Tag: Consultants

Our Own Marketing Department of the Sirius Cybernetics Corporation*

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I am referring of course, to the “White Shoe” consultancy firm McKinsey & Company, which has increasingly made justifying the illegal and immoral, and whose latest bit of evil was a proposal for Perdue Pharma to pay distributors a bounty for overdose deaths, because, like any good dope dealer, it’s all about the Benjamins.

The short version is that in order to convince distributors not to share their concerns about how Oxycontin was resulting in an explosion of deaths with regulators, or ending their relationship with Perdue, McKinsey & Company proposed a $14,810.00 payment for death or hospitalization.

It’s blood money, and it is a criminal conspiracy to bribe those distributors not to take actions that would harm the bottom line.

Even if the Sacklers and their Evil Minions™ never took up this suggestion, it is a felony to even discuss this, and McKinsey is guilty.

They really need to get the Arthur Anderson treatment.

Their name, and memory, should be effaced:

When Purdue Pharma agreed last month to plead guilty to criminal charges involving OxyContin, the Justice Department noted the role an unidentified consulting company had played in driving sales of the addictive painkiller even as public outrage grew over widespread overdoses.

Documents released last week in a federal bankruptcy court in New York show that the adviser was McKinsey & Company, the world’s most prestigious consulting firm. The 160 pages include emails and slides revealing new details about McKinsey’s advice to the Sackler family, Purdue’s billionaire owners, and the firm’s now notorious plan to “turbocharge” OxyContin sales at a time when opioid abuse had already killed hundreds of thousands of Americans.

In a 2017 presentation, according to the records, which were filed in court on behalf of multiple state attorneys general, McKinsey laid out several options to shore up sales. One was to give Purdue’s distributors a rebate for every OxyContin overdose attributable to pills they sold.

The presentation estimated how many customers of companies including CVS and Anthem might overdose. It projected that in 2019, for example, 2,484 CVS customers would either have an overdose or develop an opioid use disorder. A rebate of $14,810 per “event” meant that Purdue would pay CVS $36.8 million that year.

………

Though McKinsey has not been charged by the federal government or sued, it began to worry about legal repercussions in 2018, according to the documents. After Massachusetts filed a lawsuit against Purdue, Martin Elling, a leader for McKinsey’s North American pharmaceutical practice, wrote to another senior partner, Arnab Ghatak: “It probably makes sense to have a quick conversation with the risk committee to see if we should be doing anything” other than “eliminating all our documents and emails. Suspect not but as things get tougher there someone might turn to us.”

Why the F%$# haven’t they been charged? 

They not only engaged in a criminal conspiracy which would include bribery and other racketeering, they initiated the proposal to do so.

Mr. Ghatak, who also advised Purdue, replied: “Thanks for the heads up. Will do.”

It is not known whether consultants at the firm went on to destroy any records.

The two men were among the highest-ranking consultants at McKinsey. Five years earlier, the documents show, they emailed colleagues about a meeting in which McKinsey persuaded the Sacklers to aggressively market OxyContin.

The meeting “went very well — the room was filled with only family, including the elder statesman Dr. Raymond,” wrote Mr. Ghatak, referring to Purdue’s co-founder, the physician Raymond Sackler, who would die in 2017.

Mr. Elling concurred. “By the end of the meeting,” he wrote, “the findings were crystal clear to everyone and they gave a ringing endorsement of moving forward fast.”

………

McKinsey’s involvement in the opioid crisis came to light early last year, with the release of documents from Massachusetts, which is among the states suing Purdue. Those records show that McKinsey was helping Purdue find a way “to counter the emotional messages from mothers with teenagers that overdosed” from OxyContin.

………

“This is the banality of evil, M.B.A. edition,” Anand Giridharadas, a former McKinsey consultant who reviewed the documents, said of the firm’s work with Purdue. “They knew what was going on. And they found a way to look past it, through it, around it, so as to answer the only questions they cared about: how to make the client money and, when the walls closed in, how to protect themselves.”

………

McKinsey put together briefing materials that anticipated questions Purdue would receive. [At an FDA oversight hearing] One possible question: “Who at Purdue takes personal responsibility for these deaths?”

The proposed answer: “We all feel responsible.

Shut them down, and shame and jail anyone associated with McKinsey and Company.

They are ineluctably evil.

*Immortalized by Douglas Adams as, “A bunch of mindless jerks who’ll be the first against the wall when the revolution comes.“

Because the Consulting Get Their Vig

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Not a great report card

Over at The Nation, they are wondering why so many of the super-PACs were spending their money so stupidly.

The answer is simple: The consultants are paid a percentage of the media buys, so the more that is spent, the more money they get.

Quoting Upton Sinclair YET AGAIN, “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

If the Democratic Party establishment (There is no Democratic Party establishment) managed to kick the looters and snake oil salesmen out of the party, they would get a lot more bang for their proverbial buck:

Why do we settle for mediocrity when we should be insisting on excellence? Having spent the past few weeks working on a report card grading the Democratic super PACs and the more than $600 million they’re planning to spend on the fall elections, my main takeaway is that we tolerate far too much mediocrity in progressive politics.

The grades given in the report cards span the spectrum from D+ and C- (American Bridge 21st Century and Senate Majority PAC) to A and A- (Fair Fight, Next Gen Climate Action, and the Progressive Turnout Project), and the underlying analysis clearly shows that tens of millions of dollars are being wasted on spending strategies that are unsupported by—if not directly contradictory to—what the empirical evidence says we should be doing. A summary chart is below, and you can read the full report here.

The consultants are paid a percentage of he spending, so it is no wonder that they try to maximize spending, and hence their pay.

Q.E.D.

Why Governments Should Insource their IT

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It turns out that, after millions of dollars poured down the drain, the unemployment websites created by companies like DeLoitte and IBM do not work.

It’s a hell of a racket. You get paid to create the website, and then you get paid to fix your own piss-poor work:

In 2010, California hired the consulting firm Deloitte to overhaul the state website people use to apply for unemployment benefits. Things didn’t go well: Later that year, technical errors led to the halting of payments for some 300,000 people, according to the Los Angeles Times. And, the paper reported that, at $110 million, the final cost of the system was almost double the initial estimate.

A decade later, the taxed, aging system built by Deloitte in California is struggling again, this time under the strain of new applicants put out of work by the pandemic.

But Deloitte still won a fresh contract last month to again help out with California’s unemployment system. The Sacramento Bee reported that the company has received another $16 million to provide unemployment call center services and help deliver benefits. Deloitte still receives nearly $6 million per year under the contract to maintain the system, the Bee reported.

The move is part of a pattern: States continue to spend millions of dollars hiring Deloitte, IBM, and other contractors to build and fix unemployment websites, even amid growing concerns about the quality of their work. And the crush of unemployment applications flooding in around the country since the pandemic hit have only made the situation worse.

This problem is as follows:

  • Basic capabilities are outsourced to consultants.
  • The knowledge to supervise these projects beyond the most superficial walks out the door as the personnel are hired by these consultants.
  • The consultants do their jobs poorly, but the government cannot spot this until it is too late.
  • The consultants are then paid to fix the problem because the government lacks the ability to fix the system.
  • The consultants are paid to maintain the system because the government lacks the ability to fix the system.
  • Rinse, lather, repeat.

Somewhere along the line, there are likely some campaign donations, or similar skulduggery, but that’s a feature, not a bug.

A Good Primer on McKinsey & Company

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I have criticized the consulting company McKinsey & Company on a number of occasions.

I have accused them of laundering their (undeserved) reputation for probity to place a gloss on destructive self-dealing by politicians and senior managers.

Essentially, if you want to sell off the company in pieces, and lay of thousands, while issuing obscene bonuses, you hire McKinsey to give you the rubber stamp.

Slate has a very good survey of how their racket operates:

What exactly do management consultants do? Well, consultants help solve problems for people who run companies and other organizations. The client defines the problem, and the consultant helps find a solution. But there are consultants … and then there’s McKinsey & Company.

The idea that McKinsey hires the best of the best is central to the story that the firm tells about itself. It tackles the hardest problems for the biggest clients—and the fees it charges those clients reflect all this. They’re the bluest-chip management consultants around. And that’s why, over the course of nearly 100 years in business, McKinsey has been able to adapt to changing market conditions and skate through crises with little harm to its bottom line. Most companies see periodic dips in demand for their products and services, but there’s rarely been a down market for what McKinsey has to offer—because McKinsey sells solutions to other companies’ problems. What sorts of problems? Whatever you got.

………

The guy who had that idea, back in the 1920s, was an accounting professor named James McKinsey. At the time, accounting basically meant one thing: keeping track of the money that came in and the money that went out. You spend a dollar, you wrote it down. You earned $5, you wrote it down. At the end of the month, you added it all up and reconciled the past with the present. But what James McKinsey realized was that a smart company could use those same techniques to see the future. You could look at those numbers—numbers that represented costs and revenues—and use them as the basis for next year’s budget, or to chart a long-term corporate strategy. Maybe that seems sort of obvious? Well, it wasn’t obvious in 1926. And while a few people had similar insights right around that time, James McKinsey was the only one to build a massive consulting company around it.

………

Under Marvin Bower, McKinsey would respect the numbers, but it would refuse to be bound by them. Instead, the firm would offer advice and counsel of all sorts. If James McKinsey had turned accountants into consultants, then Bower turned consultants into professionals. To Bower, a professional was discreet; a professional talked and dressed like those top executives. McKinsey consultants were even required to wear hats right up until the 1960s, when John F. Kennedy changed the world by appearing in public with a bare head. But most importantly, Bower thought a professional should give clients the good advice they might not get internally and tell them the hard truths they might not want to hear. A professional, in Bower’s estimation, would do what was best for the client, not what was most lucrative for the adviser. “He basically said to their clients, ‘We will put your interests ahead of ours always,’ ” says McDonald. “And that is the foundation upon which McKinsey’s entire reputation and business was built.”

………

So, OK, consultants work for management. They’re trained to identify with management. And when there’s a conflict between what’s good for people who run the companies and what’s good for everyone else, which side would you expect the consultants to be on?

In 1951, a McKinsey consultant published a study in Harvard Business Review showing that ordinary worker wages were rising roughly three times as fast as executive wages. “This study made the rounds among elite American executives,” says Daniel Markovits, a Yale law professor and author of The Meritocracy Trap. “The elite executives took the view that they would like their compensation to grow more quickly.”

So the executives started bringing new problems to the consultants: foreign competition, increasing costs, declining profits. And what the McKinsey consultants started telling them was, broadly, “Do you really need all those middle managers?” Of course, most executives don’t enjoy putting people out of work, and they certainly don’t like being seen as heartless. Fortunately, that’s another problem McKinsey can help them with. Once a company has decided to fire a bunch of people, McDonald says, “it’s a lot easier to say to your employees … the ones who will still be showing up to work, that ‘I didn’t want to do this, but we went and asked McKinsey, and this is their advice.’ McKinsey will willingly be the scapegoat for that story.”

………

Over the course of its history, McKinsey has advised downsizing for so many different companies that, according to Duff McDonald, the firm may well be “the single greatest legitimizer of mass layoffs [of] anyone, anywhere, at any time in modern history.” The wave of layoffs that tore through the economy from the ’70s through the ’90s changed the shape of the American corporation. Afterward, there were fewer employees in that middle tier coordinating between the production line and the executive suite. Corporate jobs were increasingly divided between replaceable cogs at the bottom and stressed-out captains of industry at the top.

………

Of course, losing all those white-collar workers in the middle saved companies a lot of money. Some of that money went to profits. Some of it went to the consulting firms they brought in to help them. And some of it went to the salaries of those increasingly important top executives. According to Markovits, this is exactly how the meritocracy looks after its own interests. “It’s not part of my argument that places like McKinsey or Boston Consulting Group or Bain or any of these other elite consulting shops are snake oil salespeople,” he says. “They are providing real skill and expertise. It’s just that when companies manage themselves using skill and expertise delivered in this way, what ends up happening is that they increase the wages of really elite managers and graduates of fancy universities and decrease everybody else’s wages.”

………

But at the same time, according to New York magazine, McKinsey is also working for the Trump administration. The firm has contracts with the Department of Health and Human Services and the Department of Veterans Affairs, and was at one point even involved in Jared Kushner’s coronavirus task force. And it’s not just for public health, either. According to ProPublica and the New York Times, when the Trump administration in 2017 directed U.S. Immigration and Customs Enforcement to ramp up detentions, McKinsey consultants allegedly suggested that the agency save money by cutting spending on food and medical care for detainees. These recommendations were a bridge too far even for ICE, according to ProPublica and the Times, and the agency did not pursue them.

Their prescriptions were too inhumane for la Migra.  Think about that for a second.

McKinsey is Really a Plague on the World

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Between justifying layoffs, financializing businesses out of relevance, laundering money for corrupt politicians, and generally justifying unlimited stupidity and cruelty, the consultants at McKinsey & Company have been making the world a much worse place since 1926.

But they’ve outdone themselves this time.

They are consulting with the Trump administration about detaining and deporting illegal immigrants, and they are (not joking) suggesting that detainees be starved and provided inadequate medical care:

Just days after he took office in 2017, President Donald Trump set out to make good on his campaign pledge to halt illegal immigration. In a pair of executive orders, he ordered “all legally available resources” to be shifted to border detention facilities and called for hiring 10,000 new immigration officers.

The logistical challenges were daunting, but as luck would have it, Immigration and Customs Enforcement already had a partner on its payroll: McKinsey & Company, an international consulting firm brought on under the Obama administration to help engineer an “organizational transformation” in the ICE division charged with deporting migrants who are in the United States unlawfully.

The Obama administration brought in McKinsey.  There is a whole bunch of stupidity and evil in that sentence.

ICE quickly redirected McKinsey toward helping the agency figure out how to execute the White House’s clampdown on illegal immigration. But the money-saving recommendations the consultants came up with made some career ICE staff uncomfortable. They proposed cuts in spending on food for migrants, as well as on medical care and supervision of detainees, according to interviews with people who worked on the project for both ICE and McKinsey and 1,500 pages of documents obtained from the agency after ProPublica filed a lawsuit under the Freedom of Information Act.

McKinsey’s team also looked for ways to accelerate the deportation process, provoking worries among some ICE staff members that the recommendations risked short-circuiting due process protections for migrants fighting removal from the United States. The consultants, three people who worked on the project said, seemed focused solely on cutting costs and speeding up deportations — activities whose success could be measured in numbers — with little acknowledgment that these policies affected thousands of human beings.

In what one former official described as “heated meetings” with McKinsey consultants, agency staff members questioned whether saving pennies on food and medical care for detainees justified the potential human cost.

But the consulting firm’s sway at ICE grew to the point that McKinsey’s staff even ghostwrote a government contracting document that defined the consulting team’s own responsibilities and justified the firm’s retention, a contract extension worth $2.2 million. “Can they do that?” an ICE official wrote to a contracting officer in May 2017.

………

McKinsey has faced mounting scrutiny over the past two years, as reports by The New York Times, ProPublica and others have raised questions about whether the firm has crossed ethical and legal lines in pursuit of profit. The consultancy returned millions of dollars in fees after South African authorities implicated it in a profiteering scheme. The exposure of its history advising opioid makers on ways to bolster sales induced the usually secretive firm to declare publicly that its opioid work had ended. Last month, the Times reported that McKinsey’s bankruptcy practice is the subject of a federal criminal investigation. The firm has denied wrongdoing in each case, but it apologized for missteps in South Africa.

………

The consulting team became so driven to save money, people involved in the project said, that consultants sometimes ignored — and even complained to agency managers about — ICE staffers who objected that McKinsey’s cost-cutting proposals risked jeopardizing the health and safety of migrants.

………

McKinsey also looked to cut costs by lowering standards at ICE detention facilities, according to an internal ICE email and two former agency officials. McKinsey, an ICE supervisor wrote in an email dated March 30, 2017, was “looking for ways to cut or reduce standards because they are too costly,” albeit, the supervisor added, “without sacrificing quality, safety and mission.”

………

But the McKinsey recommendations remain on the books at ICE. The consultants analyzed how the agency could save money at detention centers beyond those where they helped renegotiate contracts — including several near the border, like ICE’s largest family detention facility, in Dilley, Texas — and Cox said these analyses remain reference points for future efforts to curb spending. A report issued this summer by the Department of Homeland Security’s inspector general raised concerns about food quality and upkeep at several ICE facilities, both categories on which McKinsey recommended ICE spend less.

One of the more prominent ex-employees of McKinsey & Company these days, is Pete Buttigieg, and he has refused to talk about what he did when working for them, claiming tht he is constrained by a non-disclosure agreement.

Yeah, right.

Tweet of the Day

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if pete doesn’t like people who meet and work with dictators and war criminals, i got some news for him about McKinsey…

— tyson brody (@tysonbrody) November 21, 2019

Considering McKinsey’s profoundly unethical behavior in recent years, it really behooves Mayor Pete “Sentient Mayonnaise” Buttigieg to come clean about what exactly he was doing during his time at the consulting firm.

Least Surprising News of the Day

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There is now an investigation of the consultant McKinsey & Company over what appears to be egregious self-dealing in its bankruptcy consulting:

McKinsey & Company, the elite consulting firm that advises many of the world’s largest and most powerful institutions, is facing a federal criminal investigation of its conduct advising bankrupt companies, according to five people familiar with the matter.

Prosecutors and other Justice Department officials in New York and Washington are trying to determine if McKinsey used its influence over insolvent companies in violation of the rules of Chapter 11 bankruptcy — where billions of dollars can change hands — by quietly steering valuable assets to itself or favoring its own clients over other creditors.

………

In the past two weeks, investigators have conducted interviews about McKinsey’s actions in the bankruptcies of at least two companies, Alpha Natural Resources, a coal producer, and SunEdison, an alternative energy company, said one of the people, who was questioned by F.B.I. agents.

The judges overseeing both those cases have already suggested that questions over McKinsey’s conduct could best be resolved by the Justice Department — either with civil actions or criminal charges.

In addition to the previously unreported criminal investigation, an investigation by the Office of the United States Trustee, a division of the Justice Department that polices the conduct of companies in the bankruptcy system, is underway.

The office, which can seek civil penalties and make criminal referrals to prosecutors, has told judges in at least three other bankruptcy cases that it was examining McKinsey’s practices. The firm said it had responded to questions from the United States Trustee.

American business is rotten to its core, and McKinsey is just a particularly brazen and corrupt avatar of this situation.

I’m sure that they will get off with a fine of a few bucks, so in the end, it’s just a cost of doing business.

H/t Eschaton.

Tweet of the Year

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Taavi Kotka , former CIO of Estonia, on the low £100m price tag for being the most tech-savvy government in the world: “If you don’t use Accenture or McKinsey, you’d be amazed at what you can get done.”

— Philip Salter (@Philip_Salter) November 4, 2019

The point is a valid one.

The fixation that governments have on outsourcing and consultants serves primarily to increase cost and to reduce effectiveness of government programs.

Just look at the Obamacare website.

Never Give to the DNC

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There are a number of reasons why not to give to the Democratic National Committee: It is ineffective, DNC Chair Tom Perez is clueless, and it is dominated by political consultants who make their money off the revolving door between the committee and private business.

It doesn’t help that these consultants are over priced and incompetent, otherwise, I would be complaining about President Hillary Clinton.

And now we know that the organization is completely unwilling to take even baby steps toward accountability and competence, because they just nixed an internal committee that would review spending and report to the DNC members who theoretically run the organization:

A proposal to bring unprecedented oversight to the way that the Democratic National Committee spends the billion dollars it raises between presidential elections was rejected by the DNC Rules and Bylaw Committee Tuesday, after a spirited debate highlighting that there is no independent oversight reporting back to the DNC’s 450 members.

The decision did not come without some Rules Committee members saying that the oversight issue was legitimate. But they did not feel that creating a new elected committee to review the DNC’s spending decisions was the best approach. The oversight proposal was the last piece of business from the DNC’s post-2016 Unity Reform Commission recommendations, which sought to heal the party’s internal divides after that cycle.

“I am disappointed,” said Jim Zogby, a longtime DNC member and Arab-American human rights leader, who noted that Tuesday’s proposal was the latest in a series of efforts to introduce greater transparency and oversight before 2020’s election.

………

“Look, I’ve been a DNC member—this is my 27th year. I was an executive committee member for 16 years. The issue of never seeing the budget, never being able as a member to evaluate the budget, sticks in my craw. I think it should stick in the craw of every member of the body,” he said. “At the end of the day, the ability to know how money is spent, and have some say in it, or, at least, as the [DNC] bylaws call for, to evaluate it, is essential for the governing body of any organization.”

………

Leone’s last point was referring to the current DNC leadership, under Chair Tom Perez, saying that the party’s spending has been much more transparent and accountable than in previous years. Another objection came from David McDonald, an RBC member from Washington, who said looking retrospectively could distract from current campaigns.

So let me get this straight:  We can’t let the members know how the money is spent, because it might distract from us spending our money in stupid ways.

………

“The [DNC] chair simply cannot appoint the committee that oversees the finances of the chair and the expenditures that are determined by the chair. That simply makes no sense,” he said. “We would not get into trouble—and we have had trouble—if the Finance Committee… [had had] an oversight committee that can do the due diligence and report back to us, ‘This happened. That happened. This didn’t happen. That didn’t happen. We make these recommendations for the future.’”

The DNC does not want to know when they do stupid things:  It’s how friends and relatives of current DNC staffers make their money, spending on stupid sh%$, and then getting a percentage of their ineffectual advertisement buys.

Corruption is the goal, not an accidental byproduct of incompetence.

Let the Looting Begin

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At the core of the failure of the California High speed rail project is costly and largely incompetent consultants:

When California shifted its bullet train plan into high gear in 2008, it had just 10 employees to manage and oversee design of the largest public construction project in state history.

Consultants assured the state there was little reason to hire hundreds or thousands of in-house engineers and rail experts, because the consultants could handle the heavy work themselves and save California money. It would take them only 12 years to bore under mountains, bridge rivers and build 520 miles of rail bed — all at a cost of just $33 billion.

State officials followed that advice, and for the next several years, development of the nation’s first high-speed rail line was overseen by a minuscule government staff.

Now, more than a decade later, that decision has proved to be a foundational error in the project’s execution — a miscalculation that has resulted in the California High-Speed Rail Authority being overly reliant on a network of high-cost consultants who have consistently underestimated the difficulty of the task.

………

But significant portions of this work have been flawed or mismanaged, according to records reviewed by The Times and interviews with dozens of people involved in the project. Despite repeated warnings since 2010 about weaknesses in its staffing, the rail authority believed it could reduce overall costs by relying on consultants and avoiding a large permanent workforce. But that strategy has failed to keep project costs from soaring. Ten years after voters approved it, the project is $44 billion over budget and 13 years behind schedule.

A reckoning may be coming very soon, however.

Gov. Gavin Newsom recently told The Times that he would be taking aim at the consultants when the rail authority sends a major project update to the Legislature on May 1, including a detailed plan on building a partial operating system from Bakersfield to Merced for $16 billion to $18 billion.

“I’m getting rid of a lot of consultants,” Newsom said. “How did we get away with this?”

But actually reducing the role of consultants will be problematic because they have become cemented into place.

………

The rail authority’s consultants are hardly household names, but they are politically powerful and made major contributions to support the 2008 political campaign for the bullet train bond. They have staffed their ranks with former high-level bureaucrats, and their former executives have occupied key government posts.

………

To be sure, consultants are a routine part of many state construction projects. In California, however, high-speed rail is in a league of its own when it comes to reliance on outside staffing.

………

“If you depend on consultants to know what you are doing, then you are in real trouble,” said Bent Flyvbjerg, an Oxford University professor who has studied high-speed rail projects around the world. “A good balance is where the owner is not outsourcing all the knowledge. A bad balance guarantees a bad outcome.”

Brian Kelly, chief executive of the rail authority, acknowledges that “the balance needs to be remedied.”

Gee, you think?

It turns out that corruption is why we cannot make things in the United States anymore.