, you

often occupy a position of power relative to the interviewee; you

have a responsibility to use that power wisely.

Difficult interviews. No matter how well prepared and sensitive

you are, you will eventually face someone who is just a “difficult”

interviewee. This person may have his own ideas of how

things should be, and they definitely don’t match up with yours.

If an interviewee is playing hardball, you may have to as well—just

hope his bat isn’t a lot bigger than yours.

This person could be the “sandbagger,” an individual who purposely

withholds key information. A sandbag is just an obstacle

to go around, so your path of least resistance should lead you to

another source for the information you need. Of course, if you

have the right heavy equipment, you can just bulldoze her out of

the way.

The most difficult interviewee, though, is the person whose job

is truly threatened by the problem-solving process. The person is

likely to get fired, and you know it. Unfortunately, there’s no easy

way around this one; you just have to soldier on for the benefit of

the organization as a whole.

Always write a thank-you note. Writing thank-you notes is not

just good etiquette; this is good business. Thank-you letters can

really help in building a relationship that can yield future benefits.

Imagine the nice feeling you get when you receive an unexpected

thank-you letter. Many of us need to fight the temptation to neglect

this courtesy because we keep moving forward at such a rapid pace,

especially in the wired and wireless world of the New Economy.

Take time to smell the roses, and thank someone for them as well.

LESSONS LEARNED AND IMPLEMENTATION

ILLUSTRATIONS

You may not think about it explicitly, but you probably interview

someone every day. It could be a customer, coworker, or competitor.

Consider how many times you have interacted with someone

who had important data and information that related to a problem

you were working on. What, after all, is interviewing? Nothing

more than a discussion between two or more persons conducted

for the purpose of gaining specific information and usually with a

slightly higher than normal level of formality.

Consultants, especially consultants at McKinsey, treat interviews

with the utmost respect. They spend much time and effort

preparing for them and learning from them. You should, too.

Our discussions with McKinsey alumni confirmed the effectiveness

of interviewing skills when transferred to other organizations.

Outside the Firm, however, the context is different.

McKinsey interviews are a standard operating procedure for every

project, and they are conducted with purposeful consistency (to the

extreme of having a specific MS Word template for summarizing

findings). In other business scenarios, interviews are regarded differently.

As a result, they are often less formal, with much less

preparation and follow-through. Our alumni told us stories of how

they have been working to increase the effectiveness of data gathering

through interviews, and they helped us identify ways you can

make the most of interviewing in your career:

• Structure your interviews.

• Interviewing is about listening.

• Be sensitive.

Structure your interviews. You may have sensed by now that

we subscribe to the logical, ordered, and structured approach to

problem solving. This orientation is probably a combination of our upbringing, personalities, and training at McKinsey. Since we both

left the Firm, we have come to appreciate a little variety in our

working environments, particularly the difference in levels of formality.

Nevertheless, when it comes to interviewing, even in less

formal situations, we highly recommend sticking to the structure

and basic rules described earlier, beginning with interview guides.

One alumna now at a major financial institution emphatically

concurs:

I always have interview guides—always—whether I’m talking

to people internally or meeting with people externally. I

usually refer to [my guide] for the four or five high-level

questions I want to explore. I think it’s very important to figure

out what I am trying to get at before I go in.

Although the context of interviews (the relationship, objectives,

and tone) can vary considerably, certain elements remain the

same. McKinsey consultants absorb this message early and learn to

use the same format time after time (if it ain’t broke, don’t fix it).

In truth, you don’t have to develop anything elaborate or timeconsuming.

We have included copies of the interview guides we used for

our data collection effort for this book. In our situation, we developed

two interview guides, one for E-mail questionnaires that we

sent to thousands of McKinsey alumni and one for the dozens of

in-person interviews we conducted. Our primary goal for the Email

questionnaires (Figure 3-1, pages 66–67) was to guide the

respondents to hit the major areas of our outline and to share war

stories from their post-McKinsey experiences. Notice that it is a bit

longer and more specific than the in-person interview guide. We

also sent a nice cover letter introducing ourselves, describing the

project, and identifying our key objectives. The in-person interview

guide (Figure 3-2, page 68) followed the same general format but

Thank you for taking the time to complete this questionnaire. Please return

your answers via E-mail to Paul Friga.

What is your name, company (if any), and position or function?

What is the most important lesson that you learned at McKinsey? How does it

affect the way you work in your current position?

In the following items, we have laid out a set of categories that summarizes the

tools many of us learned at the Firm. For each, please think about what you

learned at the Firm with regard to each category and give an example of how

you’ve applied it in your post-McKinsey experience.

Framing the Problem: The skills and techniques that allow McKinsey-ites to

break apart problems, e.g., initial hypotheses, brainstorming, and analytical

frameworks from previous engagements.

Gathering the Data: The techniques used to gather and manage data to test

hypotheses, e.g., interviewing, PD searches.

Analyzing the Data: The methods McKinsey uses to extract useful conclusions

from the data. This category includes such favorites as “80/20” and “Don’t boil

the ocean.”

Presenting Your Ideas: Techniques and tips for getting the message across,

whether in a formal presentation with blue books or an informal meeting with

client team members, e.g., “One message per chart,” “the elevator test,” and

the ever-important prewiring.

Managing Your Team: The skills McKinsey team leaders use (or sometimes

don’t) to keep their teams effective, including team selection, internal communications,

and team bonding.

Managing Your Client: The ever-important process of keeping the client on

your side. Includes selling the study, structuring the engagement, and managing

client teams.

Managing Yourself: Life at McKinsey can be tough. Most of us managed to

find some way of juggling life at the Firm with real life, e.g., managing expectations,

managing our bosses, and managing our “significant others.”

What problems have you faced in implementing McKinsey methods into your

new organization?

Would you be interested and/or willing to conduct a short interview with us,

either over the phone or in person? If so, please give us your contact

numbers.

Is there a question about McKinsey we’ve forgotten to ask? What’s your

answer?

If we use any of the stories you send us in the book, we will send you a signed

copy; we will also mention you in the acknowledgments unless you request

anonymity.

Please list your (snail-) mailing address:

Do you wish to have your name disguised if we use any of your stories?

___Yes ___No

Do you want your name mentioned in the acknowledgments if we use one of

your stories? ___Yes ___No

Figure 3-2. The McKinsey Mind In-Person Interview Guide

1. What is the most significant application of a particular tool or technique

that you learned during your tenure at McKinsey in your new position?

What was the context? How did it go?

2. In the following items, we have laid out a set of categories that summarizes

the tools many of us learned at the Firm. For each, please try to give an

example of how you’ve applied it in your post-McKinsey experience—

include the particular tool/technique/strategy, context, application, reaction,

and success.

Framing the Problem: The skills and techniques that allow McKinsey-ites to

break apart problems, e.g., initial hypotheses, brainstorming, and analytical

frameworks from previous engagements.

Gathering the Data: The techniques used to gather and manage data to test

hypotheses, e.g., interviewing, PD searches.

Analyzing the Data: The methods McKinsey uses to extract useful conclusions

from the data. This category includes such favorites as “80/20” and “Don’t boil

the ocean.”

Presenting Your Ideas: Techniques and tips for getting the message across,

whether in a formal presentation with blue books or an informal meeting with

client team members, e.g., “One message per chart,” “the elevator test,” and

the ever-important prewiring.

Managing Your Team: The skills McKinsey team leaders use (or sometimes

don’t) to keep their teams effective, including team selection, internal communications,

and team bonding.

Managing Your Client: The ever-important process of keeping the client on

your side. Includes selling the study, structuring the engagement, and managing

client teams.

Managing Yourself: Life at McKinsey can be tough. Most of us managed to

find some way of juggling life at the Firm with real life, e.g., managing expectations,

managing our bosses, and managing our “significant others.”

Is there a question about McKinsey we’ve forgotten to ask? What’s your

answer?

was a bit more open-ended and allowed the interviewee to move

between the sections more freely. We tried, as much as possible,

to simplify our message to emphasize the key points we wanted to

cover. This made the interview go much more smoothly and kept

us focused as well.

Unless you actually want to catch your interviewee off guard,

you should share the interview guide with him ahead of time. Be

sure to take notes during the interview, and write them up legibly

afterward.

Interviewing is about listening. After leaving McKinsey in

1997, Dean Dorman spent a year working directly under Gary

Leiver at GE, then moved to an E-commerce start-up. Now he is

the president and chief operating officer of Silver Oak Partners,

providing strategic sourcing services to the leveraged-buyout

industry. Dean is one of the hardest-charging individuals you could

ever meet and is never at a loss for words, but even Dean appreciates

the importance of listening for today’s business leaders:

Before I took my position as president of Silver Oak, I served

on the advisory board for about a year. During that time, I

paid attention to management’s plans. I also developed my

own hypotheses of what needed to get done to take the company

to the next level. My first task as president was to

launch what I call the “look, listen, and learn” tour to test

any hypotheses. Over the course of the first six weeks, I met

with all the functional and initiative leaders and interviewed

them for about two or three hours each. Taking the time

early on to listen to people has proved invaluable. It has

allowed me to have a real impact on the company.

When you are new to an organization, there are obvious benefits

to listening just as Dean did, but listening isn’t just for the new

guy in the office. Effective managers spend a majority of their time

listening. Unfortunately, our formal educational systems provide

very little training in listening. Many of us learn the hard way. The

key lessons from McKinsey that you can apply in your work situation

are to recognize the importance of listening, increase the

amount of time you spend listening (to the right people and on the

right subjects), and listen in an active manner.

Active listening simply means encouraging and guiding the

interviewee’s responses through the effective use of verbal and nonverbal

signals. Head nodding, arm crossing, and facial expressions

play a bigger role in interviews than you think. If you are truly paying

attention to the interview, these things should come naturally.

If you feel that you are forcing them, perhaps the interview should

have ended about 15 minutes earlier.

Be sensitive. In their efforts to implement interview techniques

in their post-McKinsey positions, our McKinsey alumni learned

that style matters. Some people (wrongly, in our view) see interviewees

as a source of information to be drained dry. We suggest

a different tack. Try to establish a connection with the interviewee.

Treat the interview as a chance to meet a new person and actively

involve her in the problem-solving effort. The interview is a twoway

exchange that involves much more than a one-way information

transfer. If you let the interviewee become your partner in the

process, you will be able develop this relationship.

When it comes to the actual interview, the beginning matters. It

sets the tone for the rest of your time with the interviewee.

McKinsey consultants learn to avoid sensitive issues at the beginning.

This requires some forethought in order to identify what may

be “sensitive.” For example, if you are working on a cost-cutting

project that may involve layoffs, you might not want to start your

questions with the number of years the person has been in that

position and the exact nature of her contribution to the bottom

line. Francesca Brockett, the senior vice president of strategic planning and business development at Toys “R” Us, has incorporated

this thinking in her approach:

I think the most important thing I learned at McKinsey

related to interviewing is to start with less-sensitive issues. I

have used this general technique frequently in developing

relationships in my department and across the organization.

It is probably part of my DNA at this point.

Bear in mind individual agendas as well. Everyone you

encounter day to day—employees, customers, competitors—has an

agenda. After all, an agenda is just a set of objectives that each person

has and may hope to accomplish or expedite through you.

There will be times when agendas conflict, and your job as the

interviewer is to anticipate and plan for such situations. For

instance, you may be able to help an interviewee accomplish his

objective (provided it doesn’t interfere with your goals). At the

least, express empathy for the interviewee’s situation, and avoid

issues that may cause unnecessary friction.

IMPLEMENTATION GUIDANCE

Let’s start our implementation ideas with a brief story about

McKinsey consultants’ training in people skills. The Firm sends

every consultant who makes it through the first year to an Interpersonal

Skills Workshop (ISW), usually in a beautiful rural setting

in Germany or England. The leaders of this weeklong, intensive,

and enlightening workshop carefully analyze each participant’s

ability to get along with others.

It was at one of these sessions, in Germany’s majestic Black

Forest, that one of the authors* had an eye-opening experience. Reflecting on his brief professional career, he realized that he was

so focused on setting and accomplishing goals that the finished

product had become an obsession. He had blinded himself to

everything that lay between him and the end result; he had forgotten

that there is not just the destination, there is also the journey.

We believe that task completion must be balanced with process

interaction; that means you should try to get things done without

stepping on people as you go. So it is with interviewing; relationships

matter. Think through your personal approach, and consider

expanding your capabilities if necessary.

Think through your daily schedule, and identify all of the

opportunities you have to obtain important information from people

and how you should relate to those people. Do you prepare

adequately to take full advantage of these opportunities? Do you

document what you learn, so you won’t forget it? As you think

through your schedule, try to find more time to listen and less to

speak.

After that recommendation, you might be hankering for something

a bit less touchy-feely, a bit more concrete, so let’s move on

to the issue of structure. Earlier in this section, we discussed the

interview guide and gave you some examples. Structure doesn’t

end with the development of an interview guide, however. There

are two additional opportunities for “interview discipline”: preinterview

communication and the post-interview follow-up.

You should send the interview guide (or a version of it) to the

interviewee well ahead of the interview. If you send it more than a

week in advance, it may make sense to resend the guide when you

confirm the appointment. This allows the interviewee to prepare

responses and identify additional support that may help you

immensely. Interviewees will also appreciate the courtesy, because,

let’s face it, most of us don’t like surprises. There are a few times to

bend this rule, of course. For example, in politically charged situations,

you might not want to allow for preparation that may facil-

itate resistance or deception. In general, however, this should be

your standard operating procedure for interviews. One alumnus,

now a senior administrator in the German government, elaborates

on some of the benefits of sending the guides ahead of time and

follow-up:

I make extensive use of interviews during the early phases

of projects to clarify hypotheses, identify relevant material

needs, and create buy-in. We develop interview guides and

send them in advance to allow the interviewees to prepare

and track down information that they do not already have.

After the interview, we document our findings and give that

as feedback to the interviewee to make sure we understood

him properly . . . and to correct any misunderstandings.

Post-interview follow-up also adds value to the interview

process. It gives you a chance to confirm what you heard and to

ensure you understood what was said. It is much better to have

that clarification earlier in the process, as the error can magnify

over time. (Remember those school-yard games of “telephone” in

which a sentence gets whispered around a circle and emerges hilariously

unrecognizable?) Don’t forget to send the all-important and

often-missed thank-you letters, as previously discussed.

Finally, on the topic of sensitivity, when it comes to starting the

interview off on the right foot, start slowly and gently. It is usually

safe to begin with a big picture of what you are trying to

accomplish and why you are meeting with that particular person.

Consider an icebreaker to get things moving, but avoid platitudes

like “Nice weather, isn’t it?” Rather, try to empathize with the

interviewee and what she does. For instance, “I don’t think I could

ever spot defective widgets with my eyesight. How perfect does

your vision have to be to do a job like yours?” As always, circumstances

may require a different approach, but we recommend making

a connection before you start pressing on sensitive subjects.

EXERCISES

• Develop an interview guide. First, identify your next big

interview opportunity. Then list your objectives or the critical

information you would like to obtain. (Work from your

hypothesis, as discussed in Chapters 1 and 2). Now pare

the list down. Combine where possible, and eliminate irrelevant

points. You should end up with two or three primary

objectives for the meeting. Next, structure the interview

guide around those key questions. Don’t forget to consider

the interviewee’s agenda and watch for sensitive issues.

Send your interview guide to the interviewee at least two

days in advance.

• Write a thank-you letter. Nothing complicated here, just a

discipline exercise. Write a good old-fashioned handwritten

or typed thank-you letter. If it feels good, write another

one!

KNOWLEDGE MANAGEMENT

Ah, knowledge management (KM). It’s one of the hottest business

buzzwords today, and one of the least understood. According to a

recent Business Week survey, more than 80 percent of 158 large

multinational corporations already have or are actively developing

formal knowledge management programs.* McKinsey has long

been recognized as a leader in the field of KM and has much to

offer other organizations as they formalize their KM efforts.

What is KM? First, we should tell you what knowledge is

not—data and information. Data are facts, observations about occurrences, and numbers. Information is a collection and some

synthesis of data. Knowledge is the mix of information, experience,

and context in a value-adding process. That process occurs first in

the heads of individuals (where it is what we call “uncodified

knowledge”) and can be shared with others through discussions or

documentation (at which point the knowledge becomes “codified”).

KM is the systematic process by which an organization

maximizes the value of the uncodified and codified knowledge in

the firm. In general, this means the codified knowledge has been

captured in databases or documents.

Many executives and academics focus their KM efforts on codification

strategies, including technology platforms. We believe,

and McKinsey teaches, that even the best KM technologies can

capture only a small portion of the true knowledge in a firm.

Therefore, a truly successful strategy must move beyond technology

if it is to capture and distill the valuable experience that is

walking around the hallways.

Bill Ross, a McKinsey alumnus now working for GE as the

manager of business development for the Transportation Division,

commented on KM in his new firm:

I was fortunate to land at a company that values knowledge

just as McKinsey did. GE is a learning organization, and the

person in charge of that effort is Jack Welch. In fact, Jack

will say that the KM ability of GE is the core element that

has led the company to its great success.

Everyone in the organization pays attention to best practices,

inside and outside of the organization. There is regular

communication between divisions and special groups,

such as a services council, where we stay abreast of everyone’s

key projects. We don’t try to do it through a massive

database, as it would be too hard to keep updating. This is

real time and best done through regular get-togethers such as

cross-group quarterly meetings to discuss best practices.

KM means taking advantage of what is known to maximize

the firm’s value. We believe this to be an important endeavor, and

based on the time and effort it puts into KM, so does McKinsey.

In this section, we briefly recap McKinsey’s KM strategy and then

share advice and stories about KM in other organizations.

THE McKINSEY WAY

The central KM-related principle at McKinsey is this: don’t reinvent

the wheel.

Don’t reinvent the wheel. Whatever problem you’re facing,

chances are that someone, somewhere has worked on something

similar. McKinsey recognizes the value of retaining and exploiting

that experience, and the Firm goes to great lengths to codify it. The

Firm maintains two primary databases. One, called PD-Net,

includes previous reports generated and cleansed for sharing

among the Firm’s consultants. You could think of it as the “know

what” database. The other database is a directory of all the Firm’s

experts in various industries and practice areas; call it the “know

who” database. Users of either database can sort the data by industry,

time, expert, office, and a number of other criteria.

LESSONS LEARNED AND IMPLEMENTATION

ILLUSTRATIONS

McKinsey is in the business of selling knowledge, as are a lot of

other companies. The challenge is how to take advantage of what

is known in the firm, both uncodified and codified knowledge.

We view KM from a holistic perspective that goes beyond technology.

We recommend using the schematic framework of the critical areas of KM* shown in Figure 3-3. Culture describes the way

a company’s employees understand KM, have support and incentives

to share knowledge, and interact in a sharing, interdepartmental

manner. At McKinsey, there is a well-understood KM

strategy whereby knowledge sharing is expected of all employees

and rewarded accordingly. The infrastructure pertains to the physical

layout of offices and departments, organizational structure,

and the KM program itself (including KM officers). As an example

of KM infrastructure, McKinsey has an extensive network of information

specialists in every office who can lend immediate assistance

to teams trying to get up to speed on new areas and

industries. Other organizations have begun dedicating similar resources to KM. Finally, the technology represents the specific

strategies firms take to codify and share their knowledge most

effectively. Corporate intranets represent one of the most common

KM technology platforms. With any technology platform, keeping

the information it contains current and high quality is an ongoing

challenge. The center of the triangle includes the words

business results, a reminder that the yardstick for any KM effort

is its bottom-line impact on the organization. We used this framework

to interpret the results from our alumni interviews and came

up with the following lessons regarding KM implementation

efforts:

• Develop a rapid-response culture.

• Acquire external knowledge.

• Control the quality of your input: garbage in, garbage out.

Develop a rapid-response culture. The culture of an organization

is a tough beast to tame and extremely important. We define

culture as a combination of the employees’ shared values and

assumptions regarding the organization and its events and processes,

the organization’s incentive programs, and the nature

of daily interaction among employees. Examples would be the

level of formality (e.g., use of first names, dress code), the exhibited

level of respect between colleagues, and the amount of socializing.

Another example, extremely important in KM systems and data

gathering, is the rate at which employees respond to data requests

from other employees. It is difficult to run an effective KM system

without access to the uncodified knowledge in other people’s

heads. A rapid-response culture can help give you the most access.

Larry Rouvelas, the executive vice president of Pulse Medical

Instruments, a small technology company, misses the McKinsey

culture in this regard:

At McKinsey, there is an ethic of response whereby if anyone—

even the most junior consultant—makes a call to a colleague

anywhere around the world, the call will be returned

within 24 hours. This helps immensely with data collection

as well as for general guidance. This is not the case in other

organizations, although I am trying to develop that in my

company.

Acquire external knowledge. Knowledge can be generated

either internally or externally. Internal knowledge creation involves

disseminating information to employees through discussions or

documents, and it is a vital part of any KM strategy. External

knowledge matters, too. As discussed earlier, McKinsey invests

heavily in order to maintain access to the latest thinking inside and

outside of the Firm. Every project starts with a search of internal

documents as well as the identification of external publications or

industry experts who might have something to contribute.

The same holds true at other organizations. Jack Welch doesn’t

hesitate to search for the best ideas from any external organization

and bring them to GE. Sometimes outside experts may actually

be consulting firms, as described by Jim Bennett, who was the

chairman of retail banking at Key Corp. and is now president and

CEO of EmployOn:

I always reach for the best people I can. When you are solving

a tough business problem, you need access to the best,

whether they are inside or outside. I look for first-class

resources and have used McKinsey, Deloitte, and others.

This can be kind of a foreign notion to consultant-averse or

outsider-averse companies.

In searching for the best outside advice, we recommend that

you seek out true experts who come with multiple recommendations, carefully scope their involvement opportunities, and stay

engaged in their activities. The last piece is particularly important

to ensure that you take advantage of the knowledge available and

the new knowledge created.

Control the quality of your input: garbage in, garbage out.

“Garbage in, garbage out” is an old saying among computer programmers.

One of the biggest challenges in developing meaningful

KM codification systems is ensuring accurate and timely data

availability. During the mid-1990s, many companies attempted to

set up sophisticated KM systems with databases, repositories, and

expert listings. Many became dismayed when the systems failed

to generate value for organizations because the information in the

systems was inaccurate or outdated, as described earlier by Bill

Ross at GE.

Make sure that those without firsthand knowledge of the subject

matter can interpret the inputs to your KM system. Also, make

sure that any document can be retrieved via the relevant keywords

or other search methodology. Remember, without the

proper incentives and dedicated resources, KM systems become

“garbage.”

IMPLEMENTATION GUIDANCE

KM at McKinsey goes well beyond advanced databases and codification

strategies; so should you. The culture at McKinsey

revolves around knowledge sharing. For example, there is an

unwritten rule in the Firm that every employee returns a phone call

from another McKinsey-ite within 24 hours. Both of us learned the

value of this as early in a project we contacted experts who were

able to steer us in the right direction and prevent days of excess

search efforts.

Knowledge transfer through discussion is another key part of

KM at McKinsey. The Firm provides incentives for knowledge

sharing. For example, performance evaluations include an assessment

of how well a consultant supports and develops others. The

Firm holds regular “Practice Olympics,”* where ad hoc teams of

consultants at all levels work together to summarize learnings on

a particular business topic, normally an area in which they recently

completed work. The Firm invests quite a bit of money into making

this a special event, with prizes, newsletters, time off for competition,

and fully funded trips to exotic locations for the

competitions. Teams compete at a local level and earn their way up

to such places as Australia or Hawaii, based on the merit of their

ideas and their contribution to the Firm’s knowledge.

When establishing your KM culture, the entire organization

must participate; partial efforts just don’t cut it. This means that

there must be support from the top and constant reinforcement.

This may be easier for smaller companies but is just as important

for such companies as Accenture (formerly Andersen Consulting),

as described by Jeff Sakaguchi, a partner:

I’ve always been impressed with the responsiveness of the

partnership here. I find folks responding even more quickly

than at McKinsey. The key is that the responsiveness must

come across the board and at a consistently high rate. It is

analogous to the FedEx situation in that 90 percent on time

isn’t worth it, but 98 percent is a positive breakthrough.

This level of responsiveness might be a tough goal to achieve,

but it generates results that are worth the effort.

EXERCISES

• Perform a KM audit. Using the KM schematic shown in

Figure 3-3 (page 77), analyze your firm’s performance in:

culture, infrastructure, and technology. For example, is

there a strong KM culture that is well understood, supported

by top management, with incentives for use and

active interaction of all employees? After assessing your

performance on a scale of 1 to 5 (worst to best) in each

area, try to identify opportunities for improvement.

• Write a memo to the key KM person in your organization.

The starting point in this exercise is to identify the person

with responsibility for KM. This may be an actual chief

knowledge officer (CKO), the CEO, the IT director, or the

human resources director. Once you have identified the

person, draft a brief memo requesting information related

to the questions mentioned in the previous exercise. Hold

off on your assessment and recommendation until you get

a response. Every organization has a need for KM, and

everyone in the organization should understand it, but

these things take time (and sensitivity in some cases).

CONCLUSION

So there you have it—the wild, wonderful world of data gathering.

Our goal in this chapter is to help you use data gathering to add

value. In many organizations, too much energy is spent gathering

the wrong data, and too many decisions are made without adequate

data support. In this chapter, we hope you learned how to

design more effective data-gathering efforts and picked up some

specific tools that will help you. Happy hunting.

INTERPRETING THE RESULTS

In the first three chapters of this book, we took you from the

generation of an initial hypothesis, through the design of an

analysis plan, up to the gathering of data upon which to apply that

analysis. In many ways, these are the easy parts of the McKinsey

problem-solving process. Now comes the hard part: figuring out

what it all means.

A hypothesis, after all, must still be proved or disproved, and

data on their own are mute. It is up to you and your team to use those facts to generate insights that will add value to your organization.

All the multimegabyte spreadsheets and three-dimensional

animated pie charts in the world don’t mean anything unless someone

can figure out the actions implied by these analyses and their

value to the organization. McKinsey’s consultants realize that

clients don’t, at the end of the day, pay for fancy documents and

pretty slide shows. They pay for advice that will add value to their

businesses; this is the end product of the consulting process and, by

extension, of business problem solving in general. As Jeff Sakaguchi,

who has moved from McKinsey to rival consulting firm

Accenture, recalls:

It’s not just about research and analysis; it’s research, analysis,

and insight development. McKinsey focused on generating

insights, specifically insights that had great client impact.

I take pride, since I’ve joined Accenture, in having restructured

some of our training for strategy consultants to drive

home that mentality in our teams and really make it an

explicit part of our performance evaluation process for

consultants.

In this chapter, we will show you how McKinsey-ites draw

conclusions from their analyses and turn them into useful recommendations

for their clients, and how you can do the same in your

company. We divide analysis interpretation into two parts. First

comes the process of understanding the data: piecing together (in

your own mind or within the confines of your team) the story the

data are telling you and the steps you should take based on that

story. Second comes assembling your findings into an externally

directed end product: a course of action for your organization or

client.

UNDERSTANDING THE DATA

After you’ve run all the numbers and conducted all the interviews,

you will have a huge pile of facts to sift through. Your job is to sort

the wheat from the chaff, to separate the irrelevant factoids from

the data that actually prove or disprove your hypothesis, and then

to piece together the story those data tell. This requires not just the

ability to understand the meaning of the individual analyses, but

the imagination to put the disparate facts together into a coherent

narrative. This is not always easy, as one of our more blunt-spoken

alumni said: “It’s a whole lot easier to gather and package data

than it is to think.”

The actual techniques you would use to analyze your data will

vary depending on the individual analyses you are doing, the company

you work for, and the business in which you operate. In this

section, rather than demonstrate any particular analysis, we will

show you how to take the results of whichever analyses you choose

and assemble them into something that will allow you to make a

very important decision.

Yogi Berra famously remarked, “If you come to a fork in the

road, take it.” At this point in the problem-solving process, you’ve

reached a fork in the road; the results of your analyses can take

you in one of two directions. If your analysis proves your hypothesis,

then you need to move on to the next section of this chapter

and figure out what course of action the data imply. If the data disprove

your hypothesis, then you need to revisit and restructure

your initial hypothesis to fit the data. This may or may not require

additional analysis as well. We, with the help of our alumni, will

show you how to choose which fork to take. McKinsey-ites use the following principles in their daily struggles

with data analysis.

80/20. The 80/20 rule is one of the great truths of business. It

is a rule of thumb that says 80 percent of an effect under study

will be generated by 20 percent of the examples analyzed. This rule

dates back to the economist Vilfredo Pareto. While researching

economic conditions in his native Italy, Pareto determined that 20

percent of the population owned 80 percent of the land. Subsequently,

while working in his garden, he discovered that about 80

percent of his peas came from just 20 percent of his plants. Based

on these and other observations, he determined that for any series

of elements under study, a small fraction of the number of elements

usually accounts for a large fraction of the effect. Over time,

Pareto’s observation became generalized as the 80/20 rule.

Although the 80/20 rule has been around a lot longer than

McKinsey, McKinsey consultants live and die by it. If you look at

the numbers that drive your organization, almost invariably, you

will find instances of 80/20. For instance, you may determine that

80 percent of your sales comes from 20 percent of your clients, 20

percent of your sales staff generate 80 percent of your profits, 80

percent of your time is spent on 20 percent of your job.

The 80/20 rule is all about data. When you’re doing a dataintensive

analysis on your computer, play around with the numbers

a bit. Sort them in various ways. Whenever you see 80/20 in

action, you should look for the opportunities it implies. If 80 percent

of your sales come from 20 percent of your sales force, then

what is that 20 percent doing right, and how can the 80 percent

be brought up to speed? Do you really need the other 80 percent at

all? As you can see, a little bit of 80/20 can go a long way.

Make a chart every day. At the end of each day, ask yourself,

“What are the three most important things I learned today?” Take half an hour before you leave your desk to put it down on paper—

nothing fancy, just a hastily sketched chart or a few bullet points

will do. This exercise will help you push your thinking. Whether

you use that chart or not, once you’ve drawn it, you won’t forget

it. Otherwise, the brilliant insight you had this morning might get

lost by the time you lock up your desk tonight.

Don’t make the facts fit your solution. You and your team may

have formulated a brilliant hypothesis, but when it comes time to

prove or disprove it, be prepared for the facts and analyses to

prove you wrong. If the facts don’t fit your hypothesis, then it is

your hypothesis that must change, not the facts.

LESSONS LEARNED AND IMPLEMENTATION

ILLUSTRATIONS

When interpreting your analyses, you have two parallel goals: you

want to be quick, and you want to be right. Obviously, these two

goals are sometimes in conflict. It’s usually worth taking an extra

day if that will make the difference between getting the right

answer and the wrong one. However, as we discussed in Chapter 2,

there’s probably little point in spending an extra week to go from

three decimal places of accuracy to four.

The results of our survey of McKinsey alumni led us to draw

the following conclusions about data interpretation:

• Always ask, “What’s the so what?”

• Perform sanity checks.

• Remember that there are limits to analysis.

Always ask, “What’s the so what?” When you put together

your analysis plan (as we discussed in Chapter 2), you were supposed

to eliminate any analyses, no matter how clever or interesting,

that didn’t get you a step closer to proving or disproving your

original hypothesis. No matter how good your work plan, however,

it is almost inevitable that you will have to go through

another filtering process once you’ve gathered the data, crunched

the numbers, and interpreted the interviews. Some of your results

will turn out to be dead ends: interesting facts, neat charts, but

nothing that helps you get closer to a solution. It’s your job to weed

out these irrelevancies.

At McKinsey, the shorthand for this process was for someone

on the team, usually the EM, to ask, “What’s the so what?” for a

particular analysis. What does it tell us, and how is that useful?

What recommendation does it lead to? Consultants aren’t in the

business of drawing pretty pictures, and that’s not what their

clients pay them lots of money to do. As Jeff Sakaguchi learned at

McKinsey and continues to preach at Accenture:

Consulting isn’t about analysis; it’s about insights. If you

can’t draw an insight from what you’ve just done, then it’s

a waste of time. Crunching numbers for the sake of crunching

numbers, or doing bar charts for the sake of doing bar

charts, doesn’t help unless it brings to life some insight, some

key finding, that will make your team and your client say,

“Hmm, interesting.”

A consultant must take the disparate messages of his analyses

and synthesize them into insights that will solve his client’s problem.

That happens best when every analysis meets the test of “So

what?”

Perform sanity checks. Obviously, one wants to be as accurate

as possible, but in a team situation you, as team leader, probably

don’t have time to perform a detailed check on every analysis your

team produces. Whenever someone presents you with a new recommendation

or insight, however, you can do a quick sanity check

to ensure that the answer at least sounds plausible. Like the QDT we presented in Chapter 1, a sanity check lets you swiftly ascertain

whether a particular analysis is at least within the bounds of probability.

A sanity check consists of a few pointed questions,

the answers to which will show whether a recommendation is

feasible and whether it will have a noticeable impact on the

organization.

The exact question will vary with every situation, but here are

some examples, courtesy of our alumni:

I can use an off-the-shelf, easy-to-use program like MS

Access to disprove a stupid theory very fast. For example, an

employee had a hypothesis that we should request that merchandise

be returned to the warehouse based on minimum

rather than maximum inventory levels. I was able to test that

idea in two minutes to determine that it would result in only

$4,000 of a projected return of $400,000. Not worth the

loss of a week to reprint and send procedures for the stores

to follow.

—Bob Buchsbaum, CEO, Dick Blick Holdings

_ _ _

I like to use scenario analysis. I’ll ask, “What would it take

to have this matter?” For example, how many leads would

we have to generate off the website for it to show up as anything

more than a rounding error? If the answer is 10 gazillion,

well, I doubt we’ll get that many. If the answer is 50,

then I’ll say, “Oh, OK.” If the assumptions behind the analysis

don’t make sense, then you can move on to the next idea.

—Dan Veto, Senior Vice President, Conseco

_ _ _

I actually had an analyst run lots of numbers from many different

sources and then come to me and say, “Well, here’s the

answer.” I took one look at the numbers and said that can’t

possibly be right, because if it were, the world would look a

whole lot different. So, when you’re analyzing the data, just

be sure that you’re stepping back from it and doing a highlevel

sanity check.

—Bill Ross, General Electric

_ _ _

I always ask, “How far off would our current answer need

to be before we change our conclusion?” I push very hard on

testing assumptions by making sure the drivers of those

assumptions are very clearly identified. I then focus the

analysis on these drivers. This has fundamentally improved

our acquisition strategy; the results of our recent acquisitions

speak for themselves.

—Ron O’Hanley, President, Mellon Institutional Asset

Management

Although there’s no one best way to do a sanity check, asking

a few pointed questions about your analyses before you put

together your big presentation can save you a lot of trouble.

Remember that there are limits to analysis. Analysis plays a

vital role in the McKinsey problem-solving process, but when all

is said and done, it can take you only so far. You have to draw

inferences from the analyses; they won’t speak for themselves.

You’ve reached the point in our consulting model where intuition

takes the lead from data. You’ve come to Mr. Berra’s fork in the

road, and you have to take it.

That analysis has its limitations is no reason to dispense with

it, however. Beware what one of our alumni described as the

“ready, fire, aim mentality.” Even if you are a skilled decision

maker with reliable intuition, good analysis helps support and

communicate your solution throughout your organization, as Bill

Ross describes:

In many cases, executives, being smart business leaders, have

already gone through the problem-solving process internally

without laying it out for others to see. If you go through their

thinking with them, however, you’ll often find they’ve

missed an option. More importantly, they may be ready to

move quickly, but they still have to pull their whole organization

along with them. Without having documented and

communicated some of their thought process, there’s no way

that they can bring their organization along except by brute

force. We know that doesn’t work for very long, because if

you keep at it, then people just wait for you to tell them

where to go next.

While some like to think of intuition and data as polar opposites,

yin and yang, they actually work together. And like yin and

yang, each needs the other to thrive. Data without intuition are

merely raw information, and intuition without data is just guesswork.

Put the two together, however, and you have the basis for

sound decision making.

IMPLEMENTATION GUIDANCE

At this stage in the problem-solving process, you need to figure out

what the facts are telling you. The economist John Maynard

Keynes, when berated by a critic for contradicting one of his earlier assertions, famously said, “When the facts change, I change my

mind. What do you do, sir?” Transferring this to the context of the

McKinsey problem-solving process, when the facts contradict your

hypothesis, you should change your hypothesis, not suppress the

facts. We can’t stress this too much. When you’ve spent a lot of

time and effort coming up with what you consider a brilliant

hypothesis, it’s easy to become wedded to it, refusing to believe

that you just might be wrong.

McKinsey offered several lessons on this topic: “Don’t make

the facts fit your solution”; “Be prepared to kill your babies”

(offered in the context of brainstorming, but it holds just as much

for data analysis); and “Just say, ‘I don’t know.’” What was true

at the Firm holds just as true outside of it. There is an iterative loop

that runs from hypothesis to analysis design to research to interpretation

and then, if necessary, back to hypothesis. Only after you

have definitively proved your final, modified hypothesis are you

ready to put together the end product—the advice that you will

give to your client.

When we asked our McKinsey alumni what tools they use to

help them make sense of the data, they almost all mentioned the

80/20 rule. As we discussed earlier in this chapter, 80/20 manifests

itself in a variety of ways. To offer a few more examples, 20 percent

of the population in the United States pays 80 percent of the

income tax. Of the students in a classroom, 20 percent occupy 80

percent of a teacher’s time. You might choose 80 percent of the

outfits you wear from 20 percent of your wardrobe. We could go

on and on. The 80/20 rule is not always strictly true; in one case,

the true ratio may be 75/25, in another 90/10. Furthermore, it is

not universally applicable, but it occurs so frequently as to make

it a useful predictive tool.

At McKinsey, the 80/20 is primarily about data, and that’s certainly

true as far as it goes. Applying the 80/20 rule to numerical data can lead to all sorts of insights that pass the “So what?” test.

Returning to the earlier example, if you learn that 20 percent of

your sales staff account for 80 percent of your sales, you should

immediately ask why that is and what can be done to bring the rest

of the sales team up to the level of the top performers. Note that

the 80/20 rule doesn’t necessarily lead directly to insight. Rather,

it prompts you to ask new questions and possibly perform new

analyses that will help you put the story together.

Furthermore, 80/20 can go beyond data. It’s also a useful tool

for figuring out what story to tell. After all, 80 percent of your recommendations

will come from 20 percent of your analyses. In a

word, prioritize. Consider which of your recommendations will

yield the most value for your client, and focus on them. Remember

that an organization can only do so much at one time. Concentrate

on the big wins first.

EXERCISES

• Think of the last analysis project you worked on or were

presented with. Did each exhibit in the presentation you

gave or saw meet the “So what?” test? Go through the presentation

documents and write down the “so what” for at

least 10 exhibits.

• Perform an 80/20 analysis of your job. On what do you

spend most of your time? Which of your activities produce

the most benefit for your organization? (Be honest!) Which

produce the most benefit for you? Can you think of ways

to spend more time on the things that produce the most

benefit and less time on the activities that produce the

least?

• Perform an 80/20 analysis of your company. Can you find

instances of 80/20 in your business unit or department?

Interpreting the Results 93

Which of your products or services produce most of your

profit? Which consume most of your expenses? Can you

find other instances of 80/20?

GENERATING THE END PRODUCT

Up to now, we’ve been dealing exclusively with the internal components

of the problem-solving process. Forming your hypothesis,

planning your work, doing your research, and interpreting

your results—these all happen within the confines of your own

office or team room. Theoretically, if you could get all your data

without interviewing, you could complete all those steps without

leaving your office, assuming you have a decent Internet connection

(access to plumbing facilities might be convenient, too).

Now, however, we’ve reached the nexus between you (or your

team) and your client: the end product. By “end product,” we

don’t mean the collection of charts, slides, computer images, and

other props that you use to communicate your solution to your

audience; that will come in Chapter 5, “Presenting Your Ideas.”

End product, for our purposes, means the actual message that you

will communicate. This is a subtle distinction but a meaningful

one. Your interpretation of the data leads to a story, that is, what

you think the data means. You select those portions of the story

that you believe your audience needs to know in order to understand

your conclusion, along with the supporting evidence, and

you put them together into your end product. Finally, you’ll communicate

that end product via one or more presentation media.

The message and the medium are separate entities, whatever Marshall

McLuhan may have said.*

In this section, we show you how to move from the story to the

solution.

THE McKINSEY WAY

McKinsey has one principle relevent to this section: you must make

sure the solution fits your client.

Make sure the solution fits your client. Management, like politics,

is the art of the possible. The most brilliant solution, backed

up by libraries of data and promising billions in extra profits, is

useless if your client or business can’t implement it. Know your

client. Know the business’s strengths, weaknesses, and capabilities—

what management can and cannot do. Tailor your solutions

with these factors in mind.

LESSONS LEARNED AND IMPLEMENTATION

ILLUSTRATIONS

When McKinsey consultants leave the Firm and join other organizations,

they often find that the challenge of generating an end

product as an insider is, if anything, greater than it was as an outside

consultant. The lessons from our McKinsey alumni reflect this,

as they expand on the idea of fitting your solution to your client:

• See through your client’s eyes.

• Respect the limits of your client’s abilities.

See through your client’s eyes. When McKinsey consultants

talk about their organization, whether recruiting new consultants

or undergoing a “beauty parade” for a potential client, eventually

someone will utter the term CEO focus (or sometimes top management

focus). CEO focus is the external counterpart to finding

the key drivers: it’s your view of what the five or six priorities of

the organization ought to be. This is the first step toward seeing

Interpreting the Results 95

through your client’s eyes because it forces you to concentrate on

the client’s foremost needs, even if some of them don’t immediately

affect what you’re doing. Accenture’s Jeff Sakaguchi explains:

Even though we may not even be working on that specific

area, keeping those things in mind certainly gives us a better

sensitivity for the types of things that the client is or

should be wrestling with. I’ve found many times that if I

have a good picture of what the CEO agenda should be—

even if it may not be what that current CEO is working on—

sooner or later they come around to my way of thinking.

Depending on your position and power within your organization

and on your corporate culture, you may have to rely on someone

else’s conception of the CEO focus (perhaps, even, your

CEO’s). Nevertheless, the CEO focus should be your touchstone as

you put together your recommendation.

As your next step, ask how your decisions will add value to

your client or organization. For each action that you recommend,

how large will the payoff be? Is it large enough to justify the

required commitment of time, energy, and resources? How does it

compare to the other recommendations you make? If it is significantly

smaller in terms of potential result, other, larger projects

should come first. As chair of retail banking at Key Corp., Jim Bennett

had to make decisions like this every day:

For me, the metric has to be, “Is this really going to make a

difference?” At Key, as in most companies, decisions are typically

input-oriented rather than performance- and outputoriented.

We tried to change that paradigm by going public

with performance commitments—“We’re going to grow our

earnings by X”—which put us on the hook to come up with

projects that would meet that goal. This focus on fundamental and lasting differences in performance forces us to

take an aggressive 80/20 view of any potential project. We

have to ask, “If we commit these resources for something

approaching this predicted return, what difference is it going

to make to hitting our performance objective?”

For example, my staff brought me a data warehouse

project which required an investment of $8 million for a

wonderful internal rate of return and payback in two or

three years. I said, “Look, guys, if we can’t get at least 10

times the impact for this expenditure, I’m not taking this to

the board, so go back and find some way that we’re going

to generate a return of at least 10 times whatever it is we

spend.” Everything is judged on its ability to help us meet

our performance challenge.

Sometimes you can get caught up in the elegance and cleverness

of your analysis, or even the sheer effort you put into it. Don’t

let it cloud your judgment. With apologies to Jack Kennedy, “Ask

not what your analysis means to you; ask what it can mean to your

client.”

Respect the limits of your client’s abilities. The most brilliant

strategy in the world won’t help you if your organization can’t

implement it. This holds not just for business, it’s true in any realm

that calls for strategy. If your football team doesn’t have a strong

offensive line, there’s no point trying to run the ball up the middle.

In World War II, the Germans couldn’t sustain a two-front

war. In U.S. politics, you don’t embark on a legislative campaign

if you can’t muster a majority in Congress (as McKinsey alumna

Sylvia Mathews learned from her experience at the Office of Management

and Budget).

When putting together your end product, therefore, keep in

mind whether the recommendations you are making are actionable for the client. Does your client have the skills, systems, structures,

and staff to do what is required? Will outside forces—competitors,

suppliers, customers, regulators—take actions that will nullify the

effects of your strategy? If you’ve planned your analysis correctly

in the first place, you should be able to answer these questions

before you make your recommendation.

At a level below that of grand strategy, you should also consider

whether your analysis and recommendations will be understandable

to the organization as a whole. We will examine this

issue with regard to the actual packaging of your message in Chapter

5, but your analysis itself, in most instances, should be understandable

to outsiders. The main reason is that by making your

analysis accessible to those who have to decide on and implement

it, you will make it easier for them to support it. Paul Kenny discovered

that principle at GlaxoSmithKline:

A lot of the models that we use for analyzing diseases are

overly complex: they are multimegabyte, hundreds of pages,

or interlocking Excel spreadsheets. You wouldn’t believe

some of the ones I’ve inherited. I’ve had a two-megabyte

model linking with another model linking with another

model, and you’d look at one of these things and have no

idea how to work your way through it. One of the principles

that I learned at McKinsey that I always apply when building

any sort of model is to keep it simple, keep it focused,

keep it brief. As a result, I typically do one-page models, and

I try to keep them simple and transparent, so that the audience

can see the mechanics rather than getting lost in the

detail. You don’t lose much by leaving out that detail either;

on the contrary, you can focus on the key drivers and see

what is happening.

We’ll discuss simplicity more fully in Chapter 5. For now, we’ll

just say that even if the particular analysis you are doing necessitates

gigabyte-sized models and complex mathematics, try to simplify

the results of that analysis to a level that an educated outsider

can understand.

IMPLEMENTATION GUIDANCE

At the beginning of this section, we stated that once you have all

the facts (the results of all your analyses), your job is to piece

together a story from some, but not all, of those facts. You may

wonder why you shouldn’t tell the whole story and use everything

you have. To tell you why, we’d like to use a nonbusiness analogy

that may be familiar: the story of King Arthur and his knights of

the Round Table.

Although King Arthur and his knights may have been completely

or mostly legendary, “facts” about them abound. If you dig

around, you will turn up sources dating back to the last millennium—

that is, A.D. 1000—and beyond from Wales, England,

France, Germany, Italy, and no doubt from other places. Authors

and storytellers have pieced these sources together in many different

ways over the centuries, resulting in works as diverse as Malory’s

Le Morte d’Arthur, T. H. White’s The Once and Future King,

the musical Camelot, and movie versions ranging from John Boorman’s

graphic Excalibur to Disney’s Sword in the Stone (not to

mention the Mr. Magoo version). Yet these very different end

products all stem from the same set of “facts” (and if you want to

see just how different they are, watch Excalibur followed by

Monty Python and the Holy Grail).

Each of these storytellers has a different story to tell and a different

audience to tell it to, yet at some level, they are the same

story. When you have to put your facts into a coherent story for

your client, you have the same goal as an author writing her own

version of the story of Arthur: making your audience understand

your message. What separates you from a writer of fiction or a

movie director is your responsibility to be intellectually honest.

The author can depict her Arthur however she wants to make her

point or press her agenda. As a result, audiences have seen Arthur

as a blood-soaked conqueror (Excalibur), a noble but doomed

king (Le Morte d’Arthur), an innocent boy (The Sword in the

Stone), and a very silly man who says “Ni” to old ladies (Monty

Python and the Holy Grail). You, as a consultant or employee,

don’t have that freedom:* you have to produce recommendations

that will add the most value to your client.

Remember that the goal of the problem-solving process—your

goal—is not simply to come up with a brilliant idea. If you ask a

McKinsey consultant what it is that the Firm does, one of the most

common answers you will receive is, “We help our clients make

change happen.” They won’t say, “We come up with brilliant ideas

for our clients.” They realize that the best idea or the cleverest

strategy is worth precisely nothing if the client doesn’t buy into it

and implement it. To secure that buy-in, you have to put together

a compelling narrative, and that entails leaving out facts that don’t

advance your story.

Please note, this does not mean you should ignore evidence

that contradicts your hypothesis. Quite the contrary; by this time,

you should already have adjusted your hypothesis to the facts. It

does mean that you should not throw every fact that you have into

your story just because you can. If you do so, you will lose your

audience in irrelevant detail, and this will get in the way of telling

your story.

• Get a copy of an annual report—preferably from your own

company. Based on the information in the annual report,

decide whether the company’s stock is a good investment.

Give five reasons why, in order of their importance.

• Thinking about your own organization, what are the five

or six issues on which the CEO should focus? How does

your job affect these issues, and what could you do to have

more impact?

• Make a list of the strengths and limitations of your organization.

Put them into a MECE categorization. Think about

whether your organization’s recent projects have played to

those strengths and limitations. How could future projects

be better suited to them?

CONCLUSION

As we’ve shown, interpreting the data has two components. Internally,

you piece together the facts into a coherent picture that leads

you to a recommendation. Externally, you assemble certain facts

into an end product that you will use to communicate your recommendation

to your client. At this point, you have seen the problem-

solving process from start to finish. We believe that if you

follow the recommendations we have made so far, you will be able

to improve the quality and speed of decision making in your organization.

Your work doesn’t end there, however. Now, you have

to communicate your ideas to the critical decision makers in your

organization, and possibly to the organization as a whole. For that,

you will need the presentation strategies in the next chapter.

PRESENTING YOUR IDEAS

We’ve now reached the final stage in the McKinsey problemsolving

process: presenting your ideas. All the hypothesizing,

all the work planning, all the research, and all the analysis

have led up to this point, but if you don’t get this part right, all

your efforts will have been a waste of time. If you piled up all the

good business ideas that withered on the vine for want of an effective

presentation, you’d top the Empire State Building. In this chapter, we will show you how to keep your ideas out of that pile.

If there is a stereotype of McKinsey in the minds of businesspeople,

it is the image of a formal presentation conducted by men

in dark suits and white shirts around the boardroom table. This

image grows increasingly out of date in today’s business environment;

the Firm does far fewer formal presentations than it did 10

years ago. However, the men and women of McKinsey continue

to rely on presentations in one form or another to convey ideas to

the Firm’s clients. To this end, McKinsey has developed a highly

effective set of presentation and communication skills for its consultants

to use.

In the experience of our McKinsey alumni, these skills, more

than any others they learned at the Firm, translate almost unaltered

to other organizations. With them, McKinsey alumni get

their ideas across—and get them accepted. McKinsey-style presentations

work so well that one alumnus even called them an unfair

advantage. You can have that advantage, too.

In this chapter, we examine two aspects of presentation à la

McKinsey. First, we describe how to structure your presentation

to maximize its impact on your audience. Second, we detail techniques

for generating buy-in for your ideas from your audience.

STRUCTURE

McKinsey spends a lot of time training its consultants to structure

their presentations, and they take this training seriously—even if

it often takes place in exotic locations near good golf courses.

When it comes to presentation, McKinsey consultants learn that a

presentation must convey ideas to the audience in the clearest,

most convincing way possible. To ensure that your presentation

meets this goal, you need to give it a structure that the audience can

easily grasp and follow.

In this section we will show you how to structure your presentations

for maximum effect. You’ll see how to arrange your ideas

into a logical flow that your audience can absorb and how to use

charts to get your message across.

THE McKINSEY WAY

When it comes to presentation structure, McKinsey emphasizes

organization and simplicity.

Be structured. For your presentation to succeed, it must take

the audience down the path of your logic in clear, easy-to-follow

steps. Your presentation is a manifestation of your thought

process. If your thinking is clear and logical, your presentation

should be, too. Conversely, if your thinking is muddled, you will

have a hard time putting your ideas into a sound structure.

The elevator test. Sometimes you don’t have much time to

make your case. Know your solution (or your product or business)

so thoroughly that you can explain it clearly and precisely to your

client in the course of a 30-second elevator ride. If you can pass this

“elevator test,” then you understand what you’re doing well

enough to sell your solution.

Keep it simple—one message per chart. The more complex a

chart becomes, the less effective it is at conveying information. The

meaning of a chart should be immediately obvious to the reader, so

use whatever tools you need to bring it out. If you want to use the

same chart to make multiple points, redraw it for each point and

highlight the relevant information in each chart.

Use charts as a means of getting your message across, not as an

art project. McKinsey has always erred on the side of conservatism

when it comes to graphics. You won’t see a lot of color or 3-D

graphics in a McKinsey presentation—unless such features are necessary

to communicate the point of the chart.

LESSONS LEARNED AND IMPLEMENTATION

ILLUSTRATIONS

Of all the skill sets that apply to the McKinsey problem-solving

process, structuring presentations requires the least adaptation to

the outside world. Effective communication is effective communication

pretty much anywhere, and the Firm’s methods are

extremely effective. As venture capitalist Ciara Burnham of Evercore

Partners notes:

McKinsey provides outstanding training in written communications.

The McKinsey problem-solving process forces one

to be logical and clear about each issue and its implications.

It also serves as a useful check of the thoroughness of one’s

analysis: when I am having trouble writing a presentation,

it is usually because my logic and analysis are not completely

clear.

Given how powerful these techniques are, it didn’t surprise us

that comments from our alumni centered on one main lesson

regarding presentation structure: support your ideas with a solid

structure.

Support your ideas with a solid structure. Stripped to its

essence, presentation is selling. You and your team may appreciate

the brilliance of your ideas and the quality of all the work

you’ve done, but your client, your colleagues, or your organization

may not. You have to convince them, and your presentation is your

best tool for doing so. Make no mistake, presentation matters.

That has been the experience of Bob Garda, formerly a director

of McKinsey’s Cleveland office, later CEO of a brand-name consumer goods manufacturer, and now a professor at the Fuqua

School of Business: “I’ve put half-baked ideas into great presentations

and seen them soar, and I’ve put great ideas into bad presentations

and watched them die.”

Unfortunately, in today’s corporate world, a lot more ideas are

dying than soaring, if the experiences of our McKinsey alumni are

typical. The poor quality of presentations in their new organizations

came as a shock to many of them. Here are a few typical

impressions (with the names changed to protect the innocent):

I look at the kind of presentations our senior managers give

to each other and to our customers, and it’s depressing. People

don’t know how to structure an argument. Their presentations

are just stream of consciousness. This was the most

startling change for me when I left McKinsey.

—An alumnus in the health care industry

_ _ _

I’m always amazed at the poor quality of the presentations

here. We tend to have words or outlines put on PowerPoint

slides; people actually think that’s a presentation. It’s not. If

all you have is bullet points with nothing to show graphically

with a chart or schematic, then in my mind, you should put

it in a memo that you send out before the meeting. We have

a lot of meetings where we read outlines together. No charts

for anything. It’s like kindergarten.

—An alumnus in financial services

_ _ _

I worked with a senior executive who always took hours to

build to a point. The “so what” of his slides seemed to be  “Here’s a lot of data I know.” The board would become visibly

agitated during his presentations. It took me two years

to break him of this habit.

—An alumnus in the retail industry

It’s no wonder they sound frustrated. A poor presentation can

make a good idea tough for an audience to grasp. More often,

though, a poorly designed presentation reflects a poorly thoughtout

idea. It’s difficult to put incoherent thoughts into a coherent

structure.

Conversely, a well-written presentation in service to a good

idea can be a powerful instrument of change. Communicating a

course of action throughout an organization acts as a catalyst.

When Bob Garda became CEO of a brand-name consumer goods

manufacturer, he had just such an experience:

Most people don’t feel comfortable structuring a coherent

presentation that lays out a theme from which the subthemes

emerge. When I arrived on the scene, the company lacked a

clear vision for the future: what the organization was and

what it wanted to be when it grew up. Vision was one of the

first things that I felt we needed to address, and just the fact

that I was able to put together a presentation around that

theme—because I felt very comfortable laying out my ideas

in a structured manner—had a tremendous impact.

This ability to present ideas in a flowing, logical structure lies

behind the Firm’s self-proclaimed ability to “make change happen.”

It’s not just that McKinsey consultants come up with good

ideas; it’s that they can communicate the full impact of these ideas

to their clients. This skill carries over extremely well into the outside

world. As S. Neil Crocker, general manager of Pearson PLC’s

Virtual University Enterprises, remarks:

Strong communications skills supported by strong logic wipe

out most concerns. I have yet to be turned down by my CEO

or board for anything that I really wanted. Presentation is

the “killer skill” we take into the real world. It is almost an

unfair advantage!

Fortunately, you don’t have to work at McKinsey to learn how

to put together an effective presentation. In fact, some McKinsey

alumni have started teaching these skills in their own organizations.

By the end of this section, we hope to have shown you

enough about presentation structure that you can get the ball

rolling in your organization, too.

IMPLEMENTATION GUIDANCE

A successful presentation bridges the gap between you—the presenter—

and your audience. It lets them know what you know. You

can make this process easy for your audience by giving your presentations

a clear and logical structure. Fortunately, if you have

been adhering to the principles of this book, then you already have

a solid basis for such a structure: your initial hypothesis.

If you broke out your initial hypothesis into a MECE set of

issues and subissues (and suitably modified them according to the

results of your analysis), then you have a ready-made outline for

your presentation. If you have a well-structured, MECE hypothesis,

then you will have a well-structured, MECE presentation. Conversely,

if you can’t get your presentation to make sense, then you

may want to rethink the logic of your hypothesis. Many of our

McKinsey alumni found this a useful check on their thinking. Just

put together the exhibits that prove your various points, and fit

them into their proper place on the issue tree.

As an example, let’s go back to the Acme Widgets issue tree

from Chapter 1 (see Figure 1-2, page 26). Your team came up with

the initial hypothesis that Acme can lower the marginal cost of its

thrum-mats by instituting a new, shorter curing process. Your

analysis proves that the new process is cheaper, that Acme can

implement the changes required to accommodate the new process,

and that the new process will not diminish the quality of Acme’s

thrum-mats. Say so in your first slide (Figure 5-1). With that slide,

you’ve established the structure of your presentation for your audience:

they know where you’re going and will have an easy time following

you.

The rest of your presentation flows out of the first slide. Each

of those major points under your initial hypothesis constitutes a

section of your presentation. Each section will consist of the various

levels of subissues under each of those major issues. For example,

let’s look at the second major issue, “Acme can implement the

changes necessary to accommodate the new process,” which we

delved into in Chapter 1. The various subissues that arose from

that discussion now form the major points for Section 2 of your

presentation: we have the necessary facilities and the necessary

skills within our organization (see Figure 5-2). You can repeat this

process all the way down your issue tree, but you have the freedom

not to go too deeply into detail, depending on your audience. At Acme Widgets can lower the marginal cost of its thrum-mats with a new,

shorter curing process:

• The new process saves money.

• We have the resources in place to implement the new process.

• We can use the new process while maintaining thrum-mat quality.

Figure 5-1. Acme Widgets Presentation: First Slide

whatever level of detail you stop, the logic of your presentation

will still be clear.

You may have found one aspect of this structure unusual. We

recommend starting with your conclusion—in the case of Acme

Widgets, changing the thrum-mat production process. Many presentations

take the opposite approach, going through all the data

before finally springing the conclusion on the audience. While

there are circumstances where this is warranted—you may really

want to keep your listeners in suspense—it is very easy to lose your

audience before you get to your conclusions, especially in dataintensive

presentations. By starting with your conclusion, you prevent

your audience from asking, “Where is she going with this?”

Having your conclusions or recommendations up front is

sometimes known as inductive reasoning. Simply put, inductive

reasoning takes the form, “We believe X because of reasons A, B,

and C.” This contrasts with deductive reasoning, which can run

along the lines of, “A is true, B is true, and C is true; therefore, we

believe X.” Even in this simplest and most abstract example, it is

obvious that inductive reasoning gets to the point a lot more

quickly, takes less time to read, and packs a lot more punch.

McKinsey prefers inductive reasoning in its communications for

precisely these reasons, as Ron O’Hanley of Mellon attests:

I always strive for a statement of conclusions up front in oral

and written communications. This gets everybody on the We have the resources in place to implement the new process:

• We have facilities that can accommodate the new process.

• Our people have the necessary skills to run the new process.

Figure 5-2. Acme Widgets Presentation: Second Section Lead

same page, even if they disagree, and gives context to all of

the supporting data and arguments. It also helps me be more

efficient and effective in marshaling my arguments.

As an additional advantage, starting with your conclusions

allows you to control how far you go into detail in your presentation.

For example, suppose you are presenting in an interactive setting,

say, to your boss in his office. You have three major points

you want to communicate to him. Now, suppose that he already

accepts your second point and doesn’t need to be convinced with

a lot of data. If you have organized your presentation deductively,

then you will have to take him through all the supporting data for

that point before you actually tell him your conclusion—which he

already agreed with anyway. You’ve just wasted a lot of time for no

particular gain. On the other hand, if you’ve taken the inductive

approach, then your boss can simply give his agreement to your

point at the outset. You can spend more time on the other points or

get out of the meeting and back to work.

Putting your conclusions up front will also help you pass the

elevator test. As we mentioned earlier in the chapter, you pass the

elevator test when you can rattle off your conclusions in the space

of an elevator ride. In fact, if you’ve followed the McKinsey

method, then your first slide—with your recommendation and

major points—is your answer to the elevator test. Imagine trying to

pass the elevator test using a deductive outline—not easy, is it?

We strongly recommend that you take the elevator test before

any presentation. Our McKinsey alumni gave us numerous examples

of its usefulness in their careers. Here are a few testimonials:

I’m in a post-start-up situation right now, with several former

very senior executives from large companies. I find

myself telling them, “Hey, we only have 20 minutes with

Goldman Sachs, and only the first 2 count. Pretend you only have an elevator ride to get your point across to them. What

are you going to say?” It’s amazing how many successful

people cannot simply focus on two or three key points and

articulate them well.

—Brad Farnsworth, GeoNetServices.com

Throughout my career, the ability to say what I need to say

in a short, sharp sound bite has paid off in many ways. As an

author, I find it essential to getting great media coverage. The

elevator test is simply about sound bites, and it is a great way

to know if your product or idea is compelling enough to

move a person to action. If I fail the elevator test, it not only

says that my communication is not clear, but that the underlying

issue is perhaps not compelling.

—Deborah Knuckey, author of The MsSpent Money Guide

_ _ _

My board has attention spans similar to the elevator test.

Without it, I would probably be dead!

—An alumnus in academia

Perhaps the best summation of the value of the elevator test

comes from Roger Boisvert of CTR Ventures: “In presenting businesses,

my own especially, if I am not able to do the elevator test,

I shouldn’t be talking with anyone.” If you can’t articulate your

thoughts clearly and concisely, then either you don’t understand

the material well enough and need to get better acquainted with

it, or your structure is not clear and concise enough and needs to

be reexamined.

As you might have guessed by now, we are zealous advocates

of good presentation structure. However, even the best-designed, most logical set of recommendations imaginable still needs evidence

to back it. Therefore, at this point, it’s appropriate to look at

the complement to your presentation’s organizational structure:

the exhibits you use to communicate your analyses.

These days, exhibits can be more than just charts on paper.

They can be three-dimensional scale models, product samples, or

Web pages, just to mention a few possibilities. Whatever form it

takes, a good visual aid can be an incredibly effective communications

tool. A picture is, after all, worth a thousand words. With

charts, you can express in one image data and concepts that might

take pages of text to describe. Not only that, but your audience

often will absorb your point more readily when they can see it

(and, in the case of physical models, touch it), rather than just hear

it or read it.

Whether you are using good old black-and-white charts or

rainbow-hued, three-dimensional computer animations with musical

accompaniment, the lessons that McKinsey alumni learned still

ring true. Most importantly, keep it simple. You’re trying to communicate

a set of recommendations, not show off an art project.

While you may sometimes want to put together pretty pictures to

impress your audience, the visual should not get in the way of the

message. If you actually want it to do so, then you are not trying to

communicate so much as obfuscate.

Each of your charts should have just one message for the audience

to absorb, and the simpler, the better. That way, not only does

your audience know what you’re saying, you do, too. It’s unlikely

that you’ll get confused in the middle of your presentation if your

slides have only one clear message. When Sylvia Mathews was

White House deputy chief of staff, preparing presentations for the

President, she kept that principle foremost in her mind. Hey, if it

works for the President of the United States . . .

One last, small thing about exhibits: if you are presenting data,

always document your sources. That way, if someone asks you

where you got your information, you’ll be able to reply. In addition,

if you dig out an old presentation a few years later, you’ll

know where to find the source.

As important as exhibits are, they’re not enough; you still need

a good structure in which to organize them. Otherwise, all you’ll

have is a collection of interesting facts with no overall theme.

Remember, each exhibit is a message, and those messages have to

fit into the logic of your structure, so your audience can understand

your idea—which is, after all, the point of the exercise.

EXERCISES

• Search the editorial section of your favorite newspaper for

an editorial that makes a specific recommendation. Write

down the points the author makes and the evidence he uses

to support them (e.g., we need more power plants because

electricity use is rising 20 percent per year). Next, put those

points into a logical structure as if you were going to use

them for a presentation. Does this presentation get the

message across? If not, why not?

• The next time you have to make a presentation, perform a

dress rehearsal and videotape it. If possible, give yourself

time to view the tape before the presentation. Watch the

tape as if you were a member of the intended audience,

knowing only the information that the audience might be

expected to know, including any handouts you intend to

give the audience. From that perspective, does your presentation

make sense? Were you convinced? Consider what

steps you might take that would improve the impact of

your presentation.

• Find a chart (possibly from a previous presentation) that,

the first time you looked at it, took you a long time to

understand. Redraw it in a way that makes the message

readily understandable. If the original contains multiple

messages, you may have to draw more than one chart.

Now show your new chart(s) to someone who hasn’t seen

the original. Can that person understand your version? If

not, why not?

BUY-IN

A presentation is only a tool; it is not an end in itself. A great presentation,

no matter how coherent its structure or how evocative

its charts, is useless if the organization doesn’t accept and act upon

its recommendations. The shelves of Fortune 500 companies are stacked with presentation documents that never got out of the

boardroom.

If your idea is to avoid a similar fate, you need to practice the

gentle art of generating buy-in: taking the steps necessary to maximize

the chance that your audience will accept your recommendations.

These steps involve bridging the information and trust

gaps between you. The information gap exists because you know

more about your findings than your audience does. Depending on

the relationship between you and your audience, the trust gap (if

it exists) could take any of several forms. Your audience may think

that you are too inexperienced to comment on their business, or

they may mistrust you because you are an outsider, are overeducated

(or not educated enough), or for any of a number of other

reasons.

In this section, we will describe two ways to bridge these gaps:

prewiring and tailoring. Prewiring means taking your audience

through your findings before you give your presentation. Tailoring

means adapting your presentation to your audience, both

before you give it and, if necessary, on the fly. Together, these techniques

will boost your chances of making change happen in your

organization.

THE McKINSEY WAY

On the subject of buy-in, McKinsey alumni have one principle

inscribed on their hearts: prewire everything.

Prewire everything. A good business presentation should contain

no shocking revelations for the audience. Walk the relevant

decision makers in your organization through your findings before

you gather them together for a dog and pony show. McKinsey-ites

have a shorthand expression for sending out your recommendations

to request comment from key decision makers before a presentation: prewiring. At McKinsey, consultants learn to prewire

every presentation.

Doing so has several advantages. It keeps you from getting

blindsided by major objections to your solution. It also helps you

build a consensus in favor of your solution among those who have

to approve or implement it. It gives you a chance to adapt your

solution to the political realities of your organization. Finally, it

acts as an additional reality check on your findings. These consequences

will improve the likelihood that your solution will be

approved and implemented.

LESSONS LEARNED AND IMPLEMENTATION

ILLUSTRATIONS

Because they want to be effective in their organizations, McKinsey

alumni work hard at getting buy-in. Practically everyone who

talked to us or returned a questionnaire mentioned the value of this

strategy. We boiled their experiences down to two lessons:

• Avoid surprises.

• Tailor your presentation to your audience.

Avoid surprises. In business, people don’t like surprises. By surprises,

we don’t mean getting an extra day off or a bigger than

expected bonus; we mean new information that forces decision

makers to change their plans or alter their procedures. That’s why

risky investments like small stocks have higher expected returns

than safe investments like government bonds. Prewiring reduces

your potential for surprises. It also acts as a check on your solutions

because those who review your recommendations may mention

something that you missed in your research and just might

change your results.

More importantly, discussing your results outside the context

of a large meeting increases your chances of getting those decision

makers to buy into your ideas. In the intimacy of a one-on-one

meeting, you open up your thought process to them in a way that

is difficult to do in more formal settings. You can find out their

concerns and address them. If someone takes issue with a particular

recommendation, you may be able to work out a compromise

before the big meeting, thereby ensuring that she will be on your

side when the time comes.

To illustrate just how useful prewiring can be, we present a

story told to us by Naras Eechambadi, now founder and CEO of

Quaero, Inc., but previously the head of knowledge-based marketing

for investment bank First Union. Naras used prewiring to

great effect when he joined First Union:

When I left the Firm I went to First Union to head up a

group called Knowledge-Based Marketing. At the time, it

was a very small group, and we wanted to grow it very

rapidly. I had to present a business case to John Georgius, the

president of First Union, to get the funding to scale it up over

a three-year period. Using the interviewing techniques that I

had learned at McKinsey, I spent my first two months talking

to people in different parts of the company to discover

their attitudes toward and expectations of our group. It was

a very useful exercise, just structuring the guides and making

sure I heard everybody. It was also part of the selling process.

Naras’s ability to listen resulted in multiple benefits:

I discovered that our group meant different things to different

people. Some people expected too much; some people

didn’t expect enough. I got a sense of where the political land mines were. Then, rather than just taking it to the president

directly, I went to all the heads of First Union’s business units

and told them what I was going to tell them, and got their

feedback. I got a lot of buy-in because of this.

I structured my business case just like a McKinsey presentation.

People were struck by how organized, how

thoughtful, and how forceful it was. We had scheduled a

two-hour meeting, we finished it up in an hour and a half,

and I had my acceptance by the end of the first hour—and

it was a substantial investment. I think I’m still famous at

First Union for being the guy who got money from John

Georgius on the first try. Nobody had ever done that before.

Even if you can’t get full agreement beforehand, prewiring will

help you make your case, as Paul Kenny found when he was

involved in a “battle of the presentations” at GlaxoSmithKline:

I was killing a controversial product, and I had to make a

very clear case to terminate it to some very senior champions

for this particular project. Fortunately, I had done the

groundwork beforehand. There was still resistance, but at

least I knew where it was coming from. The key people knew

the conclusions already. Some of them agreed, some of them

disagreed, but at least we knew where we stood. In my presentation,

I managed to bring together the key issues and get

my recommendation across.

In a situation such as Paul describes, prewiring is especially

helpful, because it forestalls wrangling over the facts of each individual

point. Your audience already knows where you are coming

from and can debate your ideas, rather than your facts.

Contrast Naras’s and Paul’s successes with someone who didn’t

take the time to prewire. In this case, a McKinsey alumnus was on

the receiving end of a presentation that was full of surprises:

I was on a Board in which the CEO didn’t keep us sufficiently

involved and informed. Over a period of a year, I

talked to him off-line a grand total of once; other directors

had the same experience. He needed to build alliances with

Board members to implement his vision for the company. He

needed to call Board members and say, “Here’s where I want

to take the company. I’d like to have your support for this

or that.” He should have understood who the power brokers

were and made sure they were informed. You don’t call a

Board meeting out of the blue on Thursday to figure out

whether or not you’re going to buy a company on Sunday.

The Board’s response was, “We went through that two

months ago and said we didn’t want to do it then. Now

you’re calling an emergency meeting and giving us four days’

notice?” Not a very smart thing to do without first building

support. We subsequently parted ways.

You can avoid a similar fate by prewiring whenever and wherever

you can.

Tailor your presentation to your audience. Tailoring means

adapting your presentation to your audience, whoever it may

include. Even if your audience comes from your own organization,

the people in it may not share your background or knowledge of

the subject matter. They may respond better to some styles of presentation

than others: formal versus informal, large presentations

versus intimate discussions, text-based versus audiovisual, just to

name a few. Some people want to go into the minutiae, while others

just want to hear your top-line arguments. If your presentation

is to succeed, you need to know your audience, its preferences, and

its background. Dean Dorman of Silver Oak Partners sums up our

alumni’s wisdom on tailoring:

“McKinsey-izing” your presentations, using lots of consulting

jargon—in most organizations, that gets you nowhere.

Everything has to be completely tailored for your audience.

A good leader knows his audience and how to relate to it.

Sometimes tailoring can even mean adjusting the structure of

your presentation. If you know your audience has, say, little

patience for supporting detail, what is the point of spending time

on it? Just move right to your conclusions. Here’s an example of

tailoring from Bill Ross at GE:

I still structure my pitches like we did at McKinsey—with

an up-front page, governing thoughts, and some discussion

of the background of the problem. Typically, though, I move

through them much more quickly. At GE, you don’t want

to spend too much time on that. You want to jump much

more quickly to the resolution. That’s fine—you just spend

less time on the charts that take people through the background.

It’s my version of “tell ’em what you’re going to tell

’em, tell ’em, and then tell ’em what you told ’em.”

The structure remains; you just highlight different aspects of

it for different audiences.

Tailoring means more than just knowing your audience’s likes

and dislikes, however. You should also learn their language—the

thought processes they rely on and the jargon they use. This is precisely

what Naras Eechambadi did in the example we discussed in

the section on prewiring:

The two months I spent listening to people in First Union

worked out very well for me because I got to understand

what kind of language people used within the company,

what kinds of things they were looking for, and what kind of

outcomes they wanted. For the purposes of my own thinking,

I used a McKinsey approach to solving the problem. But when presenting it to the company, I used terms that were

familiar to them, and I used an approach that was familiar to

them. I didn’t use the consulting methodology—the consulting

lingo, if you will—in my presentation; I used theirs. I’m

sure that’s one reason my presentation was so well received.

Bear in mind that not only do different organizations have different

languages; even different parts of the same organization can

have different languages. You would not want to give the same

presentation to, say, your company’s board of directors and the

drivers of your delivery trucks. It’s nothing to do with how much

smarter one is than the other, but that each group has different

expectations, different goals, and a different language. These differences

require you to tailor your message to each group.

IMPLEMENTATION GUIDANCE

The earlier you can start the prewiring process, the better. By identifying

and getting input from the relevant players early on, you

allow them to put their own mark on your solution, which will

make them more comfortable with it and give them a stake in the

outcome. You also give those outside your team a chance to expose

any errors you may have made or opportunities you may have

missed, and you still have time to correct them.

When it comes to tailoring, however, sometimes you have to

act on the fly. A good presentation structure will give you the flexibility

to change your pitch depending on the audience’s reaction.

You should never be so locked in to your script that you can’t deviate

from it if the occasion demands. Here’s an example, courtesy of

Bob Garda. In this case, he was actually a McKinsey client while

taking a sabbatical to act as the temporary CEO of a major metropolitan

utility:

One of the associates on the McKinsey team got an appointment

with me to cover the team’s analysis of one of our

problems and their initial recommendation. This young

woman came in, sat down, and gave me one of the best

lessons I’ve ever had. She said, “Let me tell you what I think

the problem is,” and started into her presentation. I said, “I

think I understand the problem; let me tell you why,” and

gave her my assessment in four or so points. She replied,

“That’s right. So I don’t need to waste your time telling you

what your problem is. Let’s just turn the first 16 pages over,

and we’ll go right to the solution.” I don’t ever recall hearing

a McKinsey consultant say that before. That was a wonderful

lesson for me.

Being flexible and, more importantly, respectful of your audience

will gain you a lot of points.

You should also be aware of the physical circumstances of your

presentation and adjust accordingly. You can deliver the same message

using very different styles according to the setting. For

instance, if you are meeting with three or four executives around

a conference table, you probably don’t need to use an overhead

projector; a laser-printed “deck” of your exhibits should work fine.

Conversely, if you have 50 people in an auditorium, you need to

use something that will allow you to reach the people in the nosebleed

seats.

EXERCISES

• Determine who the critical decision makers are for the

issues you are currently tackling. What are their agendas,

strengths, weaknesses, likes, dislikes, etc.? You might want

to write these thoughts down for future reference.

• Identify the differences between two or more groups that

interact with you regularly; they can be within your organization

or outside of it—as different as your board and the

Little League team you coach. Take a presentation you’ve

previously done, and tailor it to each of these audiences.

Ensure that your major message comes across in each

version.

CONCLUSION

For McKinsey, presentation is where the rubber meets the road. A

well-structured presentation combined with assiduous efforts to

gain the buy-in of the key decision makers helps boost the odds of

McKinsey’s recommendation being accepted. These tactics can do

the same for you.

You’ve given your presentation and had your recommendations

accepted, but that doesn’t mean the end of the work. A great

idea, once accepted, still has to be implemented by the organization

if it’s to have any impact. That, however, is a different process

and, perhaps, a different book.

Leaving aside implementation, the presentation of the team’s

final recommendation marks the end of the typical McKinsey consulting

engagement. New problems requiring McKinsey’s input

may arise with the client, but they will be the occasion for the start

of a new engagement. Likewise, in this book, we will now move

from the process of creating and delivering solutions for business

problems to the techniques required to manage that process for the

benefit of the client, the team, and yourself.

MANAGING YOUR TEAM

Over the past 20 years, the study of teams and leadership

thereof has become one of the cornerstones of management

theory. Most bookstores have at least one row (sometimes entire

sections) dedicated to providing advice on how to create and lead

a team. There is a reason for all of this advice: teams have become

extremely common in organizations these days. There is a general

belief that you can achieve more together than going at it alone.

Not all teams are successful, however, and managing them can be

difficult.

You would be hard-pressed to find an organization with more

team-based activity than McKinsey. When it comes to managing

those teams, depending upon whom you ask, the Firm is an excellent

example of either what to do or what not to do. We will

discuss both in this chapter. On the positive side, the Firm dedicates

a lot of time and energy to training its team leaders with special

training modules, conferences, and mentoring programs. Ciara

Burnham of Evercore Partners elaborates: “One obvious lesson

from McKinsey is that managing the team is a separate, distinct,

and important task. This is not widely appreciated in other

organizations.”

Although McKinsey works very hard at building teams and

team leaders, some say that the training comes too late in the game.

One alumna, now with another strategy consulting firm, complains

that some of the best team training came only at the higher

ranks in McKinsey. “Managing the team was one of the areas in

which I learned the least at McKinsey,” he says. “There was some

great material as you moved up, but in the early stages, it was

mostly on-the-job training.” He is not alone in his disappointment

with some of the ways McKinsey handled teamwork and leadership

training, as we will see in this chapter. Still, as evidenced by

the Firm’s great success over the past 75 years, it also knows how

to do some things right.

We will cover four major elements of team management in this

chapter: team selection, internal communication, bonding activities,

and individual development.

SELECTION

You can’t have a team without team members. That being the case,

the first step to building a great team is selecting the right people.

In this section, we will discuss ways to make sure that you get the

best possible people on your team. Sometimes, of course, the best

person for your team might not be part of your organization. For

that reason, this section will also look at ways to improve the efficiency

and effectiveness of recruiting.

Perhaps you are in a situation where you have no control over

the makeup of your team. In fact, based on our interviews with

McKinsey alumni, that is more often the case than not in the world

outside of McKinsey. Even so, at some future stage in your career,

you might find yourself in a position to select your own team, especially

if you follow the recommendations in the rest of this book.

THE McKINSEY WAY

Let’s review McKinsey’s approach to team selection and recruiting.

Getting the mix right. If you have the luxury of being able to

pick your team, give some deliberate thought to your selections.

McKinsey-ites make project assignment decisions based on the specific

needs of the engagement. They carefully weigh raw intellect,

experience, and interpersonal skills. Each aspect matters, but their

relative importance can vary from project to project (and team to

team).

If you have the opportunity, you should also try to meet any

potential new members in person before you make a decision. Try

to gain a sense of the chemistry among your team members. Don’t

just blindly accept others’ word on the quality of a potential teammate.

If at all possible, see for yourself.

Recruiting McKinsey-style. McKinsey wouldn’t be McKinsey if

it weren’t very picky about whom it recruits. The Firm, according

to its mission statement, strives to “attract, develop, excite, motivate

and retain exceptional people,” and it puts its money where its

mouth is. Recruiting at McKinsey is led by the partners and supported

by a number of full-time professionals and a huge budget.

Managing Your Team 129

TEAMFLY

Team-Fly®

McKinsey carries out its strategy by searching for the highest performers

in the best business schools in the world and has, over

time, expanded its sources to include the highest performers in

other schools, disciplines, and industries.

The recruiting process at McKinsey involves numerous, intensive

case study interviews. A candidate can expect to see at least

eight different consultants during the interview process, each with

a different case to solve. The Firm’s goal is to take a deep look into

each candidate’s mind to assess his analytical and interpersonal

abilities and decide whether the candidate would be a good fit.

Overall, the best strategy for making it through the rigorous

recruiting process at McKinsey is to have a strong academic

record, exhibit leadership and initiative, and knock the case interviews

out of the park by demonstrating the ability to approach a

problem in a structured manner and break it into its components.

(Reading this book might help too.)

LESSONS LEARNED AND IMPLEMENTATION

ILLUSTRATIONS

By its nature, McKinsey has certain idiosyncrasies that have limited

applicability outside its hallowed halls. For example, there is constant

turnover within teams as employees move from project to

project since each engagement typically lasts six months. Thus,

there is always a large pool of available consultants to choose

from, especially since team members can be plucked from any of

McKinsey’s offices worldwide. In recruiting, the Firm’s reputation,

high-profile client base, and generous pay provide a certain edge

that is difficult to match in, say, a midsize manufacturing firm’s

recruiting efforts.

Even so, McKinsey’s practices offer lessons that can help you

with selecting and recruiting team members. Our interviews with

McKinsey alumni suggest three additional pieces of advice that will

serve you well in this regard:

• Consider not just demonstrated ability, but potential

ability.

• Appreciate the value of diversity.

• Apply structure to recruiting efforts.

Consider not just demonstrated ability, but potential ability.

McKinsey’s starting point for the selection process is a simple one:

search for the best. Although this may sound intuitive, it is often

forgotten in the workplace. Jim Bennett, in his leadership role at

Key Corp., continued to make this a priority:

A piece of standard McKinsey lore that has stuck with me

in my post-McKinsey career involves the search for the very

best people you can find. You should be on a relentless

search for the best talent to suit the particular type of problem

you are solving. We rely on formal evaluation tools that

assess past experiences, strengths, and weaknesses. You also

need to listen to the informal network as well; that may shed

more light on the potential of the individual.

An individual’s experience has long been a key criterion in

recruiting efforts, whether it be with a particular industry, technology,

or problem type. In certain situations, this orientation is

necessary. You may need someone to hit the ground running on a

project, and the team may not have time to learn an industry from

scratch. McKinsey values experience and carefully screens candidates

based on it.

The Firm also values potential ability, however, and in most

cases, it prefers raw intellectual firepower to industry experience

(there are, of course, exceptions, such as “practice specialist” positions).

McKinsey believes that people can learn how to solve problems in a structured way, gather information about a company and

industry, and present ideas, but it is darn near impossible to make

someone more intelligent. Thus, the Firm seeks out bright individuals

and trains them. Academic achievement and performance on

case interviews weigh heavily in the selection process. Evan Grossman,

now a partner at Hook Media, has adopted a similar policy

in his new organization:

One of the important things I learned at McKinsey was the

importance of hiring smart people, as opposed to looking for

people with tons of experience in a given area. It is important

for us to hire people who can think logically. We do casebased

interviews to assess their ability in this area and to

ensure that they can be hypothesis driven.

McKinsey has managed to hire successful business consultants

who influence quite a few of the world’s largest, most successful

companies. Many of their recruits had little to no actual experience

in the area in which they are consulting. We believe that many

recruiting efforts in other organizations overemphasize demonstrated

performance in a narrowly defined area in preference to

bright, trainable individuals who lack such prerequisites. By casting

your net more widely, your organization may find future stars

who only need a chance to demonstrate their potential.

Appreciate the value of diversity. These days, “diversity” is all

the rage among recruiters, whether in business, government, or

academia. When it comes to team selection, we’re great believers in

diversity, too. We depart, however, from the mainstream definition

of diversity that values individuals based on their race, sex, religion,

or dining preferences. How “diverse,” after all, are two

men—one who happens to be white, and the other black—both of whom prepped at Groton, majored in economics at Harvard,

worked for two years on Wall Street, and received MBAs in finance

from Wharton? Our book is about ways to enable more successful

decision making in your organization, and that doesn’t happen

by counting individuals like beans. When we talk about valuing

diversity, we don’t mean some arbitrary program of affirmative

action; we mean diversity of experience.

Take McKinsey, for example. It is hardly a diverse firm with

regard to race, gender, or school backgrounds (the “average”

McKinsey consultant in the United States is a white male with an

MBA from a top-five business school). Over the past 10 years,

though, the Firm has launched study after study on how to diversify

its profile of consultants, and as a result, the mix is becoming

much more diverse—and for good reason. The focus of this effort,

however, has been to recruit more individuals with different backgrounds.

For example, the Firm is hiring an increasing number of

law students, Ph.D.s from all disciplines, and specialized industry

hires.*

Dan Veto was a leader of recruiting in the Pittsburgh office of

McKinsey. He claims that the real value of a team comes from

diversity and the right balance of “background, enthusiasm, and

strong intellect.” He uses headhunters but is also open to hiring

from “nontraditional” sources if that will help him assemble the

best possible team.

What are the actual benefits of diversity on teams? Beyond

simply broadening the skill mix of the team, diversity can bring

fresh perspectives to bear on the problem and challenge assumptions

that are too easily taken for granted. It can also make the

whole problem-solving experience more interesting for the team.

True diversity can strengthen the problem-solving process and

enhance the development of individual team members.

Apply structure to recruiting efforts. As previously discussed,

McKinsey follows a strictly formal recruiting process. The system

includes a dedicated team of consultants and professionals who

prepare detailed plans for each target school with itemized task

lists and budgets. They crunch the numbers on candidates, track

their status, and communicate frequently with those deemed hot

prospects. Whether or not one makes it through the recruiting

machine, one cannot dispute its efficiency and effectiveness. The

Firm prides itself on avoiding “recruiting mistakes.”

To improve your recruiting efforts, spend time developing a

consistent recruiting process. For instance, Bill Ross is working to

make recruiting at GE more systematic:

GE has a tremendous amount of talent in its ranks but also a

lot of variance. The recruiting effort, and the interview

process specifically, could use some work. This was a great

strength of McKinsey, and the result was an organization full

of 100 percent top-notch high-performing individuals. Systematic,

consistent recruiting helps in this regard. I have not

yet had the opportunity to fully transfer these lessons to GE,

but the need exists.

Not all companies need pay the same amount of attention and

resources to recruiting as McKinsey. They may not hire as many

people each year nor need the same amount of Olympian talent.

There is no disputing, however, that employees are a critical element

in every organization. Therefore you should apply some critical

thinking to your recruiting strategy. The key lesson to learn

from McKinsey in this regard is not one of formality, but rather the

importance of forethought and consistency.

IMPLEMENTATION GUIDANCE

In thinking through your own organization, you must answer two

key questions: Whom should we hire? And how should we hire

them?

To answer the first question, start with your business needs.

This goes beyond the basic job description. What is the most

important task that this person will be responsible for? Although

all positions involve numerous activities, assess the job using the

elevator test (described in Chapter 5), and boil the job description

down to a few sentences. For example, back at Acme Widgets,

you’ve been put in charge of the search for a new purchasing manager

for the Grommets Division. This person will be responsible

for ensuring, at the lowest cost possible, the delivery of the bulk

resins, intermediary plastics, and specialty polymers used in grommet

production.

Devise a list of key attributes that relate to successful completion

of the key tasks described in the first step. In the search for a

purchasing manager, you are looking for telephone skills, negotiation

ability, and a math or accounting background. Note that

familiarity with grommets is not on the list, as you believe that

Acme can adequately train the successful candidate in this technical

aspect. You would have a harder time developing the listed

skills if they were absent.

Now you know what kind of person you would like to hire.

The next question is, how do you find the right person? You need

a plan that identifies potential sources and details the tasks and

resources required. For the Grommets Division, you decide that a

two-person team, Joe and Robin, will handle the recruiting effort.

They are to focus on recent math and accounting graduates from

the local community college, preferably but not necessarily with

some experience in manufacturing. They will also have a contingent

budget for expanding the search to neighboring counties if they come up empty and the college agrees to give us a list of graduates

from the past five years. You also place an advertisement in

the local paper and run a posting on one of the leading Internet job

search sites because you never know who might turn up.

Now, consider the team that the new purchasing manager will

be joining, with respect to diversity. If everyone is of the same background

and personality, you may miss innovation opportunities

that more diverse combinations might stimulate. Say one candidate

came from a different country; he may have new perspectives on

interpersonal relations that might help in your dealings with suppliers.

Another candidate with, say, computer-programming experience,

might be able to improve your inventory management

system. It’s not enough to be open to candidates with varying backgrounds,

however; you have to seek them out, and the suggestions

in this section make a good starting point.

EXERCISES

• Identify your dream team. Start this exercise by completely

ignoring anyone who works for you. Think of your most

important tasks, and identify which ones require the help

of others. Then, using the techniques described in this

chapter, identify your specific business needs and lay out

the ideal team to assist in accomplishing your and/or your

department’s (and ultimately your organization’s) objectives.

After the exercise, overlay the team with your

current team and think through a strategy on how to best

fill the gaps.

• Develop a recruiting plan. For this exercise, the starting

point is an opening in your staff or a new position you

would like to create. Actually document your recruiting

plan, addressing the following areas: business needs, skill

requirements, recruiting team, sources, and budget.

COMMUNICATION

Communication is one of the most important elements of effective

team management. Teams can’t function without it, yet its importance

is often underestimated. There is no one best communication

style, however, so in this section we explore a few general communication

rules that should help as you develop your portfolio of

communication skills.

THE McKINSEY WAY

At McKinsey the importance of communication was expressed by

this principle: keep the information flowing.

Keep the information flowing. Information is power. Unlike

other resources, information can actually increase in value as it is

shared, to the benefit of everyone on your team. For your team to

succeed, you have to keep the information flowing. You don’t want

someone to make a bad decision or say the wrong thing to a client

just because he’s out of the loop.

Teams communicate mainly through messages and meetings.

Both should be kept brief and focused. In addition, remember the

unscientific but powerful art of learning by walking around—random

meetings to connect with team members outside of scheduled

meetings.

LESSONS LEARNED AND IMPLEMENTATION

ILLUSTRATIONS

All organizations develop a “communication culture” that governs

the type and frequency of internal communication, and McKinsey

is no exception. In most conversations at McKinsey, there are certain

words and phrases you can expect to hear (“at the end of the day,” “so what,” and “client impact,” for example). You’ll also

witness some common mannerisms (brief E-mails, grouping of

issues in threes, responses to requests within 24 hours). In generating

advice for other organizations, we feel it is more important to

discuss general rules rather than McKinsey specifics:

• Remember that you have two ears and only one mouth.

• It’s not just what you say, it’s how you say it.

• Overcommunication is better than undercommunication.

Remember that you have two ears and only one mouth. Dean

Dorman, who has worked for GE and two high-tech start-ups

since leaving McKinsey, is never at a loss for words. His outgoing

personality has served him well in his career and makes him fun

to be around, but he has also learned the value of listening:

In my latest position, as the president of Silver Oak, my listening

skills are proving to be invaluable. I have served on

the board for about a year, listening to the top-level discussions

of business issues at the company. My first task as president

was to conduct a “look, listen, and learn” tour

involving two- to three-hour interviews with more than 40

key people in the organization to better understand what is

going on. Before testing my hypotheses for a change program,

it made sense to see exactly where people stood.

Most of us speak more than we listen. In managerial situations,

this can cause problems. Not only do we risk making wrong decisions

because we lack important facts, but we also induce resistance

to change when the people involved feel their input is being

ignored. Although chief executive officers and others recognize the

importance of listening, how often do we formally cover the topic

in academic curricula or corporate training programs?

Alan Barasky, now at one of the world’s largest consulting and

accounting firms, PricewaterhouseCoopers, took this lesson to

heart:

As I think of important lessons related to teamwork, three

words come to mind: communicate, communicate, and communicate.

Before, during, and after each major decision,

milestone, project, or whatever. As I have learned, listening

adds more value than talking.

What would this world be like if we spoke half as much as we

listened? Who knows, less hot air might reduce global warming.

Less noise pollution would be another benefit. We might also learn

to pick our words carefully and just maybe become more thoughtful.

We will discuss a few specific listening tips in the implementation

ideas later in this chapter.

It’s not just what you say, it’s how you say it. Misunderstandings

are a plague in today’s workplace. The art of communication

is full of inferences, innuendos, and nuances that make it difficult

to convey our messages as we intend. Varying personality types,

cultures, and agendas compound this problem.

To reduce miscommunication among its teams, McKinsey

instituted a program of extensive interpersonal training. Three elements

of the training were role-play interactions in first-year orientation,

an advanced Interpersonal Skills Workshop (ISW) in the

second or third year, and extensive use of the Myers-Briggs Type

Indicator* for most engagement teams. These programs convey the

importance of flexibility in verbal communication.

We all have default communication styles rooted in, among

other things, our upbringing, education, and training. Our word

choices and tone of voice have great impact on our daily interactions

with coworkers and clients. We need to develop a conscious

understanding of our communication style—and sometimes

change it. Formal programs, such as those used at McKinsey, can

assist in that and help us develop a portfolio of communication

skills. Those around us—our parents, spouse, and friends—can

help, too.

Lee Newman, the executive vice president of on-line product

development at HR One, describes how he brought this tool into

his new organization after leaving McKinsey:

The ISW program at McKinsey had great impact on me. The

training was invaluable in developing my strategy for getting

the most out of people in the teamwork environment. One of

the specific tools I brought over was the MBTI [Myers-

Briggs Type Indicator]. We use this extensively, and it helps

us ensure that we leverage diversity in personality types and

work styles to our advantage.

By becoming more familiar with our own communication style

and understanding that other people have their own, different

styles, we can begin to see beyond the way people are saying things

to listen to what they are actually saying.

Overcommunication is better than undercommunication.

When grilling chicken, there is a point at which the meat is perfectly

done. Too much flame and it’s shoe leather; too little heat

means a quick trip to the emergency room. So it is with communication;

we often under- or overcommunicate our message, but

we rarely get it just right. And just like chicken on the grill, it’s

better to err on the side of too much rather than too little.

Let’s compare the costs of under- and overcommunication.

Undercommunication leads to lack of information, which in turn

leads to mistakes. It also hurts the morale of the team when members

are out of the loop and feel alienated. Even when we think

we’re saving time by not passing on information, we often end up

having to play catch-up later on.

Overcommunication generally costs less. Yes, busy executives

get annoyed when you give them too much information, but the

cost of that to the organization is low, unless it takes overcommunication

to an extreme. The marginal cost of including additional

people in the information flow is small, especially given the ease

of modern communication tools such as E-mail, voice mail, and

intranets.

Moreover, the costs of overcommunication are mostly “opportunity

costs”: executives who could be performing value-added

tasks have to spend incrementally more time filtering and assimilating

information. Compare this with the value-destroying potential

of undercommunication—clients or customers lost, accidents,

lawsuits—and you can see why we say that more information is

better than less. Of course, there are limits to this hypothesis, and

you should assess each situation carefully. But in general, if you

must err, do so on the side of overcommunication.

IMPLEMENTATION GUIDANCE

What specific steps can you take to improve communication in

your organization? First, formalize listening training. In our survey

of McKinsey alumni, we found that, in general, their new organizations

offered considerably less interpersonal skills training than

McKinsey does. Granted, not all companies are in a knowledge

industry per se, but corporate training is increasingly becoming a source of competitive advantage. The amount spent on corporate

training is huge, yet only a small portion of that training is in listening.

Still, it is available. External consultants with expertise in

listening or organizational behavior can help diagnose the state of

communication within a firm. McKinsey regularly uses external

consultants in this capacity.

Second, launch a personality profile program as part of your

organization’s human resource effort. As a first step in that direction,

find the right tool for your organization. McKinsey uses

Myers-Briggs, and most new consultants (and even their spouses

or significant others) receive this training very early in their careers.

The tool is extremely helpful in assessing one’s baseline personality

and communication style. Specifically, it measures the interaction

type, problem-solving approach, and sensitivity. You can use the

tool for a project team or department to assess the differences

among personalities and identify strategies for dealing with

conflict.

EXERCISES

• Conduct a Myers-Briggs evaluation on yourself (and your

spouse if you like). You can visit the Consulting Psychological

Press website for information on the MBTI at

www.cpp-db.com. Find your personality type and understand

the default communication style you possess. Consider

the best strategies for dealing with positive and

negative interaction between you and your coworkers

and/or your spouse. How can you expand your communication

portfolio and develop more flexibility in dealing

with others?

BONDING

The concept of team bonding is easy to understand yet often overlooked.

Why? Perhaps it is that the nature of business is to drive

forward with a relentless focus on results. We often find ourselves

in tough team situations because we overvalued the end product

and undervalued the process of getting it done. This section serves

as a reminder of the importance of putting a little time and energy

into team bonding—and a little is probably all that is needed.

THE McKINSEY WAY

Two lessons from McKinsey regard team bonding.

Take your team’s temperature to maintain morale. No one

likes to walk into a freezing-cold or a boiling-hot room. Taking the

temperature is an analogy that stresses the importance of staying in

touch with your team to maintain a sense of the level of motivation

and enthusiasm during the often-challenging course of a project.

People who attend to motivation levels should steer a steady

course, inform all team members of project status and their respective

contribution, treat everyone with respect, get to know each

other, and feel others’ pain.

A little team bonding goes a long way. When a team spends

14 hours a day, 6 days a week working together, the last thing team

members want to do in their precious remaining time is go on a

team outing to Disney World or to dinner at the most expensive

restaurant in town. Some of that is OK, but the balance is important.

Too much can be as bad as too little. Bonding can take place

at work, too, so try to lighten up at times.

That said, when you do plan bonding events, be strategic.

Focus on something that everyone will enjoy, and include significant

others when possible.

LESSONS LEARNED AND IMPLEMENTATION

ILLUSTRATIONS

More often than not, our alumni suggest that bonding is not the

norm in their post-McKinsey positions. So rather than jump right

in with the idea that retreats, fancy dinners, and family fun events

are the way to go, they suggested a more conservative approach

that still aims to increase performance through team bonding. This

boiled down to two lessons:

• Spend time together (but not too much).

• Reward well.

Spend time together (but not too much). Dan Veto brought a

high level of energy and new ideas for bonding to his new position

as the head of the strategy group of Conseco:

I am a believer in the need for team events, as we called them

at McKinsey. This company and many others are less

accustomed to that idea. It doesn’t have to be that expensive.

Even taking a dozen people out to dinner is relatively cheap

in terms of the cost/benefit when you consider the impact

on productivity and the morale boost of getting to know

each other better. I believe in this so much that there have

been instances when I have paid for events out of my own

pocket.

People take pictures at these things and put them up on

their desks, which helps us build our own group identity.

Some other departments are following suit but probably not

enough of them.

Maybe they should. Other examples from alumni support

Dan’s basic premise that some fun time outside of work can pay

major dividends and doesn’t cost that much.

Bonding doesn’t just have to be around a fun theme; you can

also bond while getting something done. McKinsey combines

incredible office retreats to exotic locations (usually involving a

golf course, ski resort, or beach) with developmental programs.

Kurt Lieberman, now at Reynolds & Reynolds, took this lesson

to heart:

One of the most effective tools I brought from McKinsey

related to team bonding and problem solving. I take the top

two levels of my organization off-site every other month for

a half day. Most of the work is done in subteams with each

team reporting its results. Sometimes each subteam solves

the same problem, sometimes not, but bonding always takes

place.

This example shows how team exercises can be work-oriented

and still contribute to bonding. You don’t have to go anywhere

fancy; just a new location can make a world of difference.

Our alumni also counseled moderation. In the words of comedian

Steven Wright, “You can’t have everything; where would you

put it?”* Too much bonding can overload the team. It even drove

one alumna to leave McKinsey:

The bonding expectations at McKinsey were tough at times.

In fact, this element of the lifestyle was one that I was ultimately

unable to resolve. The Firm expected far too much

outside of regular client work, such as recruiting events,

team dinners, Practice Development, etc. I worked too hard

on my client projects to be excited about leaving my family to go on a firm retreat or to spend an evening out entertaining

prospective analysts. The extracurricular demands spiraled

out of control because no one at a senior level focused

on how much of a burden [this expectation] was. The irony

is that the more successful one was, the more of the extra

work one had to do, and therefore the more likely one was

to leave the Firm.

It may be this concern that leads certain companies to avoid

planning social events altogether. We advise against that. These

events offer performance-enhancing activities that simply cannot

be replicated in most existing work environments. Our suggestion:

Plan few events, but plan them strategically. Focus on their timing,

type, and participant lists to ensure the highest impact at the

lowest cost.

Reward well. Steve Anderson, president and CEO of Acorn

Systems, a technology consulting company, found that his new culture

was even more intense than McKinsey’s. Still, he told us, the

rewards were greater as well:

Acorn is more intense than McKinsey, and thus we have to

work hard not only to build company morale, but also to

foster team bonding. Our teams hardly get any sleep on the

road. So, to top it off, we have very nice, long dinners, stay

in comfortable hotels, and party hard. It is amazing

how consultants thrive in this intense culture. We also have

other rewards such as regular office dinners and Fridays in

the office for everybody. Nobody works on weekends. We

stole almost all these winning reward philosophies from

McKinsey.

Of course, not all organizations are this intense (thank goodness).

Different types of rewards will work in different companies.

As examples, some alumni mentioned bonuses, extra days off, trophies, and publications as rewards in their new organizations.

These rewards need not be financial. Often, simple but widespread

recognition programs work even more effectively than financial

incentives for motivating performance.

IMPLEMENTATION GUIDANCE

When designing a program of bonding activities in your organization,

bear in mind two things: culture and resources.

As with so many management topics, the context of the culture

of your organization (or department or team, as cultures can vary

widely within organizations) will play a major role in how best to

promote bonding. There are so many variations in norms and

acceptable behavior—a team night out at a typical Silicon Alley

dot-com might be scandalous at, say, Proctor and Gamble—that

we wouldn’t dare to suggest exactly which type of activity would

work best for you. Still, we believe that most organizations could

benefit from a bit of loosening up—not that they should forget

about strategic planning or financial controls, just that people

should enjoy themselves a little more in the workplace. We also

suggest that you consider some events beyond the annual company

picnic or golf outing: go-carting, bowling, skiing, paintball, anything

to take people out of their routine and help them bond.

Once you’ve come up with the ultimate bonding program, you

still have to get the resources, that is, the money, to pay for it.

Paintball for 300 people isn’t cheap. Frankly, we assume that a certain

amount of bonding improves performance within the organization.

This seems intuitive to us and, since quite a number of

companies spend a lot of money on such activities, to many corporations

around the world. Nevertheless, if your organization

doesn’t devote many resources to bonding, then you will probably

have to make a case for the benefits of bonding that will convince

whoever controls your organization’s purse strings.

How would you go about this? If the decision makers in your

organization respond well to qualitative arguments, then you could

put together a proposal based on the intuitive argument that bonding

leads to better performance. If, on the other hand, your culture

values quantitative arguments, then put together an analysis of

the financial benefits of enhanced performance. If you can find an

example of best practice in your industry or organization—for

example, one business unit that is especially good at bonding—

use it to bolster your argument. You might also try to launch a

modest pilot program. If you can show that the program yields

benefits via improved performance, then you have a launching pad

from which to expand your bonding program throughout the

organization.

As you plan your activities, remember the moderation message.

For example, plan just a few key events over the course of a year.

Involve as many people in the planning process as possible (even

send surveys for ideas). The exposure will increase interest and

eventual buy-in. Another helpful tip is to evaluate employees’

satisfaction with different types of events and continually focus

on the few events that are most appreciated. Finally, don’t forget to

have fun.

EXERCISES

• Assess the rewards system in your organization. Create a

list of all of the reward mechanisms your organization

uses. Be sure to include financial and nonfinancial rewards

in the summary, but track them separately. Then rank the

items on each list, using the following question as your

decision criterion: How much does this mechanism mean

to me in terms of motivation and team bonding? If possible, have others in your team or department go through the

exercise as well. Try to identify a few reward mechanisms

that are most powerful. If you are in a position to do so,

consider whether you can request more resources to ensure

that the most powerful mechanisms stay in place.

• Develop a social plan for your team or department. Use the

advice in the Implementation Guidance of this section as a

starting point. It may be helpful to include others in the

planning process. Focus on identifying the types of activities

and timing that would be most appropriate for your

organization. Include as many details as possible, and refer

to this plan as you launch your program.

DEVELOPMENT

We believe that to be satisfying, a job should provide ample opportunities

for the employee to develop. This development comes not

only from experience but also via a process of objective setting,

performance assessment, and feedback that helps the employee to

meet both her career goals and the objectives of the organization.

The original outline of this book—our initial hypotheses, if you

will—did not have a development section. After reviewing our

alumni interview notes, however, the topic surfaced as one of the

most important lessons that alumni took with them—and one they

are actively implementing in their new organizations. By the end of

this section, we hope that you will realize that one of the most

important responsibilities you have in managing teams is ensuring

the individual development of team members.

THE McKINSEY WAY

McKinsey intensively trains its first-class consultants to solve business

problems. Development at McKinsey is so ingrained in the

culture that it has become second nature.

LESSONS LEARNED AND IMPLEMENTATION

ILLUSTRATIONS

We dissected development at McKinsey and interviewed alumni

to find ways that other organizations can evaluate and enhance

their development programs. Our McKinsey alumni were very

clear in articulating how they have transferred McKinsey lessons in

development into their new organizations. They gave us two broad

guidelines:

• Set high expectations.

• Evaluate regularly, and make it balanced.

Set high expectations. At the beginning of our interview with

Jim Bennett, who was in charge of retail banking at Key Corp. at

the time, high performance aspirations became the central topic

of the discussion:

The single most important McKinsey tool I have in my new

position is the power to set very, very high performance

aspirations and drive the organization to achieve them.

For example, my team and I established a $100 million

cost reduction target and made it public. Quite a goal, but

we are going after it aggressively, and it is amazing what you

can accomplish when you do it in a “take no prisoners”

manner.

What applies to the organization also holds for the individuals

within it. High expectations lead to high results; low expectations yield low results. Development equals change, something

many are uncomfortable with. By setting high goals (with implicitly

high rewards for their achievement), managers help overcome

the inertia that results from the fear of change. Setting a

“stretch” target that appears—at least, at first—unreachable forces

the employees and the organization to deploy all their creativity

and energy toward reaching the goal. Exploring new ideas and

options (“thinking outside the box” in MBA parlance) can be a

liberating experience for the individual and a profitable one for the

organization.

Evaluate regularly, and make it balanced. Feedback is a double-

edged sword. On one hand, we have a strong interest in finding

out what people think of us, as a means both to improve ourselves

and to feed our egos. On the other hand, feedback can make us

uncomfortable when it forces us to confront our weaknesses. Handled

properly, feedback is one of the most important development

tools around, and McKinsey offers some good lessons on doing it

well.

The Firm has instituted a number of formal developmental

tools that may transfer well to your organization. First, each consultant

is assigned a formal mentor, the Development Group

Leader (DGL). This person is usually at the partner level and is

responsible for monitoring a consultant’s progress as she moves

through the ranks of the Firm. The DGL has access to all of a consultant’s

performance reviews and discusses them in detail with

other members of the engagement team.

The Firm also uses a formal evaluation form that is completed

by the EM or partner for each consultant after each project. It

includes a grid of key skill areas (analytical, interpersonal, leadership,

etc.) with specific expectations as to where a consultant at

each level should be in each area. Certain McKinsey offices have

implemented 360-degree feedback programs. In these programs, each consultant is evaluated by anyone who comes in contact with

the consultant, including subordinates, peers, supervisors, and

even administrative personnel. Many teams at McKinsey also use

Team Evaluation Performance Reviews where they explicitly evaluate

their performance working together. There is no shortage of

feedback at McKinsey; in fact, some may argue that there is too

much (as we discuss at the end of this section).

McKinsey alumni found these techniques very effective. Some

of them miss that feedback in their current organizations. Ron

O’Hanley, now the president of Mellon Institutional Asset Management,

reflects on his attempts to develop similarly intense feedback

channels in his organization:

Real teams have open, unimpaired feedback loops. This is

very hard in a traditional corporate hierarchy. Open feedback,

particularly about me, has become a way of life

around here.

Barbara Goose, now the vice president and associate marketing

director at Digitas, brought some of the specific tools with her:

I have used tools similar to the Team Evaluation Performance

Review effectively with my teams. Other organizations

that I have been a part of tend not to be as thorough

with team selection, evaluation, and development. The

Development Group Leader (at McKinsey) played a large

role in this—and that is often missing at other places. You

really felt at McKinsey like you had an advocate.

This hard-hitting, constant evaluation and development advice

is not for everyone. Even though we are all on a developmental

journey, the bumps along the road can be uncomfortable at times.

One of the areas that some say McKinsey misses is the balance.

When it comes to comments, there are two considerations: quantity

and type (i.e., positive or negative).

The quantity issue comes down to how many comments are

enough. Giving too few comments leaves employees in the dark,

relying on their self-evaluative skills to lead them to proper developmental

moves. Too many comments also can have a negative

effect on motivation. The employee may feel that there is too much

pressure and become so consumed with the evaluation that other

job responsibilities become secondary.

IMPLEMENTATION GUIDANCE

As we said at the beginning of this section, development is a continuous

cycle. When you are in charge of someone’s development—

when you are a mentor—you have to set objectives for that person

that meet the needs of both the organization and the individual.

Then you must assess the employee’s performance and provide

feedback. Based on that feedback, you set new objectives, thus

starting the cycle over again.

The first step, as so often in this book, is to identify your organizational

objectives. What are the primary tasks for which your

employees (or you, for that matter) are responsible? In consulting,

it boils down to analytical skills, teamwork, and presentation.

Develop aggressive target expectations in each area for everyone in

your organization. Consider also the goals of those you are mentoring.

You should meet with them to establish their expectations

of their role and career and incorporate those expectations into

whatever objectives you set.

Next, consider how you communicate these expectations to

employees in the organization. Is there a consistent and formal

program, or is it loose, relying on word of mouth and advice from

more-experienced employees? Both types of systems have strengths

and weaknesses. The choice between them comes down to the culture

of your organization. Chances are you know which method

suits your corporate culture best.

Some organizations are particularly hard to change because

their employees have developed routines and even entire personalities

around the formal and informal procedures and incentive

programs in their organization.

Performance assessment should meet three criteria. It should be

objective, be based on expectations that were set in advance, and

account only for events that were within the control of the person

you are mentoring. Objectivity is paramount if the mentoring

process is to be of any benefit to the employee. You won’t necessarily

like everyone you mentor, but you musn’t let personal feelings

get in the way of doing your job. In addition, if you don’t

communicate your expectations ahead of time, the individual will

be flying blind; you can’t expect him to meet goals under such circumstances.

And don’t blame the person you mentor for things

beyond his control: if the client goes bankrupt or the economy

plunges into recession, that’s unlikely to be his fault.

Finally, think about the frequency and type of feedback in your

organization. Many people automatically assume that development

comments need to be negative, pointing out what is wrong

and then suggesting ways to change. Positive comments, however,

play a critical role in development as well.

Let’s explore the impact of positive and negative comments on

performance, using a graph to illustrate a hypothesis based on our

own experience. As shown in Figure 6-1, the performance curves

vary based on the nature of the comment. For simplicity, think negative

or positive; a negative comment points out a weakness, and

a positive comment recognizes a strength. By the way, negative

comments that are communicated in a nice tone are not positive

comments.

The messages from this chart and hypothesis are as follows.

First, a few negative comments are important to influence performance. The absence of negative comments does not assist in development

(and if we look hard enough, all of us have areas we can

develop). It doesn’t take too long, however, for the slope of the

negative-comment curve to reverse. As humans, we can only

absorb and appreciate a certain number of negative comments

before we begin to lose motivation and become demoralized. The

positive comments represent a more gradual slope, meaning a few

more positive comments are necessary to truly influence performance.

However, the impact of more positive comments continues

for a longer period of time. Eventually the positive comments

reach a “B.S. point,” the level at which the comments appear

superficial or unbelievable.

Overall, the message of this graph is that balanced feedback is

best. It is important to point out weaknesses and development

opportunities but to avoid going overboard and making every

comment a “suggestion for improvement.” Positive comments play a critical role as well, and all of us could use a few more way to gos

and attaboys. Again, balance is key. Too much praise can have

detrimental effects as well if it appears insincere—especially if it

never identifies any areas for improvement.

EXERCISES

• Take a self-development journey. Examine your own developmental

needs. We recommend involving others (direct

reports, peers, spouse, friends, etc.) in the process. For help

with this process, try one of the packaged tools that have

been developed for this use (such as those available from

the Center for Creative Leadership and the Franklin Covey

Institute). Your goal: an honest assessment of your

strengths and weaknesses, not just as you perceive them,

but also as others perceive them. In addition to identifying

your development portfolio, you should also identify one

or two major aspects to focus on (if you try for more, you

may hit the demoralization level).

• Identify the development needs of your direct reports.

You interact with them every day, but have you spent

much time actually reflecting on their development needs?

And try to think from their perspective, not just yours.

Think of the person holistically, not just in terms of your

requirements. Create a list of positives and negatives

(opportunities for improvement, if you prefer) for each of

your direct reports. You may ask them to create their own

list, as well as one for you. Compare theirs with the list

you made. Try to avoid doing this over lunch, lest a food

fight break out.

CONCLUSION

The study of leadership and team management has received significant

attention in academic and practitioner study over the past

50 years, and for good reason—a little improvement in this area

can yield large results. Accordingly, most of the concepts presented

in this chapter are not new. Instead, our focus has been on pulling

out the nuggets of wisdom that McKinsey consultants offer, based

on their extensive experience in teams.

Team management is often more of an art than a science, and

the specific recommendations in this chapter may not apply in all

situations. Even so, the general themes of careful selection, constant

communication, selective bonding, and purposeful development

should serve us all well.

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After developing your initial hypothesis and determining the

analyses you need to prove it comes the unglamorous but allimportant

task of gathering the data necessary to perform those

analyses. An unquenchable appetite for facts is one of the hallmarks

of consulting à la McKinsey, and data gathering ranks

among the most important consulting skills—just ask any new

consultant after about six months on the job. Our interviews with

McKinsey alumni suggest that this area is also one of the most significant

opportunities for improvement in other organizations. As

described in our model in the introduction of this book, we suggest

a balance between fact-based analysis and intuition. The key, however,

is balance. Our hypothesis is that much of the daily decision

making in business lacks rigorous, fact-based support, a McKinsey

imperative and obsession since the Firm’s founding in 1923.

In this chapter, we dive deep into the exciting world of data

gathering. We begin, in the first section, with an overview of

research strategies. We also share some successful techniques for

conducting meaningful research—“gathering data smart” as one of

our alumni put it. We get to the nitty-gritty with specific research

tools widely recognized as best practices in and beyond McKinsey.

Although some of these tools may sound familiar, their successful

implementation with limited resources presents a constant

challenge. The first section also identifies some of the best sources

for data gathering, many of which are available free.

The second section takes you through one of McKinsey’s most

important data collection tools, the interview. A few incisive interview

secrets can greatly improve the quality of your decision making.

Follow our tried and tested techniques, and you’ll boost your

chances of uncovering those choice nuggets of information.

Finally, we’ve included a section on knowledge management

(KM), one of the hottest current topics in business. In addition to

describing effective KM strategies and tools, we share stories of

how McKinsey alumni have successfully transformed KM efforts

in their post-McKinsey organizations.

We considered writing a section on how to make research fun

but lacked sufficient fact-based support. So we just focused on how

to conduct it as painlessly as possible.

RESEARCH STRATEGIES AND TOOLS

As with most of the ideas in this book, we suggest taking a step

back and thinking before jumping in. Let’s face it, information

availability is not the issue these days. Quite the opposite: we have

too much of it. Our alumnus at GlaxoSmithKline, Paul Kenny,

faces this problem every day:

The data-gathering process has changed. I find loads of

information on the Web, much more than even a few years

ago. In pharmaceuticals, there is no shortage of data or

information. In fact, we’re inundated by it. There’s information

on the market, in very detailed form, along with a

tremendous amount of complex scientific data. The difficulty

is pinpointing the useful bits.

Rainer Siggelkow, owner and board member of US Forty and

Bordercross Marketing, reiterates the need for strategic focus: “In

our business, it is helpful to get to the one or two really important

numbers that need to be considered. There isn’t time for more.”

We concur. When doing your research, you don’t want to get as

much information as possible, you want to get the most important

information as quickly as possible.

As illustrated by the previous two alumni quotes, McKinsey’s

dedication to strategic fact-finding has a place in other organizations

as well. Have you ever been involved in a data search

that took forever yet yielded little? That’s what we hope to avoid.

Let’s review how McKinsey gathers data and then discuss new

lessons learned as these concepts are implemented in other

organizations.

THE McKINSEY WAY

Let’s briefly review McKinsey’s principles for research:

Facts are friendly. Problem solving at McKinsey relies on facts.

Facts compensate for a consultant’s lack of experience and intuition

relative to an executive with years of business experience.

Facts also bridge the credibility gap between consultant and client;

they allow the consultant to show she knows her stuff. Despite (or

possibly because of) the power of facts, many businesspeople fear

them, but hiding from unpleasant facts will, at best, delay the

inevitable.

Don’t accept “I have no idea.” People always have an idea if

you probe a bit. Ask a few pointed questions, and you’ll be amazed

at what people know. If you ask someone a question and the person

responds, “I have no idea,” treat it as a challenge. Chances are,

the response stems from a lack of time, a feeling of insecurity, or

worst of all, sheer idleness. Your challenge is to figure out the

source of resistance and adjust accordingly.

Remember, too, that just as you shouldn’t accept “I have no

idea” from others, so you shouldn’t accept it from yourself. With a

bit of thinking and searching, you’ll usually find that you do know

something, or at least can find it out.

Specific research tips. Three high-impact techniques courtesy of

McKinsey to enhance your research are (1) start with the annual

report, (2) look for outliers, and (3) look for best practices. The

annual report offers a wealth of information about a company in

one package; be sure to read the message to the shareholders or

CEO’s report. Outliers analysis (often accomplished with the help

of a computer) is a tool to isolate key opportunities for investigation

within a firm. This method involves comparing ratios or calculating

key measures (such as sales per salesperson by region),

paying particular attention to high and low performers. Finally,

although the term best practices may be painfully familiar (as one of the business buzzwords of the 1990s), most companies can still

learn from a competitor or other top-performing organization,

even one in a different industry.

LESSONS LEARNED AND IMPLEMENTATION

ILLUSTRATIONS

How can you take the McKinsey lessons of strategic data gathering

and apply them in your organization? Our interviews with

McKinsey alumni who have worked to transfer the data orientation

and fact-finding approaches to post-McKinsey organizations

helped us identify three ways to get this done:

• Diagnose the data orientation of your organization.

• Demonstrate the power of good facts.

• Build the proper infrastructure.

Diagnose the data orientation of your organization. The cultures

of organizations vary widely, as do their “data orientations.”

McKinsey has developed a strong, fact-based culture that mandates

factual support for articulated positions, both in internal

communications to employees and in external communications to

clients. When they leave the Firm, many alumni are surprised at the

lack of concrete data analysis in their new organizations. Stevie

McNeal, vice president at Blue Cross/Blue Shield of North Carolina,

identified the absence of facts as a potential inhibitor of

effective decision making. “Certain facts and the effective communication

thereof can be intimidating,” she observes, “especially

when people are operating without a basis in facts and logic.”

A fact-oriented culture is hardly the exclusive preserve of

McKinsey, however. Other companies can and do rely on data

ahead of instinct, and some McKinsey alumni have helped their

organizations develop this attitude. The first step in advancing data collection efforts in your organization is to assess your particular

situation honestly. Is the culture in your company more or less fact

based? Do colleagues present their ideas with factual support? Do

the decision makers explain the basis of their choices with reference

to evidence? Naturally, there will be variance within the organization,

but you shouldn’t take long to diagnose the dominant

orientation, if you can’t pinpoint it already.

Once you’ve analyzed your organization, you can begin

redressing any imbalances that you discover, particularly the

aspects you can control. Start within your sphere of influence—

your direct reports and department. If necessary, take a grassroots

approach to spreading the word. Of course, if you have the luxury

of building a department or company from scratch, you can

start from a fact-based orientation. Before you can determine the

right balance for your organization, however, you need to follow

the ancient maxim “Know thyself.”

Demonstrate the power of good facts. Dan Veto left McKinsey

to form the strategic planning group of the huge conglomerate

Conseco. He used his skill at gathering, synthesizing, and communicating

facts to earn the respect of his internal clients, the division

presidents:

I was new to the organization and in charge of building credibility

for a newly created group within the company. I

wanted to make the new strategy group contribute to the

overall company’s success as quickly as possible. It took a

couple of months, but I was able to establish critical, credible

relationships with the SBU [strategic business unit] heads,

who are, in essence, our clients. My strategy, based on my

McKinsey experiences, was to have our team focus on providing

fact-based insights using information that previously

had not been shared among the business units. By devoting more thought and attention to data gathering, you

will be able to generate credible insights you might not otherwise

reach—and with the fact base, your insights will be credible. By

relying more on facts, you should be able to increase the impact

of your analyses and recommendations within your organization.

Use Dan’s example, and spread the word on the power of factbased

insights.

Build the proper infrastructure. McKinsey has the luxury of

abundant resources for data gathering. In addition to the extensive

databases that codify all studies and expertise within the Firm,

McKinsey employs information specialists, who run office libraries

and assist consultants in their data gathering. Lists of studies,

names of experts, “sanitized”* reports, industry studies, and Wall

Street analyst reports reach a consultant’s desk on the first day of a

new study. The consultant receives not just lots of information, but

the right information.

A former McKinsey-ite who is now an executive at a major

financial institution recognizes that most companies’ data support

efforts don’t reach the bar set by McKinsey:

I find that most companies do very little in this regard, and

their efforts are very spread out. We have a corporate library,

but I miss the value of conversation with an expert who

understands business and knows exactly how to point me

in the right direction.

We won’t venture an estimate of the exact budget needed for

data collection activities. Suffice it to say that you should probably

spend more than whatever you currently are spending. At

McKinsey, consultants rely on internal reports, industry reports,

To ensure confidentiality, client names are eliminated from sanitized reports, and financial

or other data are disguised.

analyst reports, census data, and the like. Identify the key data

sources for the kind of information most important to your particular

organization, and spend whatever is necessary to secure

these sources—within the constraints of your oganization’s budget,

of course.

IMPLEMENTATION GUIDANCE

Strategic data gathering can significantly improve your effectiveness

and efficiency. Perhaps a (hypothetical) nonbusiness example

will help bring the point home.

Jerry and Marilyn want to buy a new car. Jerry sees an advertisement

on TV for a new SUV from Honda. He likes the way it

looks and knows from experience that Honda makes quality automobiles.

He goes out the next day to the dealer, sees a color that he

knows Marilyn likes, and orders the car. It will arrive in two

weeks.

Marilyn has a hunch that Jerry is moving too quickly on the

car purchase as he often relies on his intuition to guide his actions.

Being a bit more fact-oriented, she ponders her situation and

decides to do a little research. She logs on to her new fast-access

Internet connection that her son helped her install the weekend

before and begins gathering data and accessing consumer reports

(see Appendix A for similar leads).

Once she has compared features and statistics for the various

models (utilizing key decision criteria such as room for grandkids,

safety, and fuel efficiency), she changes gears. She then gathers

some information about different fishing rod and reel combinations

because she knows Jerry is thinking about buying new equipment

for the annual family trip to the lake. She prints out some

excellent, brief comparison reports on different fishing sets, including

price data, from four different manufacturers. Jerry is

impressed by the rod and reel information and together they make

56 The McKinsey Mind

the purchase online. Two days later he asks whether or not Marilyn

has considered making similar comparisons for the auto purchase

they’re planning.

As you consider the potential impact of powerful facts in your

organization, try out this method, just as Marilyn did, and seek to

provide insights not previously available (the goal of effective data

gathering). Based on your company’s primary objectives, such as

profitability and sales growth, take the time to find out what is

important. Then gather the right facts and share the insights.

When it comes to building a more fact-based culture, don’t try

to go at it alone. McKinsey did not achieve its research expertise

without adequate, dedicated resources. Make the investment to

hire research specialists, and grant full authority to purchase the

right journals and reports that will prove useful to decision making

in the organization. Be selective, however. Monitor their use to

control spending, and evaluate their usefulness. This strategy will

vary with the specifics of your organization, of course. A large

multinational will have the need and ability to build a more sophisticated

support structure than a five-person start-up. Remember

that you need more than just a budget; you also need the right cultural

elements, including the incentives to increase the usage of

facts in your organization. We will discuss this issue in more detail

in the knowledge management section of this chapter.

Finally, given the importance of “good” data sources, we have

included a summary of some of the outstanding research tools currently

available to the public. Table 3-1 (pages 58–59) lists some

powerful search engines and general information guides. In addition,

Appendix A provides a long list of the most helpful data

sources we could find.* Some of these sources contain a lot of general

information (e.g., Census Bureau data), while others focus on

Note that although these sources were accurate at the time of writing, Web addresses

and contents can change rapidly.

Category Name Description Cost Location

Search engines Asianet’s Select Over 950 search engines in one place Free www.asianet.net/search.php

Search Engines

Search engines Findspot Nice search engine guide plus search assistance Free www.findspot.com

Search engines Google Easy search that claims access to over Free www.google.com

1.3 billion Web pages

Search engines Hotbot Full text of over 100 million Web pages Free www.hotbot.lycos.com

Search engines Alta Vista Power search engine—especially for Free www.altavista.com

advanced searches

Search engines FAST Search Claims access to over 575 million URLs; Free www.alltheweb.com

extensive list of sites

Search engines Yahoo One of the old standards—some Free www.yahoo.com

commercialization

Category Name Description Cost Location

General ABI/Inform Global Abstracts and some full text for articles Varies Subscription information at

information (Proquest Direct) in over 1,000 leading journals www.proquest.com

General Academic Universe General and specific industry and company Varies Subscription information at

information (Lexis/Nexis) information; major news wires www.lexis-nexis.com

General AJR NewsLink Access to over 3,400 U.S. and 2,000 non– Free ajr.newslink.org/news.php

information U.S. newspapers

General Business & Industry Facts, figures, and key events for Varies Subscription information at

information international companies www.galegroup.com/wel

come.php

General Business Wire Business news and information about Free www.businesswire.com

information industries and companies—latest news

General Dow Jones Extensive access to full-text articles from Varies Subscription information at

information Interactive newspapers, magazines, journals, and http://askdj.dowjones.com/

broadcast media

General Individual.com Free company and industry news; can be Free www.individual.com

information customized based on your input

TEAMFLY

specific subjects or industries. Experiment with them a bit, and

you’ll soon discover which sources can provide you with the

“right” information in the easiest fashion. And remember, quality

over quantity.

EXERCISES

• Conduct a data orientation audit. Obtain the material from

your last big presentation (to your board, boss, spouse,

etc.), and review the written material and notes. Summarize

the key arguments. Under each argument, jot down the

facts that support the points. How many facts do you

have? Do you make any arguments without supporting

facts? If so, this is a red flag. Depending upon the nature of

the presentation, you should have at least three good supporting

facts for each point (unless one fact is a slam

dunk).

• Develop a data-gathering plan for a current problem. What

major issue at work keeps you up at night? Analyze it.

First, develop your overall hypothesis (from Chapter 1).

Then think of at least three major arguments, and identify

the most relevant fact or two that may support the position

(or disprove it). Next, identify the potential source of the

information (document or person). You may have to get

creative here.

INTERVIEWING

We didn’t have to look far for an example to illustrate the importance

of interviewing in non-McKinsey positions. In writing this book, we used interviewing as our primary data collection method

and found the interviewing techniques we learned at the Firm

extremely helpful. In conducting interviews with dozens of

McKinsey alumni and sending E-mail questionnaires to thousands

of alumni, we focused on identifying the right people, carefully

thinking through our interview guides and questionnaires, and diligently

documenting our findings. We then summarized the content

of the interviews on spreadsheets and used our alumni’s

comments throughout the book.

The Firm relies extensively on interviews. In fact, interviewing

is part of every McKinsey engagement, as it not only generates primary

data but can also identify great sources of secondary data.

The value of interviewing also extends beyond data gathering by

serving as a mechanism to test ideas and increase buy-in (see Chapter

7). Let’s review some interviewing tips from McKinsey and

identify how you can successfully implement specific interview

techniques in your organization.

THE McKINSEY WAY

In interviewing, McKinsey emphasizes preparation and courtesy.

Be prepared: write an interview guide. An interview guide is

simply a written list of the questions you want to ask, arranged in

the order you expect to ask them. There are two reasons why you

should have such a guide. First, placing your thoughts on paper

forces you to organize them. Second, the guide helps the interviewee

to identify the topics you intend to cover in the interview and

prepare accordingly.

Your guide should be brief. Boil down your list of questions

to the three or four most important. Your goal should be to get

those answered in the limited time you have with the interviewee;

anything more is gravy. And don’t forget to close with every

Gathering the Data 61

McKinsey-ite’s favorite question: “Is there anything I forgot to

ask?” Every now and then, it hits pay dirt.

When conducting interviews, listen and guide. Conduct your

interviews in a rigorous but sensitive manner. Active listening—

acknowledging the interviewee with nods, interjections, and the

“McKinsey grunt” (“uh-huh, uh-huh”)—plays a key part in that,

but don’t overlook the value of silence. Use positive body language.

Don’t let the interviewee lead you off on tangents or, worse, the

garden path; politely but firmly keep the interviewee on track.

Seven tips for successful interviews. McKinsey consultants

have many stratagems for conducting effective interviews:

1. Have the interviewee’s boss set up the meeting.

2. Interview in pairs.

3. Listen, don’t lead.

4. Paraphrase, paraphrase, paraphrase.

5. Use the indirect approach.

6. Don’t ask for too much.

7. Adopt the Columbo tactic.

Most of these are self-explanatory, save the last one. Lieutenant

Columbo was a 1970s TV cop played by Peter Falk. He would

often finish questioning a suspect and then pause by the door to

ask one more question—usually a zinger. This tactic succeeded

because the suspects often dropped their guard and allowed the

truth to come out. You can try this approach if you think an interviewee

is holding out on you. Who knows, you just might crack

the case.

Don’t leave the interviewee naked. Some people become

uncomfortable under the stress of an interview. As the interviewer,

you are responsible for being sensitive to the fears of the interviewee.

Establish a connection with him in order to get those few bits of information you seek. Don’t squeeze the interviewee dry

and leave him regretting the process afterward. Instead, take time

to explain the positive impact the information may make and the

primary objectives of your time together, and give some good

information in return as a quid pro quo. As the interviewer, you

often occupy a position of power relative to the interviewee; you

have a responsibility to use that power wisely.

Difficult interviews. No matter how well prepared and sensitive

you are, you will eventually face someone who is just a “difficult”

interviewee. This person may have his own ideas of how

things should be, and they definitely don’t match up with yours.

If an interviewee is playing hardball, you may have to as well—just

hope his bat isn’t a lot bigger than yours.

This person could be the “sandbagger,” an individual who purposely

withholds key information. A sandbag is just an obstacle

to go around, so your path of least resistance should lead you to

another source for the information you need. Of course, if you

have the right heavy equipment, you can just bulldoze her out of

the way.

The most difficult interviewee, though, is the person whose job

is truly threatened by the problem-solving process. The person is

likely to get fired, and you know it. Unfortunately, there’s no easy

way around this one; you just have to soldier on for the benefit of

the organization as a whole.

Always write a thank-you note. Writing thank-you notes is not

just good etiquette; this is good business. Thank-you letters can

really help in building a relationship that can yield future benefits.

Imagine the nice feeling you get when you receive an unexpected

thank-you letter. Many of us need to fight the temptation to neglect

this courtesy because we keep moving forward at such a rapid pace,

especially in the wired and wireless world of the New Economy.

Take time to smell the roses, and thank someone for them as well.

LESSONS LEARNED AND IMPLEMENTATION

ILLUSTRATIONS

You may not think about it explicitly, but you probably interview

someone every day. It could be a customer, coworker, or competitor.

Consider how many times you have interacted with someone

who had important data and information that related to a problem

you were working on. What, after all, is interviewing? Nothing

more than a discussion between two or more persons conducted

for the purpose of gaining specific information and usually with a

slightly higher than normal level of formality.

Consultants, especially consultants at McKinsey, treat interviews

with the utmost respect. They spend much time and effort

preparing for them and learning from them. You should, too.

Our discussions with McKinsey alumni confirmed the effectiveness

of interviewing skills when transferred to other organizations.

Outside the Firm, however, the context is different.

McKinsey interviews are a standard operating procedure for every

project, and they are conducted with purposeful consistency (to the

extreme of having a specific MS Word template for summarizing

findings). In other business scenarios, interviews are regarded differently.

As a result, they are often less formal, with much less

preparation and follow-through. Our alumni told us stories of how

they have been working to increase the effectiveness of data gathering

through interviews, and they helped us identify ways you can

make the most of interviewing in your career:

• Structure your interviews.

• Interviewing is about listening.

• Be sensitive.

Structure your interviews. You may have sensed by now that

we subscribe to the logical, ordered, and structured approach to

problem solving. This orientation is probably a combination of our upbringing, personalities, and training at McKinsey. Since we both

left the Firm, we have come to appreciate a little variety in our

working environments, particularly the difference in levels of formality.

Nevertheless, when it comes to interviewing, even in less

formal situations, we highly recommend sticking to the structure

and basic rules described earlier, beginning with interview guides.

One alumna now at a major financial institution emphatically

concurs:

I always have interview guides—always—whether I’m talking

to people internally or meeting with people externally. I

usually refer to [my guide] for the four or five high-level

questions I want to explore. I think it’s very important to figure

out what I am trying to get at before I go in.

Although the context of interviews (the relationship, objectives,

and tone) can vary considerably, certain elements remain the

same. McKinsey consultants absorb this message early and learn to

use the same format time after time (if it ain’t broke, don’t fix it).

In truth, you don’t have to develop anything elaborate or timeconsuming.

We have included copies of the interview guides we used for

our data collection effort for this book. In our situation, we developed

two interview guides, one for E-mail questionnaires that we

sent to thousands of McKinsey alumni and one for the dozens of

in-person interviews we conducted. Our primary goal for the Email

questionnaires (Figure 3-1, pages 66–67) was to guide the

respondents to hit the major areas of our outline and to share war

stories from their post-McKinsey experiences. Notice that it is a bit

longer and more specific than the in-person interview guide. We

also sent a nice cover letter introducing ourselves, describing the

project, and identifying our key objectives. The in-person interview

guide (Figure 3-2, page 68) followed the same general format but

Thank you for taking the time to complete this questionnaire. Please return

your answers via E-mail to Paul Friga.

What is your name, company (if any), and position or function?

What is the most important lesson that you learned at McKinsey? How does it

affect the way you work in your current position?

In the following items, we have laid out a set of categories that summarizes the

tools many of us learned at the Firm. For each, please think about what you

learned at the Firm with regard to each category and give an example of how

you’ve applied it in your post-McKinsey experience.

Framing the Problem: The skills and techniques that allow McKinsey-ites to

break apart problems, e.g., initial hypotheses, brainstorming, and analytical

frameworks from previous engagements.

Gathering the Data: The techniques used to gather and manage data to test

hypotheses, e.g., interviewing, PD searches.

Analyzing the Data: The methods McKinsey uses to extract useful conclusions

from the data. This category includes such favorites as “80/20” and “Don’t boil

the ocean.”

Presenting Your Ideas: Techniques and tips for getting the message across,

whether in a formal presentation with blue books or an informal meeting with

client team members, e.g., “One message per chart,” “the elevator test,” and

the ever-important prewiring.

Managing Your Team: The skills McKinsey team leaders use (or sometimes

don’t) to keep their teams effective, including team selection, internal communications,

and team bonding.

Managing Your Client: The ever-important process of keeping the client on

your side. Includes selling the study, structuring the engagement, and managing

client teams.

Managing Yourself: Life at McKinsey can be tough. Most of us managed to

find some way of juggling life at the Firm with real life, e.g., managing expectations,

managing our bosses, and managing our “significant others.”

What problems have you faced in implementing McKinsey methods into your

new organization?

Would you be interested and/or willing to conduct a short interview with us,

either over the phone or in person? If so, please give us your contact

numbers.

Is there a question about McKinsey we’ve forgotten to ask? What’s your

answer?

If we use any of the stories you send us in the book, we will send you a signed

copy; we will also mention you in the acknowledgments unless you request

anonymity.

Please list your (snail-) mailing address:

Do you wish to have your name disguised if we use any of your stories?

___Yes ___No

Do you want your name mentioned in the acknowledgments if we use one of

your stories? ___Yes ___No

Figure 3-2. The McKinsey Mind In-Person Interview Guide

1. What is the most significant application of a particular tool or technique

that you learned during your tenure at McKinsey in your new position?

What was the context? How did it go?

2. In the following items, we have laid out a set of categories that summarizes

the tools many of us learned at the Firm. For each, please try to give an

example of how you’ve applied it in your post-McKinsey experience—

include the particular tool/technique/strategy, context, application, reaction,

and success.

Framing the Problem: The skills and techniques that allow McKinsey-ites to

break apart problems, e.g., initial hypotheses, brainstorming, and analytical

frameworks from previous engagements.

Gathering the Data: The techniques used to gather and manage data to test

hypotheses, e.g., interviewing, PD searches.

Analyzing the Data: The methods McKinsey uses to extract useful conclusions

from the data. This category includes such favorites as “80/20” and “Don’t boil

the ocean.”

Presenting Your Ideas: Techniques and tips for getting the message across,

whether in a formal presentation with blue books or an informal meeting with

client team members, e.g., “One message per chart,” “the elevator test,” and

the ever-important prewiring.

Managing Your Team: The skills McKinsey team leaders use (or sometimes

don’t) to keep their teams effective, including team selection, internal communications,

and team bonding.

Managing Your Client: The ever-important process of keeping the client on

your side. Includes selling the study, structuring the engagement, and managing

client teams.

Managing Yourself: Life at McKinsey can be tough. Most of us managed to

find some way of juggling life at the Firm with real life, e.g., managing expectations,

managing our bosses, and managing our “significant others.”

Is there a question about McKinsey we’ve forgotten to ask? What’s your

answer?

was a bit more open-ended and allowed the interviewee to move

between the sections more freely. We tried, as much as possible,

to simplify our message to emphasize the key points we wanted to

cover. This made the interview go much more smoothly and kept

us focused as well.

Unless you actually want to catch your interviewee off guard,

you should share the interview guide with him ahead of time. Be

sure to take notes during the interview, and write them up legibly

afterward.

Interviewing is about listening. After leaving McKinsey in

1997, Dean Dorman spent a year working directly under Gary

Leiver at GE, then moved to an E-commerce start-up. Now he is

the president and chief operating officer of Silver Oak Partners,

providing strategic sourcing services to the leveraged-buyout

industry. Dean is one of the hardest-charging individuals you could

ever meet and is never at a loss for words, but even Dean appreciates

the importance of listening for today’s business leaders:

Before I took my position as president of Silver Oak, I served

on the advisory board for about a year. During that time, I

paid attention to management’s plans. I also developed my

own hypotheses of what needed to get done to take the company

to the next level. My first task as president was to

launch what I call the “look, listen, and learn” tour to test

any hypotheses. Over the course of the first six weeks, I met

with all the functional and initiative leaders and interviewed

them for about two or three hours each. Taking the time

early on to listen to people has proved invaluable. It has

allowed me to have a real impact on the company.

When you are new to an organization, there are obvious benefits

to listening just as Dean did, but listening isn’t just for the new

guy in the office. Effective managers spend a majority of their time

listening. Unfortunately, our formal educational systems provide

very little training in listening. Many of us learn the hard way. The

key lessons from McKinsey that you can apply in your work situation

are to recognize the importance of listening, increase the

amount of time you spend listening (to the right people and on the

right subjects), and listen in an active manner.

Active listening simply means encouraging and guiding the

interviewee’s responses through the effective use of verbal and nonverbal

signals. Head nodding, arm crossing, and facial expressions

play a bigger role in interviews than you think. If you are truly paying

attention to the interview, these things should come naturally.

If you feel that you are forcing them, perhaps the interview should

have ended about 15 minutes earlier.

Be sensitive. In their efforts to implement interview techniques

in their post-McKinsey positions, our McKinsey alumni learned

that style matters. Some people (wrongly, in our view) see interviewees

as a source of information to be drained dry. We suggest

a different tack. Try to establish a connection with the interviewee.

Treat the interview as a chance to meet a new person and actively

involve her in the problem-solving effort. The interview is a twoway

exchange that involves much more than a one-way information

transfer. If you let the interviewee become your partner in the

process, you will be able develop this relationship.

When it comes to the actual interview, the beginning matters. It

sets the tone for the rest of your time with the interviewee.

McKinsey consultants learn to avoid sensitive issues at the beginning.

This requires some forethought in order to identify what may

be “sensitive.” For example, if you are working on a cost-cutting

project that may involve layoffs, you might not want to start your

questions with the number of years the person has been in that

position and the exact nature of her contribution to the bottom

line. Francesca Brockett, the senior vice president of strategic planning and business development at Toys “R” Us, has incorporated

this thinking in her approach:

I think the most important thing I learned at McKinsey

related to interviewing is to start with less-sensitive issues. I

have used this general technique frequently in developing

relationships in my department and across the organization.

It is probably part of my DNA at this point.

Bear in mind individual agendas as well. Everyone you

encounter day to day—employees, customers, competitors—has an

agenda. After all, an agenda is just a set of objectives that each person

has and may hope to accomplish or expedite through you.

There will be times when agendas conflict, and your job as the

interviewer is to anticipate and plan for such situations. For

instance, you may be able to help an interviewee accomplish his

objective (provided it doesn’t interfere with your goals). At the

least, express empathy for the interviewee’s situation, and avoid

issues that may cause unnecessary friction.

IMPLEMENTATION GUIDANCE

Let’s start our implementation ideas with a brief story about

McKinsey consultants’ training in people skills. The Firm sends

every consultant who makes it through the first year to an Interpersonal

Skills Workshop (ISW), usually in a beautiful rural setting

in Germany or England. The leaders of this weeklong, intensive,

and enlightening workshop carefully analyze each participant’s

ability to get along with others.

It was at one of these sessions, in Germany’s majestic Black

Forest, that one of the authors* had an eye-opening experience. Reflecting on his brief professional career, he realized that he was

so focused on setting and accomplishing goals that the finished

product had become an obsession. He had blinded himself to

everything that lay between him and the end result; he had forgotten

that there is not just the destination, there is also the journey.

We believe that task completion must be balanced with process

interaction; that means you should try to get things done without

stepping on people as you go. So it is with interviewing; relationships

matter. Think through your personal approach, and consider

expanding your capabilities if necessary.

Think through your daily schedule, and identify all of the

opportunities you have to obtain important information from people

and how you should relate to those people. Do you prepare

adequately to take full advantage of these opportunities? Do you

document what you learn, so you won’t forget it? As you think

through your schedule, try to find more time to listen and less to

speak.

After that recommendation, you might be hankering for something

a bit less touchy-feely, a bit more concrete, so let’s move on

to the issue of structure. Earlier in this section, we discussed the

interview guide and gave you some examples. Structure doesn’t

end with the development of an interview guide, however. There

are two additional opportunities for “interview discipline”: preinterview

communication and the post-interview follow-up.

You should send the interview guide (or a version of it) to the

interviewee well ahead of the interview. If you send it more than a

week in advance, it may make sense to resend the guide when you

confirm the appointment. This allows the interviewee to prepare

responses and identify additional support that may help you

immensely. Interviewees will also appreciate the courtesy, because,

let’s face it, most of us don’t like surprises. There are a few times to

bend this rule, of course. For example, in politically charged situations,

you might not want to allow for preparation that may facil-

itate resistance or deception. In general, however, this should be

your standard operating procedure for interviews. One alumnus,

now a senior administrator in the German government, elaborates

on some of the benefits of sending the guides ahead of time and

follow-up:

I make extensive use of interviews during the early phases

of projects to clarify hypotheses, identify relevant material

needs, and create buy-in. We develop interview guides and

send them in advance to allow the interviewees to prepare

and track down information that they do not already have.

After the interview, we document our findings and give that

as feedback to the interviewee to make sure we understood

him properly . . . and to correct any misunderstandings.

Post-interview follow-up also adds value to the interview

process. It gives you a chance to confirm what you heard and to

ensure you understood what was said. It is much better to have

that clarification earlier in the process, as the error can magnify

over time. (Remember those school-yard games of “telephone” in

which a sentence gets whispered around a circle and emerges hilariously

unrecognizable?) Don’t forget to send the all-important and

often-missed thank-you letters, as previously discussed.

Finally, on the topic of sensitivity, when it comes to starting the

interview off on the right foot, start slowly and gently. It is usually

safe to begin with a big picture of what you are trying to

accomplish and why you are meeting with that particular person.

Consider an icebreaker to get things moving, but avoid platitudes

like “Nice weather, isn’t it?” Rather, try to empathize with the

interviewee and what she does. For instance, “I don’t think I could

ever spot defective widgets with my eyesight. How perfect does

your vision have to be to do a job like yours?” As always, circumstances

may require a different approach, but we recommend making

a connection before you start pressing on sensitive subjects.

EXERCISES

• Develop an interview guide. First, identify your next big

interview opportunity. Then list your objectives or the critical

information you would like to obtain. (Work from your

hypothesis, as discussed in Chapters 1 and 2). Now pare

the list down. Combine where possible, and eliminate irrelevant

points. You should end up with two or three primary

objectives for the meeting. Next, structure the interview

guide around those key questions. Don’t forget to consider

the interviewee’s agenda and watch for sensitive issues.

Send your interview guide to the interviewee at least two

days in advance.

• Write a thank-you letter. Nothing complicated here, just a

discipline exercise. Write a good old-fashioned handwritten

or typed thank-you letter. If it feels good, write another

one!

KNOWLEDGE MANAGEMENT

Ah, knowledge management (KM). It’s one of the hottest business

buzzwords today, and one of the least understood. According to a

recent Business Week survey, more than 80 percent of 158 large

multinational corporations already have or are actively developing

formal knowledge management programs.* McKinsey has long

been recognized as a leader in the field of KM and has much to

offer other organizations as they formalize their KM efforts.

What is KM? First, we should tell you what knowledge is

not—data and information. Data are facts, observations about occurrences, and numbers. Information is a collection and some

synthesis of data. Knowledge is the mix of information, experience,

and context in a value-adding process. That process occurs first in

the heads of individuals (where it is what we call “uncodified

knowledge”) and can be shared with others through discussions or

documentation (at which point the knowledge becomes “codified”).

KM is the systematic process by which an organization

maximizes the value of the uncodified and codified knowledge in

the firm. In general, this means the codified knowledge has been

captured in databases or documents.

Many executives and academics focus their KM efforts on codification

strategies, including technology platforms. We believe,

and McKinsey teaches, that even the best KM technologies can

capture only a small portion of the true knowledge in a firm.

Therefore, a truly successful strategy must move beyond technology

if it is to capture and distill the valuable experience that is

walking around the hallways.

Bill Ross, a McKinsey alumnus now working for GE as the

manager of business development for the Transportation Division,

commented on KM in his new firm:

I was fortunate to land at a company that values knowledge

just as McKinsey did. GE is a learning organization, and the

person in charge of that effort is Jack Welch. In fact, Jack

will say that the KM ability of GE is the core element that

has led the company to its great success.

Everyone in the organization pays attention to best practices,

inside and outside of the organization. There is regular

communication between divisions and special groups,

such as a services council, where we stay abreast of everyone’s

key projects. We don’t try to do it through a massive

database, as it would be too hard to keep updating. This is

real time and best done through regular get-togethers such as

cross-group quarterly meetings to discuss best practices.

KM means taking advantage of what is known to maximize

the firm’s value. We believe this to be an important endeavor, and

based on the time and effort it puts into KM, so does McKinsey.

In this section, we briefly recap McKinsey’s KM strategy and then

share advice and stories about KM in other organizations.

THE McKINSEY WAY

The central KM-related principle at McKinsey is this: don’t reinvent

the wheel.

Don’t reinvent the wheel. Whatever problem you’re facing,

chances are that someone, somewhere has worked on something

similar. McKinsey recognizes the value of retaining and exploiting

that experience, and the Firm goes to great lengths to codify it. The

Firm maintains two primary databases. One, called PD-Net,

includes previous reports generated and cleansed for sharing

among the Firm’s consultants. You could think of it as the “know

what” database. The other database is a directory of all the Firm’s

experts in various industries and practice areas; call it the “know

who” database. Users of either database can sort the data by industry,

time, expert, office, and a number of other criteria.

LESSONS LEARNED AND IMPLEMENTATION

ILLUSTRATIONS

McKinsey is in the business of selling knowledge, as are a lot of

other companies. The challenge is how to take advantage of what

is known in the firm, both uncodified and codified knowledge.

We view KM from a holistic perspective that goes beyond technology.

We recommend using the schematic framework of the critical areas of KM* shown in Figure 3-3. Culture describes the way

a company’s employees understand KM, have support and incentives

to share knowledge, and interact in a sharing, interdepartmental

manner. At McKinsey, there is a well-understood KM

strategy whereby knowledge sharing is expected of all employees

and rewarded accordingly. The infrastructure pertains to the physical

layout of offices and departments, organizational structure,

and the KM program itself (including KM officers). As an example

of KM infrastructure, McKinsey has an extensive network of information

specialists in every office who can lend immediate assistance

to teams trying to get up to speed on new areas and

industries. Other organizations have begun dedicating similar resources to KM. Finally, the technology represents the specific

strategies firms take to codify and share their knowledge most

effectively. Corporate intranets represent one of the most common

KM technology platforms. With any technology platform, keeping

the information it contains current and high quality is an ongoing

challenge. The center of the triangle includes the words

business results, a reminder that the yardstick for any KM effort

is its bottom-line impact on the organization. We used this framework

to interpret the results from our alumni interviews and came

up with the following lessons regarding KM implementation

efforts:

• Develop a rapid-response culture.

• Acquire external knowledge.

• Control the quality of your input: garbage in, garbage out.

Develop a rapid-response culture. The culture of an organization

is a tough beast to tame and extremely important. We define

culture as a combination of the employees’ shared values and

assumptions regarding the organization and its events and processes,

the organization’s incentive programs, and the nature

of daily interaction among employees. Examples would be the

level of formality (e.g., use of first names, dress code), the exhibited

level of respect between colleagues, and the amount of socializing.

Another example, extremely important in KM systems and data

gathering, is the rate at which employees respond to data requests

from other employees. It is difficult to run an effective KM system

without access to the uncodified knowledge in other people’s

heads. A rapid-response culture can help give you the most access.

Larry Rouvelas, the executive vice president of Pulse Medical

Instruments, a small technology company, misses the McKinsey

culture in this regard:

At McKinsey, there is an ethic of response whereby if anyone—

even the most junior consultant—makes a call to a colleague

anywhere around the world, the call will be returned

within 24 hours. This helps immensely with data collection

as well as for general guidance. This is not the case in other

organizations, although I am trying to develop that in my

company.

Acquire external knowledge. Knowledge can be generated

either internally or externally. Internal knowledge creation involves

disseminating information to employees through discussions or

documents, and it is a vital part of any KM strategy. External

knowledge matters, too. As discussed earlier, McKinsey invests

heavily in order to maintain access to the latest thinking inside and

outside of the Firm. Every project starts with a search of internal

documents as well as the identification of external publications or

industry experts who might have something to contribute.

The same holds true at other organizations. Jack Welch doesn’t

hesitate to search for the best ideas from any external organization

and bring them to GE. Sometimes outside experts may actually

be consulting firms, as described by Jim Bennett, who was the

chairman of retail banking at Key Corp. and is now president and

CEO of EmployOn:

I always reach for the best people I can. When you are solving

a tough business problem, you need access to the best,

whether they are inside or outside. I look for first-class

resources and have used McKinsey, Deloitte, and others.

This can be kind of a foreign notion to consultant-averse or

outsider-averse companies.

In searching for the best outside advice, we recommend that

you seek out true experts who come with multiple recommendations, carefully scope their involvement opportunities, and stay

engaged in their activities. The last piece is particularly important

to ensure that you take advantage of the knowledge available and

the new knowledge created.

Control the quality of your input: garbage in, garbage out.

“Garbage in, garbage out” is an old saying among computer programmers.

One of the biggest challenges in developing meaningful

KM codification systems is ensuring accurate and timely data

availability. During the mid-1990s, many companies attempted to

set up sophisticated KM systems with databases, repositories, and

expert listings. Many became dismayed when the systems failed

to generate value for organizations because the information in the

systems was inaccurate or outdated, as described earlier by Bill

Ross at GE.

Make sure that those without firsthand knowledge of the subject

matter can interpret the inputs to your KM system. Also, make

sure that any document can be retrieved via the relevant keywords

or other search methodology. Remember, without the

proper incentives and dedicated resources, KM systems become

“garbage.”

IMPLEMENTATION GUIDANCE

KM at McKinsey goes well beyond advanced databases and codification

strategies; so should you. The culture at McKinsey

revolves around knowledge sharing. For example, there is an

unwritten rule in the Firm that every employee returns a phone call

from another McKinsey-ite within 24 hours. Both of us learned the

value of this as early in a project we contacted experts who were

able to steer us in the right direction and prevent days of excess

search efforts.

Knowledge transfer through discussion is another key part of

KM at McKinsey. The Firm provides incentives for knowledge

sharing. For example, performance evaluations include an assessment

of how well a consultant supports and develops others. The

Firm holds regular “Practice Olympics,”* where ad hoc teams of

consultants at all levels work together to summarize learnings on

a particular business topic, normally an area in which they recently

completed work. The Firm invests quite a bit of money into making

this a special event, with prizes, newsletters, time off for competition,

and fully funded trips to exotic locations for the

competitions. Teams compete at a local level and earn their way up

to such places as Australia or Hawaii, based on the merit of their

ideas and their contribution to the Firm’s knowledge.

When establishing your KM culture, the entire organization

must participate; partial efforts just don’t cut it. This means that

there must be support from the top and constant reinforcement.

This may be easier for smaller companies but is just as important

for such companies as Accenture (formerly Andersen Consulting),

as described by Jeff Sakaguchi, a partner:

I’ve always been impressed with the responsiveness of the

partnership here. I find folks responding even more quickly

than at McKinsey. The key is that the responsiveness must

come across the board and at a consistently high rate. It is

analogous to the FedEx situation in that 90 percent on time

isn’t worth it, but 98 percent is a positive breakthrough.

This level of responsiveness might be a tough goal to achieve,

but it generates results that are worth the effort.

EXERCISES

• Perform a KM audit. Using the KM schematic shown in

Figure 3-3 (page 77), analyze your firm’s performance in:

culture, infrastructure, and technology. For example, is

there a strong KM culture that is well understood, supported

by top management, with incentives for use and

active interaction of all employees? After assessing your

performance on a scale of 1 to 5 (worst to best) in each

area, try to identify opportunities for improvement.

• Write a memo to the key KM person in your organization.

The starting point in this exercise is to identify the person

with responsibility for KM. This may be an actual chief

knowledge officer (CKO), the CEO, the IT director, or the

human resources director. Once you have identified the

person, draft a brief memo requesting information related

to the questions mentioned in the previous exercise. Hold

off on your assessment and recommendation until you get

a response. Every organization has a need for KM, and

everyone in the organization should understand it, but

these things take time (and sensitivity in some cases).

CONCLUSION

So there you have it—the wild, wonderful world of data gathering.

Our goal in this chapter is to help you use data gathering to add

value. In many organizations, too much energy is spent gathering

the wrong data, and too many decisions are made without adequate

data support. In this chapter, we hope you learned how to

design more effective data-gathering efforts and picked up some

specific tools that will help you. Happy hunting.

INTERPRETING THE RESULTS

In the first three chapters of this book, we took you from the

generation of an initial hypothesis, through the design of an

analysis plan, up to the gathering of data upon which to apply that

analysis. In many ways, these are the easy parts of the McKinsey

problem-solving process. Now comes the hard part: figuring out

what it all means.

A hypothesis, after all, must still be proved or disproved, and

data on their own are mute. It is up to you and your team to use those facts to generate insights that will add value to your organization.

All the multimegabyte spreadsheets and three-dimensional

animated pie charts in the world don’t mean anything unless someone

can figure out the actions implied by these analyses and their

value to the organization. McKinsey’s consultants realize that

clients don’t, at the end of the day, pay for fancy documents and

pretty slide shows. They pay for advice that will add value to their

businesses; this is the end product of the consulting process and, by

extension, of business problem solving in general. As Jeff Sakaguchi,

who has moved from McKinsey to rival consulting firm

Accenture, recalls:

It’s not just about research and analysis; it’s research, analysis,

and insight development. McKinsey focused on generating

insights, specifically insights that had great client impact.

I take pride, since I’ve joined Accenture, in having restructured

some of our training for strategy consultants to drive

home that mentality in our teams and really make it an

explicit part of our performance evaluation process for

consultants.

In this chapter, we will show you how McKinsey-ites draw

conclusions from their analyses and turn them into useful recommendations

for their clients, and how you can do the same in your

company. We divide analysis interpretation into two parts. First

comes the process of understanding the data: piecing together (in

your own mind or within the confines of your team) the story the

data are telling you and the steps you should take based on that

story. Second comes assembling your findings into an externally

directed end product: a course of action for your organization or

client.

UNDERSTANDING THE DATA

After you’ve run all the numbers and conducted all the interviews,

you will have a huge pile of facts to sift through. Your job is to sort

the wheat from the chaff, to separate the irrelevant factoids from

the data that actually prove or disprove your hypothesis, and then

to piece together the story those data tell. This requires not just the

ability to understand the meaning of the individual analyses, but

the imagination to put the disparate facts together into a coherent

narrative. This is not always easy, as one of our more blunt-spoken

alumni said: “It’s a whole lot easier to gather and package data

than it is to think.”

The actual techniques you would use to analyze your data will

vary depending on the individual analyses you are doing, the company

you work for, and the business in which you operate. In this

section, rather than demonstrate any particular analysis, we will

show you how to take the results of whichever analyses you choose

and assemble them into something that will allow you to make a

very important decision.

Yogi Berra famously remarked, “If you come to a fork in the

road, take it.” At this point in the problem-solving process, you’ve

reached a fork in the road; the results of your analyses can take

you in one of two directions. If your analysis proves your hypothesis,

then you need to move on to the next section of this chapter

and figure out what course of action the data imply. If the data disprove

your hypothesis, then you need to revisit and restructure

your initial hypothesis to fit the data. This may or may not require

additional analysis as well. We, with the help of our alumni, will

show you how to choose which fork to take. McKinsey-ites use the following principles in their daily struggles

with data analysis.

80/20. The 80/20 rule is one of the great truths of business. It

is a rule of thumb that says 80 percent of an effect under study

will be generated by 20 percent of the examples analyzed. This rule

dates back to the economist Vilfredo Pareto. While researching

economic conditions in his native Italy, Pareto determined that 20

percent of the population owned 80 percent of the land. Subsequently,

while working in his garden, he discovered that about 80

percent of his peas came from just 20 percent of his plants. Based

on these and other observations, he determined that for any series

of elements under study, a small fraction of the number of elements

usually accounts for a large fraction of the effect. Over time,

Pareto’s observation became generalized as the 80/20 rule.

Although the 80/20 rule has been around a lot longer than

McKinsey, McKinsey consultants live and die by it. If you look at

the numbers that drive your organization, almost invariably, you

will find instances of 80/20. For instance, you may determine that

80 percent of your sales comes from 20 percent of your clients, 20

percent of your sales staff generate 80 percent of your profits, 80

percent of your time is spent on 20 percent of your job.

The 80/20 rule is all about data. When you’re doing a dataintensive

analysis on your computer, play around with the numbers

a bit. Sort them in various ways. Whenever you see 80/20 in

action, you should look for the opportunities it implies. If 80 percent

of your sales come from 20 percent of your sales force, then

what is that 20 percent doing right, and how can the 80 percent

be brought up to speed? Do you really need the other 80 percent at

all? As you can see, a little bit of 80/20 can go a long way.

Make a chart every day. At the end of each day, ask yourself,

“What are the three most important things I learned today?” Take half an hour before you leave your desk to put it down on paper—

nothing fancy, just a hastily sketched chart or a few bullet points

will do. This exercise will help you push your thinking. Whether

you use that chart or not, once you’ve drawn it, you won’t forget

it. Otherwise, the brilliant insight you had this morning might get

lost by the time you lock up your desk tonight.

Don’t make the facts fit your solution. You and your team may

have formulated a brilliant hypothesis, but when it comes time to

prove or disprove it, be prepared for the facts and analyses to

prove you wrong. If the facts don’t fit your hypothesis, then it is

your hypothesis that must change, not the facts.

LESSONS LEARNED AND IMPLEMENTATION

ILLUSTRATIONS

When interpreting your analyses, you have two parallel goals: you

want to be quick, and you want to be right. Obviously, these two

goals are sometimes in conflict. It’s usually worth taking an extra

day if that will make the difference between getting the right

answer and the wrong one. However, as we discussed in Chapter 2,

there’s probably little point in spending an extra week to go from

three decimal places of accuracy to four.

The results of our survey of McKinsey alumni led us to draw

the following conclusions about data interpretation:

• Always ask, “What’s the so what?”

• Perform sanity checks.

• Remember that there are limits to analysis.

Always ask, “What’s the so what?” When you put together

your analysis plan (as we discussed in Chapter 2), you were supposed

to eliminate any analyses, no matter how clever or interesting,

that didn’t get you a step closer to proving or disproving your

original hypothesis. No matter how good your work plan, however,

it is almost inevitable that you will have to go through

another filtering process once you’ve gathered the data, crunched

the numbers, and interpreted the interviews. Some of your results

will turn out to be dead ends: interesting facts, neat charts, but

nothing that helps you get closer to a solution. It’s your job to weed

out these irrelevancies.

At McKinsey, the shorthand for this process was for someone

on the team, usually the EM, to ask, “What’s the so what?” for a

particular analysis. What does it tell us, and how is that useful?

What recommendation does it lead to? Consultants aren’t in the

business of drawing pretty pictures, and that’s not what their

clients pay them lots of money to do. As Jeff Sakaguchi learned at

McKinsey and continues to preach at Accenture:

Consulting isn’t about analysis; it’s about insights. If you

can’t draw an insight from what you’ve just done, then it’s

a waste of time. Crunching numbers for the sake of crunching

numbers, or doing bar charts for the sake of doing bar

charts, doesn’t help unless it brings to life some insight, some

key finding, that will make your team and your client say,

“Hmm, interesting.”

A consultant must take the disparate messages of his analyses

and synthesize them into insights that will solve his client’s problem.

That happens best when every analysis meets the test of “So

what?”

Perform sanity checks. Obviously, one wants to be as accurate

as possible, but in a team situation you, as team leader, probably

don’t have time to perform a detailed check on every analysis your

team produces. Whenever someone presents you with a new recommendation

or insight, however, you can do a quick sanity check

to ensure that the answer at least sounds plausible. Like the QDT we presented in Chapter 1, a sanity check lets you swiftly ascertain

whether a particular analysis is at least within the bounds of probability.

A sanity check consists of a few pointed questions,

the answers to which will show whether a recommendation is

feasible and whether it will have a noticeable impact on the

organization.

The exact question will vary with every situation, but here are

some examples, courtesy of our alumni:

I can use an off-the-shelf, easy-to-use program like MS

Access to disprove a stupid theory very fast. For example, an

employee had a hypothesis that we should request that merchandise

be returned to the warehouse based on minimum

rather than maximum inventory levels. I was able to test that

idea in two minutes to determine that it would result in only

$4,000 of a projected return of $400,000. Not worth the

loss of a week to reprint and send procedures for the stores

to follow.

—Bob Buchsbaum, CEO, Dick Blick Holdings

_ _ _

I like to use scenario analysis. I’ll ask, “What would it take

to have this matter?” For example, how many leads would

we have to generate off the website for it to show up as anything

more than a rounding error? If the answer is 10 gazillion,

well, I doubt we’ll get that many. If the answer is 50,

then I’ll say, “Oh, OK.” If the assumptions behind the analysis

don’t make sense, then you can move on to the next idea.

—Dan Veto, Senior Vice President, Conseco

_ _ _

I actually had an analyst run lots of numbers from many different

sources and then come to me and say, “Well, here’s the

answer.” I took one look at the numbers and said that can’t

possibly be right, because if it were, the world would look a

whole lot different. So, when you’re analyzing the data, just

be sure that you’re stepping back from it and doing a highlevel

sanity check.

—Bill Ross, General Electric

_ _ _

I always ask, “How far off would our current answer need

to be before we change our conclusion?” I push very hard on

testing assumptions by making sure the drivers of those

assumptions are very clearly identified. I then focus the

analysis on these drivers. This has fundamentally improved

our acquisition strategy; the results of our recent acquisitions

speak for themselves.

—Ron O’Hanley, President, Mellon Institutional Asset

Management

Although there’s no one best way to do a sanity check, asking

a few pointed questions about your analyses before you put

together your big presentation can save you a lot of trouble.

Remember that there are limits to analysis. Analysis plays a

vital role in the McKinsey problem-solving process, but when all

is said and done, it can take you only so far. You have to draw

inferences from the analyses; they won’t speak for themselves.

You’ve reached the point in our consulting model where intuition

takes the lead from data. You’ve come to Mr. Berra’s fork in the

road, and you have to take it.

That analysis has its limitations is no reason to dispense with

it, however. Beware what one of our alumni described as the

“ready, fire, aim mentality.” Even if you are a skilled decision

maker with reliable intuition, good analysis helps support and

communicate your solution throughout your organization, as Bill

Ross describes:

In many cases, executives, being smart business leaders, have

already gone through the problem-solving process internally

without laying it out for others to see. If you go through their

thinking with them, however, you’ll often find they’ve

missed an option. More importantly, they may be ready to

move quickly, but they still have to pull their whole organization

along with them. Without having documented and

communicated some of their thought process, there’s no way

that they can bring their organization along except by brute

force. We know that doesn’t work for very long, because if

you keep at it, then people just wait for you to tell them

where to go next.

While some like to think of intuition and data as polar opposites,

yin and yang, they actually work together. And like yin and

yang, each needs the other to thrive. Data without intuition are

merely raw information, and intuition without data is just guesswork.

Put the two together, however, and you have the basis for

sound decision making.

IMPLEMENTATION GUIDANCE

At this stage in the problem-solving process, you need to figure out

what the facts are telling you. The economist John Maynard

Keynes, when berated by a critic for contradicting one of his earlier assertions, famously said, “When the facts change, I change my

mind. What do you do, sir?” Transferring this to the context of the

McKinsey problem-solving process, when the facts contradict your

hypothesis, you should change your hypothesis, not suppress the

facts. We can’t stress this too much. When you’ve spent a lot of

time and effort coming up with what you consider a brilliant

hypothesis, it’s easy to become wedded to it, refusing to believe

that you just might be wrong.

McKinsey offered several lessons on this topic: “Don’t make

the facts fit your solution”; “Be prepared to kill your babies”

(offered in the context of brainstorming, but it holds just as much

for data analysis); and “Just say, ‘I don’t know.’” What was true

at the Firm holds just as true outside of it. There is an iterative loop

that runs from hypothesis to analysis design to research to interpretation

and then, if necessary, back to hypothesis. Only after you

have definitively proved your final, modified hypothesis are you

ready to put together the end product—the advice that you will

give to your client.

When we asked our McKinsey alumni what tools they use to

help them make sense of the data, they almost all mentioned the

80/20 rule. As we discussed earlier in this chapter, 80/20 manifests

itself in a variety of ways. To offer a few more examples, 20 percent

of the population in the United States pays 80 percent of the

income tax. Of the students in a classroom, 20 percent occupy 80

percent of a teacher’s time. You might choose 80 percent of the

outfits you wear from 20 percent of your wardrobe. We could go

on and on. The 80/20 rule is not always strictly true; in one case,

the true ratio may be 75/25, in another 90/10. Furthermore, it is

not universally applicable, but it occurs so frequently as to make

it a useful predictive tool.

At McKinsey, the 80/20 is primarily about data, and that’s certainly

true as far as it goes. Applying the 80/20 rule to numerical data can lead to all sorts of insights that pass the “So what?” test.

Returning to the earlier example, if you learn that 20 percent of

your sales staff account for 80 percent of your sales, you should

immediately ask why that is and what can be done to bring the rest

of the sales team up to the level of the top performers. Note that

the 80/20 rule doesn’t necessarily lead directly to insight. Rather,

it prompts you to ask new questions and possibly perform new

analyses that will help you put the story together.

Furthermore, 80/20 can go beyond data. It’s also a useful tool

for figuring out what story to tell. After all, 80 percent of your recommendations

will come from 20 percent of your analyses. In a

word, prioritize. Consider which of your recommendations will

yield the most value for your client, and focus on them. Remember

that an organization can only do so much at one time. Concentrate

on the big wins first.

EXERCISES

• Think of the last analysis project you worked on or were

presented with. Did each exhibit in the presentation you

gave or saw meet the “So what?” test? Go through the presentation

documents and write down the “so what” for at

least 10 exhibits.

• Perform an 80/20 analysis of your job. On what do you

spend most of your time? Which of your activities produce

the most benefit for your organization? (Be honest!) Which

produce the most benefit for you? Can you think of ways

to spend more time on the things that produce the most

benefit and less time on the activities that produce the

least?

• Perform an 80/20 analysis of your company. Can you find

instances of 80/20 in your business unit or department?

Interpreting the Results 93

Which of your products or services produce most of your

profit? Which consume most of your expenses? Can you

find other instances of 80/20?

GENERATING THE END PRODUCT

Up to now, we’ve been dealing exclusively with the internal components

of the problem-solving process. Forming your hypothesis,

planning your work, doing your research, and interpreting

your results—these all happen within the confines of your own

office or team room. Theoretically, if you could get all your data

without interviewing, you could complete all those steps without

leaving your office, assuming you have a decent Internet connection

(access to plumbing facilities might be convenient, too).

Now, however, we’ve reached the nexus between you (or your

team) and your client: the end product. By “end product,” we

don’t mean the collection of charts, slides, computer images, and

other props that you use to communicate your solution to your

audience; that will come in Chapter 5, “Presenting Your Ideas.”

End product, for our purposes, means the actual message that you

will communicate. This is a subtle distinction but a meaningful

one. Your interpretation of the data leads to a story, that is, what

you think the data means. You select those portions of the story

that you believe your audience needs to know in order to understand

your conclusion, along with the supporting evidence, and

you put them together into your end product. Finally, you’ll communicate

that end product via one or more presentation media.

The message and the medium are separate entities, whatever Marshall

McLuhan may have said.*

In this section, we show you how to move from the story to the

solution.

THE McKINSEY WAY

McKinsey has one principle relevent to this section: you must make

sure the solution fits your client.

Make sure the solution fits your client. Management, like politics,

is the art of the possible. The most brilliant solution, backed

up by libraries of data and promising billions in extra profits, is

useless if your client or business can’t implement it. Know your

client. Know the business’s strengths, weaknesses, and capabilities—

what management can and cannot do. Tailor your solutions

with these factors in mind.

LESSONS LEARNED AND IMPLEMENTATION

ILLUSTRATIONS

When McKinsey consultants leave the Firm and join other organizations,

they often find that the challenge of generating an end

product as an insider is, if anything, greater than it was as an outside

consultant. The lessons from our McKinsey alumni reflect this,

as they expand on the idea of fitting your solution to your client:

• See through your client’s eyes.

• Respect the limits of your client’s abilities.

See through your client’s eyes. When McKinsey consultants

talk about their organization, whether recruiting new consultants

or undergoing a “beauty parade” for a potential client, eventually

someone will utter the term CEO focus (or sometimes top management

focus). CEO focus is the external counterpart to finding

the key drivers: it’s your view of what the five or six priorities of

the organization ought to be. This is the first step toward seeing

Interpreting the Results 95

through your client’s eyes because it forces you to concentrate on

the client’s foremost needs, even if some of them don’t immediately

affect what you’re doing. Accenture’s Jeff Sakaguchi explains:

Even though we may not even be working on that specific

area, keeping those things in mind certainly gives us a better

sensitivity for the types of things that the client is or

should be wrestling with. I’ve found many times that if I

have a good picture of what the CEO agenda should be—

even if it may not be what that current CEO is working on—

sooner or later they come around to my way of thinking.

Depending on your position and power within your organization

and on your corporate culture, you may have to rely on someone

else’s conception of the CEO focus (perhaps, even, your

CEO’s). Nevertheless, the CEO focus should be your touchstone as

you put together your recommendation.

As your next step, ask how your decisions will add value to

your client or organization. For each action that you recommend,

how large will the payoff be? Is it large enough to justify the

required commitment of time, energy, and resources? How does it

compare to the other recommendations you make? If it is significantly

smaller in terms of potential result, other, larger projects

should come first. As chair of retail banking at Key Corp., Jim Bennett

had to make decisions like this every day:

For me, the metric has to be, “Is this really going to make a

difference?” At Key, as in most companies, decisions are typically

input-oriented rather than performance- and outputoriented.

We tried to change that paradigm by going public

with performance commitments—“We’re going to grow our

earnings by X”—which put us on the hook to come up with

projects that would meet that goal. This focus on fundamental and lasting differences in performance forces us to

take an aggressive 80/20 view of any potential project. We

have to ask, “If we commit these resources for something

approaching this predicted return, what difference is it going

to make to hitting our performance objective?”

For example, my staff brought me a data warehouse

project which required an investment of $8 million for a

wonderful internal rate of return and payback in two or

three years. I said, “Look, guys, if we can’t get at least 10

times the impact for this expenditure, I’m not taking this to

the board, so go back and find some way that we’re going

to generate a return of at least 10 times whatever it is we

spend.” Everything is judged on its ability to help us meet

our performance challenge.

Sometimes you can get caught up in the elegance and cleverness

of your analysis, or even the sheer effort you put into it. Don’t

let it cloud your judgment. With apologies to Jack Kennedy, “Ask

not what your analysis means to you; ask what it can mean to your

client.”

Respect the limits of your client’s abilities. The most brilliant

strategy in the world won’t help you if your organization can’t

implement it. This holds not just for business, it’s true in any realm

that calls for strategy. If your football team doesn’t have a strong

offensive line, there’s no point trying to run the ball up the middle.

In World War II, the Germans couldn’t sustain a two-front

war. In U.S. politics, you don’t embark on a legislative campaign

if you can’t muster a majority in Congress (as McKinsey alumna

Sylvia Mathews learned from her experience at the Office of Management

and Budget).

When putting together your end product, therefore, keep in

mind whether the recommendations you are making are actionable for the client. Does your client have the skills, systems, structures,

and staff to do what is required? Will outside forces—competitors,

suppliers, customers, regulators—take actions that will nullify the

effects of your strategy? If you’ve planned your analysis correctly

in the first place, you should be able to answer these questions

before you make your recommendation.

At a level below that of grand strategy, you should also consider

whether your analysis and recommendations will be understandable

to the organization as a whole. We will examine this

issue with regard to the actual packaging of your message in Chapter

5, but your analysis itself, in most instances, should be understandable

to outsiders. The main reason is that by making your

analysis accessible to those who have to decide on and implement

it, you will make it easier for them to support it. Paul Kenny discovered

that principle at GlaxoSmithKline:

A lot of the models that we use for analyzing diseases are

overly complex: they are multimegabyte, hundreds of pages,

or interlocking Excel spreadsheets. You wouldn’t believe

some of the ones I’ve inherited. I’ve had a two-megabyte

model linking with another model linking with another

model, and you’d look at one of these things and have no

idea how to work your way through it. One of the principles

that I learned at McKinsey that I always apply when building

any sort of model is to keep it simple, keep it focused,

keep it brief. As a result, I typically do one-page models, and

I try to keep them simple and transparent, so that the audience

can see the mechanics rather than getting lost in the

detail. You don’t lose much by leaving out that detail either;

on the contrary, you can focus on the key drivers and see

what is happening.

We’ll discuss simplicity more fully in Chapter 5. For now, we’ll

just say that even if the particular analysis you are doing necessitates

gigabyte-sized models and complex mathematics, try to simplify

the results of that analysis to a level that an educated outsider

can understand.

IMPLEMENTATION GUIDANCE

At the beginning of this section, we stated that once you have all

the facts (the results of all your analyses), your job is to piece

together a story from some, but not all, of those facts. You may

wonder why you shouldn’t tell the whole story and use everything

you have. To tell you why, we’d like to use a nonbusiness analogy

that may be familiar: the story of King Arthur and his knights of

the Round Table.

Although King Arthur and his knights may have been completely

or mostly legendary, “facts” about them abound. If you dig

around, you will turn up sources dating back to the last millennium—

that is, A.D. 1000—and beyond from Wales, England,

France, Germany, Italy, and no doubt from other places. Authors

and storytellers have pieced these sources together in many different

ways over the centuries, resulting in works as diverse as Malory’s

Le Morte d’Arthur, T. H. White’s The Once and Future King,

the musical Camelot, and movie versions ranging from John Boorman’s

graphic Excalibur to Disney’s Sword in the Stone (not to

mention the Mr. Magoo version). Yet these very different end

products all stem from the same set of “facts” (and if you want to

see just how different they are, watch Excalibur followed by

Monty Python and the Holy Grail).

Each of these storytellers has a different story to tell and a different

audience to tell it to, yet at some level, they are the same

story. When you have to put your facts into a coherent story for

your client, you have the same goal as an author writing her own

version of the story of Arthur: making your audience understand

your message. What separates you from a writer of fiction or a

movie director is your responsibility to be intellectually honest.

The author can depict her Arthur however she wants to make her

point or press her agenda. As a result, audiences have seen Arthur

as a blood-soaked conqueror (Excalibur), a noble but doomed

king (Le Morte d’Arthur), an innocent boy (The Sword in the

Stone), and a very silly man who says “Ni” to old ladies (Monty

Python and the Holy Grail). You, as a consultant or employee,

don’t have that freedom:* you have to produce recommendations

that will add the most value to your client.

Remember that the goal of the problem-solving process—your

goal—is not simply to come up with a brilliant idea. If you ask a

McKinsey consultant what it is that the Firm does, one of the most

common answers you will receive is, “We help our clients make

change happen.” They won’t say, “We come up with brilliant ideas

for our clients.” They realize that the best idea or the cleverest

strategy is worth precisely nothing if the client doesn’t buy into it

and implement it. To secure that buy-in, you have to put together

a compelling narrative, and that entails leaving out facts that don’t

advance your story.

Please note, this does not mean you should ignore evidence

that contradicts your hypothesis. Quite the contrary; by this time,

you should already have adjusted your hypothesis to the facts. It

does mean that you should not throw every fact that you have into

your story just because you can. If you do so, you will lose your

audience in irrelevant detail, and this will get in the way of telling

your story.

• Get a copy of an annual report—preferably from your own

company. Based on the information in the annual report,

decide whether the company’s stock is a good investment.

Give five reasons why, in order of their importance.

• Thinking about your own organization, what are the five

or six issues on which the CEO should focus? How does

your job affect these issues, and what could you do to have

more impact?

• Make a list of the strengths and limitations of your organization.

Put them into a MECE categorization. Think about

whether your organization’s recent projects have played to

those strengths and limitations. How could future projects

be better suited to them?

CONCLUSION

As we’ve shown, interpreting the data has two components. Internally,

you piece together the facts into a coherent picture that leads

you to a recommendation. Externally, you assemble certain facts

into an end product that you will use to communicate your recommendation

to your client. At this point, you have seen the problem-

solving process from start to finish. We believe that if you

follow the recommendations we have made so far, you will be able

to improve the quality and speed of decision making in your organization.

Your work doesn’t end there, however. Now, you have

to communicate your ideas to the critical decision makers in your

organization, and possibly to the organization as a whole. For that,

you will need the presentation strategies in the next chapter.

PRESENTING YOUR IDEAS

We’ve now reached the final stage in the McKinsey problemsolving

process: presenting your ideas. All the hypothesizing,

all the work planning, all the research, and all the analysis

have led up to this point, but if you don’t get this part right, all

your efforts will have been a waste of time. If you piled up all the

good business ideas that withered on the vine for want of an effective

presentation, you’d top the Empire State Building. In this chapter, we will show you how to keep your ideas out of that pile.

If there is a stereotype of McKinsey in the minds of businesspeople,

it is the image of a formal presentation conducted by men

in dark suits and white shirts around the boardroom table. This

image grows increasingly out of date in today’s business environment;

the Firm does far fewer formal presentations than it did 10

years ago. However, the men and women of McKinsey continue

to rely on presentations in one form or another to convey ideas to

the Firm’s clients. To this end, McKinsey has developed a highly

effective set of presentation and communication skills for its consultants

to use.

In the experience of our McKinsey alumni, these skills, more

than any others they learned at the Firm, translate almost unaltered

to other organizations. With them, McKinsey alumni get

their ideas across—and get them accepted. McKinsey-style presentations

work so well that one alumnus even called them an unfair

advantage. You can have that advantage, too.

In this chapter, we examine two aspects of presentation à la

McKinsey. First, we describe how to structure your presentation

to maximize its impact on your audience. Second, we detail techniques

for generating buy-in for your ideas from your audience.

STRUCTURE

McKinsey spends a lot of time training its consultants to structure

their presentations, and they take this training seriously—even if

it often takes place in exotic locations near good golf courses.

When it comes to presentation, McKinsey consultants learn that a

presentation must convey ideas to the audience in the clearest,

most convincing way possible. To ensure that your presentation

meets this goal, you need to give it a structure that the audience can

easily grasp and follow.

In this section we will show you how to structure your presentations

for maximum effect. You’ll see how to arrange your ideas

into a logical flow that your audience can absorb and how to use

charts to get your message across.

THE McKINSEY WAY

When it comes to presentation structure, McKinsey emphasizes

organization and simplicity.

Be structured. For your presentation to succeed, it must take

the audience down the path of your logic in clear, easy-to-follow

steps. Your presentation is a manifestation of your thought

process. If your thinking is clear and logical, your presentation

should be, too. Conversely, if your thinking is muddled, you will

have a hard time putting your ideas into a sound structure.

The elevator test. Sometimes you don’t have much time to

make your case. Know your solution (or your product or business)

so thoroughly that you can explain it clearly and precisely to your

client in the course of a 30-second elevator ride. If you can pass this

“elevator test,” then you understand what you’re doing well

enough to sell your solution.

Keep it simple—one message per chart. The more complex a

chart becomes, the less effective it is at conveying information. The

meaning of a chart should be immediately obvious to the reader, so

use whatever tools you need to bring it out. If you want to use the

same chart to make multiple points, redraw it for each point and

highlight the relevant information in each chart.

Use charts as a means of getting your message across, not as an

art project. McKinsey has always erred on the side of conservatism

when it comes to graphics. You won’t see a lot of color or 3-D

graphics in a McKinsey presentation—unless such features are necessary

to communicate the point of the chart.

LESSONS LEARNED AND IMPLEMENTATION

ILLUSTRATIONS

Of all the skill sets that apply to the McKinsey problem-solving

process, structuring presentations requires the least adaptation to

the outside world. Effective communication is effective communication

pretty much anywhere, and the Firm’s methods are

extremely effective. As venture capitalist Ciara Burnham of Evercore

Partners notes:

McKinsey provides outstanding training in written communications.

The McKinsey problem-solving process forces one

to be logical and clear about each issue and its implications.

It also serves as a useful check of the thoroughness of one’s

analysis: when I am having trouble writing a presentation,

it is usually because my logic and analysis are not completely

clear.

Given how powerful these techniques are, it didn’t surprise us

that comments from our alumni centered on one main lesson

regarding presentation structure: support your ideas with a solid

structure.

Support your ideas with a solid structure. Stripped to its

essence, presentation is selling. You and your team may appreciate

the brilliance of your ideas and the quality of all the work

you’ve done, but your client, your colleagues, or your organization

may not. You have to convince them, and your presentation is your

best tool for doing so. Make no mistake, presentation matters.

That has been the experience of Bob Garda, formerly a director

of McKinsey’s Cleveland office, later CEO of a brand-name consumer goods manufacturer, and now a professor at the Fuqua

School of Business: “I’ve put half-baked ideas into great presentations

and seen them soar, and I’ve put great ideas into bad presentations

and watched them die.”

Unfortunately, in today’s corporate world, a lot more ideas are

dying than soaring, if the experiences of our McKinsey alumni are

typical. The poor quality of presentations in their new organizations

came as a shock to many of them. Here are a few typical

impressions (with the names changed to protect the innocent):

I look at the kind of presentations our senior managers give

to each other and to our customers, and it’s depressing. People

don’t know how to structure an argument. Their presentations

are just stream of consciousness. This was the most

startling change for me when I left McKinsey.

—An alumnus in the health care industry

_ _ _

I’m always amazed at the poor quality of the presentations

here. We tend to have words or outlines put on PowerPoint

slides; people actually think that’s a presentation. It’s not. If

all you have is bullet points with nothing to show graphically

with a chart or schematic, then in my mind, you should put

it in a memo that you send out before the meeting. We have

a lot of meetings where we read outlines together. No charts

for anything. It’s like kindergarten.

—An alumnus in financial services

_ _ _

I worked with a senior executive who always took hours to

build to a point. The “so what” of his slides seemed to be  “Here’s a lot of data I know.” The board would become visibly

agitated during his presentations. It took me two years

to break him of this habit.

—An alumnus in the retail industry

It’s no wonder they sound frustrated. A poor presentation can

make a good idea tough for an audience to grasp. More often,

though, a poorly designed presentation reflects a poorly thoughtout

idea. It’s difficult to put incoherent thoughts into a coherent

structure.

Conversely, a well-written presentation in service to a good

idea can be a powerful instrument of change. Communicating a

course of action throughout an organization acts as a catalyst.

When Bob Garda became CEO of a brand-name consumer goods

manufacturer, he had just such an experience:

Most people don’t feel comfortable structuring a coherent

presentation that lays out a theme from which the subthemes

emerge. When I arrived on the scene, the company lacked a

clear vision for the future: what the organization was and

what it wanted to be when it grew up. Vision was one of the

first things that I felt we needed to address, and just the fact

that I was able to put together a presentation around that

theme—because I felt very comfortable laying out my ideas

in a structured manner—had a tremendous impact.

This ability to present ideas in a flowing, logical structure lies

behind the Firm’s self-proclaimed ability to “make change happen.”

It’s not just that McKinsey consultants come up with good

ideas; it’s that they can communicate the full impact of these ideas

to their clients. This skill carries over extremely well into the outside

world. As S. Neil Crocker, general manager of Pearson PLC’s

Virtual University Enterprises, remarks:

Strong communications skills supported by strong logic wipe

out most concerns. I have yet to be turned down by my CEO

or board for anything that I really wanted. Presentation is

the “killer skill” we take into the real world. It is almost an

unfair advantage!

Fortunately, you don’t have to work at McKinsey to learn how

to put together an effective presentation. In fact, some McKinsey

alumni have started teaching these skills in their own organizations.

By the end of this section, we hope to have shown you

enough about presentation structure that you can get the ball

rolling in your organization, too.

IMPLEMENTATION GUIDANCE

A successful presentation bridges the gap between you—the presenter—

and your audience. It lets them know what you know. You

can make this process easy for your audience by giving your presentations

a clear and logical structure. Fortunately, if you have

been adhering to the principles of this book, then you already have

a solid basis for such a structure: your initial hypothesis.

If you broke out your initial hypothesis into a MECE set of

issues and subissues (and suitably modified them according to the

results of your analysis), then you have a ready-made outline for

your presentation. If you have a well-structured, MECE hypothesis,

then you will have a well-structured, MECE presentation. Conversely,

if you can’t get your presentation to make sense, then you

may want to rethink the logic of your hypothesis. Many of our

McKinsey alumni found this a useful check on their thinking. Just

put together the exhibits that prove your various points, and fit

them into their proper place on the issue tree.

As an example, let’s go back to the Acme Widgets issue tree

from Chapter 1 (see Figure 1-2, page 26). Your team came up with

the initial hypothesis that Acme can lower the marginal cost of its

thrum-mats by instituting a new, shorter curing process. Your

analysis proves that the new process is cheaper, that Acme can

implement the changes required to accommodate the new process,

and that the new process will not diminish the quality of Acme’s

thrum-mats. Say so in your first slide (Figure 5-1). With that slide,

you’ve established the structure of your presentation for your audience:

they know where you’re going and will have an easy time following

you.

The rest of your presentation flows out of the first slide. Each

of those major points under your initial hypothesis constitutes a

section of your presentation. Each section will consist of the various

levels of subissues under each of those major issues. For example,

let’s look at the second major issue, “Acme can implement the

changes necessary to accommodate the new process,” which we

delved into in Chapter 1. The various subissues that arose from

that discussion now form the major points for Section 2 of your

presentation: we have the necessary facilities and the necessary

skills within our organization (see Figure 5-2). You can repeat this

process all the way down your issue tree, but you have the freedom

not to go too deeply into detail, depending on your audience. At Acme Widgets can lower the marginal cost of its thrum-mats with a new,

shorter curing process:

• The new process saves money.

• We have the resources in place to implement the new process.

• We can use the new process while maintaining thrum-mat quality.

Figure 5-1. Acme Widgets Presentation: First Slide

whatever level of detail you stop, the logic of your presentation

will still be clear.

You may have found one aspect of this structure unusual. We

recommend starting with your conclusion—in the case of Acme

Widgets, changing the thrum-mat production process. Many presentations

take the opposite approach, going through all the data

before finally springing the conclusion on the audience. While

there are circumstances where this is warranted—you may really

want to keep your listeners in suspense—it is very easy to lose your

audience before you get to your conclusions, especially in dataintensive

presentations. By starting with your conclusion, you prevent

your audience from asking, “Where is she going with this?”

Having your conclusions or recommendations up front is

sometimes known as inductive reasoning. Simply put, inductive

reasoning takes the form, “We believe X because of reasons A, B,

and C.” This contrasts with deductive reasoning, which can run

along the lines of, “A is true, B is true, and C is true; therefore, we

believe X.” Even in this simplest and most abstract example, it is

obvious that inductive reasoning gets to the point a lot more

quickly, takes less time to read, and packs a lot more punch.

McKinsey prefers inductive reasoning in its communications for

precisely these reasons, as Ron O’Hanley of Mellon attests:

I always strive for a statement of conclusions up front in oral

and written communications. This gets everybody on the We have the resources in place to implement the new process:

• We have facilities that can accommodate the new process.

• Our people have the necessary skills to run the new process.

Figure 5-2. Acme Widgets Presentation: Second Section Lead

same page, even if they disagree, and gives context to all of

the supporting data and arguments. It also helps me be more

efficient and effective in marshaling my arguments.

As an additional advantage, starting with your conclusions

allows you to control how far you go into detail in your presentation.

For example, suppose you are presenting in an interactive setting,

say, to your boss in his office. You have three major points

you want to communicate to him. Now, suppose that he already

accepts your second point and doesn’t need to be convinced with

a lot of data. If you have organized your presentation deductively,

then you will have to take him through all the supporting data for

that point before you actually tell him your conclusion—which he

already agreed with anyway. You’ve just wasted a lot of time for no

particular gain. On the other hand, if you’ve taken the inductive

approach, then your boss can simply give his agreement to your

point at the outset. You can spend more time on the other points or

get out of the meeting and back to work.

Putting your conclusions up front will also help you pass the

elevator test. As we mentioned earlier in the chapter, you pass the

elevator test when you can rattle off your conclusions in the space

of an elevator ride. In fact, if you’ve followed the McKinsey

method, then your first slide—with your recommendation and

major points—is your answer to the elevator test. Imagine trying to

pass the elevator test using a deductive outline—not easy, is it?

We strongly recommend that you take the elevator test before

any presentation. Our McKinsey alumni gave us numerous examples

of its usefulness in their careers. Here are a few testimonials:

I’m in a post-start-up situation right now, with several former

very senior executives from large companies. I find

myself telling them, “Hey, we only have 20 minutes with

Goldman Sachs, and only the first 2 count. Pretend you only have an elevator ride to get your point across to them. What

are you going to say?” It’s amazing how many successful

people cannot simply focus on two or three key points and

articulate them well.

—Brad Farnsworth, GeoNetServices.com

Throughout my career, the ability to say what I need to say

in a short, sharp sound bite has paid off in many ways. As an

author, I find it essential to getting great media coverage. The

elevator test is simply about sound bites, and it is a great way

to know if your product or idea is compelling enough to

move a person to action. If I fail the elevator test, it not only

says that my communication is not clear, but that the underlying

issue is perhaps not compelling.

—Deborah Knuckey, author of The MsSpent Money Guide

_ _ _

My board has attention spans similar to the elevator test.

Without it, I would probably be dead!

—An alumnus in academia

Perhaps the best summation of the value of the elevator test

comes from Roger Boisvert of CTR Ventures: “In presenting businesses,

my own especially, if I am not able to do the elevator test,

I shouldn’t be talking with anyone.” If you can’t articulate your

thoughts clearly and concisely, then either you don’t understand

the material well enough and need to get better acquainted with

it, or your structure is not clear and concise enough and needs to

be reexamined.

As you might have guessed by now, we are zealous advocates

of good presentation structure. However, even the best-designed, most logical set of recommendations imaginable still needs evidence

to back it. Therefore, at this point, it’s appropriate to look at

the complement to your presentation’s organizational structure:

the exhibits you use to communicate your analyses.

These days, exhibits can be more than just charts on paper.

They can be three-dimensional scale models, product samples, or

Web pages, just to mention a few possibilities. Whatever form it

takes, a good visual aid can be an incredibly effective communications

tool. A picture is, after all, worth a thousand words. With

charts, you can express in one image data and concepts that might

take pages of text to describe. Not only that, but your audience

often will absorb your point more readily when they can see it

(and, in the case of physical models, touch it), rather than just hear

it or read it.

Whether you are using good old black-and-white charts or

rainbow-hued, three-dimensional computer animations with musical

accompaniment, the lessons that McKinsey alumni learned still

ring true. Most importantly, keep it simple. You’re trying to communicate

a set of recommendations, not show off an art project.

While you may sometimes want to put together pretty pictures to

impress your audience, the visual should not get in the way of the

message. If you actually want it to do so, then you are not trying to

communicate so much as obfuscate.

Each of your charts should have just one message for the audience

to absorb, and the simpler, the better. That way, not only does

your audience know what you’re saying, you do, too. It’s unlikely

that you’ll get confused in the middle of your presentation if your

slides have only one clear message. When Sylvia Mathews was

White House deputy chief of staff, preparing presentations for the

President, she kept that principle foremost in her mind. Hey, if it

works for the President of the United States . . .

One last, small thing about exhibits: if you are presenting data,

always document your sources. That way, if someone asks you

where you got your information, you’ll be able to reply. In addition,

if you dig out an old presentation a few years later, you’ll

know where to find the source.

As important as exhibits are, they’re not enough; you still need

a good structure in which to organize them. Otherwise, all you’ll

have is a collection of interesting facts with no overall theme.

Remember, each exhibit is a message, and those messages have to

fit into the logic of your structure, so your audience can understand

your idea—which is, after all, the point of the exercise.

EXERCISES

• Search the editorial section of your favorite newspaper for

an editorial that makes a specific recommendation. Write

down the points the author makes and the evidence he uses

to support them (e.g., we need more power plants because

electricity use is rising 20 percent per year). Next, put those

points into a logical structure as if you were going to use

them for a presentation. Does this presentation get the

message across? If not, why not?

• The next time you have to make a presentation, perform a

dress rehearsal and videotape it. If possible, give yourself

time to view the tape before the presentation. Watch the

tape as if you were a member of the intended audience,

knowing only the information that the audience might be

expected to know, including any handouts you intend to

give the audience. From that perspective, does your presentation

make sense? Were you convinced? Consider what

steps you might take that would improve the impact of

your presentation.

• Find a chart (possibly from a previous presentation) that,

the first time you looked at it, took you a long time to

understand. Redraw it in a way that makes the message

readily understandable. If the original contains multiple

messages, you may have to draw more than one chart.

Now show your new chart(s) to someone who hasn’t seen

the original. Can that person understand your version? If

not, why not?

BUY-IN

A presentation is only a tool; it is not an end in itself. A great presentation,

no matter how coherent its structure or how evocative

its charts, is useless if the organization doesn’t accept and act upon

its recommendations. The shelves of Fortune 500 companies are stacked with presentation documents that never got out of the

boardroom.

If your idea is to avoid a similar fate, you need to practice the

gentle art of generating buy-in: taking the steps necessary to maximize

the chance that your audience will accept your recommendations.

These steps involve bridging the information and trust

gaps between you. The information gap exists because you know

more about your findings than your audience does. Depending on

the relationship between you and your audience, the trust gap (if

it exists) could take any of several forms. Your audience may think

that you are too inexperienced to comment on their business, or

they may mistrust you because you are an outsider, are overeducated

(or not educated enough), or for any of a number of other

reasons.

In this section, we will describe two ways to bridge these gaps:

prewiring and tailoring. Prewiring means taking your audience

through your findings before you give your presentation. Tailoring

means adapting your presentation to your audience, both

before you give it and, if necessary, on the fly. Together, these techniques

will boost your chances of making change happen in your

organization.

THE McKINSEY WAY

On the subject of buy-in, McKinsey alumni have one principle

inscribed on their hearts: prewire everything.

Prewire everything. A good business presentation should contain

no shocking revelations for the audience. Walk the relevant

decision makers in your organization through your findings before

you gather them together for a dog and pony show. McKinsey-ites

have a shorthand expression for sending out your recommendations

to request comment from key decision makers before a presentation: prewiring. At McKinsey, consultants learn to prewire

every presentation.

Doing so has several advantages. It keeps you from getting

blindsided by major objections to your solution. It also helps you

build a consensus in favor of your solution among those who have

to approve or implement it. It gives you a chance to adapt your

solution to the political realities of your organization. Finally, it

acts as an additional reality check on your findings. These consequences

will improve the likelihood that your solution will be

approved and implemented.

LESSONS LEARNED AND IMPLEMENTATION

ILLUSTRATIONS

Because they want to be effective in their organizations, McKinsey

alumni work hard at getting buy-in. Practically everyone who

talked to us or returned a questionnaire mentioned the value of this

strategy. We boiled their experiences down to two lessons:

• Avoid surprises.

• Tailor your presentation to your audience.

Avoid surprises. In business, people don’t like surprises. By surprises,

we don’t mean getting an extra day off or a bigger than

expected bonus; we mean new information that forces decision

makers to change their plans or alter their procedures. That’s why

risky investments like small stocks have higher expected returns

than safe investments like government bonds. Prewiring reduces

your potential for surprises. It also acts as a check on your solutions

because those who review your recommendations may mention

something that you missed in your research and just might

change your results.

More importantly, discussing your results outside the context

of a large meeting increases your chances of getting those decision

makers to buy into your ideas. In the intimacy of a one-on-one

meeting, you open up your thought process to them in a way that

is difficult to do in more formal settings. You can find out their

concerns and address them. If someone takes issue with a particular

recommendation, you may be able to work out a compromise

before the big meeting, thereby ensuring that she will be on your

side when the time comes.

To illustrate just how useful prewiring can be, we present a

story told to us by Naras Eechambadi, now founder and CEO of

Quaero, Inc., but previously the head of knowledge-based marketing

for investment bank First Union. Naras used prewiring to

great effect when he joined First Union:

When I left the Firm I went to First Union to head up a

group called Knowledge-Based Marketing. At the time, it

was a very small group, and we wanted to grow it very

rapidly. I had to present a business case to John Georgius, the

president of First Union, to get the funding to scale it up over

a three-year period. Using the interviewing techniques that I

had learned at McKinsey, I spent my first two months talking

to people in different parts of the company to discover

their attitudes toward and expectations of our group. It was

a very useful exercise, just structuring the guides and making

sure I heard everybody. It was also part of the selling process.

Naras’s ability to listen resulted in multiple benefits:

I discovered that our group meant different things to different

people. Some people expected too much; some people

didn’t expect enough. I got a sense of where the political land mines were. Then, rather than just taking it to the president

directly, I went to all the heads of First Union’s business units

and told them what I was going to tell them, and got their

feedback. I got a lot of buy-in because of this.

I structured my business case just like a McKinsey presentation.

People were struck by how organized, how

thoughtful, and how forceful it was. We had scheduled a

two-hour meeting, we finished it up in an hour and a half,

and I had my acceptance by the end of the first hour—and

it was a substantial investment. I think I’m still famous at

First Union for being the guy who got money from John

Georgius on the first try. Nobody had ever done that before.

Even if you can’t get full agreement beforehand, prewiring will

help you make your case, as Paul Kenny found when he was

involved in a “battle of the presentations” at GlaxoSmithKline:

I was killing a controversial product, and I had to make a

very clear case to terminate it to some very senior champions

for this particular project. Fortunately, I had done the

groundwork beforehand. There was still resistance, but at

least I knew where it was coming from. The key people knew

the conclusions already. Some of them agreed, some of them

disagreed, but at least we knew where we stood. In my presentation,

I managed to bring together the key issues and get

my recommendation across.

In a situation such as Paul describes, prewiring is especially

helpful, because it forestalls wrangling over the facts of each individual

point. Your audience already knows where you are coming

from and can debate your ideas, rather than your facts.

Contrast Naras’s and Paul’s successes with someone who didn’t

take the time to prewire. In this case, a McKinsey alumnus was on

the receiving end of a presentation that was full of surprises:

I was on a Board in which the CEO didn’t keep us sufficiently

involved and informed. Over a period of a year, I

talked to him off-line a grand total of once; other directors

had the same experience. He needed to build alliances with

Board members to implement his vision for the company. He

needed to call Board members and say, “Here’s where I want

to take the company. I’d like to have your support for this

or that.” He should have understood who the power brokers

were and made sure they were informed. You don’t call a

Board meeting out of the blue on Thursday to figure out

whether or not you’re going to buy a company on Sunday.

The Board’s response was, “We went through that two

months ago and said we didn’t want to do it then. Now

you’re calling an emergency meeting and giving us four days’

notice?” Not a very smart thing to do without first building

support. We subsequently parted ways.

You can avoid a similar fate by prewiring whenever and wherever

you can.

Tailor your presentation to your audience. Tailoring means

adapting your presentation to your audience, whoever it may

include. Even if your audience comes from your own organization,

the people in it may not share your background or knowledge of

the subject matter. They may respond better to some styles of presentation

than others: formal versus informal, large presentations

versus intimate discussions, text-based versus audiovisual, just to

name a few. Some people want to go into the minutiae, while others

just want to hear your top-line arguments. If your presentation

is to succeed, you need to know your audience, its preferences, and

its background. Dean Dorman of Silver Oak Partners sums up our

alumni’s wisdom on tailoring:

“McKinsey-izing” your presentations, using lots of consulting

jargon—in most organizations, that gets you nowhere.

Everything has to be completely tailored for your audience.

A good leader knows his audience and how to relate to it.

Sometimes tailoring can even mean adjusting the structure of

your presentation. If you know your audience has, say, little

patience for supporting detail, what is the point of spending time

on it? Just move right to your conclusions. Here’s an example of

tailoring from Bill Ross at GE:

I still structure my pitches like we did at McKinsey—with

an up-front page, governing thoughts, and some discussion

of the background of the problem. Typically, though, I move

through them much more quickly. At GE, you don’t want

to spend too much time on that. You want to jump much

more quickly to the resolution. That’s fine—you just spend

less time on the charts that take people through the background.

It’s my version of “tell ’em what you’re going to tell

’em, tell ’em, and then tell ’em what you told ’em.”

The structure remains; you just highlight different aspects of

it for different audiences.

Tailoring means more than just knowing your audience’s likes

and dislikes, however. You should also learn their language—the

thought processes they rely on and the jargon they use. This is precisely

what Naras Eechambadi did in the example we discussed in

the section on prewiring:

The two months I spent listening to people in First Union

worked out very well for me because I got to understand

what kind of language people used within the company,

what kinds of things they were looking for, and what kind of

outcomes they wanted. For the purposes of my own thinking,

I used a McKinsey approach to solving the problem. But when presenting it to the company, I used terms that were

familiar to them, and I used an approach that was familiar to

them. I didn’t use the consulting methodology—the consulting

lingo, if you will—in my presentation; I used theirs. I’m

sure that’s one reason my presentation was so well received.

Bear in mind that not only do different organizations have different

languages; even different parts of the same organization can

have different languages. You would not want to give the same

presentation to, say, your company’s board of directors and the

drivers of your delivery trucks. It’s nothing to do with how much

smarter one is than the other, but that each group has different

expectations, different goals, and a different language. These differences

require you to tailor your message to each group.

IMPLEMENTATION GUIDANCE

The earlier you can start the prewiring process, the better. By identifying

and getting input from the relevant players early on, you

allow them to put their own mark on your solution, which will

make them more comfortable with it and give them a stake in the

outcome. You also give those outside your team a chance to expose

any errors you may have made or opportunities you may have

missed, and you still have time to correct them.

When it comes to tailoring, however, sometimes you have to

act on the fly. A good presentation structure will give you the flexibility

to change your pitch depending on the audience’s reaction.

You should never be so locked in to your script that you can’t deviate

from it if the occasion demands. Here’s an example, courtesy of

Bob Garda. In this case, he was actually a McKinsey client while

taking a sabbatical to act as the temporary CEO of a major metropolitan

utility:

One of the associates on the McKinsey team got an appointment

with me to cover the team’s analysis of one of our

problems and their initial recommendation. This young

woman came in, sat down, and gave me one of the best

lessons I’ve ever had. She said, “Let me tell you what I think

the problem is,” and started into her presentation. I said, “I

think I understand the problem; let me tell you why,” and

gave her my assessment in four or so points. She replied,

“That’s right. So I don’t need to waste your time telling you

what your problem is. Let’s just turn the first 16 pages over,

and we’ll go right to the solution.” I don’t ever recall hearing

a McKinsey consultant say that before. That was a wonderful

lesson for me.

Being flexible and, more importantly, respectful of your audience

will gain you a lot of points.

You should also be aware of the physical circumstances of your

presentation and adjust accordingly. You can deliver the same message

using very different styles according to the setting. For

instance, if you are meeting with three or four executives around

a conference table, you probably don’t need to use an overhead

projector; a laser-printed “deck” of your exhibits should work fine.

Conversely, if you have 50 people in an auditorium, you need to

use something that will allow you to reach the people in the nosebleed

seats.

EXERCISES

• Determine who the critical decision makers are for the

issues you are currently tackling. What are their agendas,

strengths, weaknesses, likes, dislikes, etc.? You might want

to write these thoughts down for future reference.

• Identify the differences between two or more groups that

interact with you regularly; they can be within your organization

or outside of it—as different as your board and the

Little League team you coach. Take a presentation you’ve

previously done, and tailor it to each of these audiences.

Ensure that your major message comes across in each

version.

CONCLUSION

For McKinsey, presentation is where the rubber meets the road. A

well-structured presentation combined with assiduous efforts to

gain the buy-in of the key decision makers helps boost the odds of

McKinsey’s recommendation being accepted. These tactics can do

the same for you.

You’ve given your presentation and had your recommendations

accepted, but that doesn’t mean the end of the work. A great

idea, once accepted, still has to be implemented by the organization

if it’s to have any impact. That, however, is a different process

and, perhaps, a different book.

Leaving aside implementation, the presentation of the team’s

final recommendation marks the end of the typical McKinsey consulting

engagement. New problems requiring McKinsey’s input

may arise with the client, but they will be the occasion for the start

of a new engagement. Likewise, in this book, we will now move

from the process of creating and delivering solutions for business

problems to the techniques required to manage that process for the

benefit of the client, the team, and yourself.

MANAGING YOUR TEAM

Over the past 20 years, the study of teams and leadership

thereof has become one of the cornerstones of management

theory. Most bookstores have at least one row (sometimes entire

sections) dedicated to providing advice on how to create and lead

a team. There is a reason for all of this advice: teams have become

extremely common in organizations these days. There is a general

belief that you can achieve more together than going at it alone.

Not all teams are successful, however, and managing them can be

difficult.

You would be hard-pressed to find an organization with more

team-based activity than McKinsey. When it comes to managing

those teams, depending upon whom you ask, the Firm is an excellent

example of either what to do or what not to do. We will

discuss both in this chapter. On the positive side, the Firm dedicates

a lot of time and energy to training its team leaders with special

training modules, conferences, and mentoring programs. Ciara

Burnham of Evercore Partners elaborates: “One obvious lesson

from McKinsey is that managing the team is a separate, distinct,

and important task. This is not widely appreciated in other

organizations.”

Although McKinsey works very hard at building teams and

team leaders, some say that the training comes too late in the game.

One alumna, now with another strategy consulting firm, complains

that some of the best team training came only at the higher

ranks in McKinsey. “Managing the team was one of the areas in

which I learned the least at McKinsey,” he says. “There was some

great material as you moved up, but in the early stages, it was

mostly on-the-job training.” He is not alone in his disappointment

with some of the ways McKinsey handled teamwork and leadership

training, as we will see in this chapter. Still, as evidenced by

the Firm’s great success over the past 75 years, it also knows how

to do some things right.

We will cover four major elements of team management in this

chapter: team selection, internal communication, bonding activities,

and individual development.

SELECTION

You can’t have a team without team members. That being the case,

the first step to building a great team is selecting the right people.

In this section, we will discuss ways to make sure that you get the

best possible people on your team. Sometimes, of course, the best

person for your team might not be part of your organization. For

that reason, this section will also look at ways to improve the efficiency

and effectiveness of recruiting.

Perhaps you are in a situation where you have no control over

the makeup of your team. In fact, based on our interviews with

McKinsey alumni, that is more often the case than not in the world

outside of McKinsey. Even so, at some future stage in your career,

you might find yourself in a position to select your own team, especially

if you follow the recommendations in the rest of this book.

THE McKINSEY WAY

Let’s review McKinsey’s approach to team selection and recruiting.

Getting the mix right. If you have the luxury of being able to

pick your team, give some deliberate thought to your selections.

McKinsey-ites make project assignment decisions based on the specific

needs of the engagement. They carefully weigh raw intellect,

experience, and interpersonal skills. Each aspect matters, but their

relative importance can vary from project to project (and team to

team).

If you have the opportunity, you should also try to meet any

potential new members in person before you make a decision. Try

to gain a sense of the chemistry among your team members. Don’t

just blindly accept others’ word on the quality of a potential teammate.

If at all possible, see for yourself.

Recruiting McKinsey-style. McKinsey wouldn’t be McKinsey if

it weren’t very picky about whom it recruits. The Firm, according

to its mission statement, strives to “attract, develop, excite, motivate

and retain exceptional people,” and it puts its money where its

mouth is. Recruiting at McKinsey is led by the partners and supported

by a number of full-time professionals and a huge budget.

Managing Your Team 129

TEAMFLY

Team-Fly®

McKinsey carries out its strategy by searching for the highest performers

in the best business schools in the world and has, over

time, expanded its sources to include the highest performers in

other schools, disciplines, and industries.

The recruiting process at McKinsey involves numerous, intensive

case study interviews. A candidate can expect to see at least

eight different consultants during the interview process, each with

a different case to solve. The Firm’s goal is to take a deep look into

each candidate’s mind to assess his analytical and interpersonal

abilities and decide whether the candidate would be a good fit.

Overall, the best strategy for making it through the rigorous

recruiting process at McKinsey is to have a strong academic

record, exhibit leadership and initiative, and knock the case interviews

out of the park by demonstrating the ability to approach a

problem in a structured manner and break it into its components.

(Reading this book might help too.)

LESSONS LEARNED AND IMPLEMENTATION

ILLUSTRATIONS

By its nature, McKinsey has certain idiosyncrasies that have limited

applicability outside its hallowed halls. For example, there is constant

turnover within teams as employees move from project to

project since each engagement typically lasts six months. Thus,

there is always a large pool of available consultants to choose

from, especially since team members can be plucked from any of

McKinsey’s offices worldwide. In recruiting, the Firm’s reputation,

high-profile client base, and generous pay provide a certain edge

that is difficult to match in, say, a midsize manufacturing firm’s

recruiting efforts.

Even so, McKinsey’s practices offer lessons that can help you

with selecting and recruiting team members. Our interviews with

McKinsey alumni suggest three additional pieces of advice that will

serve you well in this regard:

• Consider not just demonstrated ability, but potential

ability.

• Appreciate the value of diversity.

• Apply structure to recruiting efforts.

Consider not just demonstrated ability, but potential ability.

McKinsey’s starting point for the selection process is a simple one:

search for the best. Although this may sound intuitive, it is often

forgotten in the workplace. Jim Bennett, in his leadership role at

Key Corp., continued to make this a priority:

A piece of standard McKinsey lore that has stuck with me

in my post-McKinsey career involves the search for the very

best people you can find. You should be on a relentless

search for the best talent to suit the particular type of problem

you are solving. We rely on formal evaluation tools that

assess past experiences, strengths, and weaknesses. You also

need to listen to the informal network as well; that may shed

more light on the potential of the individual.

An individual’s experience has long been a key criterion in

recruiting efforts, whether it be with a particular industry, technology,

or problem type. In certain situations, this orientation is

necessary. You may need someone to hit the ground running on a

project, and the team may not have time to learn an industry from

scratch. McKinsey values experience and carefully screens candidates

based on it.

The Firm also values potential ability, however, and in most

cases, it prefers raw intellectual firepower to industry experience

(there are, of course, exceptions, such as “practice specialist” positions).

McKinsey believes that people can learn how to solve problems in a structured way, gather information about a company and

industry, and present ideas, but it is darn near impossible to make

someone more intelligent. Thus, the Firm seeks out bright individuals

and trains them. Academic achievement and performance on

case interviews weigh heavily in the selection process. Evan Grossman,

now a partner at Hook Media, has adopted a similar policy

in his new organization:

One of the important things I learned at McKinsey was the

importance of hiring smart people, as opposed to looking for

people with tons of experience in a given area. It is important

for us to hire people who can think logically. We do casebased

interviews to assess their ability in this area and to

ensure that they can be hypothesis driven.

McKinsey has managed to hire successful business consultants

who influence quite a few of the world’s largest, most successful

companies. Many of their recruits had little to no actual experience

in the area in which they are consulting. We believe that many

recruiting efforts in other organizations overemphasize demonstrated

performance in a narrowly defined area in preference to

bright, trainable individuals who lack such prerequisites. By casting

your net more widely, your organization may find future stars

who only need a chance to demonstrate their potential.

Appreciate the value of diversity. These days, “diversity” is all

the rage among recruiters, whether in business, government, or

academia. When it comes to team selection, we’re great believers in

diversity, too. We depart, however, from the mainstream definition

of diversity that values individuals based on their race, sex, religion,

or dining preferences. How “diverse,” after all, are two

men—one who happens to be white, and the other black—both of whom prepped at Groton, majored in economics at Harvard,

worked for two years on Wall Street, and received MBAs in finance

from Wharton? Our book is about ways to enable more successful

decision making in your organization, and that doesn’t happen

by counting individuals like beans. When we talk about valuing

diversity, we don’t mean some arbitrary program of affirmative

action; we mean diversity of experience.

Take McKinsey, for example. It is hardly a diverse firm with

regard to race, gender, or school backgrounds (the “average”

McKinsey consultant in the United States is a white male with an

MBA from a top-five business school). Over the past 10 years,

though, the Firm has launched study after study on how to diversify

its profile of consultants, and as a result, the mix is becoming

much more diverse—and for good reason. The focus of this effort,

however, has been to recruit more individuals with different backgrounds.

For example, the Firm is hiring an increasing number of

law students, Ph.D.s from all disciplines, and specialized industry

hires.*

Dan Veto was a leader of recruiting in the Pittsburgh office of

McKinsey. He claims that the real value of a team comes from

diversity and the right balance of “background, enthusiasm, and

strong intellect.” He uses headhunters but is also open to hiring

from “nontraditional” sources if that will help him assemble the

best possible team.

What are the actual benefits of diversity on teams? Beyond

simply broadening the skill mix of the team, diversity can bring

fresh perspectives to bear on the problem and challenge assumptions

that are too easily taken for granted. It can also make the

whole problem-solving experience more interesting for the team.

True diversity can strengthen the problem-solving process and

enhance the development of individual team members.

Apply structure to recruiting efforts. As previously discussed,

McKinsey follows a strictly formal recruiting process. The system

includes a dedicated team of consultants and professionals who

prepare detailed plans for each target school with itemized task

lists and budgets. They crunch the numbers on candidates, track

their status, and communicate frequently with those deemed hot

prospects. Whether or not one makes it through the recruiting

machine, one cannot dispute its efficiency and effectiveness. The

Firm prides itself on avoiding “recruiting mistakes.”

To improve your recruiting efforts, spend time developing a

consistent recruiting process. For instance, Bill Ross is working to

make recruiting at GE more systematic:

GE has a tremendous amount of talent in its ranks but also a

lot of variance. The recruiting effort, and the interview

process specifically, could use some work. This was a great

strength of McKinsey, and the result was an organization full

of 100 percent top-notch high-performing individuals. Systematic,

consistent recruiting helps in this regard. I have not

yet had the opportunity to fully transfer these lessons to GE,

but the need exists.

Not all companies need pay the same amount of attention and

resources to recruiting as McKinsey. They may not hire as many

people each year nor need the same amount of Olympian talent.

There is no disputing, however, that employees are a critical element

in every organization. Therefore you should apply some critical

thinking to your recruiting strategy. The key lesson to learn

from McKinsey in this regard is not one of formality, but rather the

importance of forethought and consistency.

IMPLEMENTATION GUIDANCE

In thinking through your own organization, you must answer two

key questions: Whom should we hire? And how should we hire

them?

To answer the first question, start with your business needs.

This goes beyond the basic job description. What is the most

important task that this person will be responsible for? Although

all positions involve numerous activities, assess the job using the

elevator test (described in Chapter 5), and boil the job description

down to a few sentences. For example, back at Acme Widgets,

you’ve been put in charge of the search for a new purchasing manager

for the Grommets Division. This person will be responsible

for ensuring, at the lowest cost possible, the delivery of the bulk

resins, intermediary plastics, and specialty polymers used in grommet

production.

Devise a list of key attributes that relate to successful completion

of the key tasks described in the first step. In the search for a

purchasing manager, you are looking for telephone skills, negotiation

ability, and a math or accounting background. Note that

familiarity with grommets is not on the list, as you believe that

Acme can adequately train the successful candidate in this technical

aspect. You would have a harder time developing the listed

skills if they were absent.

Now you know what kind of person you would like to hire.

The next question is, how do you find the right person? You need

a plan that identifies potential sources and details the tasks and

resources required. For the Grommets Division, you decide that a

two-person team, Joe and Robin, will handle the recruiting effort.

They are to focus on recent math and accounting graduates from

the local community college, preferably but not necessarily with

some experience in manufacturing. They will also have a contingent

budget for expanding the search to neighboring counties if they come up empty and the college agrees to give us a list of graduates

from the past five years. You also place an advertisement in

the local paper and run a posting on one of the leading Internet job

search sites because you never know who might turn up.

Now, consider the team that the new purchasing manager will

be joining, with respect to diversity. If everyone is of the same background

and personality, you may miss innovation opportunities

that more diverse combinations might stimulate. Say one candidate

came from a different country; he may have new perspectives on

interpersonal relations that might help in your dealings with suppliers.

Another candidate with, say, computer-programming experience,

might be able to improve your inventory management

system. It’s not enough to be open to candidates with varying backgrounds,

however; you have to seek them out, and the suggestions

in this section make a good starting point.

EXERCISES

• Identify your dream team. Start this exercise by completely

ignoring anyone who works for you. Think of your most

important tasks, and identify which ones require the help

of others. Then, using the techniques described in this

chapter, identify your specific business needs and lay out

the ideal team to assist in accomplishing your and/or your

department’s (and ultimately your organization’s) objectives.

After the exercise, overlay the team with your

current team and think through a strategy on how to best

fill the gaps.

• Develop a recruiting plan. For this exercise, the starting

point is an opening in your staff or a new position you

would like to create. Actually document your recruiting

plan, addressing the following areas: business needs, skill

requirements, recruiting team, sources, and budget.

COMMUNICATION

Communication is one of the most important elements of effective

team management. Teams can’t function without it, yet its importance

is often underestimated. There is no one best communication

style, however, so in this section we explore a few general communication

rules that should help as you develop your portfolio of

communication skills.

THE McKINSEY WAY

At McKinsey the importance of communication was expressed by

this principle: keep the information flowing.

Keep the information flowing. Information is power. Unlike

other resources, information can actually increase in value as it is

shared, to the benefit of everyone on your team. For your team to

succeed, you have to keep the information flowing. You don’t want

someone to make a bad decision or say the wrong thing to a client

just because he’s out of the loop.

Teams communicate mainly through messages and meetings.

Both should be kept brief and focused. In addition, remember the

unscientific but powerful art of learning by walking around—random

meetings to connect with team members outside of scheduled

meetings.

LESSONS LEARNED AND IMPLEMENTATION

ILLUSTRATIONS

All organizations develop a “communication culture” that governs

the type and frequency of internal communication, and McKinsey

is no exception. In most conversations at McKinsey, there are certain

words and phrases you can expect to hear (“at the end of the day,” “so what,” and “client impact,” for example). You’ll also

witness some common mannerisms (brief E-mails, grouping of

issues in threes, responses to requests within 24 hours). In generating

advice for other organizations, we feel it is more important to

discuss general rules rather than McKinsey specifics:

• Remember that you have two ears and only one mouth.

• It’s not just what you say, it’s how you say it.

• Overcommunication is better than undercommunication.

Remember that you have two ears and only one mouth. Dean

Dorman, who has worked for GE and two high-tech start-ups

since leaving McKinsey, is never at a loss for words. His outgoing

personality has served him well in his career and makes him fun

to be around, but he has also learned the value of listening:

In my latest position, as the president of Silver Oak, my listening

skills are proving to be invaluable. I have served on

the board for about a year, listening to the top-level discussions

of business issues at the company. My first task as president

was to conduct a “look, listen, and learn” tour

involving two- to three-hour interviews with more than 40

key people in the organization to better understand what is

going on. Before testing my hypotheses for a change program,

it made sense to see exactly where people stood.

Most of us speak more than we listen. In managerial situations,

this can cause problems. Not only do we risk making wrong decisions

because we lack important facts, but we also induce resistance

to change when the people involved feel their input is being

ignored. Although chief executive officers and others recognize the

importance of listening, how often do we formally cover the topic

in academic curricula or corporate training programs?

Alan Barasky, now at one of the world’s largest consulting and

accounting firms, PricewaterhouseCoopers, took this lesson to

heart:

As I think of important lessons related to teamwork, three

words come to mind: communicate, communicate, and communicate.

Before, during, and after each major decision,

milestone, project, or whatever. As I have learned, listening

adds more value than talking.

What would this world be like if we spoke half as much as we

listened? Who knows, less hot air might reduce global warming.

Less noise pollution would be another benefit. We might also learn

to pick our words carefully and just maybe become more thoughtful.

We will discuss a few specific listening tips in the implementation

ideas later in this chapter.

It’s not just what you say, it’s how you say it. Misunderstandings

are a plague in today’s workplace. The art of communication

is full of inferences, innuendos, and nuances that make it difficult

to convey our messages as we intend. Varying personality types,

cultures, and agendas compound this problem.

To reduce miscommunication among its teams, McKinsey

instituted a program of extensive interpersonal training. Three elements

of the training were role-play interactions in first-year orientation,

an advanced Interpersonal Skills Workshop (ISW) in the

second or third year, and extensive use of the Myers-Briggs Type

Indicator* for most engagement teams. These programs convey the

importance of flexibility in verbal communication.

We all have default communication styles rooted in, among

other things, our upbringing, education, and training. Our word

choices and tone of voice have great impact on our daily interactions

with coworkers and clients. We need to develop a conscious

understanding of our communication style—and sometimes

change it. Formal programs, such as those used at McKinsey, can

assist in that and help us develop a portfolio of communication

skills. Those around us—our parents, spouse, and friends—can

help, too.

Lee Newman, the executive vice president of on-line product

development at HR One, describes how he brought this tool into

his new organization after leaving McKinsey:

The ISW program at McKinsey had great impact on me. The

training was invaluable in developing my strategy for getting

the most out of people in the teamwork environment. One of

the specific tools I brought over was the MBTI [Myers-

Briggs Type Indicator]. We use this extensively, and it helps

us ensure that we leverage diversity in personality types and

work styles to our advantage.

By becoming more familiar with our own communication style

and understanding that other people have their own, different

styles, we can begin to see beyond the way people are saying things

to listen to what they are actually saying.

Overcommunication is better than undercommunication.

When grilling chicken, there is a point at which the meat is perfectly

done. Too much flame and it’s shoe leather; too little heat

means a quick trip to the emergency room. So it is with communication;

we often under- or overcommunicate our message, but

we rarely get it just right. And just like chicken on the grill, it’s

better to err on the side of too much rather than too little.

Let’s compare the costs of under- and overcommunication.

Undercommunication leads to lack of information, which in turn

leads to mistakes. It also hurts the morale of the team when members

are out of the loop and feel alienated. Even when we think

we’re saving time by not passing on information, we often end up

having to play catch-up later on.

Overcommunication generally costs less. Yes, busy executives

get annoyed when you give them too much information, but the

cost of that to the organization is low, unless it takes overcommunication

to an extreme. The marginal cost of including additional

people in the information flow is small, especially given the ease

of modern communication tools such as E-mail, voice mail, and

intranets.

Moreover, the costs of overcommunication are mostly “opportunity

costs”: executives who could be performing value-added

tasks have to spend incrementally more time filtering and assimilating

information. Compare this with the value-destroying potential

of undercommunication—clients or customers lost, accidents,

lawsuits—and you can see why we say that more information is

better than less. Of course, there are limits to this hypothesis, and

you should assess each situation carefully. But in general, if you

must err, do so on the side of overcommunication.

IMPLEMENTATION GUIDANCE

What specific steps can you take to improve communication in

your organization? First, formalize listening training. In our survey

of McKinsey alumni, we found that, in general, their new organizations

offered considerably less interpersonal skills training than

McKinsey does. Granted, not all companies are in a knowledge

industry per se, but corporate training is increasingly becoming a source of competitive advantage. The amount spent on corporate

training is huge, yet only a small portion of that training is in listening.

Still, it is available. External consultants with expertise in

listening or organizational behavior can help diagnose the state of

communication within a firm. McKinsey regularly uses external

consultants in this capacity.

Second, launch a personality profile program as part of your

organization’s human resource effort. As a first step in that direction,

find the right tool for your organization. McKinsey uses

Myers-Briggs, and most new consultants (and even their spouses

or significant others) receive this training very early in their careers.

The tool is extremely helpful in assessing one’s baseline personality

and communication style. Specifically, it measures the interaction

type, problem-solving approach, and sensitivity. You can use the

tool for a project team or department to assess the differences

among personalities and identify strategies for dealing with

conflict.

EXERCISES

• Conduct a Myers-Briggs evaluation on yourself (and your

spouse if you like). You can visit the Consulting Psychological

Press website for information on the MBTI at

www.cpp-db.com. Find your personality type and understand

the default communication style you possess. Consider

the best strategies for dealing with positive and

negative interaction between you and your coworkers

and/or your spouse. How can you expand your communication

portfolio and develop more flexibility in dealing

with others?

BONDING

The concept of team bonding is easy to understand yet often overlooked.

Why? Perhaps it is that the nature of business is to drive

forward with a relentless focus on results. We often find ourselves

in tough team situations because we overvalued the end product

and undervalued the process of getting it done. This section serves

as a reminder of the importance of putting a little time and energy

into team bonding—and a little is probably all that is needed.

THE McKINSEY WAY

Two lessons from McKinsey regard team bonding.

Take your team’s temperature to maintain morale. No one

likes to walk into a freezing-cold or a boiling-hot room. Taking the

temperature is an analogy that stresses the importance of staying in

touch with your team to maintain a sense of the level of motivation

and enthusiasm during the often-challenging course of a project.

People who attend to motivation levels should steer a steady

course, inform all team members of project status and their respective

contribution, treat everyone with respect, get to know each

other, and feel others’ pain.

A little team bonding goes a long way. When a team spends

14 hours a day, 6 days a week working together, the last thing team

members want to do in their precious remaining time is go on a

team outing to Disney World or to dinner at the most expensive

restaurant in town. Some of that is OK, but the balance is important.

Too much can be as bad as too little. Bonding can take place

at work, too, so try to lighten up at times.

That said, when you do plan bonding events, be strategic.

Focus on something that everyone will enjoy, and include significant

others when possible.

LESSONS LEARNED AND IMPLEMENTATION

ILLUSTRATIONS

More often than not, our alumni suggest that bonding is not the

norm in their post-McKinsey positions. So rather than jump right

in with the idea that retreats, fancy dinners, and family fun events

are the way to go, they suggested a more conservative approach

that still aims to increase performance through team bonding. This

boiled down to two lessons:

• Spend time together (but not too much).

• Reward well.

Spend time together (but not too much). Dan Veto brought a

high level of energy and new ideas for bonding to his new position

as the head of the strategy group of Conseco:

I am a believer in the need for team events, as we called them

at McKinsey. This company and many others are less

accustomed to that idea. It doesn’t have to be that expensive.

Even taking a dozen people out to dinner is relatively cheap

in terms of the cost/benefit when you consider the impact

on productivity and the morale boost of getting to know

each other better. I believe in this so much that there have

been instances when I have paid for events out of my own

pocket.

People take pictures at these things and put them up on

their desks, which helps us build our own group identity.

Some other departments are following suit but probably not

enough of them.

Maybe they should. Other examples from alumni support

Dan’s basic premise that some fun time outside of work can pay

major dividends and doesn’t cost that much.

Bonding doesn’t just have to be around a fun theme; you can

also bond while getting something done. McKinsey combines

incredible office retreats to exotic locations (usually involving a

golf course, ski resort, or beach) with developmental programs.

Kurt Lieberman, now at Reynolds & Reynolds, took this lesson

to heart:

One of the most effective tools I brought from McKinsey

related to team bonding and problem solving. I take the top

two levels of my organization off-site every other month for

a half day. Most of the work is done in subteams with each

team reporting its results. Sometimes each subteam solves

the same problem, sometimes not, but bonding always takes

place.

This example shows how team exercises can be work-oriented

and still contribute to bonding. You don’t have to go anywhere

fancy; just a new location can make a world of difference.

Our alumni also counseled moderation. In the words of comedian

Steven Wright, “You can’t have everything; where would you

put it?”* Too much bonding can overload the team. It even drove

one alumna to leave McKinsey:

The bonding expectations at McKinsey were tough at times.

In fact, this element of the lifestyle was one that I was ultimately

unable to resolve. The Firm expected far too much

outside of regular client work, such as recruiting events,

team dinners, Practice Development, etc. I worked too hard

on my client projects to be excited about leaving my family to go on a firm retreat or to spend an evening out entertaining

prospective analysts. The extracurricular demands spiraled

out of control because no one at a senior level focused

on how much of a burden [this expectation] was. The irony

is that the more successful one was, the more of the extra

work one had to do, and therefore the more likely one was

to leave the Firm.

It may be this concern that leads certain companies to avoid

planning social events altogether. We advise against that. These

events offer performance-enhancing activities that simply cannot

be replicated in most existing work environments. Our suggestion:

Plan few events, but plan them strategically. Focus on their timing,

type, and participant lists to ensure the highest impact at the

lowest cost.

Reward well. Steve Anderson, president and CEO of Acorn

Systems, a technology consulting company, found that his new culture

was even more intense than McKinsey’s. Still, he told us, the

rewards were greater as well:

Acorn is more intense than McKinsey, and thus we have to

work hard not only to build company morale, but also to

foster team bonding. Our teams hardly get any sleep on the

road. So, to top it off, we have very nice, long dinners, stay

in comfortable hotels, and party hard. It is amazing

how consultants thrive in this intense culture. We also have

other rewards such as regular office dinners and Fridays in

the office for everybody. Nobody works on weekends. We

stole almost all these winning reward philosophies from

McKinsey.

Of course, not all organizations are this intense (thank goodness).

Different types of rewards will work in different companies.

As examples, some alumni mentioned bonuses, extra days off, trophies, and publications as rewards in their new organizations.

These rewards need not be financial. Often, simple but widespread

recognition programs work even more effectively than financial

incentives for motivating performance.

IMPLEMENTATION GUIDANCE

When designing a program of bonding activities in your organization,

bear in mind two things: culture and resources.

As with so many management topics, the context of the culture

of your organization (or department or team, as cultures can vary

widely within organizations) will play a major role in how best to

promote bonding. There are so many variations in norms and

acceptable behavior—a team night out at a typical Silicon Alley

dot-com might be scandalous at, say, Proctor and Gamble—that

we wouldn’t dare to suggest exactly which type of activity would

work best for you. Still, we believe that most organizations could

benefit from a bit of loosening up—not that they should forget

about strategic planning or financial controls, just that people

should enjoy themselves a little more in the workplace. We also

suggest that you consider some events beyond the annual company

picnic or golf outing: go-carting, bowling, skiing, paintball, anything

to take people out of their routine and help them bond.

Once you’ve come up with the ultimate bonding program, you

still have to get the resources, that is, the money, to pay for it.

Paintball for 300 people isn’t cheap. Frankly, we assume that a certain

amount of bonding improves performance within the organization.

This seems intuitive to us and, since quite a number of

companies spend a lot of money on such activities, to many corporations

around the world. Nevertheless, if your organization

doesn’t devote many resources to bonding, then you will probably

have to make a case for the benefits of bonding that will convince

whoever controls your organization’s purse strings.

How would you go about this? If the decision makers in your

organization respond well to qualitative arguments, then you could

put together a proposal based on the intuitive argument that bonding

leads to better performance. If, on the other hand, your culture

values quantitative arguments, then put together an analysis of

the financial benefits of enhanced performance. If you can find an

example of best practice in your industry or organization—for

example, one business unit that is especially good at bonding—

use it to bolster your argument. You might also try to launch a

modest pilot program. If you can show that the program yields

benefits via improved performance, then you have a launching pad

from which to expand your bonding program throughout the

organization.

As you plan your activities, remember the moderation message.

For example, plan just a few key events over the course of a year.

Involve as many people in the planning process as possible (even

send surveys for ideas). The exposure will increase interest and

eventual buy-in. Another helpful tip is to evaluate employees’

satisfaction with different types of events and continually focus

on the few events that are most appreciated. Finally, don’t forget to

have fun.

EXERCISES

• Assess the rewards system in your organization. Create a

list of all of the reward mechanisms your organization

uses. Be sure to include financial and nonfinancial rewards

in the summary, but track them separately. Then rank the

items on each list, using the following question as your

decision criterion: How much does this mechanism mean

to me in terms of motivation and team bonding? If possible, have others in your team or department go through the

exercise as well. Try to identify a few reward mechanisms

that are most powerful. If you are in a position to do so,

consider whether you can request more resources to ensure

that the most powerful mechanisms stay in place.

• Develop a social plan for your team or department. Use the

advice in the Implementation Guidance of this section as a

starting point. It may be helpful to include others in the

planning process. Focus on identifying the types of activities

and timing that would be most appropriate for your

organization. Include as many details as possible, and refer

to this plan as you launch your program.

DEVELOPMENT

We believe that to be satisfying, a job should provide ample opportunities

for the employee to develop. This development comes not

only from experience but also via a process of objective setting,

performance assessment, and feedback that helps the employee to

meet both her career goals and the objectives of the organization.

The original outline of this book—our initial hypotheses, if you

will—did not have a development section. After reviewing our

alumni interview notes, however, the topic surfaced as one of the

most important lessons that alumni took with them—and one they

are actively implementing in their new organizations. By the end of

this section, we hope that you will realize that one of the most

important responsibilities you have in managing teams is ensuring

the individual development of team members.

THE McKINSEY WAY

McKinsey intensively trains its first-class consultants to solve business

problems. Development at McKinsey is so ingrained in the

culture that it has become second nature.

LESSONS LEARNED AND IMPLEMENTATION

ILLUSTRATIONS

We dissected development at McKinsey and interviewed alumni

to find ways that other organizations can evaluate and enhance

their development programs. Our McKinsey alumni were very

clear in articulating how they have transferred McKinsey lessons in

development into their new organizations. They gave us two broad

guidelines:

• Set high expectations.

• Evaluate regularly, and make it balanced.

Set high expectations. At the beginning of our interview with

Jim Bennett, who was in charge of retail banking at Key Corp. at

the time, high performance aspirations became the central topic

of the discussion:

The single most important McKinsey tool I have in my new

position is the power to set very, very high performance

aspirations and drive the organization to achieve them.

For example, my team and I established a $100 million

cost reduction target and made it public. Quite a goal, but

we are going after it aggressively, and it is amazing what you

can accomplish when you do it in a “take no prisoners”

manner.

What applies to the organization also holds for the individuals

within it. High expectations lead to high results; low expectations yield low results. Development equals change, something

many are uncomfortable with. By setting high goals (with implicitly

high rewards for their achievement), managers help overcome

the inertia that results from the fear of change. Setting a

“stretch” target that appears—at least, at first—unreachable forces

the employees and the organization to deploy all their creativity

and energy toward reaching the goal. Exploring new ideas and

options (“thinking outside the box” in MBA parlance) can be a

liberating experience for the individual and a profitable one for the

organization.

Evaluate regularly, and make it balanced. Feedback is a double-

edged sword. On one hand, we have a strong interest in finding

out what people think of us, as a means both to improve ourselves

and to feed our egos. On the other hand, feedback can make us

uncomfortable when it forces us to confront our weaknesses. Handled

properly, feedback is one of the most important development

tools around, and McKinsey offers some good lessons on doing it

well.

The Firm has instituted a number of formal developmental

tools that may transfer well to your organization. First, each consultant

is assigned a formal mentor, the Development Group

Leader (DGL). This person is usually at the partner level and is

responsible for monitoring a consultant’s progress as she moves

through the ranks of the Firm. The DGL has access to all of a consultant’s

performance reviews and discusses them in detail with

other members of the engagement team.

The Firm also uses a formal evaluation form that is completed

by the EM or partner for each consultant after each project. It

includes a grid of key skill areas (analytical, interpersonal, leadership,

etc.) with specific expectations as to where a consultant at

each level should be in each area. Certain McKinsey offices have

implemented 360-degree feedback programs. In these programs, each consultant is evaluated by anyone who comes in contact with

the consultant, including subordinates, peers, supervisors, and

even administrative personnel. Many teams at McKinsey also use

Team Evaluation Performance Reviews where they explicitly evaluate

their performance working together. There is no shortage of

feedback at McKinsey; in fact, some may argue that there is too

much (as we discuss at the end of this section).

McKinsey alumni found these techniques very effective. Some

of them miss that feedback in their current organizations. Ron

O’Hanley, now the president of Mellon Institutional Asset Management,

reflects on his attempts to develop similarly intense feedback

channels in his organization:

Real teams have open, unimpaired feedback loops. This is

very hard in a traditional corporate hierarchy. Open feedback,

particularly about me, has become a way of life

around here.

Barbara Goose, now the vice president and associate marketing

director at Digitas, brought some of the specific tools with her:

I have used tools similar to the Team Evaluation Performance

Review effectively with my teams. Other organizations

that I have been a part of tend not to be as thorough

with team selection, evaluation, and development. The

Development Group Leader (at McKinsey) played a large

role in this—and that is often missing at other places. You

really felt at McKinsey like you had an advocate.

This hard-hitting, constant evaluation and development advice

is not for everyone. Even though we are all on a developmental

journey, the bumps along the road can be uncomfortable at times.

One of the areas that some say McKinsey misses is the balance.

When it comes to comments, there are two considerations: quantity

and type (i.e., positive or negative).

The quantity issue comes down to how many comments are

enough. Giving too few comments leaves employees in the dark,

relying on their self-evaluative skills to lead them to proper developmental

moves. Too many comments also can have a negative

effect on motivation. The employee may feel that there is too much

pressure and become so consumed with the evaluation that other

job responsibilities become secondary.

IMPLEMENTATION GUIDANCE

As we said at the beginning of this section, development is a continuous

cycle. When you are in charge of someone’s development—

when you are a mentor—you have to set objectives for that person

that meet the needs of both the organization and the individual.

Then you must assess the employee’s performance and provide

feedback. Based on that feedback, you set new objectives, thus

starting the cycle over again.

The first step, as so often in this book, is to identify your organizational

objectives. What are the primary tasks for which your

employees (or you, for that matter) are responsible? In consulting,

it boils down to analytical skills, teamwork, and presentation.

Develop aggressive target expectations in each area for everyone in

your organization. Consider also the goals of those you are mentoring.

You should meet with them to establish their expectations

of their role and career and incorporate those expectations into

whatever objectives you set.

Next, consider how you communicate these expectations to

employees in the organization. Is there a consistent and formal

program, or is it loose, relying on word of mouth and advice from

more-experienced employees? Both types of systems have strengths

and weaknesses. The choice between them comes down to the culture

of your organization. Chances are you know which method

suits your corporate culture best.

Some organizations are particularly hard to change because

their employees have developed routines and even entire personalities

around the formal and informal procedures and incentive

programs in their organization.

Performance assessment should meet three criteria. It should be

objective, be based on expectations that were set in advance, and

account only for events that were within the control of the person

you are mentoring. Objectivity is paramount if the mentoring

process is to be of any benefit to the employee. You won’t necessarily

like everyone you mentor, but you musn’t let personal feelings

get in the way of doing your job. In addition, if you don’t

communicate your expectations ahead of time, the individual will

be flying blind; you can’t expect him to meet goals under such circumstances.

And don’t blame the person you mentor for things

beyond his control: if the client goes bankrupt or the economy

plunges into recession, that’s unlikely to be his fault.

Finally, think about the frequency and type of feedback in your

organization. Many people automatically assume that development

comments need to be negative, pointing out what is wrong

and then suggesting ways to change. Positive comments, however,

play a critical role in development as well.

Let’s explore the impact of positive and negative comments on

performance, using a graph to illustrate a hypothesis based on our

own experience. As shown in Figure 6-1, the performance curves

vary based on the nature of the comment. For simplicity, think negative

or positive; a negative comment points out a weakness, and

a positive comment recognizes a strength. By the way, negative

comments that are communicated in a nice tone are not positive

comments.

The messages from this chart and hypothesis are as follows.

First, a few negative comments are important to influence performance. The absence of negative comments does not assist in development

(and if we look hard enough, all of us have areas we can

develop). It doesn’t take too long, however, for the slope of the

negative-comment curve to reverse. As humans, we can only

absorb and appreciate a certain number of negative comments

before we begin to lose motivation and become demoralized. The

positive comments represent a more gradual slope, meaning a few

more positive comments are necessary to truly influence performance.

However, the impact of more positive comments continues

for a longer period of time. Eventually the positive comments

reach a “B.S. point,” the level at which the comments appear

superficial or unbelievable.

Overall, the message of this graph is that balanced feedback is

best. It is important to point out weaknesses and development

opportunities but to avoid going overboard and making every

comment a “suggestion for improvement.” Positive comments play a critical role as well, and all of us could use a few more way to gos

and attaboys. Again, balance is key. Too much praise can have

detrimental effects as well if it appears insincere—especially if it

never identifies any areas for improvement.

EXERCISES

• Take a self-development journey. Examine your own developmental

needs. We recommend involving others (direct

reports, peers, spouse, friends, etc.) in the process. For help

with this process, try one of the packaged tools that have

been developed for this use (such as those available from

the Center for Creative Leadership and the Franklin Covey

Institute). Your goal: an honest assessment of your

strengths and weaknesses, not just as you perceive them,

but also as others perceive them. In addition to identifying

your development portfolio, you should also identify one

or two major aspects to focus on (if you try for more, you

may hit the demoralization level).

• Identify the development needs of your direct reports.

You interact with them every day, but have you spent

much time actually reflecting on their development needs?

And try to think from their perspective, not just yours.

Think of the person holistically, not just in terms of your

requirements. Create a list of positives and negatives

(opportunities for improvement, if you prefer) for each of

your direct reports. You may ask them to create their own

list, as well as one for you. Compare theirs with the list

you made. Try to avoid doing this over lunch, lest a food

fight break out.

CONCLUSION

The study of leadership and team management has received significant

attention in academic and practitioner study over the past

50 years, and for good reason—a little improvement in this area

can yield large results. Accordingly, most of the concepts presented

in this chapter are not new. Instead, our focus has been on pulling

out the nuggets of wisdom that McKinsey consultants offer, based

on their extensive experience in teams.

Team management is often more of an art than a science, and

the specific recommendations in this chapter may not apply in all

situations. Even so, the general themes of careful selection, constant

communication, selective bonding, and purposeful development

should serve us all well.

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