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"McKinsey & Co has a long history of ruining Credit Suisse"

So, Credit Suisse is thinking of bringing the consultants back? I would strongly advise against engaging McKinsey & Co. Quite aside from McKinsey’s self-inflicted reputational disasters (remember Rajat Gupta?), McKinsey has a long history of ruining Credit Suisse. 

Those of us with long memories will recall Lukas Mühlemann. He was the ex-Credit Suisse CEO who spent 12 years with McKinsey & Co. Mühlemann ran McKinsey & Co. Switzerland before joining Credit Suisse as CEO in 1997.

Mühlemann embarked upon an expansion strategy that included the acquisition of Winterthur Insurance for $8.8bn in 1997 and Donaldson, Lufkin and Jenrette for $11.5bn in 2000. However, after a series of losses and a halving of the share price, Mühleman was forced out in 2002. Winterthur was later sold to Axa.

This should have been sufficient to warn Credit Suisse that McKinsey people know less than they claim to. But the bank then hired Tidjane Thiam, another McKinsey Consultant as CEO in 2015, and Thiam promptly appointed other ex-McKinsey people like Pierre-Olivier Bouée as COO. Both were ultimately forced out, but not before Thiam had made the fateful move of appointing the inexperienced Lara Warner as chief risk and compliance officer. 

McKinsey people therefore carry some of the blame for the situation Credit Suisse finds itself in. For McKinsey to come in and fix the merger with UBS would be a great irony.

Ralph Hamers is too young and inexperienced to know the game, but bringing in the consultants is a common ploy. Sergio Ermotti is simply covering himself. If you go out and hire the most expensive consultants you can find, you simply tell the board:  “I did everything I could—look, I hired McKinsey—how can that be wrong?  Everyone else does it.”

But if Sergio really knew what he was doing, he wouldn't need consultants at all. And he especially would not need them from McKinsey.

Ralph Tangemann is a pseudonym

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AUTHORRalph Tangemann Insider Comment
  • Br
    14 April 2023

    It is 110% true that consultants are useless, however they are not hired for their productivity, but as a hedge for the executives. Executives loathe the idea of taking responsibilities. If their team performs bad, it's because of the consultants, if they succeed it's because they are very smart.

  • ph
    5 April 2023

    Bringing in consultants as bankers as part of the transition might be necessary as many bankers who can will jump ship. But there are other types of consultants, who have skills needed to merge large financial firms. One area, is that of external vendor contracts, something that often gets forgotten until it's too late. Ensuring that staff get the services from these vendors after being absorbed into the new firm if needed, and that staff still on board at the old maintains their services until moved over or terminated. What can happen is that this is ignored, and high priority services disappear, or money is wasted, or contracts are violated.

  • Am
    1 April 2023

    Brilliant piece and absolutely spot on. The days consultants with a focus on short-term profits and performance and next to zero capability to develop culture have to be coming to an end.

    My colleague wrote an enlightening piece which briefly summarises how this short-term focus (surely helped along by McK & Co) dug a huge hole for CS. Worth a read.

  • Fr
    Fr.333 account
    1 April 2023

    I can only hope UBS reads this article

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