McKinsey

Golden Goose Economics and a Cautionary Tale of Greed

 

Jason George shares an origin story of management consulting and lessons from the barnyard to highlight the benefits of putting people and practice before personal profit. 

Marvin Bower faced a critical choice. He had led McKinsey & Company from its earliest years, in the process helping to define the fledgling field of management consulting. Now nearing retirement age, it was time to hand the reins to the next generation of leaders. As the principal shareholder in the partnership, Bower’s ownership stake was a gold mine, appreciating to many multiples of its value since his joining roughly thirty years prior.

To cash out he could sell to a third-party buyer interested in taking over operations. Alternatively, he could require the current partners of the firm to buy out his stake at market value. This would involve significant indebtedness that could constrain future agility.

Bower chose a radical, nearly unprecedented path. When the time came for him to step down as managing director, he elected to sell his shares back to the partnership at their nominal book value instead of their true market price. In the process he would forego a massive windfall, while also setting an example that would reverberate throughout the organization for decades to come. For Bower, a one-time gain was not worth more than investing in the culture and health of the institution he had laboriously built up.

 

Points of interest in this article include:

  • Bain & Company’s downturn
  • The twist in modern capitalism
  • Establishing the ownership structure for investing

 

Read the full article, How giving away value can create more, on Jason’s website.