How McKinsey Became One Of The Most Powerful Companies In The World

When the most powerful executives in the world have a problem they just can’t crack, many of them turn to McKinsey – a prestigious and secretive consulting firm that has been influencing business and government decisions for decades. But now, as consumers require more transparency, the company has been thrust into the spotlight.

 

 

12 min

influential in Western Europe they have
been for half a century
whether that’s England or Germany or
elsewhere but also some recent New York
Times reporting has shown that they are
very involved with China a lot of
state-owned enterprises Saudi Arabia
South Africa is a great example there
the company was ensnared in a government
corruption scandal McKinsey repaid about
seventy four million dollars in fees and
while not admitting legal wrongdoing has
apologised for its involvement global
managing partner Kevin Schneider told
CNBC Africa I think we’ve learned many
lessons from the saga not the least of
which is when you make a mistake it’s
best to say sorry quickly and clearly
and then take steps to ensure you don’t
repeat the errors and so the second

Eric Schmidt Has Lessons to Pass Along

In a new book, the former Google chairman pays tribute to his late Silicon Valley mentor

Pinned in the doorway of Eric Schmidt’s snug corner office in Mountain View, Calif., is a comic strip that neatly sums up what the longtime Google chief executive wants you to know about himself and the company.

The cartoon, custom-created for Mr. Schmidt, shows Google’s technology rivals making supposed apologies. There’s Facebook ’s Mark Zuckerberg saying, “Sorry…but we’re still right.” Then there’s Apple Inc.’s Tim Cook saying, “You’re holding it wrong.” Finally, there’s Mr. Schmidt, who says, “We screwed up. Sorry.”

This is the Google way, perfected under Mr. Schmidt: high-minded, self-assured and a little smug.

Mr. Schmidt says that his approach is derived from the many lessons he learned from his late mentor, the Silicon Valley management guru Bill Campbell: “If you make a mistake, admit it, and do it right now. And if you didn’t make a mistake, don’t admit it.”

.. While it is now de rigueur for startup founders to take on formal mentors, Mr. Campbell was the beta version of the trend, personally counseling Mr. Schmidt, Steve Jobs, Facebook’s Sheryl Sandberg and many other Silicon Valley stars. A former Columbia University football coach who became a wealthy tech executive and adviser, Mr. Campbell was known for getting through to type-A people who might otherwise struggle to think of themselves as part of a team.

Mr. Schmidt credits Mr. Campbell for talking him off the cliff when he threatened to quit Google early on after being asked to relinquish his title of chairman. “Your pride is getting in the way,” Mr. Campbell told him, Mr. Schmidt recalls.

Later, Mr. Campbell helped to soften Mr. Schmidt’s edges as a boss. “Like, for you, I’d say: ‘You’re the best writer I’ve met in your generation,’ ” Mr. Schmidt says, with considerable overstatement. “Then I’d read something and say, ‘Well, you missed something, you could do better.’ Notice how because I’ve praised you, now you want to be a better person.”

.. When asked about Apple founder Steve Jobs, with whom Mr. Schmidt had a public falling-out over Google’s development of rival mobile software, Mr. Schmidt diplomatically observes, “When Steve was upset, he was loud.” He hastens to add: “Steve was a good friend, and I miss him terribly.”

Mr. Schmidt’s arrival on the self-help circuit comes amid a tide of leadership missives from wealthy entrepreneurs. The hedge-fund billionaire Ray Dalio has spent more than a year evangelizing his book of “Principles,” which tells employees to argue with one another and rank each others’ performance in real time. Mr. Schmidt, who says he knows Mr. Dalio well, calls that approach “sort of the extreme.” He prefers to deliver hard feedback behind closed doors. He says that he steered clear of Wall Street early in his career because “it wasn’t forgiving…it wasn’t tolerant.”

Google under Mr. Schmidt was tolerant—maybe too much so, according to some of its own employees. Staffers world-wide staged a walkout last year after it was reported that the company paid millions in exit packages to top executives who left after being accused of sexual harassment. Google covered up the reasons for their departures, according to documents filed in a recent civil lawsuit. The company says it has since made changes to the workplace.

Mr. Schmidt’s late mentor was touchy-feely in a more innocent manner, Mr. Schmidt says. His description of Mr. Campbell carries a whiff of the “Saturday Night Live” sketches lampooning a family that constantly kisses one another.

Mr. Campbell “would walk into a room and everyone would stand up, and he would hug every person in the perimeter, including the assistants—two women and a man,” Mr. Schmidt says. “If you went to visit him, you had to hug his secretary, and then you had to hug him, and then you had to watch him hug her.”

Mr. Schmidt says he hugs subordinates less frequently.

Sheryl Sandberg Can’t Have It All

The truth is, Sheryl Sandberg has been preoccupied with her own P.R. — and has been a master of the cold science of optics — ever since she was a teenager. One of the most revealing stories in “Lean In” is about her senior year, when she was voted Most Likely to Succeed. Believing that the title would interfere with her chances of getting a date to the biggest party of the year — “Who wants to go to the prom with the smartest girl in the class?”— she got a friend on the yearbook to remove the designation.

.. Much of the advice Sandberg gives in “Lean In” is, frankly, unapologetically strategic. And why ever not, when the obstacles to female advancement can seem as high as the moon? But controversially, much of it was also retrograde, a nod to realpolitik: Ask for a raise because women as a group tend to be underpaid, not because you personally deserve it. Note that someone more senior to you suggested that you ask for this salary negotiation in the first place. Be “relentlessly pleasant,” to borrow a phrase from Mary Sue Coleman, president of the Association of American Universities.

.. What makes Sandberg’s current behavior so unsavory is that she put corporate interests — and her own image — ahead of the needs of democracy. She would sooner downplay Facebook’s involvement in a national security crisis than compromise the integrity of her reputation. And in so doing, Sandberg, one of the country’s most influential and renowned feminists, may have contributed to the historic loss of the first viable female candidate for president of the United States.

What Facebook Knew and Tried to Hide

Even when the Facebook leaders understood the problem, they tried to hide it.

Right after the election Zuckerburg was dismissive of the idea that Fake News influenced the election.

People within the company thought he was out of touch.

At the time Facebook was under pressure.

Trump had won the election using social media, but Facebook was dismissive.

Facebook employees saw the tip of the iceberg .  They had been following Russian

Mark wanted to find a technical fix.

Sheryl was thinking about the legal risk and was wondering whether they would find out things they didn’t want to know.  Sheryl was thinking about what the consequences would be.

Sheryl yelled at the security team for investigating Russian interference without formal approval.

The leadership was concerned that Washington was controlled by conservatives who would have an adverse reaction to an investigation or efforts to curb this activity.  Conservatives already think Silicon Valley is a bunch of hippies.

There was pressure within Facebook not to publish anything linking activity back to Russia.  Sheryl(?) also signed off on a policy not to take down the Russian troll accounts.

Mark Zuckerburg was traveling the country, milking cows, and acting as though he wanted to run for President.

Sheryl Sandberg was running her own “Lean-In” brand.

Alex Stamos (Security Chief) briefs the audit committee and the board’s response is to yell at Mark(?) and Sheryl(?)

The leadership holds a big meeting and Sheryl yells at Alex Stamos for

  • not briefing her fully
  • admitting that they hadn’t fully got a grip on the situation
  • suggesting that Russia would likely do this again in the future

Alex has gotten in trouble in the past for being too transparent

The Cambridge Analytical Scandal illustrates:

  • The consequences of surveillance capitalism
  • The potential of Facebook to influence elections

Apple CEO Tim Cook castigates Facebook for their business model.

Facebook conducts an advertising campaign and privately goes on attack using the Washington PR opposition research campaign, which uses the NTK network which publishes propaganda.

Confronted with a Propaganda Scandal, they turn to a PR campaign to create their own Propaganda.

Attacks Apple and Tim Cook.  Attack George Soros, arguing the Facebook’s criticism was masterminded by George Soros.  In taking on Soros they are getting into the smear and conspiracy business.

 

Related:

Damage Control at Facebook: 6 Takeaways From The Times’s Investigation

With Facebook at ‘War,’ Zuckerberg Adopts More Aggressive Style

New approach causes turmoil, driving several key executives from the company and creating tensions with longtime Chief Operating Officer Sheryl Sandberg

Mark Zuckerberg gathered about 50 of his top lieutenants earlier this year and told them that Facebook Inc. FB -5.72% was at war and he planned to lead the company accordingly.

During times of peace, executives can move more slowly and ensure that everybody is on board with key decisions, he said during the June meeting, according to people familiar with the remarks. But with Facebook under siege from lawmakers, investors and angry users, he needed to act more decisively, the people said.

.. On Friday, that tension was on display when, during a question-and-answer session with employees at Facebook’s headquarters in Menlo Park, Calif., he blasted a fresh round of critical news coverage as “bullshit,” according to the people familiar with the remarks.

One employee at the session asked if Facebook could deter leaks by publishing an internal report about how frequently offenders are found and fired. Mr. Zuckerberg said Facebook does fire leakers, but the root cause was “bad morale” perpetuated by attacks in the media.

.. He believes this tougher management style is necessary to tackle challenges being raised both internally and externally, according to a person familiar with his thinking.
.. Mr. Zuckerberg’s new posture could trouble those who feel his “move fast, break things” mantra from Facebook’s early days contributed to many of the company’s current problems. It also has led to confrontations with some of his top reports, including Ms. Sandberg, who has long had considerable autonomy over the Facebook teams that control communications and policy.
.. This spring, Mr. Zuckerberg told Ms. Sandberg, 49, that he blamed her and her teams for the public fallout over Cambridge Analytica
Ms. Sandberg later confided in friends that the exchange rattled her, and she wondered if she should be worried about her job.

.. Mr. Zuckerberg also has told Ms. Sandberg she should have been more aggressive in allocating resources to review troublesome content on the site

.. The heads of some other key Facebook units didn’t survive conflicts with Mr. Zuckerberg.

Mr. Zuckerberg clashed with the co-founders of Instagram

.. The co-founders of WhatsApp likewise left after disagreements with Mr. Zuckerberg over how to generate more revenue from the messaging-service

.. More recently, Mr. Zuckerberg forced out Brendan Iribe, co-founder of Oculus VR, in part because of a disagreement about the future of the Oculus Rift virtual-reality headset

.. Facebook remains hugely profitable, with net income of more than $5 billion in the third quarter, but its margins are under pressure in part because of its increased spending on security.

.. Mr. Zuckerberg has said Facebook is in the midst of a three-year turnaround ending in 2019 to strengthen its defenses against the risks posed by having an open platform.

.. All told, about a dozen senior or highly visible executives disclosed their resignations or left Facebook in 2018. In May, Facebook announced a major reshuffling of top product executives in a way that helped free up Mr. Zuckerberg to oversee a broader portfolio within the company.

.. This turmoil at the top of Facebook has made it difficult for the company to execute on some product decisions and shore up employee morale, which has been sinking over the last year along with the stock price, which has fallen 36% since its peak. Many employees are frustrated by the bad press and constant reorganizations, including of the security team, which can disrupt their work, according to current and former employees.

.. Scrutiny of Facebook has only escalated in the past week after the New York Times reported its use of opposition-research firms tasked with exposing critical information about Facebook’s detractors, including one called Definers Public Affairs. Ms. Sandberg and Mr. Zuckerberg both said the decision to employ the firm was made by Facebook’s communications officials.

Ms. Sandberg’s comments in particular have angered many people on those teams, according to people familiar with the matter, given how closely she tracked and managed Facebook’s media strategy, sometimes getting involved in wording changes. In the internal Q&A Friday, Ms. Sandberg said she took full responsibility for the actions of the communications team.

.. In September 2017, Erskine Bowles, the head of the audit committee and a former Clinton White House official, told Ms. Sandberg and Mr. Zuckerberg that he felt they needed to take the issue of Russian interference on the platform much more seriously.

“This is going to be much bigger than you think,” Mr. Bowles said

.. Later, after the Cambridge Analytica disclosure, the board urged Mr. Zuckerberg to name an executive who would be in charge of corralling Facebook’s response to that matter and resolving other issues before they metastasized, said a person familiar with the matter. After that, he put Ms. Sandberg in charge of that effort.

Mr. Zuckerberg also sought advice from a mentor, former Microsoft Corp. Chairman and CEO Bill Gates. He recommended Microsoft’s model, which relies on Brad Smith to oversee its corporate, external, and legal affairs. Mr. Smith wears the title “president” and reports directly to the CEO.

Sheryl Sandberg and the emptiness of leaning in

Sandberg argues in her 2013 mega-selling book, “Lean In,” should take a seat at the table. That’s all well and good. But what should they do once they’re sitting there? Sandberg herself, consummate table-sitter, has offered an answer over her company’s year of horrors: Keep everything exactly the same.

Let your Republican strategist tell you that being honest will make GOP members of Congress mad — and stay silent. Yell at your security officer for doing his job because it might put yours at risk. Allow your subordinates to play on the same political polarization your platform is under fire for facilitating by using public-relations firms to fan partisan flames. These tactics, all reported by the Times, whose portrayal Facebook has rebutted and the company’s board of directors has called “grossly unfair,” are how people in power have always held on to it. Sandberg intended to hold on to it, too.

In fact, this approach is perfectly consistent with the message of Sandberg’s opus. “Lean In” is not fundamentally a feminist manifesto. It is a road map for operating within the existing system, perhaps changing it at the margins to make it easier for other women to, well, operate within the system. Sandberg does not spend much time asking whether the system is so screwed up that pushing against it might be the better route toward meaningful change.

.. But the answer isn’t to lower the standard for women to match the too-low expectations set for men. Better to raise the bar for everyone so that aggressiveness and selfishness and untrustworthiness no longer shortened the track to success.

.. Sandberg didn’t do these things because she was a woman. She did them because she was not so different from all those men.

Sandberg posits in her book that installing women in positions of power is a worthy end in itself. And it is. But it means a lot less if, once women are in power, they do nothing to alter the society-wide structures that separate the haves from the have-nots along lots of lines besides gender.

.. she suggests that women in particular may be able to clear an atmosphere of pent-up male emotion. Real leadership, she argues, “stems from individuality that is honestly and sometimes imperfectly expressed.”

Exclusive: WhatsApp Cofounder Brian Acton Gives The Inside Story On #DeleteFacebook And Why He Left $850 Million Behind

Now he’s talking publicly for the first time. Under pressure from Mark Zuckerberg and Sheryl Sandberg to monetize WhatsApp, he pushed back as Facebook questioned the encryption he’d helped build and laid the groundwork to show targeted ads and facilitate commercial messaging.

Acton also walked away from Facebook a year before his final tranche of stock grants vested. “It was like, okay, well, you want to do these things I don’t want to do,” Acton says. “It’s better if I get out of your way. And I did.” It was perhaps the most expensive moral stand in history. Acton took a screenshot of the stock price on his way out the door—the decision cost him $850 million.

.. “As part of a proposed settlement at the end, [Facebook management] tried to put a nondisclosure agreement in place,” Acton says. “That was part of the reason that I got sort of cold feet in terms of trying to settle with these guys.”

.. That kind of answer masks the kind of issues that just prompted Instagram’s founders to abruptly quit. Kevin Systrom and Mike Krieger reportedly chafed at Facebook and Zuckerberg’s heavy hand. Acton’s account of what happened at WhatsApp—and Facebook’s plans for it—provides a rare founder’s-level window into a company that’s at once the global arbiter of privacy standards and the gatekeeper of facts, while also increasingly straying from its entrepreneurial roots.

.. Despite a transfer of several billion dollars, Acton says he never developed a rapport with Zuckerberg. “I couldn’t tell you much about the guy,” he says. In one of their dozen or so meetings, Zuck told Acton unromantically that WhatsApp, which had a stipulated degree of autonomy within the Facebook universe and continued to operate for a while out of its original offices, was “a product group to him, like Instagram.”

.. So Acton didn’t know what to expect when Zuck beckoned him to his office last September, around the time Acton told Facebook brass that he planned to leave. Acton and Koum had a clause in their contract that allowed them to get all their stock, which was being doled out over four years, if Facebook began “implementing monetization initiatives” without their consent.

.. The Facebook-WhatsApp pairing had been a head-scratcher from the start. Facebook has one of the world’s biggest advertising networks; Koum and Acton hated ads. Facebook’s added value for advertisers is how much it knows about its users; WhatsApp’s founders were pro-privacy zealots who felt their vaunted encryption had been integral to their nearly unprecedented global growth.

.. This dissonance frustrated Zuckerberg. Facebook, Acton says, had decided to pursue two ways of making money from WhatsApp. First, by showing targeted ads in WhatsApp’s new Status feature, which Acton felt broke a social compact with its users. “Targeted advertising is what makes me unhappy,” he says. His motto at WhatsApp had been “No ads, no games, no gimmicks”—a direct contrast with a parent company that derived 98% of its revenue from advertising. Another motto had been “Take the time to get it right,” a stark contrast to “Move fast and break things.”

.. Facebook also wanted to sell businesses tools to chat with WhatsApp users. Once businesses were on board, Facebook hoped to sell them analytics tools, too. The challenge was WhatsApp’s watertight end-to-end encryption, which stopped both WhatsApp and Facebook from reading messages.

.. For his part, Acton had proposed monetizing WhatsApp through a metered-user model, charging, say, a tenth of a penny after a certain large number of free messages were used up. “You build it once, it runs everywhere in every country,” Acton says. “You don’t need a sophisticated sales force. It’s a very simple business.”

.. Acton’s plan was shot down by Sandberg. “Her words were ‘It won’t scale.’ ”

.. “I called her out one time,” says Acton, who sensed there might be greed at play. “I was like, ‘No, you don’t mean that it won’t scale. You mean it won’t make as much money as . . . ,’ and she kind of hemmed and hawed a little. And we moved on. I think I made my point. . . . They are businesspeople, they are good businesspeople. They just represent a set of business practices, principles and ethics, and policies that I don’t necessarily agree with.”

.. When Acton reached Zuckerberg’s office, a Facebook lawyer was present. Acton made clear that the disagreement—Facebook wanted to make money through ads, and he wanted to make it from high-volume users—meant he could get his full allocation of stock. Facebook’s legal team disagreed, saying that WhatsApp had only been exploring monetization initiatives, not “implementing” them.

.. Zuckerberg, for his part, had a simple message: “He was like, This is probably the last time you’ll ever talk to me.”

.. Acton graduated from Stanford with a bachelor’s in computer science and eventually became one of the first employees at Yahoo in 1996, making millions in the process. His biggest asset from that time at Yahoo: befriending Koum, a Ukrainian immigrant he clicked with over their similar no-nonsense style.

.. WhatsApp, persuading a handful of former Yahoo colleagues to fund a seed round while he took on cofounder status and wound up with a roughly 20% stake.

.. two things sparked Zuckerberg’s mega-offer in early 2014. One was hearing that WhatsApp’s founders had been invited to Google’s Mountain View headquarters for talks, and he did not want to lose them to a competitor.

.. He recalls Zuckerberg being “supportive” of WhatsApp’s plans to roll out end-to-end encryption, even though it would block attempts to harvest user data. If anything, he was “quick to respond” during the discussions. Zuckerberg “was not immediately evaluating ramifications in the long term.”

.. told them that they would have “zero pressure” on monetization for the next five years.

.. Facebook prepared Acton to meet with around a dozen representatives of the European Competition Commission in a teleconference. “I was coached to explain that it would be really difficult to merge or blend data between the two systems,”

.. Later he learned that elsewhere in Facebook, there were “plans and technologies to blend data.” Specifically, Facebook could use the 128-bit string of numbers assigned to each phone as a kind of bridge between accounts. The other method was phone-number matching, or pinpointing Facebook accounts with phone numbers and matching them to WhatsApp accounts with the same phone number.

.. Within 18 months, a new WhatsApp terms of service linked the accounts and made Acton look like a liar. “I think everyone was gambling because they thought that the EU might have forgotten because enough time had passed.” No such luck: Facebook wound up paying a $122 million fine for giving “incorrect or misleading information” to the EU—a cost of doing business

.. Linking these overlapping accounts was a crucial first step toward monetizing WhatsApp. The terms-of-service update would lay the groundwork for how WhatsApp could make money. During the discussions over these changes, Facebook sought “broader rights” to WhatsApp user data, Acton says, but WhatsApp’s founders pushed back, reaching a compromise with Facebook management. A clause about no ads would remain, but Facebook would still link the accounts to present friend suggestions on Facebook and offer its advertising partners better targets for ads on Facebook.

.. By then, three years since the deal, Zuckerberg was growing impatient, Acton says, and he expressed his frustrations at an all-hands meeting for WhatsApp staffers. “The CFO projections, the ten-year outlook—they wanted and needed the WhatsApp revenues to continue to show the growth to Wall Street,”

.. Internally, Facebook had targeted a $10 billion revenue run rate within five years of monetization, but such numbers sounded too high to Acton—and reliant on advertising.

.. Acton had left a management position on Yahoo’s ad division over a decade earlier with frustrations at the Web portal’s so-called “Nascar approach” of putting ad banners all over a Web page. The drive for revenue at the expense of a good product experience “gave me a bad taste in my mouth,” Acton remembers. He was now seeing history repeat.

.. He has supercharged a small messaging app, Signal, run by a security researcher named Moxie Marlinspike with a mission to put users before profit, giving it $50 million and turning it into a foundation. Now he’s working with the same people who built the opensource encryption protocol that is part of Signal and protects WhatsApp’s 1.5 billion users and that also sits as an option on Facebook Messenger, Microsoft’s Skype and Google’s Allo messenger. Essentially, he’s re-creating WhatsApp in the pure, idealized form it started: free messages and calls, with end-to-end encryption and no obligations to ad platforms.