McKinsey partners vote against leader after opioid deal and other crises

Partners at McKinsey & Co. voted to replace Kevin Sneader as the leader of the elite consulting firm, following internal dissatisfaction with the steps he took following a series of crises for the firm, people familiar with the matter said.

The decision, the result of a staggered voting process that McKinsey’s approximately 650 senior partners undertake every three years to elect or reconfirm the company’s global managing partner, marks the first time in decades that a McKinsey leader has not won a second term. . Sneader, who was elected global managing partner three years ago, failed to make it past the first round of voting, in part because partners were irritated by changes aimed at keeping McKinsey scandal-free, but limited partner autonomy, they said. people.

Sneader, a 54-year-old Scotsman and McKinsey veteran of more than three decades, has spent much of his tenure trying to carry over the firm to past controversies surrounding McKinsey’s previous work with clients, including this month’s deal from $ 573 million with the states on his work advising OxyContin maker Purdue Pharma LP and other drug makers to aggressively market opioid pain relievers.

The firm has also come under scrutiny over its work with e-cigarette maker Juul, as well as some autocratic foreign governments, including Saudi Arabia. In December, it reached an agreement with the Justice Department’s watchdogs on how the company discloses potential conflicts of interest. In both the disclosure and opioid agreements, McKinsey did not admit to having committed any crime.

Much of Sneader’s response to those crises has involved moving McKinsey from a culture that relied on the judgments of individual partners to one based on systems, rules and processes, fueling dissent within its senior positions, people familiar with it say. with the matter. Historically, its partners have enjoyed wide freedom over their work and their clients. McKinsey refused to make Mr. Sneader available for an interview.

Historically, McKinsey’s business model depended on “hiring the best people to do the most important work at a premium price,” says one person who spent years with the company. If a potential customer was deemed not important enough, or not contributing to a greater good, the company would reject it. “It is fundamental to their ethics to refuse the job,” the person said.

But in the years before Mr. Sneader’s rise, McKinsey undertook rapid expansion. The company looked for new ways to grow and, with a decentralized management structure, few protections existed to prevent an ambitious partner from accepting lucrative, albeit troubled clients, the person said.

With Sneader, the firm’s top partners had to approve controversial new clients, and McKinsey said it would not serve defense, intelligence, justice or police institutions in undemocratic countries. This made it potentially more difficult for non-US partners to acquire some customers and was seen as a centralization of power away from the partners, according to people familiar with the operations. In an interview with the Financial Times published this week, Sneader said the company’s customer service risk committee, which evaluates any new work that may raise flags, reviewed more than 2,000 projects in 2020.

“It certainly introduced higher risk protocols; higher levels of due diligence; red lines on serving the public sector in some countries, “said the person who spent years at the firm, adding that Mr. Sneader’s partners in the field believed that” it was not feasible to go back to an era where you can doing what you like or don’t have to be governed by a compliance regime. “

The firm’s recent opioid deal also drew opposition from some non-U.S. Partners who were more willing to fight back, people familiar with the matter said. Mr. Sneader’s letter to employees about the deal was blunt in criticizing the company’s behavior, saying that McKinsey did not meet its standards and “did not adequately recognize the epidemic that was unfolding in our communities or the terrible impact of use opioid misuse and addiction, and for that I am deeply sorry. “

Some partners felt the language was too strong and McKinsey’s advice to clients was legal and given in good faith, people familiar with the matter said.

The shift in power highlights the complexity of running a global partnership company. As a global managing partner, Mr. Sneader was more of a first among equals than a CEO, and his reforms were approved by senior partners. But when he ran for re-election for another three-year term, there were enough dissenters to keep him off the final ballot.

His failure to reach the second and final round of voting leaves two other senior partners in the running to succeed Mr. Sneader: Bob Sternfels and Sven Smit, senior partners at McKinsey’s San Francisco and Amsterdam offices, respectively.

McKinsey’s senior partners will decide whether Messrs. Sternfels or Smit will replace Sneader in a final round of voting, which is expected to take place in March, people close to the matter said. Sternfels is seen as a protégé of Dominic Barton, who led McKinsey from 2009 to 2018 and is credited with accelerating its growth.

As part of the process, the principal partners nominate several candidates and then vote in a first round. The two candidates who receive the most votes advance to a final round.

Among the hot topics Mr. Sneader discussed was McKinsey’s work with e-cigarette maker Juul. In 2019, a former Juul employee said in a court docket that even as the company said it was removing flavored products from the market, McKinsey recommended selling mint-flavored nicotine capsules. The New York Times and ProPublica reported that year that McKinsey also assisted US Immigration and Customs Enforcement with changes that include cutting food and medical expenses for detainees and speeding up deportations. In addition to the Saudi government, McKinsey worked for the Chinese government and held a retreat 4 miles from a camp where Uighurs, members of a Muslim minority, were interned, the Times reported.

McKinsey also played a central role in the rise of Saudi Crown Prince Mohammed bin Salman. In 2015, Prince Mohammed, the son of the newly crowned king, had no direct route to the throne. His father, King Salman, put the prince in charge of economic reforms, and McKinsey was involved in devising a strategy to move the kingdom’s economy away from its dependence on oil.

In late 2015, the company’s research arm, the McKinsey Global Institute, released a public report called “Saudi Arabia Beyond Oil” which said “we see a real opportunity for the Kingdom to inject new dynamism into the economy through through productivity and investment, he led the transformation. “

The report put McKinsey’s stamp on the strategy Prince Mohammed was pursuing at a time when he was seeking approval from foreign political and business leaders to help legitimize his claim for a greater role in running the kingdom. His father, the king, gave him additional responsibility and, in 2017, the prince imprisoned his cousin, who was then crown prince, and took the title himself. Since then, the crown prince, known as MBS, has been the day-to-day ruler of the kingdom. He presided over economic reforms, as well as a brutal bombing campaign in Yemen that sparked a humanitarian crisis, the jailing of many of his critics, and a team of men that assassinated dissident writer Jamal Khashoggi in 2018.

One major project the firm has recently worked on was the prince’s plan for a built-from-scratch city called Neom on the remote western coast of Saudi Arabia. The prince envisioned a technology-driven metropolis populated by the world’s elites, replete with flying robot taxis and an automated police force. McKinsey and other consulting firms were recruited to help with the plan. In thousands of pages of internal planning reports reviewed by the Journal, McKinsey detailed using a “13-pillar livability framework” and big data to quantify how pleasant it would be to live in Neom. The Saudi government has begun to move the local population from the land to build the city.

Addiction experts broadly agree on the most effective way to help opioid addicts: drug-assisted treatment. But most inpatient rehab facilities in the US don’t offer this option. WSJ’s Jason Bellini reports on why the medication option is controversial and, in many places, hard to come by. Image: Ryno Eksteen and Thomas Williams (Originally Posted Nov 16, 2017)

Corrections and amplifications
Bob Sternfels and Sven Smit are senior partners in McKinsey’s offices in San Francisco and Amsterdam, respectively. An earlier version of this article incorrectly stated that they were heads of those offices. (Corrected on February 24)

Write to Justin Scheck at [email protected] and Vanessa Fuhrmans at [email protected]

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