McKinsey Partners Votes Leader on Opioid Settlement, Other Crises

Mr Sneader, a 54-year-old Scottish and McKinsey veteran of more than three decades, has spent much of his tenure trying to push the company past the controversies surrounding McKinsey’s previous work with clients, including this month’s $ 573 million settlement with Labor States advising OxyContin maker Purdue Pharma LP and other drugmakers to aggressively market opioid pain relievers.

The company has also drawn attention to its work with e-cigarette maker Juul, as well as some autocratic foreign governments, including Saudi Arabia. In December, he reached a settlement with Department of Justice watchdogs over how the company discloses potential conflicts of interest. In the opioid and disclosure regulations, McKinsey did not admit any wrongdoing.

Much of Mr. Sneader’s response to these crises has been to shift McKinsey from a culture that relies on the judgments of individual partners to one based on systems, rules and processes, fueling dissent within from its senior ranks, say people familiar with the matter. Its partners have historically enjoyed great latitude in their work and their clients. McKinsey declined to make Mr. Sneader available for an interview.

Historically, McKinsey’s business model has been “hiring the best people to do the most important work at a high price,” says a person who has spent years with the company. If a potential customer was deemed insufficient or not contributing to a greater good, the company would accept a pass. “It is at the heart of his ethics to refuse to work,” said the person.

But in the years before Mr. Sneader’s rise, McKinsey began to expand rapidly. The company was looking for new ways to grow and, with a decentralized management structure, few safeguards were in place to prevent an ambitious partner from accepting lucrative, albeit problematic clients, the person said.

Under Mr Sneader’s leadership, the company’s main partners had to approve controversial new clients, and McKinsey said it would not serve defense, intelligence, justice or police institutions in undemocratic countries. . This potentially made it more difficult for non-U.S. Partners to accept certain clients 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, Mr Sneader said that the company’s customer service risk committee, which assesses any new work that may raise signals, reviewed more than 2,000 projects in 2020.

“He certainly introduced high risk protocols; higher levels of due diligence; red lines on service to the public sector in some countries, ”said the person who spent years at the company, adding that partners in Mr. Sneader’s camp believed it was“ not possible to return to a time when you can just do what you love or you don’t have to be governed by a compliance regime. “

The company’s recent opioid deal also drew opposition from some non-U.S. Partners who were more willing to fight, people familiar with the matter said. Mr Sneader’s letter to employees about the settlement was bluntly critical of the company’s behavior, saying McKinsey had failed to live up to its standards and “failed to adequately recognize the epidemic unfolding in our communities or the terrible impact of opioid abuse and addiction, and for that I am deeply sorry.

Some partners felt the language was too strong and that 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 business. As a global managing partner, Sneader was more a first among his peers than a CEO, and his reforms were endorsed by key partners. But when he was re-elected for another three-year term, there were enough dissenters to prevent him from participating in the final ballot.

His failure to make it to the second and final ballot leaves two other senior partners vying to succeed Mr. Sneader: Bob Sternfels and Sven Smit, senior partners in McKinsey’s San Francisco and Amsterdam offices, respectively.

McKinsey’s main partners will decide whether Messrs. Sternfels or Smit will replace Mr Sneader in a final ballot, which is expected to take place in March, people familiar with the matter said. Mr. Sternfels is considered a protégé of Dominic Barton, who led McKinsey from 2009 to 2018 and accelerated his growth.

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

McKinsey’s work with e-cigarette maker Juul was among the simmering issues Mr Sneader addressed. In 2019, a former Juul employee said in a court file that even as the company said it was removing flavored products from the market, McKinsey advised it to sell mint nicotine pods. The New York Times and ProPublica reported that year that McKinsey had also helped U.S. immigration and customs services make changes, including cutting food and medical expenses for detainees and speeding up deportations. In addition to the Saudi government, McKinsey worked for the Chinese government and organized a retreat 4 miles from a camp where Uyghurs, 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 access to the throne. His father, King Salman, gave the prince responsibility for economic reforms, and McKinsey was involved in devising a strategy to divert the kingdom’s economy from its dependence on oil.

At the end of 2015, the firm’s research arm, the McKinsey Global Institute, released a public report titled “Saudi Arabia Beyond Oil” which read: “We see a real opportunity for the Kingdom to inject new dynamism into the economy. through productivity and investment. drives transformation. “

The report gave McKinsey’s imprimatur to the strategy Prince Mohammed was pursuing at a time when he sought the approval of foreign business leaders and politicians to help him legitimize his claim for a greater role in management. of the Kingdom. His father, the King, gave him additional responsibility, and in 2017 the prince imprisoned his cousin, then crown prince, and took the title himself. Since then, the Crown Prince, known as MBS, has been the daily ruler of the kingdom. He presided over economic reforms, as well as a brutal bombing campaign in Yemen that led to a humanitarian crisis, the confinement of several of his critics and a team of men who murdered dissident writer Jamal Khashoggi in 2018.

One major project the company has been working on recently was the prince’s plan for a city built from the ground up called Neom on Saudi Arabia’s remote west coast. The prince envisioned a tech-fueled metropolis populated by global elites, filled with flying robot taxis and an automated police force. McKinsey and other consulting firms were enlisted to help develop the plan. In thousands of pages of internal planning reports reviewed by the Journal, McKinsey detailed using a “13 pillar living environment” and big data to quantify how great it would be to live in Neom. The Saudi government has started to move local people to build the city.

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 the heads of these offices. (Corrected February 24)

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