In a conversation with HBR, McKinsey & Company's Global Managing Partner, Bob Sternfels, discusses the firm's evolution over its 100-year history. He reflects on navigating challenges, restoring reputation, adapting to AI, and shifting towards an outcomes-based model.
Since assuming the role of Global Managing Partner at McKinsey & Company in 2021, Bob Sternfels has faced a series of significant challenges. He has been actively working to restore the consulting firm's reputation, particularly in the wake of scandals, including its involvement in the U.S. opioid crisis. Simultaneously, he is focused on refining the firm's client selection criteria and governance protocols, aiming for greater rigor while avoiding internal friction among McKinsey's partners.
Furthering the firm's adaptation to the burgeoning AI era, Sternfels and his partners are leading an organizational transformation. This strategic shift involves reducing the emphasis on traditional consulting services in favor of a greater focus on delivering tangible outcomes for clients. Sternfels, who commenced his career at McKinsey as an associate 32 years ago, discussed these challenges with HBR editor at large Adi Ignatius. The conversation explored how these challenges are reshaping McKinsey as it celebrates its centennial anniversary. The conversation provided valuable insights into the firm's evolution and its vision for the future of consulting. Sternfels shared his perspective on how McKinsey is navigating the changing landscape, embracing innovation, and adapting to the impact of AI. Sternfels stated that McKinsey creates many new ideas, with over a billion dollars invested in innovation each year, in IP, new ideas, etc. He emphasizes the collaborative approach with clients, focusing on helping them achieve goals beyond their current capabilities. One key area of innovation is AI, which is transforming the way businesses operate. Sternfels highlighted the importance of organizational change in successful AI implementations. He pointed out the need to redesign workflows, potentially flattening organizational structures, and fostering alignment between CFOs and CIOs. AI is impacting McKinsey's internal dynamics, affecting headcount, pricing, productivity, and profit margins. The firm is integrating AI agents to augment its workforce, with the aim of having every employee supported by one or more agents in the coming years. This shift requires McKinsey to adapt its business model, moving away from a purely advisory and fee-for-service approach towards an outcomes-based model. In this model, fees will be tied to the impact that McKinsey’s work delivers for clients, aligning their interests more closely. This approach is seen as crucial for tackling complex issues related to technology and enterprise change, as AI capabilities continue to advance. Sternfels anticipates a future where clients will seek consulting services to address increasingly intricate challenges. He believes the focus will be on helping clients achieve ambitious goals, such as doubling their market capitalization. This suggests a continued evolution in the nature of consulting work, with a greater emphasis on strategic, outcome-oriented solutions. Sternfels explains that McKinsey has evolved and adapted their work over the years. They solve much more complicated, interconnected questions that clients cannot do themselves, which is the next evolution. What will clients pay McKinsey for? To find ways to double their market cap.
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