Lessons from McKinsey on the importance of being seen to be ethical


McKinsey’s reputation has been heavily impacted by its work in South Africa. Could the same happen in Saudi? (image credit: Ingram Pinn)

McKinsey is a household name, at least in Saudi and South Africa. And not for the right reasons either.

The firm, which consults for governments and businesses the world over, hasn’t had a good time of it lately in these two markets. In South Africa, McKinsey has been embroiled in the Gupta family scandals through its work with the state energy firm Eskom and Trillian, a local company linked to the Gupta family.

In Saudi, McKinsey has been working with the government for years. The company hasn’t always been popular, and has often been blamed by the Saudi public for the austerity measures the Kingdom has enacted. Recent events have shone even more light on McKinsey. An article in the Wall Street Journal looked at the consultancy’s habit of hiring from the elites. To quote:

“The consulting company has employed, among others, at least two children of the man who serves as the Saudi energy minister and head of the state oil company, a son of the finance minister and a son of the CEO of government-controlled Saudi Arabian Mining Co.”

The Wall Street Journal piece describes in detail McKinsey’s company’s hiring practices in the Kingdom, and also notes that there is no allegation of wrongdoing by the firm.

The issue that McKinsey faces isn’t dissimilar to tens of thousands of other firms. It’s the choice between reputation and profit. However, few other firms are as prominent as the consultancy, partly owing to its clients (primarily government in emerging markets) and the quality of McKinsey’s people. To quote the response to the Wall Street Journal article, a McKinsey spokesperson explained that:

“McKinsey is a meritocracy. We hire exceptional people and are confident in the robust policies and practices that underpin our recruiting and development both globally and locally.”

How many exceptional people would it take to understand that working with the Gupta family in South Africa wouldn’t be good for business. Five minutes of due diligence would have thrown up the links between Eskom, Trillian and the Gupta family.

Last year I wrote about Caroline Sapriel’s masterclass on crisis communications. There’s one chart I want to re-share, which should be a guide for all of us.


CS&A’s crisis management culture ladder maps out where organizations are in terms of their ability to manage and learn from a crisis. At the bottom are organizations who essentially don’t care as long as they’re not caught; at the top are organizations who thrive on and grow with every crisis they encounter. Where are you at?

The question that I have for McKinsey (and every other business leader) is what price would you put on reputation? Even if the firm did work in a legally appropriate fashion, which McKinsey has claimed it did in South Africa, the spirit and the letter of the law are two different things. This question could also be asked of KPMG and SAP, who have also found themselves in the thick of it in South Africa.

If you’re unsure as to where you are on the culture ladder, here’s a stress test you can use to understand how your firm fares. Can your executives answer the following questions relating to any business engagement?

  1. Have they done a due diligence test, including listening to the communications team on possible reputational risks and stakeholder reactions?
  2. Are the executives able to clearly explain their actions? Is their reasoning believable and authentic?
  3. When viewed from the outside, would an action seem to be ethically dubious at best, or illegal at worst?
  4. What are you doing in general when it comes to corporate social responsibility? How do you engage others in conversation?
Writing in the Financial Times in September of this year, John Gapper shared his thoughts on McKinsey’s activities in South Africa:
The firm has a brisk defence to accusations from South African politicians and Corruption Watch that it facilitated state capture by helping Trillian to gain money from Eskom. It says that its own inquiry into its behaviour has not uncovered wrongdoing, nor anything that would require it to report itself to the US authorities under anti-corruption laws. This seems to be setting the reputational bar rather low.
Being willing to charge an entrenched institution in a fractured country so much money looks awfully like rent seeking, especially when payments of up to $700m were to be split with what it should have known was a dubious consulting partner. McKinsey is full of superior intellects but sometimes you only need to open your eyes. None of this occurred in a vacuum.
The group Business Unity South Africa this month bemoaned the “scourge of corruption that is stifling the country” and called for an end to a “culture of immunity”. Each time that a consultant or accountant fails to take a decisive stand, the scourge worsens. KPMG has recognised it but McKinsey is still learning. It could start by confessing that it was wrong and promising not to repeat its failure.
The firm still maintains that it behaved correctly and is walking the tightrope of self-justification. I am intrigued to see how long it will take to fall off.
I wonder if the same will be said of McKinsey’s activities in Saudi Arabia. What price is McKinsey willing to put on its reputation? You tell me.

A crisis of competence or character? How to understand (and prepare for) crisis basics


Are you prepared for the worst? (image source: http://www.adweek.com)

The past 18 months has been a remarkable time for crisis watchers. We’ve watched as global brands and leaders have become embroiled in crises. Some of these have been of their own making (think Sepp Blatter and FIFA, or Volkswagen and emissions). Others have been due to unfortunate circumstances, such as with Emirates flight 521.

As communications professionals out there know, there’s nothing like working on a crisis. In an excellent piece for the Financial Times by David Bond, Rupert Younger, director at the Oxford University Centre for Corporate Reputation, sorts crises into two basic definitions – a crisis of competence or a crisis of character. To quote from the piece:

Examples of competence scandals include Toyota’s 2009-11 recall of 4m of its cars because of defective accelerator pedals, or the battery defaults on some of Boeing’s Dreamliner aircraft. These, according to Mr Younger, can deliver a direct, and in some cases short-term, hit to a company’s sales figures.

A character crisis calls into question the culture and behaviour of a company and its senior executives and often arises out of media scrutiny or criminal or regulatory investigations. Fifa and News International were both crises of character.

The worst type of crisis involves both. The BP Deepwater Horizon oil spill in 2010 is a case in point. It was triggered by a disastrous oil rig explosion that called BP’s offshore drilling competence into question. But the company’s response turned the crisis into a far wider issue of trust.

As communicators, our roles have traditionally covered managing the fallout from a crisis. However, whether we like it or not (I hope the former), we’re also becoming the conscience of our organizations. It’s incumbent on us to speak up when we hear about or see an issue that could harm an organization’s reputation. This is easier said than done. Volkswagen is a great example of a crisis of character – dozens of VW employees must have known about the manipulation of data, and yet no one spoke up (or, if they did, the information didn’t get to the right people).

To tackle such a crisis, communicators need to work with executive management to create an ‘incident aware culture’. Employees should feel that they can report issues without reproach or fear of retaliation. Employees also need to feel that they’re working for and in an ethical organization that cares about doing the right thing. This requires continuous communication from and engagement by the board and management, as well as support from legal and HR teams. If things do go wrong, communicators and management need to proactively engage with stakeholders to explain what has happened and why, a strategy known as stealing thunder. This is best defined as an organization “breaking the news about its own crisis before the crisis is discovered by the media or other interested parties” (Arpan & Roskos-Ewoldsen, 2005).

Unfortunately, as has been noted by academics such as An-Sofie Claeys, this type of self-disclosure is rare in practice. As with the case of VW, organizations are tempted to conceal the crisis rather than make it public.

Crises of competence are easier to deal with. However, many of us still aren’t prepared for what happens when this type of crisis occurs. Here’s a simple crisis communications assessment grid developed by the communications team at US firm Timken, which establishes crisis severity based on the type of incident and the involvement of various stakeholders, as well as who needs to be involved.


For a more detailed look at how to handle a crisis (pre, during and post), then have a look at this post I wrote after meeting with crisis communications expert Caroline Sapriel. And, if you have any feedback on how do deal with a crisis, please do share. I’d love to hear your views.

Caroline Sapriel and a masterclass in crisis communications

While I’ve been in the communications industry for a while (read the lines on my face!), every now and then I have the opportunity to meet someone who wows me. I had that feeling two weeks back when I met with Caroline Sapriel. Caroline, who is an expert in crisis management and communications, was invited along by the International Association of Business Communicators to talk about her insights on crises. What with all that is happening globally, it seemed apt to talk about how we can communicate better on issues that have an adverse impact, both on reputations and operations.

First of all, Caroline defined a crisis by three points:

1) Surprise

2) Brevity or shortness of time

3) Threat

What is fascinating is Caroline’s assertion that two-third of crises are smoldering, in other words they’re issues which aren’t tackled properly or which are ignored. However, as Caroline also adds, “most organizations don’t properly understand what a crisis is.”

Now, to the good news. Organizations rarely face true crises, issues which can substantially damage or stop operations and ultimately destroy reputations. However, most crises are still handled incorrectly. Many leaders look to manage a crisis in the same way as they manage through normal times, by forming a consensus and aligning others. However, Caroline states that a crisis needs a different type of behaviour, one that follows a command and control model where one person takes charge and acts decisively, with or without the approval of others. She spelled out five key competencies that leaders need to navigate a crisis.

1) Situational awareness and analysis

2) Sense-making

3) Stakeholder mapping

4) Scenario planning

5) Decision-making in a crisis

Now, let’s come to our role as communicators. Caroline was very kind to share her company’s integrated business contingency framework as well as spell out her 10 commandments of crisis management, which are based on decades of hands-on experience as well as research.

CS&A's integrated business contingency framework seeks to explain how communications and stakeholder management can support organizations in a crisis, through every stage of a crisis.

CS&A’s integrated business contingency framework seeks to explain how communications and stakeholder management can support organizations in a crisis, through every stage of a crisis.

The 10 commandments is also a fantastic read:

#1 Own up to and communicate the problem early on

#2 Recognize that you cannot make what is bad look good

#3 Be prepared for the worst. In a crisis, things get worse before they get better

#4 Prioritize and remember people’s safety is always first

#5 Focus on protecting your credibility and not winning brownie points

#6 Set the course, have a Mission Statement and stick to it

#7 Map and remap issues and stakeholders as the situation develops

#8 Use every available channel to communicate with your stakeholders

#9 If the crisis drags, don’t retreat into a siege. Stay out there!

#10 Manage the aftermath of the crisis. Remember, it’s not over until it’s really over

Caroline adds that in a crisis we can’t control the events, but we can control our credibility.

If you’re wondering how your organization is doing, have a look at the below image which has been developed by Caroline and her organization. The crisis management culture ladder will help you to understand where you are in terms of preparing your organization for a crisis.

CS&A's crisis management culture ladder maps out where organizations are in terms of their ability to manage and learn from a crisis. At the bottom are organizations who essentially don't care as long as they're not caught; at the top are organizations who thrive on and grow with every crisis they encounter. Where are you at?

CS&A’s crisis management culture ladder maps out where organizations are in terms of their ability to manage and learn from a crisis. At the bottom are organizations who essentially don’t care as long as they’re not caught; at the top are organizations who thrive on and grow with every crisis they encounter. Where are you at?

As an additional plus, Caroline has shared a reading list that will help guide you on improving your understanding of crises and what you should do to prepare as a communicator and leader.

On a final note, I’d like to thank Caroline for her time. And if you’re interested in knowing more about Caroline Sapriel, she’s the managing partner and founder of CS&A International, a pioneer and a recognised leader in the field of risk, crisis and business continuity management. For additional information please visit her company’s website.