Schools of enterprise: How management consulting firms produce CEOs and entrepreneurs

Schools of enterprise: How management consulting firms produce CEOs and entrepreneurs

By: 
Michelle Zhu
02/10/18, 09:25 pm

SINGAPORE (Oct 1): The boardrooms of Ryan Ho’s (main image, left) earlier job may be a far cry from the lightsabers and bubble soccer at his current office, but he credits his two-year stint at McKinsey & Co for equipping him with the experience and skills to start a business and make it a success. Ho now runs The Fun Empire, a self-funded, innovative team building and events company, with his wife and business partner Natasha Koh. It is the couple’s third venture, having started and shuttered T-shirt printing and online tuition businesses while still in school.

“We needed to learn how to pick up on things really quickly and efficiently, often by the 80/20 rule, which is to focus on what’s most important and learning how to prioritise,” Ho recalls of his time at McKinsey. He is referring to the Pareto principle, which observes that 80% of effect comes from 20% of causes. He says the firm emphasised honing its consultants’ metacognitive abilities based on this concept. “I feel that metacognitive skills are quite underestimated. When we are engaged as consultants for projects in an industry that we are unfamiliar with, we are still expected to bring ourselves up to speed in one to two weeks.”

The 28-year-old advocates McKinsey as a great place to not only learn the basics of business, but also work in teams to solve problems. “We were tasked to solve huge, complicated problems for companies as consultants and [the process] really equips you with a very good mix of skill sets that are truly valuable and portable to start-ups. The firm also had a network of great mentors and advisers that could help us fill the knowledge gaps very quickly.”

Could landing a job at McKinsey boost one’s odds of success? After all, the company takes pride in being a “leadership factory” and claims to have produced more than 450 alumni who have taken leadership roles in billion-dollar enterprises.

Several major corporations have hired former McKinsey consultants for the executive office. Among the more illustrious is Sheryl Sandberg, Facebook’s chief operating officer. Other consulting groups have their share of high achievers: The Boston Consulting Group counts Indra Nooyi, the PepsiCo CEO who has just stepped down after 12 years, among its former employees. Bain & Co alumnus include Mitt Romney, its former CEO and previous US presidential candidate.

In Singapore, Jonathan Auerbach, now executive vice-president and chief strategy, growth & data officer at PayPal, took the leap from McKinsey to Singapore Telecommunications as CEO, Group Digital Life, in 2014. Another high-profile appointment was Wolfgang Baier, who joined Singapore Post as chief executive of international operations after 10 years with McKinsey and was appointed its group CEO in the same year.

Now, it seems that the firm’s budding consultants are leaving to start their businesses right off the bat. According to the global McKinsey website, one in five alumni have started their own venture.

Not quite a ‘factory’

Hsieh Tsun-yan, chairman and lead counsellor of leadership services at LinHart Group, says McKinsey has had a reputation for being a “CEO factory” for at least 30 years. Over his three-decade career at McKinsey before retiring in 2008, Hsieh himself saw a number of associates leave to join their clients as senior and top management- level executives at multinational companies. They include Sundar Pichai, Google’s CEO, and David Lawee, partner at CapitalG, Alphabet’s venture capital arm. Hsieh, who is also provost chair professor at the NUS Business School and Lee Kuan Yew School of Public Policy, disagrees, however, that McKinsey is a “factory” for CEOs or entrepreneurs. “It is true that the CEOs of every industry and region in the world have a very high density of McKinsey alumnus. But to say it is a ‘CEO factory’ — that, I think, is going a little bit too far because I don’t think it deliberately set out to accomplish that,” he says in an interview with The Edge Singapore.

What could have helped was the access McKinsey gave them to top management positions in large companies, given the nature of consultancy work. When Hsieh was working at the company in the 1980s and 1990s, it was commonplace for its consultants to be exposed to high-level consulting projects with prominent companies. He believes this gave them the confidence to eventually run the companies they consulted for.

“If you work in corporate strategy consulting, you end up dealing with a lot of top management [personnel] of the company you are working for. So you end up becoming fairly attractive to the company, and by working as their consultant, you are armed with the most intimate knowledge of the company… It’s a lot easier for people with a background in McKinsey to be understood and appreciated, given their important responsibilities as consultants,” he says.

More importantly, Hsieh believes it is self-leadership that makes these people who they are today. The professor emphasises that prominent line personnel such as Lawee, Pichai and Facebook’s Sandberg were junior or mid-level consultants when they left the firm for greener pastures. Jessica Tan, deputy group CEO, COO and CIO of China’s Ping An Insurance, is another case in point. Hsieh recalls serving McKinsey as managing director of its Asean operations at the time Tan joined McKinsey and worked with the firm in the US and Singapore as a consultant and eventually, junior partner.

“She had served Ping An as a consultant for quite a few years, and from there she joined the client [Ping An]. She did a lot of tech work and Ping An runs a lot of businesses, so that [her work at McKinsey] became a very strong platform for her to jump across. “If these people had stayed, could they have made senior partner [at McKinsey]? I don’t know. But are they fine people with great leadership skills and enormous intellect? Absolutely,” Hsieh states.

Consultancy as stepping stone

Since Ho started The Fun Empire in 2015, he has organised over 5,000 events for companies such as global industry giants Google, Facebook and even McKinsey. Like Ho, Samuel Tan (main image, right), CEO and co-founder of Auk Industries, an Internet of Things solutions provider for the manufacturing industry, credits McKinsey with equipping him with valuable skills and experience. Tan was an associate in McKinsey’s operations practice, consulting in the areas of lean manufacturing and supply chain for clients in a range of sectors including ICT, healthcare and logistics. He left in 2017 to “jump right into the heat of the action” with Auk Industries, and estimates that the business is valued in the low double digit of millions.

Tan, now 32, looks back on his twoyear stint at McKinsey as a humbling yet empowering experience. The key takeaways for him were that, clear thinking and keen observations, coupled with sensible technical knowledge, could go a long way if applied diligently. He describes the environment at McKinsey as one filled with high-calibre individuals working to rally huge changes in large organisations. It was also during this time that Tan says he was emboldened to “start making a small dent in the big, big world” as an entrepreneur. “As a consultant, I learnt to navigate organisations, communicate better and motivate change in the right directions. I trained to stay composed under immense stress,” Tan says in a separate interview with The Edge Singapore.

But Tan thinks alumni-turned-entrepreneurs are not as common as one might imagine. He knows of only one or two former consultants who left McKinsey to join their clients, but none who have left to start their own business like he has. “Consultants typically love their work [at McKinsey] because of their peers, the project challenges, the fast pace and diversity of scope. Gears have to shift when they move to corporate roles,” he observes.

In Tan’s view, the majority of consultants who quit McKinsey do so mainly for lifestyle reasons, as the management consulting role requires frequent travel. Also, working for another company is a safer alternative to the route he chose.

“It was the desire to carve out my own path and venture into the unknown, especially after having climbed the steepest part of the learning curve at McKinsey,” Tan, a father-of-two, says of his reasons for leaving. “Entrepreneurs have the odds stacked way against them. Disrupting incumbents [as a start-up] is never easy, likely, or predictable in the early stages,” he adds. Nevertheless, he has no regrets about his move, adding that while the jump from McKinsey to a corporate job may be lucrative, it does not offer the immense potential that running one’s own business comes with. 

This story appears in The Edge Singapore (Issue 850, week of Oct 1) which is on sale now. Subscribe here

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