McKinsey boss Bob Sternfels is facing a tougher than expected bid for re-election after a backlash to his restructuring of the consulting firm and a slowdown in growth.
Sternfels failed to clinch a second three-year term on the first round of voting for global managing partner after more than half of McKinsey’s 750 senior partners selected other candidates as their first choice to run the firm, according to people familiar with the outcome.
With up to three possible rounds of voting, Sternfels is widely seen as the favourite but the process has highlighted internal debate on issues ranging from corporate governance to McKinsey’s financial performance. If he fails to win over a majority of senior partners, Sternfels would be the second consecutive leader ousted after a single term.
Current and former partners and other people familiar with internal discussions pointed to last year’s lay-offs of 1,400 back office employees as one source of uncertainty over Sternfels’ leadership.
The restructuring, codenamed Project Magnolia, was designed to protect partner profits at the 45,000-person firm, but some felt it was mishandled by an organisation whose stock in trade is advising corporations how to conduct such exercises.
“McKinsey is a meritocracy and it is not shy about telling you we turn over people. The stupid part was that they put a name on it,” said one former senior partner. “It is like the cobbler that cannot put shoes on his kids.”
While some partners felt the restructuring did not go far enough, many felt it paid too little regard to the long service of people affected and was imposed without appropriate consultation — reinforcing impressions in some quarters that Sternfels had concentrated decision-making among too few people.
“Managing partners have always sought the advice of large numbers of people, but Bob is willing to make larger shifts without seeking the same level of consensus,” the former senior partner said.
Under McKinsey’s idiosyncratic election process, senior partners can vote for anyone from within their ranks in the first round as long as the candidate can serve a full term before turning 60. If a candidate fails to win 50 per cent of first preference votes, the top 10 names go forward to a second round.
Candidates who have advanced to the next round with Sternfels include Carter Wood, chief risk officer, and Rodney Zemmel, global leader of McKinsey Digital, as well as Asutosh Padhi, McKinsey’s North America managing partner, and his predecessor in that role, chief client officer Liz Hilton Segel.
Eric Kutcher, McKinsey’s chief financial officer, is also on the ballot, along with Virginia Simmons, a former head of the UK office, and the ex-chair of McKinsey Asia, Oliver Tonby, according to people who have seen the list.
Gassan Al-Kibsi, chair of McKinsey’s Middle East business, and Homayoun Hatami, former managing partner in France, round out the list.
Sternfels is credited with restoring stability after the ousting of his predecessor Kevin Sneader, whose leadership was overshadowed by a legal and public backlash over McKinsey’s work for opioid manufacturers. The scandal caused a rift in the partnership that led to Sneader becoming the first boss since 1976 to not win a second term.
Shortly before the 2021 ballot, McKinsey agreed to pay almost $600mn to settle allegations in the US that it helped drugmakers “turbocharge” drug sales and contributed to an epidemic of opioid addiction. It has since paid more than $300mn more.
Under Sternfels, the firm has doubled down on Sneader’s investments in risk and compliance functions and new processes to vet clients, which many partners accept are vital for managing a large organisation and safeguarding its reputation, even if they have chafed at times under the strictures.
“McKinsey partners don’t like having a boss,” said one former senior partner. “Now it can feel like someone is always looking over your shoulder.”
Sternfels has also sought to knit McKinsey’s global organisation more tightly together to bring expertise from across the world to help clients wherever they operate. He told the Financial Times in July it was a project spanning more than one term. “Those aren’t things that you land . . . in the next six months,” he said.
Some observers have questioned whether Sternfels’ expertise in operations is the right fit for the next few years, when McKinsey will need to project itself as a strategic counsellor to chief executives and governments tackling era-defining challenges such as climate change and the rise of artificial intelligence.
“I’m sure there’s a desire for somebody who will speak more compellingly and excitingly about what the firm is doing,” said one former partner.
The election is also unfolding against a backdrop of slower growth in the consulting market, which last year prompted McKinsey to cut the number of promotions to its exclusive and lucrative partnership and to defer some partner compensation to help smooth cash flow.
People familiar with the internal dynamics disagreed over how heavily economic factors featured in senior partners’ voting decisions. One said McKinsey had weathered much worse downturns in 2001 and 2008 without it affecting leadership elections, while another former partner said some people “vote solely on the economics”.
Another said uncertainty pervaded all walks of life and voters were sceptical of incumbent leaders of all kinds, whether they are presidents, prime ministers or managing partners of McKinsey.
McKinsey declined to comment beyond saying that it would announce the result after the election concludes.
Additional reporting by Anjli Raval