O'Mahoney, J., & Sturdy, A. J. (2016). Power and the diffusion of management ideas: The Case of McKinsey & Co. Management Learning, 47(3), 247-265. https://doi.org/10.1177/1350507615591756 Peer reviewed version Link to published version (if available): 10.1177/1350507615591756 Link to publication record in Explore Bristol Research PDF-document This is the author accepted manuscript (AAM). The final published version (version of record) is available online via Sage at http://mlq.sagepub.com/content/47/3/247. Please refer to any applicable terms of use of the publisher. University of Bristol - Explore Bristol Research General rights This document is made available in accordance with publisher policies. Please cite only the published version using the reference above. Full terms of use are available: http://www.bristol.ac.uk/red/research-policy/pure/user-guides/ebr-terms/ Power and the diffusion of management ideas: The case of McKinsey & Co. Joe O’Mahoney, University of Cardiff & Andrew Sturdy, University of Bristol (forthcoming in Management Learning) May 2015 Abstract In studies of the diffusion or translation of management ideas, power is frequently implied but is rarely theorised explicitly. Moreover, when it is recognised, the focus is often on only one form of power. This can obscure how different forms of power relate to each-other, shape idea diffusion, and connect to different forms of resistance. Using Lukes’ classic framing of power, we explore the activities of a key agent in the diffusion of ideas – management consultancy – and one of the leading players in that field - McKinsey & Co. We draw on diverse, publicly available forms of data on three different management ideas to identify how different forms of power and resistance enable and constrain the diffusion of management ideas. Our study emphasises both the dynamic relations between different forms of power over time and the importance of acknowledging the unintended consequences of power. At the same time, by focusing on power dynamics mostly operating outside of consulting projects, we add to our understanding of the role of consultancy in the diffusion of management ideas more generally. Key Words Power; management ideas; diffusion; McKinsey & Co.; management consultancy; Introduction In recent years, attention has been given to how management ideas spread and change within and between organisations, sectors and nations (e.g.Birkinshaw et al., 2008). Yet, despite the centrality of power as a concept in social and management studies (Courpasson et al., 2012) and a wide recognition that ideas need power to ‘move’ and take root, it is still common to see research on management ideas which make no reference to power. Such inattention is evident even in situations where power is otherwise explicit such as when actors appear to impose ideas upon resistant others (van Veen et al., 2011; Fu, 2012; Birkinshaw et al., 2008). Where power is mentioned explicitly, diffusion research tends to adopt a singular, rather than multi-dimensional view. For example, the most common perspective in 1 management focuses on resource-based conflicts between different actors, where one group, generally management, seeks to implement management innovations, whilst others, often employees, resist (e.g. Delbridge et al., 2007). Whilst such studies reveal the tensions between different groups, their focus on direct conflicts delimits an analysis of the wider, often discursive, forms of power that are also important (e.g. Mueller and Whittle, 2011). Conversely, these approaches often reject research that focuses on more structural or resource-based deployments of power (Kostova and Roth, 2002; Frenkel, 2005). Other approaches, such as actor network accounts, draw attention to power through the associations of networks and the active role of non-human actors (Bloomfield and Best, 1992), especially in the translation of ideas (Whittle and Spicer, 2008). Overall, the effect of singular approaches to power has been ‘to provide a limited and impoverished conceptualization of, power, authority and domination’ (Zald and Lounsbury, 2010: 933). Accordingly, we seek to explore how different forms of power enable and constrain the diffusion of management ideas. To achieve this, we analyse the case of one of the most well-known management consultancy firms - McKinsey & Co. - using Lukes’ (2005; 1974) tripartite framing of power. Drawing on publicly available sources, we show how McKinsey deploys multiple forms of power, but is also substantially resisted, not only by clients, but by a range of agentic, institutional and ideological factors that are rarely considered together. Our study also has a secondary contribution in allowing us to explore how different types of power interrelate dynamically, and how unintended consequences are important in power analyses. We suggest that these insights not only help in understanding the diffusion of management ideas, but add to our understanding of management consultancy, especially in contexts beyond those of the client project (c.f. Nikolova, 2007). Below, we first show how studies of the spread of management ideas which discuss power tend to do so by focusing on only one form. We then briefly introduce Lukes’ (2005) model in this context and outline how it might be developed and adapted before explaining our selection of consultants and the McKinsey case. We then set out three vignettes of ideas illustrating McKinsey’s involvement in power relations. In our analysis, we show how developing and applying Lukes’ model helps us better understand the spread of, and resistance to, management ideas. Management ideas and power In studies of the diffusion or translation of management ideas, power is frequently implied but is rarely theorised explicitly. New management ideas which help shape changes in practices and identities can require considerable political effort but also lead to contestation. For example, in Rogers’ classic text on innovations, a strong theme is that ideas ‘do not sell themselves’ but require ‘opinion leadership’ 2 from those ‘in a system who possess power, status or technical expertise’ (1995: 7, 27). Yet, even in this text, power is barely otherwise mentioned. Of course, power is recognised in the literature, but even in those studies where it is an explicit focus, power tends to be seen with a singular emphasis, often as a resource of the person, hierarchical structure, network location or association (e.g. Ibarra, 1993). This pattern is echoed in our specific area of concern - the diffusion of management ideas. For example, in one comprehensive review of the management innovation literature (Birkinshaw et al., 2008), power, politics and interests are all but absent from the analysis. Different dimensions of power are sometimes acknowledged. For example, in Sturdy (2004) classification of the diffusion literature in management, he identifies political perspectives as important, such as the attention given to the imposition of ideas, their use for ulterior motives and their shaping of subjectivities. Moreover, in emphasising the lack of engagement between these perspectives, Sturdy also urges consideration of ‘the possibilities for, and desirability of, theoretical integration’ (p. 168). In framing this literature below, we use the three forms of power detailed by Lukes (1974; 2005). Clearly, there are potentially many approaches to power that we could have used, but the value of Lukes’ model for our purposes is that it explicitly sets out different forms of power and has been subjected to various forms of developmental critique over the years (e.g.Bradshaw, 1976; Edwards, 2006; Hardy and Leiba-O'Sullivan, 1998). Indeed, recent formulations of power in diverse forms often use categories derived explicitly from Lukes’ work (e.g. Fleming and Spicer, 2014). Furthermore, it is one of the few frameworks to have been used to study multiple forms of power explicitly in relation to management innovation (e.g. Swan and Scarbrough, 2005; Ferner et al., 2012; Gordon, 2005). In the diffusion of management ideas literature, the most common form of power described or implied concerns groups or individuals using resource-based power to impose, adapt or resist management ideas. This can be seen in relation to struggles between managers and workers (e.g. Delbridge et al., 2007); multi-nationals and subsidiaries (Kostova and Roth, 2002); or the state, industry and unions (Frenkel, 2005). Resources, such as hierarchical authority, capital and expertise, are used by groups to legitimate and support the imposition of new ideas on others, but also to adapt or translate those ideas. Lukes argues that such ‘resource based power’ is exercised in a direct, largely observable manner: attempting to force groups to act in ways that may be contrary to their espoused interests. Resistance is often equally visible and overt: workers strike, governments refuse bail-outs, populations riot (McCabe et al., 1998). Such conflict will often result in the translation of the proposed change into a local context such that its manifestation becomes a temporary compromise between actors (Czarniawska-Joerges and Sevón, 1996). More generally, Lukes sees resistance as ‘internal to, and so generated by, power’ (2005: 95), but resistance, as we shall see, is by no means inevitable - it is ‘only one among many responses’ and may coincide with non-resistant practices (2005: 131). 3 Another form of power is evinced where groups seek to emasculate others, often prior to the implementation of new management practices, so to minimise resistance (e.g. Mazza and Pedersen, 2004). This is witnessed in studies of organisational change where de-unionisation and casualisation are not only implemented as management ideas in themselves, but are also strategies which facilitate the implementation of other ideas by weakening oppositional groups (e.g. Kvaloy and Olsen, 2012). Resistance in this process domain is deemed more difficult because it focuses on altering forms of governance, for example by excluding spokespeople and redefining which actors can contribute to decision-making (Harrisson and Laberge, 2002; Greener, 2006). This epitomises Lukes’ second form of power which emphasises the marginalisation of dissenting voices or the ‘mobilization of bias’ in decisions to prevent opportunities for open conflict from arising in the first place (Bachrach and Baratz, 1963). Processual forms of power might sometimes be more difficult to resist than resource power, but both types risk encountering overt resistance. To overcome this, the powerful might seek to ‘shape the perceptions and beliefs of the subordinated so that they accept existing situation[s] and cannot imagine any alternative’ (Haran, 2010: 49). This power over meaning can change actors’ perceptions, both of their interests (through ideology), and their selves (through subjectification) (Fleming and Spicer, 2014). In the realm of management ideas, this is evident through activities such as ‘thought leadership’ (e.g. research published by consultancies), training, lobbying and advertising (e.g. Starkey and Crane, 2003). Here then, power can be seen not only as ‘sovereign’ – that is, in a Lukesian sense, as a possession of individuals or groups (either individually or collectively) - but also as an (often unintentional) effect. Resistance here is not always explicitly oppositional or even evident. Indeed, Lukes downplays resistance in this domain (2005: 131). However, resistance can clearly occur, as workers and decision-makers draw upon, and seek to assert, competing or alternative structures or ideologies (e.g. Thomas, 2005). Indeed, although we are emphasising power exercised by those in formal authority, this need not be the case. Moreover, resistance can also be seen as the exercise of power (Hardy and Leiba-O'Sullivan, 1998) in a relation of negative dialectics – power and control as ‘mutually implicative and co-productive’ (Mumby, 2005: 3). This brief elaboration of Lukes helps illustrate the fact that ‘prior research has largely neglected how power constellations affect diffusion processes’ (Fiss and Zajac, 2004: 507; also, Swan and Scarbrough, 2005: 920), and that where power is examined, it is often from only one perspective. Given that the different forms of power we have outlined above are widely acknowledged in wider literature (e.g. Fleming and Spicer, 2014), these limitations curtail our understanding of the diffusion of management 4 ideas. In particular, they prompt further exploration of how these different forms of power manifest and interrelate when management ideas diffuse. Methodology The limitations of the literature suggest the need for a study in which a variety of forms of power can be explored in relation to management ideas. There are various possibilities, but we focused on one particular agent in this process - management consultancy - which is seen as a key ‘generator and distributor of new knowledge’ (Thrift, 2005: 35). In particular, its activities are pronounced in relation to promoting the adoption of ideas by others where power is especially visible (Anand et al., 2007). Thus, consultancy serves as an ‘extreme’ case (Blaikie, 2009). At the same time, it is a sector where research has not systematically examined power in multiple forms, especially not outside the immediate client-consultant project relationship (Nikolova, 2007). Two arguments then persuaded us to focus on one consultancy for our research: first, the value of in-depth case-studies in ‘unpicking the complexities of power’ (Ferner et al. 2012, p.182) and, second, the ability provide ample breadth without the need for multiple contextual introductions. To this end, we selected McKinsey, because it is, once again, an ‘extreme’, cited as having had considerable influence across sectors and geographical areas (e.g. McKenna, 2006: 9). It has packaged and disseminated several management innovations such as the Multidivisional organisational form (M-form), corporate culture and process-engineering. More generally, as McDonald argued, ‘McKinsey’s ability to take an idea and “leverage” it up, using its brand and organizational effectiveness …. made its consultants far and away the most effective disseminators of ideas via the consulting process’ (McDonald, 2013, p289). In terms of data, the sensitivity of the conceptual focus (power) and context (consulting) combined with our broad empirical coverage led us to use publicly available sources. From inside McKinsey, this included: video footage from their conferences, reports and publications, publicity material, and public statements. Outside McKinsey, our data included: government publications; parliamentary transcripts; newspaper and magazine articles; television documentaries; research reports; request for information responses; court proceedings; blogs and websites from special interest groups; and a number of academic and non-academic histories, biographies and other analyses. The prominence of McKinsey in public sector reforms meant that many documents which, in the private sector would have been confidential, are often legally available for public scrutiny, offering researchers rare insights into a company famed for its secrecy. Overall, the variety of sources helped us piece together evidence about the company’s activities, but we should also stress that this still required considerable cross-referencing and caution. 5 An additional challenge was the extent to which we would focus on a particular management idea or seek to generalise. We chose an intermediate position of using vignettes. Vignettes are rich stories that help provide substance to an argument and help provide qualitative research with a ‘thickness’ (Sergi and Hallin, 2011), especially when considering power (Reed, 2012). They are suited to developing conceptual frameworks (e.g. Mantere and Vaara, 2008) and their selective and focused nature is useful in unpacking how things happen (e.g. Alvesson and Robertson, 2006). In line with our extreme case approach, we sought vignettes to illustrate a variety of forms of power, ideas and contexts. In each case, cognisant of some of the limitations of document-based data (Silverman, 2000), we tried to secure a range of different sources to limit our vulnerability to undue distortion that might arise from a single source. We initially explored six vignettes for which we felt there were adequate data. We eventually rejected the M-form structure and corporate culture because the specific role of McKinsey was difficult to isolate (c.f. Kipping and Westerhuis, 2014). By contrast, a study by Greenpeace (2011) which identified McKinsey as directly linked to deforestation, was deselected because of an insufficient quantity and diversity of sources. Ultimately, we chose one methods-based idea which applied across different sectors - the ‘war for talent’ which shaped recruitment practices in large organisations. The next idea – healthcare privatisation – was more diffuse, but sector specific. The final idea is not an idea that McKinsey commercialised, however, the very idea of what it is to be a professional consultant and manager has been strongly influenced by McKinsey. This highlights the role of consultancy as not just active disseminators of ideas, but as role models for them. Given that this also reveals much about McKinsey and how it operates more generally, we discuss it first and in greater detail, by way of a further consideration of the case. Our research design combined induction and abduction (Van Maanen et al., 2007). Analysis involved inducing themes about the types and effects of power that the vignettes revealed and comparing these across vignettes to reach generalisations about what ‘made a difference’. The next step was to seek a wider explanatory framework from the power literature which helped explain our findings (Danermark, 2002). This abductive and iterative process settled on Lukes as the ‘best fit’. Our choice of Lukes as a conceptual framework was based partly on its multi-dimensional form, but it was by no means pre- determined as other models were available. For example, we initially attempted to follow, but subsequently rejected, Hardy and Leiba-O’Sullivan’s (1998) amendment of Lukes which adds a fourth, discursive, dimension of power. Our rejection was because their distinction between ‘meaning’ and ‘discourse’ appeared confused and incompatible with our data. We also pursued, and rejected, several of our own theoretical modifications, for example, the use of different ‘emergent’ levels as an additional perspective. A final step involved re-examining the vignettes using Lukes and seeking opportunities to 6 develop his framework where we felt it did not fit easily with our findings – especially concerning temporal relations between types of power and unintended consequences. Vignettes 1: The professional consultant / manager McKinsey & Co. was founded in 1926 to sell management engineering and accounting advice and techniques, but soon became influential in management consulting. The founder, James McKinsey, was President of the American Accounting Association, a Professor at Chicago University, and had published several books on accounting with a managerial emphasis (David et al., 2013). His work establishing McKinsey was significantly extended by Marvin Bower, whom it is claimed, ‘virtually invented top management consulting’ (Edersheim 2010:3). Given the intangibility of much consulting and the early pursuit of occupational legitimacy, professionalisation is a theme in McKinsey’s history. McKenna for example notes how, mimicking more traditional professions, McKinsey ‘training emphasized professional language, professional metaphors, and professional comportment’ (2006: 204-5). Likewise, David et al. (2013: 369) show how McKinsey and a small number of other firms sought collectively to shape a professional body (the Association of Consulting Management Engineers, ACME) for the emerging industry. In the 1950s, they successfully crafted its code of ethics in an effort to resist alternative ‘high volume, low-cost’ approaches – ‘to keep the scoundrels out’ as Bower said (quoted in McKenna, 2006:213). As ‘professional’ consulting became institutionalised in terms of firm practices and partnership structures - as ‘corporate professionalism’ (Muzio et al., 2011) - the role of the ACME lessened (David et al, 2013). However, the focus on professional identity remains strong at McKinsey, with today’s website for example, exhorting consultants to ‘Behave as professionals - uphold absolute integrity’. Debate continues as to what constitutes a professional, especially in consulting. This means that seemingly superficial features can be important (Kipping, 2011). This includes dress and appearance, and here, McKinsey is also considered as having been influential in setting the trend for a conservative dress code in the sector. In particular, Edersheim (2010: 71) lists black socks, blue suits and white shirts as well as, for a while, hats. The idea, he claims, was to mimic the dress of the high status clients they targeted. This was adopted by other leading firms such as IBM, but also consulting companies in post- war USA. Together, they exported to their European consulting counterparts the ‘“McKinsey look of successful young professionals” (Kipping, 1999:215). 7 The explicit strategy, pursued from the 1950s, of recruiting young, relatively inexperienced, MBA graduates from Harvard and other elite universities also had aesthetic implications and lowered the median age of McKinsey consultants by ten years in a decade (Edersheim, 2010: 79). This was seen as especially innovative and successful such that ‘when copied by McKinsey and Company’s competitors, (it) led to the increasing homogenisation of management consulting in the early 1960s’ (McKenna, 2006:158). Indeed, these images have proved both enduring and popular, reflected in media portrayals such as the television series about consultants, House of Lies (Carnahan, 2012). The ‘professional’ culture at McKinsey is also fostered by human resources policies which promote long hours (up to 100 a week) (Graef and Vale, 1999) and high performance goals. Recruitment, based around partner interviews and the ‘case interview’, seeks out those, not only with strong analytical skills, but also strong rhetorical and communication skills (Armbrüster, 2010). Once recruited, the consultants receive high levels of pay, training, mentoring by partners and continual feedback (Lemann, 1999 : 215). They are also subject to an ‘up-or-out policy, with up to 80% of consultants leaving in the first five years (O’Shea and Madigan, 1997: 261), which not only ensures a steady stream of new recruits, but also a strong alumni network (Smets and Reihlen, 2012). Strong normative controls aim to ensure that the ‘McKinsey mind’ is maintained even after consultants have left (Raisel, 2003), an argument partially supported by the management styles and techniques of ex-McKinsey CEOs who use their methods (Haigh, 2003). McKinsey’s influence as regards others adopting its own practices does not stop at the consulting sector. The industry itself, and McKinsey in particular, has also been seen as important in shaping client firms and their managers. As McKenna observes: ‘the organization and culture of the leading management consulting firms would exert a powerful influence on large-scale bureaucratic institutions as executives began increasingly to model their organizations after knowledge-based, team-led consultancies’ (2006:195) Such emulation is achieved through various channels, including MBA case-studies on McKinsey (Bartlett, 1996) and having their approach established as ‘best practice’ by their own literature (see vignette below). More directly, employing former consultants into managerial positions has been used as one way to instil ‘professional consulting’ orientations in non-consultancy organisations (Sturdy and Wright, 2008). Similarly, it was consultancies, especially McKinsey, that led the way for the dominance of the MBA graduate in senior management ranks in the USA and elsewhere. As Kipping notes: ‘McKinsey - and the many other consulting firms which subsequently emulated its policies – did more to strengthen the underlying “elite professionalism”’ of a new professional class of general managers’ (2011:540). 8 It is, however, important not to overstate the influence of McKinsey on consulting and management. Firstly, there are other traditions of consulting which are not without significance, such as engineering or process consulting in the past, and emerging hybrid forms now (Christensen et al, 2013). Secondly, many of the practices adopted by the firm, such as the ‘up or out’ policy, recruiting young elite graduates, and even some of the consulting methods used, were taken from elsewhere, notably US law and accounting firms (McKenna, 2006; Bhide, 1995; Higdon, 1970) and also promoted by other consulting firms (David et al, 2013). In the former case then, McKinsey might be better seen as a recipient or intermediary in a wider process of promoting and adapting professional authority. Thirdly, the model of living for work and the ‘firm’ has come under scrutiny and resistance from those advocating and pursuing a ‘work-life balance’ (Whittle, 2008; Topconsultant, 2009). Fourthly, McKinsey’s profile sometimes attracts dissent within the sector and among clients. One client, quoted by Higdon (1969:145) in the 1960s stated, ‘I got the impression that people at McKinsey were very able people, but they didn’t have to keep telling me over and over again’. 2: The War For Talent McKinsey adopts a ‘low leverage – low utilisation’ strategy (Maister, 2003) which allows consultants time to undertake ‘thought leadership’ activities such as best-practice surveys, which are then generated into reports or benchmarking tools for clients (Morris, 2001). One example of this is the ‘War for Talent’ surveys McKinsey undertook in 1997 and 2000. This work sought to explain how the ‘best performing companies’ managed their employees in a context of increasing demand for ‘excellent’ managers. The resulting reports (Chambers et al. 1998; Michaels et al. 2001) were published by Harvard Business Press, with whom McKinsey had strong institutional relations, and are replete with rhetorical flourishes (Fincham, 2002): the exultation of ‘A-players’ and ‘leaders’, and the use of biblical references suggesting the immorality of the lazy worker. Likewise, a militaristic tone informs many of the passages and evolutionist language celebrates the survival of the ‘fit’ and urges the rejection of the ‘unfit’. These references had resonance with, and contributed to a wider rhetoric concerning war, competition and fighting, which some argue, helped diffusion (Morris and Pinnington, 2002). As such, the War for Talent can be interpreted as a reinvention, or translation, of a much older ‘hard HRM’ or even Taylorist theme that has been in evidence for many decades. The general message in the book is that often young, inexperienced ‘A players’ should be highly rewarded and given free rein, whilst ‘C-Players’ should be managed (out) using an ‘iron hand in a velvet glove’ (Michaels et al., 2001: 140). Such rhetoric proved seemingly successful in a wider corporate climate of deregulation, privatisation and flatter organisations. At least, the very phrase ‘war for talent’ entered popular parlance as consultancies, 9