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The
MarvinLast Bower and his Quest for Pro f e s s i o n a l I n d e p e n d e n c e L ionBy Jac k Sw e e n e y
12 Fe b ruary/March 2003 C o n s u l t i n g Tri b u te
Before En r o n bought $27 million in c onsulting services from its audi t o r ... before Eliot Spitzer, New York State attorney general, subpoenaed the e-mails of research analysts at Merrill Lynch ... before the audit and compensation committees of dozens of major corporations had their own inherent conflicts exposed to an irate investing public ... Marv i n Bower was pleading the case for independence to James O. McKinsey onboard a New Yo r k - bound Pullman car. Or was it Chicago-bound? No matter — it was still Bower who nearly seven decades ago bellowed the battle cry for independence, and it was he who filled the trough where corporate reformers seek to satisfy their thirst.
McKinsey was dead, to begin with. There is no doubt drudgery of bookkeeping, and arguably helped fuel the rise of whatever about that. the age of the accounting consultancy. It is just such a revelation On Wed n e s d a y , December 1, 1937, The Chicago Daily that begs this question: If McKinsey had not died, would the Tri b u n e ran the words “Head of Field’s Store Dies” across the story of the consulting profession, and for that matter the top of its front page in 70-point type. accounting profession, be different? For those who belong to And that rainy December day is as good a place in time as the cult of McKinsey, the answer is an emphatic “Yes.” any to begin telling the tale of his quest. For it was likely that Still, you can’t help but wonder whether Bower’s quest to on this day and not before it, Marvin Bower finally expunged have McKinsey & Company occupy his profession’s high the fanciful notion that his brilliant and charis- ground would have in some way been com- matic mentor, James O. McKinsey, would p r o m i s e d had he continued to operate under someday soon return to his firm, and that they the spell of the enchanting Mr. McKinsey. In a would together build a management consultancy wa y , McKinsey’s death fired the starter’s pistol unlike any before it. of a competition that would be scored not by Those familiar with McKinsey & greater revenue or profits, but by the professional Co m p a n y ’ s history up to this point can likely ambitions of both accounting’s and consulting’s attest to just how doleful a day this must have leaderships. Over the decades that followed, been for the 34-year-old Bower. You wonder di f ferent champions of professional standards how it did not become the proverbial third and would emerge in both fields and attempt to final straw of Bower’s fledgling consulting move their respective occupations to a plane M a rvin Bower career — the first being his mentor’s initial (1903-2003) above other forms of business, a level where departure from the firm, and the second being people aspire to something more than money- the firm’s subsequent merger with another. making, and where a person is entitled to a This last had been a move that vastly altered degree of respect or honor. the firm’s makeup, and seemingly challenged the widely held Among those business leaders courageous enough to lift belief that the two men were of one mind when it came to the the sword of professionalism in the first half of the 20th century, field of management engineering — or what later became many would lose heart early, others would passively watch th e i r known as management consulting. visions wither away, and still others would persevere only to lose “T oday is not very different from then,” Marvin Bower told their professional fortunes in the industrial carnage that Enron Consulting Magazine, some four months before his recent wrought. In the end, hardly a champion has been left standing. passing. Bower’s thought is not an original one. Phalanxes of pundits have routinely put forth the notion that the post-Enron era — punctuated by business failures and investor outrage — The Emancipation of the Bookkeepers shares much in common with the early 1930s, a period when Marvin Bower was born August 1, 1903, in Cincinnati, Ohio. the harsh lessons of the Great Depression began to chasten the He grew up in Cleveland, where his father worked closely with greedy revelers of the 1920s. the legal community, a healthy network of attorneys that But when issued by Bower, the idea packs a wallop. For it played no small part in influencing the future career aspirations was “then” that he first voiced his objections to the marriage a father held for his son. of consulting and accounting — a point of view that some- And so it was that after graduating from Brown University times put him at odds with his esteemed mentor, a man whose in 1925, the book-minded Bower took his father’s advice and thoughtful books had helped emancipate accountants from the headed off to Harvard for law school. During the summers he
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worked at a Cleveland law firm, where he recalls discovering that it foreshadows Bower’s future path — where he meets how “dull” he found most legal work. Nevertheless, as and is recruited by one of the great minds of business. The g r a d u a t i o n neared, Bower applied for a job with a top law firm second reason is that it subtly links Bower’s name with one in Cleveland — Jones Day Revis & Pogue. The firm turned credited not only with founding a firm, but also with helping him down, so back to Harvard he went. This time he returned to establish a profession — a higher calling, and one that likely for a degree in business, and it was at the conclusion of his first appealed to Bower’s maturing ambitions. year of business school that he began telling friends that “Mr. By the early 1930s, Arthur Andersen had one of the best- Arthur Anderson” had offered him a job. known names in business given he had been managing the firm This oft-told anecdote had to do with Bower landing a he founded for more than 20 years. In 1932, the 46-year- o l d summer job at Morgan Stanley in New York. Not having contacts a c c o u n t a n t served as president of the board of trustees of at Morga n ’ s Wall Street address, Bower lifted the name Ar t h u r Northwestern University, where he lectured on such provocative Marvin Anderson out of the company’s directory and asked a topics as “The Accountant and his Clientele.”
M arv i n B o w e r, McKinsey & Co m p a n y , 1933 1935 1 9 4 2 and • While visiting a Jones Day client in • James O. McKinsey leaves the • A rth u r Chicago, Bower meets James O. firm upon accepting appointment A n d e rs e n M ile s tone s McKinsey, who invites him to join his as chairman and form a l i z e s seven-year-old consulting firm with chief executive co n s u l t i n g in the Quest for offices in Chicago and New York. of Marshall function Inde p e n d e n ce Field & with the establishment of its Company. Administrative Accounting Division. 1903 • Marvin Bower is born August 1, in • James O. Cincinnati, Ohio. McKinsey & 1946 Company • Pr ice Wate r house & Co. form a l i z e s merges with consulting function with th e Scovell, Wellington & Company, a e stablishment of non-audit fir m largel y focused on accounting. s e rvices department. The n ew fi rm's manage m e n t c o n s u l t i n g business will operate under the name McKinsey, Wellington & Company. 1926 1947 • James O. McKinsey & • Upon the death of Co mp a n y, Acc o u n ta n t s Arthur Andersen, and Engineers is 1937 Leonard Spacek, a es tab l i s h e d . • James O. McKinsey dies in partner known to champion Chicago of pneumonia independence, is named AA’s upon returning from a tour second managing partner. 1928 of Marshall Field’s mills. • Bower graduates from Harvard Law School. 1934 1939 1950 1930 • Bo wer is named manager • The eastern offices of • Bower is named McKinsey & • Bower joins the Cleveland office of of New York office, where McKinsey, Wellington break off Company’s fourth managing law firm Jones Day, where he works he expunges audit work to form McKinsey & Company. director. During his tenure as MD, for fabled legal giant Frank Ginn, a f rom its menu of serv i c e s . The Chicago office becomes the firm will see vas t national and champion of independence. McKinsey, Kearney & Company. in te r national expansion.
guard to query Mr. Anderson for an appointment. The middle “The accountant today is coming to be regarded as a business name became Bower’s “scientific basis in choice,” he explains ad v i s e r , whose counsel is sought not only at the time of the with careful detail in his 1997 treatise, The Will to Lead. Mr. periodic examination of accounts, but continuously during the Anderson subsequently hired Bower. ye a r ,” Andersen expounded during a popular lecture series. While Arthur Andersen the accounting wu n d e r k i n d sp e l l e d “In fact, it is not too much to say that the accountant of his last name differently than the Mr. Anderson who hired today who is most successful, in the broadest sense, is the one Bo w e r , the idea of being taken on by the famous accountant’s whose clients rely on him for advice on accounting and business near-namesake likely held a deeper meaning for the future problems just as an attorney is looked to for advice on current consultant. No matter how minor a happenstance it may relate, legal questions which arise,” he continued. the anecdote deserves mentioning for two reasons: One is Anyone familiar with the influential business writings of
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the times may have surmised that Andersen had merely work and careful planning, is the one who is now chosen b o r r o w e d a page from the insightful writings of James O. for the presidency of business concerns.” As one of scien- Mc K i n s e y . Four years younger than Andersen, McKinsey also tific management’s most outspoken disciples, McKinsey kept a foot in both the academic and business worlds. Wh i l e e m p h a s i z e d that the sales department would no longer be the his accounting and consulting firm had been in operation si n c e training place for future leaders. It was this theme (the 1925, he had served as professor of business policy from 1 9 2 6 revenge of the nerds) that began to resonate in the minds of to 1935 at the University of Chicago, where he had previously corporate leadership, and recast bookkeeping — a term he headed the accounting department. disliked — as being more comprehensive. Going forward, Among the affiliations that perhaps best underscores business leaders needed to understand the collecting and pre- Mc K i n s e y ’ s fondness for both teaching and accounting was sentation of corporate data to incorporate it into their manage- his membership in the American Association of University ment strategies. “The student is taught to look at the records Instructors in Accounting, where he would serve as president. from the point of view of the manager rather than the point of
1972 1984 • Citing conflicts and a ch a l l e n ge to • Ar thur Andersen’s consulting business gen e r - M c K i n s ey & Comp a ny’s indep e n- at es more p ro fit than its auditing b u s in e s s 1 9 6 7 dence, Bo wer jumps o ff the sidelines for the first time in the firm’s history. • Bo wer ret i re s a gain to ch a l l e n ge an amendment fr om his post that would soften a policy that pro- as managing h i b i t s fi rm dire c to rs from sitting on 2001 di re c to r , but pledges to remain c o mp a ny boards of dire c to rs . • All U.S. public companies are required to active in the firm and the fig h t disclose in their proxy statements fees paid for prof essional independence. to their audit firms for non-audit work. 1973 2002 • After AMCF admits publicly held • Sherron Watkins (Enron VP and whistleblower) was a former accountant firms into the association, wi t h AA, while Jeff Skilling (Enron's embattled CEO) was a for mer consultan t 1969 Bo wer engineers the withd r awal with McKinsey. While many perceived a lack of independence on the part • Citing a challenge to the firm’s of McKinsey & Company from of AA for selling non-audit services to an audit client, McKinsey may have independence, Bower jumps off AMCF’s membership. the sidelines to speak against a dodged a bullet by not having one of its partners sitting on Enron's board. joint venture proposal between McKinsey & Company Arthur Andersen vs. M c K i n s e y ? and securities firm 1977 Donaldson, Lufkin & • Mc K i n s e y & Compa n y narrows Jenrette. McKinsey its provision for exemp t i n g directors give venture p a rt n e rs from its policy of a thumbs-down. not perm i t t i n g partners to serve on boards.
1979 • Harvey Kapnick, Arthur Andersen’s third leader, resigns after AA p a rt n e rs fl a t ly refuse his pro p o s a l to spin off con- s u l t i n g s e rv i c e s 1970 f rom auditing. • C h a mpion of independence Harvey Kapnick dies at 77 years of • Booz Allen Hamilton sells shares age, only days before Arthur Andersen relinquishes its pe r mits in all to the public stat es where it was licensed to practice public accountan c y .
But McKinsey’s most lasting and impactful contribution to view of the bookkeeper,” McKinsey wrote in his book business was through his writings, published in nearly a dozen Bookkeeping and Accounting. books and many more pamphlets and bulletins. Of those texts, Without a doubt, the clarity and consistency with which perhaps none penetrated the business minds of the day as McKinsey put forth his point of view began to broaden the deeply as Bu d g e t a r y Control . Published in 1922, the book role of the accounting profession in the minds of upper remains a classic to this day, having broadly exposed the management and at the same time began to expose opportunities u s e f u l n e s s of budgeting controls in managing enterprises. for a new breed of business adviser. While accounting houses In a speech delivered in 1925, when he served as head of of all sizes began enlarging their non-audit services to clients, the University of Chicago’s accounting department, the larger accounting houses, perhaps given their exposure to McKinsey said, “The scientific man, accustomed to research the regulatory powers of the day, moved cautiously. H o w e v e r,
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by 1942, Arthur Andersen had formalized its consulting to serve as the formidable retailer’s chairman, it was perhaps function in what became known as the administrative services felt that McKinsey’s advisory business was not worthy of department. Four years later, Price Waterhouse & Co. did the mention. Besides, shortly after accepting the board’s invitation, same. McKinsey opted to merge the firm then known as James O. It is perhaps an ironic footnote that what may have been McKinsey & Co. with an accountancy known as Scovell, Mc K i n s e y ’ s greatest contribution to business is seemingly at Wellington & Co. — a move that gave the new company a sp l i t odds with the contribution of the man who has most influenced pe r s o n a l i t y . Going forward, the enterprise would be composed the makeup of the firm that bears the McKinsey name. For of two partnerships: Scovell, Wellington & Co., accountants, while few people did more to unshackle accounting profes- and McKinsey, Wellington & Co., management consultants. si o n a l s than James O. McKinsey, fewpeople would work harder Bower had just been promoted to manager of the New Yor k than Bower in the coming years to put the shackles back on. Or of fice only months before the merge r , and had taken some at least, keep the accountants out of the boardroom. pride in the fact that he had convinced McKinsey to do away with that offi c e ’ s auditing function. Following the merge r , B o w e r’s firm would be attached to a sizable accounting The Ghost of December Pa s t e n t e r p r i s e , with 11 offices including such cities such as And so McKinsey was dead. Again, with credit to Dickens: Boston, New York, Chicago, and San Francisco. Wh a t ’ s more, This fact must be distinctly understood or nothing wonderful Bower would now answer to a certified public accountant by can come of the story we now re l a t e. For it was on one the name of Horace “Guy” Crockett. Fifty-five-year- o l d bleak December morning that one partner’s death may have Crockett had headed Scovell, We l l i n g t o n ’s New Yo r k spurred another’s epiphany, or as we have already suggested, c o n s u l t i n g practice and was now named the manager of the that McKinsey’s death may have broken the spell he had c o m b i n e d fi r m s ’ New York consulting practice. cast upon Bower. The image of Bower receiving the news of McKinsey’s Years later, Bower told colleagues that at the time death while sitting in a office surrounded by accountants is McKinsey took the helm of Marshall Field, he had felt assured probably not a stretch, given the breadth of the merged firm’s that his mentor would someday return to the consulting busi- accounting resources. In the months ahead, McKinsey, ness and that they would together make the firm more like Wellington would fall on hard times after the loss of a major Bower envisioned. That vision, Bower would have us believe, client, and the escalation of a dissension between the firm’s was the subject of spirited discussions aboard many of the New York and Chicago offi c e s . pullman railroad cars the two men would ride together. An d not least among the young Bower’s concerns was the outward pe r c e p t i o n of an auditor seeking other income from its clients. The Feast of the Epiphany Such an alignment would underscore a lack of independence In the fall of 1939, McKinsey, Wel l i n g t o n ’ s New York offi c e not only on the auditor’s part, but also on the part of the would be renamed McKinsey & Company, the Chicago offi c e c o n s u l t a n t , Bower told his partners. would become McKinsey Kearney & Company (the predecessor Given McKinsey’s dedication to the field of accounting, of A. T . Kearney & Co.), and Oliver Wellington would with- you can’t help but question whether Bower may have been draw to return to Scovell, Wellington & Co. The splitting off overly confident in his ability to modify McKinsey’s opinion of Scovell, Wellington and the renaming of the Chicago and on the subject. No matter: The noted accountant, management New York practices were all part of a reorganization plan p i o n e e r, and chairman of Marshall Field & Co. would McKinsey consultants credit Bower with having authored. Just u n e x p e c t e d l y die after a bad cold turned into pneumonia. how Bower — within less than two years of McKinsey’s death “Never in my whole before did I know how much more — managed to reformulate the firm amidst high-spirited sparring d i fficult it is to make business decisions myself than it is to among the firm’s partners is a testament to his political savvy. merely advise others what to do in their businesses without Such a role also allowed him to better position the firm with having to take the final responsibility myself.” Such were the his own unique ambitions. haunting words a Field underling claims McKinsey uttered In an as-yet-unpublished autobiography*, Bower talks less than 24 hours before his demise. This alleged statement, about how, as a young attorney at Jones Day in Cleveland, the found in the pages of Give the Lady What She Wants, The issue of independence as it relates to serving clients came to S t o ry of Marshall Field & Company, became a stinging make a sizable impression on him. indictment for a line of work few yet considered a profession. At the time, the law firm’s managing director, Frank Ginn, In fact, the notion that 47-year-old McKinsey was also declined to take on a sizable piece of business related to the founder of a 11- y e a r -old business advisory firm garnered little me r ger of two steel companies because he was convinced that ink in his New York Tim e s ob i t u a r y . Having almost two years the merger would violate antitrust laws. Despite the fact that the earlier accepted an invitation from the board of Marshall Field *CM was permi t t ed to view only cha p te r s relating events prior to Bower joining McKinsey.
16 Fe b ruary/March 2003 C o n s u l t i n g Tri b u te Our Days with Marvin Lou Gerstner (McKinsey, 1965–78)
Louis V. Gerstner, Jr., was chair- ca r ried it for war d to ever y compa n y I’ve operat ed in. IBM has man of the board of IBM been the most impo r tant place for me to fol l o w that, because Corporation from April 1993 until IBM in a sense is a knowle d g e compa n y just as McKinsey is. his retirement in December 2002. He ser ved as chief executive offi- CM : Marvin was no longer managing director of the firm when cer of IBM from 1993 until March you served as a director? 2002. In January 2003, he G e r s t n e r : Yes, but an indication of a great leader is how the assumed the position of chairman of The Carlyle Group, a cu l t u r e he crea t es lives on without him, and gets picked up by global private equity firm located in Washington, DC. o th e rs. When the fir m was ver y small, Marvin could rea c h out to many of his partn e r s and be power ful and persu a s i v e as far C M : Your and Marvin Bower’s care e rs inte rs e c ted at as the decisions that wer e made went, but by the time I got M c K i n s ey more than 30 ye a rs ago. What type of imp re s s i o n the r e, the principles wer e not just Marvin’s any longer , the y did he make on you? wer e the fir m’s, and the fir m’s leadership’s. So in a sense, my G e r s t n e r : I would say to you that there were two things ex p e r ience with Marvin and his principles was thr ough the fir m remarkable and memorable about Marvin. First, there were he built. Now, of course I would hear him at meetings and I his principles that gave him a very clear sense of what would see him one-on-one on a number of occasions, but it McKinsey should do — how it should behave, how it should wasn’t as though the r e was this guru who sat in the corner and perform, how it should relate to clients. He adhered to those gave off messages. Instead, the r e was a ver y large and suc- principles without ever moving an inch from them. Second, he cessful enterp r ise that he inven t ed that embodied those mes- was an extrao rd i n a r y leader. He was a power ful communicator , sa g es ever y day thr ough hundreds if not thousands of people. and this had to do with his clarity of thinking and his ability to communicate those principles and make everyone believe “I was about 26 years old when Marvin walked there was a right way for a consultant to behave. Even after he into my office one day and asked, ‘W h a t retired, McKinsey was driven by Marvin’s principles and what he viewed as right and the correct thing to do. are you doing to give some- thing back?’ I said, ‘Well, I’m working to CM: What types of skills made him a power ful communicator ? pay off all my student loans as fast as I can.’ Obviously, effective speaking was just a component. And he said, ‘No! That’s not good enough.’” G e r s t n e r : He did it in all the ways good leaders do. He was an ef fec t i v e communicator in writing and he also was a for ceful and clear speaker . But more than anyt hing else, he never devi a te d fr om his message. Being a great leader is often less a matter of el o q uence and more a matter of repetition and consisten c y . CM : You never worked beside Marvin Bower at McKinsey? G e r s t n e r : Well, that’s correct in te rms of actual client wo rk . CM : And again, his principles never wavered? But I had a ve ry personal relationship with him, because — to G e r s t n e r : Yes, but these principles were not just fancy be candid — McKinsey is not a big place, or at least it wa s notions. These were what McKinsey lived by day after day, not a big place when I was th e re, and so I saw Marvin a lot. decision after decision. He wouldn’t tolerate any violation of We had lunch to ge th e r. We had dinner to ge th e r. He, inte re st- them, either by fact or by anyone suggesting they be changed. i n gly ... I have had a lifelong commitment to wo rking on fi x- ing the public schools in America, and I’ve been wo rking on CM : What leadership qualities do you believe you share that coming up on 35 ye a rs, and it was Marvin Bower who w i th Bower? i n t roduced me to the wo rld of public education and wo rk i n g Ge r s t n e r : I’d rat her not put it that way. I’d rat her say that I on fixing the public schools. I was about 26 ye a rs old when le a r ned from him the impo r tance of articulating a set of prin c i - M a rvin wa l ked into my office one day and asked, “What are ples that driv e peoples’ behavior and actions. And that’s a you doing to give something back?” I said, “Well, I’m wo rk i n g mu c h more power ful leadership tool than a bunch of proc e - to pay off all my student loans as fa st as I can.” And he said, du r es and guidelines — parti c u l a r ly in a knowle d g e-based enter - “ No! That’s not good enough. How about coming over and pr ise like consulting. Principles connect people to a sense of helping me with a pro bono effo rt I’m leading re l a ted to pub- rightness, and for this reason people fol l o w them and fol l o w lic education?” And that was — now, let’s see — 36 ye a rs ago, le a d e r s who adhere to them. I learned this from Marvin and I’ve and I’m still at it.
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client suggested it was prepared to lose the case, Ginn had turned without question — influenced Marvin,” says Daniel, invoking them away. Later, the firm that took the case fought and lost. the name of the accountant who became AA ’s managing partner On this particular occurrence, Bower writes: “If the in 1947 upon the death of the accounting firm’s founder. i n d e p e n d e n c e and professional stature of Jones Day had not Just as Bower would emerge as the driving force behind been established up to this point, Mr. Ginn’s one brilliant and McKinsey & Company, Spacek would emerge as Ar t h u r courageous professional decision established it then.” A n d e r s e n ’s own brand of high octane. Not unlike what The fact that Bower effectively broke off from a profession h a p p e n e d in the leadership void McKinsey experienced to pursue consulting made him perhaps more driven than others following the departure of its founder, certain Andersen partners to raise the stature of his new line of work. For his part, believed that their firm might be better off disbanding, given McKinsey continued to maintain a connection to both the some of the grave financial uncertainties it faced going forward. accounting and academics professions, and alternately appears Spacek convinced them otherwise. to have enjoyed the ego-massaging perks of both. For Bower Here was an accountant who did not hesitate to speak out there no longer were such perks. Having cast his lot with a against chummy client relationships; here finally was a rival fledgling profession, he found that any perks would now reside for Bower — one who shared the grand ambition not just of exclusively in the future. building a firm, but of energizing a profession. Be that as it may, Bower’s new firm would be headed by At times, the two men appear to have been competitive as Guy Crockett. Having from the start backed Bower’s reorga n i - they sped down similar tracks within different fields. Beneath zation plan, the 55-year-old accountant-turned-consultant made them their firms would rise and expand around the globe, a sizable capital investment in the firm, an act his deputy, c a p t u r i n g the high ground of their professions while remaining Bo w e r , would some time later label as heroic. unflinching champions of independence. “Crockett was the head, but Bower was the drive and the idea Under Bower, McKinsey would shed its accounting business person,” says Ron Daniel, who served as the firm’s managing once and for all, and put a stop to exploitative sojourns into director from 1976 to 1988 — a span longer than any other outlying services such as those the firm had taken into executive McKinseyite except for Bower, who would ultimately take over recruiting and the actuary business. Under Spacek, An d e r s e n from Crockett and lead the firm for 17 years (1950 to 1967). would routinely challenge its profession to adopt conservative Another former McKinseyite, who worked closely with auditing standards, as its managing partner set an example for both Bower and Crockett during both their tenures as managing being blunt with clients. di r e c t o r , put it another way: “There was no comparison No n e t h e l e s s , Arthur Andersen would not let go of consulting between them. Crockett was an accountant.” work. Perhaps, at the time, given the clamor of An d e r s e n ’ s Within the years that followed McKinsey’s death, the army of dedicated auditors, such a conflict with consulting “accountant” label became internal code for someone not well- seemed all too remote. suited for consulting work, the idea being that accountants Without a doubt, the greatest test for the two men’s leader- lacked certain people skills and were not “broad-gauged” ship still lay ahead. Like all great leaders, their legacy would enough to address complex problem-solving. hinge on the ability of their values to transcend generations. Colleagues say Bower himself frequently expressed the “Marvin was really one of the early pioneers of the notion view that with the exception of his esteemed mentor, those that if you defined a work environment of a particular sort and people who made good accountants would not likely make then lived up to it, you’d have an institution that people would good consultants, given the different “success factors.” be committed to and energized by. Marvin was a true lion in “T h e r e ’ s a whole emotional side to a human being that’s that respect — he walked the talk at all times,” says An d r a l l very important to the consultant, and great consultants are seldom Pearson, founding chairman of Yum! Brands, Inc., and a former dependent on the mechanics of problem-solving,” says Jon McKinsey director (see interview on Page 20). Pearson says Katzenbach, managing partner of Katzenbach Partners and that Bower was one of the first people to understand the role former McKinsey director. “Consultants are better at really of cultural values in leading high-potential people. relating to the individual situation and making things happen, Another McKinsey alum, Carlyle Group chairman and and I don’t know of anyone who did this better than Marvin.” f o r m e r IBM Corp. chief executive Lou Gerstner, recalls how the firm’s culture and Bower’s values ultimately became one. “When the firm was very small, Marvin could reach out to A Shared Passion for Independence many of his partners and be powerful and persuasive as far as No matter how they differed in terms of the skills their people the decisions that were made went, but by the time I got there, possessed, both consulting and accounting harbored similar the principles were not just Marvin’s any longer, they were the professional ambitions. fi r m ’ s, and the firm’s leadership’s,” says Gerstner, whose “Certainly Jones Day was a model for Marvin, but career as a McKinsey consultant (1965–78) would span a Andersen was also a model for him, and Leonard Spacek — transformational period for both McKinsey and the consulting
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Our Days with Marvin Leo F. Mullin (McKinsey, 1967–77)
Leo F. Mullin is ch a i rman and and applied physics and I had a master’s in applied math- chief exe c u t i ve officer of Delta ematics in addition to my MBA. So I had a sort of qu a n t i- Air Lines. Prior to joining Delta , ta t i ve view of the wo rld. Marvin undoubte d ly was ve ry he served as vice ch a i rman of b right analy t i c a l ly, but what I remember was his capacity Unicom Corpo r ation and its chi e f for leadership as it pertains to what are sometimes called su b s i d i a r y, Commonwea l t h Edison. the soft va riables — but what are ve ry real in terms of dis- tinguishing the firm and establishing its sustaining c a p a c i- C M : When did you arri ve at McKinsey ? t i e s . M u l l i n: I joined McKinsey in 196 7 out of Harvar d Business Sc hool; at the time, I was only 24 yea r s old. … I have a ve ry CM : Over the years, have you stayed in touch with Marvin? st rong memory of Marvin, who was about 65 ye a rs old, I M u l l i n: When I made the decision to leave the fi rm afte r b e l i eve, at the time. He came th rough the Wa s h i n g to n nine ye a rs, I was a principal at the time. He appro a ched me o ffice that I was associated with and spoke to us. He made and said “… my deep re gret is that we ’ re losing a re a l ly it clear that pro fit was a by- p roduct and that you always good person in the fi rm, and I’m sorry for us in th a t put the client fi rst. He gave a number of exa mples as to respect.” And it was such a kind of sta te s m a n l i ke, wa rm , h ow that came fo rth. To a sort of young and idealistic per- m e m o rable sta tement on his part for me. son out of college, it was a wo n d e rful kind of exposure to Then, you know, I lost contact with Marvin other than that a philosophy of a fi rm that had existed as long as it had. oddly I saw him about seven or eight years ago on the street ... The meeting was not a personal thing, but in a gro u p . corner in Harvard Square. He recognized me, and I wound He had a certain auste rity about him. He had certain mes- up having a half-hour discussion with this 90-year-old man, s a ges to delive r. He wa n ted these new people coming in to and it was like we had just left off the day before. k n ow pretty close to Day One what kind of a fi rm th ey we re joining, and he wa n ted to deliver that message pers o n a l ly. CM : You resided at McKinsey longer than at other companies ... I was with a group of 10 or so when I fi rst met him. Mullin: When you look back on McKinsey ... I worked there nine ye a rs, and I have used McKinsey many times in many CM : How did Marvin influence your style of leadership? s e t t i n g s , so I know the managers, but when you look at the M u l l i n : I came into the fi rm with somewhat of a belief in person who made that firm what it is, it’s Marvin Bower. Ralph that, a commitment to the hard va riables as opposed to Waldo Emerson said, “Great institutions are the reflection of the soft ones. My background is that I majored in engin e e ri n g one man,” and that is absolutely true here.
profession (see interview on page 17). (AMCF) opened its membership to publicly held consulting After Bower stepped down as McKinsey’s managing director firms as well as the accounting houses, Bower would engineer in 1967, the profession’s independence became challenged the withdrawal of McKinsey & Company from the group. While on a number of fronts. And while Bower no longer headed the nowhere near a deathblow, the firm’s withdrawal from mem- firm, he did not hesitate to do that which he had encouraged bership in 1973 made a strong statement at the time, given that every other McKinsey consultant to do: To speak up and McKinsey’s leadership had had a hand in the association’s be heard. founding, and that its former MD, Guy Crockett, had served as president of the AMCF for five terms. Even within McKinsey, Bower found the need to continue The Lion in Wi n t e r to address growing challenges to the firm’s independent posture. In 1970, McKinsey rival Booz Allen Hamilton would sell In October of 1969, two years after he resigned his post as shares publicly — a move that, according to Bower, challenged managing director, Bower is said to have joined other the dictum that economic independence undergirds professional McKinsey directors at a meeting in Madrid, where a independence. No bank managers, investment analysts, or m e m o r a n d u m detailing a joint venture with securities firm shareholder attorneys would ever hold captive the decision- Donaldson, Lufkin & Jenrette (DLJ) was discussed. making of McKinsey’s consultants, Bower told his colleagues. Mc K i n s e y ’ s Daniels recalls: “We considered a possible When the Association of Management Consulting Firms joint venture with DLJ, when they wanted to better serve small
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Our Days with Marvin
Andrall E. Pe a r s o n (McKinsey, 1964–1980) A n d rall E. Pe a rson is pre s e n t ly Pe a r s o n: Yes. Some things that have helped me and some the founding ch a i rman of Yu m ! things that have perhaps hurt me. I’m known as a ver y tou g h Br ands, Inc., the larges t res tau ra n t le a d e r , someone who says what he thi n k s and demands high chain in the wo rld. He spent 14 stan d a r ds from himself and othe r s. Now, I got that from Marvi n , ye a rs serving as PepsiCo’s pre s- and I’d say that it made me an effec t i v e leader, but it also i d e n t and chief operating offi c e r. caused some other people some anguish. I think I have a te n d e n c y to not praise something unless it’s extrem e l y good, CM : Do you recall how you came to McKinsey? and Marvin did that, too. Pe a r s o n: I joined McKinsey in New Yo rk because of Marv i n . The fi rm had ori g i n a l ly wa n ted me to go to Los Angeles, and CM : How has it hurt you? I went over to Marvin’s house because back then he Pea r s o n : Well, when I joined Tricon (Tricon Global Restaurants), i n te rv i ewe d people that way, and he said to me that with my the guy running KFC was great at recognition — and I’ve seen b a ckground I’d be much better suited for McKinsey’s New people from secre ta ries on up cry after rec e i v i n g cheap awards Yo rk office than LA, and I said that’s how I felt from the sta rt . — but these were symbolic awards. And first the p e rson wa s And he said, “W hy don’t you consider that you are being told what was appre c i a ted, but this was then fo l l owe d by o ffe red a New Yo rk job, and I’ll ta ke care of the re st.” That criticism that said how they could be even better if they was vinta ge Marv i n . focused on this and that, and Marvin never had time for that and neither did I. “ M a rvin had more influence CM : Did he have a temper? Pe a r s o n: I’ve seen him chew someone out pretty good, with on my management style than anyone else or some real energ y, but have I ever seen him lose control of even any three people combined.” h i m s e l f ? No. I think these are two different things. He wasn’t entirely catholic by any means as to where the chewing-out happened. If you had a lousy idea or your presentation was CM : His leadership st yle has been described as having a stalling, Marvin wasn’t going to waste time. p e rs o n a l touch. Pearson: I don’t think you could ever be with him without him CM : What about consultants who didn’t abide by the firm’s asking you questions about what you were doing at a client or principles? what your thoughts were on how to make the firm better. ... He Pe a r s o n: I can remember thr ee ver y promising guys that Marvi n genuinely believed you shouldn’t dictate to high-potential peo- ripped out of the fir m because the y wer e promoting the m s e l ves ple what they ought to do. All that does is dissatisfy and to clients for jobs. And Marvin said, “That’s not what we do here, demotivate, and people leave. and we don’t need people who do that here.”
CM : He was, in a way, offering lessons in leadership. CM : Was his approach innovative? Pe a r s o n: Well, if you went and tal k ed to anyone who left the Pe a r s o n : M a rvin was re a l ly one of the early pioneers of th e fir m and joined large companies, the y would tell you what I did, notion that if you defined a wo rk env i ronment of a part i c u l a r wh i c h is that of all the people I have ever wor ked with, Marvi n s o rt and then lived up to it — if you wa l ked the talk at all had more influence on my management sty le than anyone else times — then you’d end up with a great institution. Pe o p l e or even any thr ee people combined. And it was because he would be re a l ly committed to it and energized, and I th i n k ea r ned that and wor ked at it — this being a tea c her — and at that’s the ultimate heri ta ge of the guy. .... The whole idea — ar ticulating things so that you could get them into your mind. w h i ch some people re fer to as corp o ra te culture now — ve ry And it became a fabulous learning experience for a lot of people few fi rms and part i c u l a rly ve ry few pro fessionals under- who ended up in leadership positions. stood. And Marvin’s whole idea about the will to manage was sort of a joke among the pro fessional fi rms, because CM : Have you incorporated some of Marvin’s style into your the thought was that th e re was no will to manage — th e own form of leadership? p a rt n e rs just walk all over each oth e r.
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companies, and the rationale was that DLJ wanted access to board seats,” another siege in the war for independence smaller companies, and we’d supply the management insight spilled over onto the pages of the nation’s business dailies, and problem-solving, and DLJ would share their fees.” when in 1979 Arthur A n d e r s e n ’s then–chief executive, The DLJ opportunity came along via an internal task force Harvey Kapnick, resigned from his post. Kapnick, a Spacek deployed to investigate outside opportunities. Unlike as with disciple, left in disgust after AA partners rejected his proposal earlier opportunities brought forth — such as an interest on to spin off the firm’s consulting business. the part of Planning Research Corp. to buy the firm — this Kapnick had been a devoted champion of the cause of time the directors voted to continue negotiations with DLJ. independence as it related to tight-knit relationships with “Marvin then made a very e m o t i o n a l speech about audit clients, and had increasingly become fearful of how p r o f e ssi o n a l firms keeping their independence,” says Daniel. AA ’s growing consulting business was impacting the perception Ev e n t u a l l y , interest in the deal faded of its auditor independence. His as more McKinsey directors ap p e a r e d p r o p o s a l was in large part made in to move toward Bower’s way of response to the SEC suggesting that thinking. going forward, companies disclose Not all directors agreed with the amount and percentage of non- Bo w e r ’s unbending position toward a u d i t fees they pay to their auditors. independence. Twenty-one years later, after The late John Neukom, a director the SEC succeeded in turning its within McKinsey’s San Francisco suggestion into law, Kapnick’s of fice who had the added distinction fears were realized when, in the of being one of James O. McKinsey’s aftermath of Enron’s collapse, original hires, locked horns with prosecutors mulling the details Bower over the issue of McKinsey behind A A’s infamous document consultants serving on the boards of shredding became galvanized by publicly held firms. The consultancy’s the fact that the large oil trader had independence was bound to be ques- paid its auditor another $27 mil- tioned if the firm garners revenue lion for non-audit services. It was from the company while a member just a perception, but one that of the firm sits on the board, Bower Bower & his Pri n c i p l e : “To maintain would effectively lift the issue of re a s o n e d . an independent position, being independence into the mind’s eye Bower was apparently unable to ready to differ with client managers of the public. In the months that dissuade McKinsey’s then–managing and telling the truth as we see it, followed Enron’s collapse, dozens di r e c t o r , Lee Walton, from assisting even though it may adversely affect of publicly held corporations Neukom in his efforts to secure seats fi r m income or endanger continuance moved to discontinue the procure- on a number of different boards. of the relationship.” ment of non-audit services from In his privately published Mc K i n s e y their auditor. Memoirs, A Personal Persp e c t i v e AA was not the only supplier of (1975), Neukom writes: “I am indebted to Lee for making consulting services caught in the crosshairs of Enron's melt- arrangements that permitted me to take advantage of opportunities down. McKinsey & Company had adopted the company as to serve on three boards of directors of three important enterprises one of its marquee accounts. Enron CEO Jeff Skilling, a for- as I moved into retirement.” mer McKinsey partner and loyal alum, had cultivated a Having perhaps felt some of the heat being applied internally close relationship with his former firm over the years. Tod a y , by Bower, Neukom appears to be putting forth something of a while the question as to whether McKinsey breached its rigid defense when he adds: “There need be no great concern about pr i n c i p l e of independence continues to be debated among firm hazards of board membership where competent management m e m b e r s, the newly enthroned pundits of independence and knowledgeable outside directors work together from a appear to have failed to find a smoking gun. Just what background of a constructive consulting relationship.” would have registered as an independence breach for Still, Bower appears to have later scored a victory when in McKinsey? How about a gray-haired McKinsey partner sit- the late seventies the firm narrowed the loophole used for ting on the energy concern’s board? exempting partners from its stated policy of not having In the words of one senior McKinsey partner: “Thank c o n s u l t a n t s serve on boards. goodness we listened to Marvin.” In mid August, as Arthur Andersen shuttered its off i c e s across the country, Harvey Kapnick passed away at his When Perception Becomes Reality home in Florida. Marvin Bower would die five months later At about the same time Bower was waging his battle “against on January 22, 2003. C
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