McKinsey’s John Lydon says consultants are life coaches
AUSTRALIAN arm of McKinsey & Company, the world’s most famous management consultants, found itself in the spotlight recently following the announced departure of Woolworths’ chief executive Grant O’Brien. O’Brien was reported to have relied heavily on McKinsey advice as he battled to turn around the company. Woolworths’ new chairman, Gordon Cairns has stepped down from an advisory role with McKinsey to avoid a conflict of interest. There were reports the firm was paid tens of millions in fees each year by Woolworths with some estimates putting it as high as $45 million. But what does McKinsey do? The Deal spoke to the chief executive of the Australian business John Lydon who has a big vision for the firm in Australia – but remains tight lipped about clients “even if it is to set the record straight”.
What do companies want from consultants?
Australia is going through a huge period of change. For the past decade 90 per cent of our growth came from rising terms of trade and our resource investment. Both are reversing or stopping. Real wage growth will come from increasing productivity and increasing our competitiveness in a world where everything is globally traded. You don’t have to do final assembly any more; you can be part of a global supply chain, or a knowledge supply chain. There are potential opportunities for Australia but there are, at the same time, these forces of disruption. There is massive technological change and there is a big demographic change where we are all living longer. Our clients need a bit of a guide to help them see into the future, to see around corners. Like a coach or a personal trainer who helps them adjust quickly.
How big is McKinsey in Australia?
We are the fastest growing office – country – in our global firm. We have a total staff of about 300 including 196 professional staff. But, currently, we have 320 consultants working in Australia. We have people here from overseas on temporary assignments who are experts in banking or mining or technology. Until about two or three years ago we had about 100 consultants here. Our growth has come from innovating the business. But we don’t judge ourselves by numbers, we judge ourselves by our clients’ success and by our country’s prosperity.
You come from Britain. How did you end up here?
I came here in 1997 to do a project for a mining company and loved the place. I have always had lots of Aussie friends. So I came back in 1999 with my then girlfriend (now my wife) on a one-year project for McKinsey. We loved it. It was the Olympics and Australia was on a high. We wanted to stay. It has been the best thing we have ever done. We now have two wonderful children who are Aussies. We took out Australian citizenship and I even supported Australia in the cricket this year.
How efficient are today’s big Australian companies?
I really rate the Australian executives of companies. Some of the global companies are being run by Australians. There are some great Australian corporate leaders who are very highly regarded. Many of Australia’s companies, such as the mining companies, are the most efficient in the world. The next leap forward for them is learning how to use data and analytics to be smarter about how they do their business and translate that into increased productivity and competitiveness. But there are other parts of the economy where there is more distress and a need for recovery and transformation. What I am most excited about is the opportunity for our companies to leapfrog a lot of their global competitors by taking advantage of technology, digitisation and analytics. Don’t consultants these days have a bit of a bad image? We read about CEOs bringing the management consultants in and sacking lots of people. You always see bad press in any industry. We have high standards of confidentiality and professionalism. We will never talk about our client’s work, even if it is to put the record straight. We are not going to discuss our clients and we don’t like our clients to discuss us either. When we look at a potential engagement we don’t want to be doing things that management can do on its own or that other professional firms are better placed to do. If someone comes to us, say, and just wants to save $100m from their global supply chain just because they feel like making more money, it is less appealing to our team. If they want to save $100m from their supply chain so they can grow their business and maybe expand into new markets – that’s a mission we would like to accept.
The past few years have seen the decline of the manufacturing industry. What can be done?
Australia’s manufacturing industry was always very advanced. We always had very lean manufacturing. I would go around plants here which would often look as good as any plants around the world. But we were probably never going to be able to compete with some of the lowest cost countries with their more recent investment in new technology. We need to look at the niches where Australia can lead – it will take the private sector, the public sector, the right education and the right research and development, and investment.
What’s the mood in corporate Australia?
I think there is more optimism than you might expect looking at the numbers. People are beginning to see that there is all this disruption. But disruption can also be an opportunity as much as a threat. There was a period when everyone was saying reform was needed but they were looking to others to lead the reform. Now I think business is recognising that we all have to be involved in reform – business, government and the social services sector. The recent reform summit hosted by
The Australian and The Australian Financial Review was a terrific initiative. The mood is cautiously optimistic but realistic at the same time. People know change is hard. But for them to make their businesses thrive over the next 10 or 20 years they have to make changes and investments for the long term.
What are the main traits of successful business leaders?
Our research has shown that great leaders have three qualities: curiosity, agility and optimism. I am an optimist. Winston Churchill once said that he was an optimist because there didn’t seem to be much point in being anything else. Curiosity, agility and optimism; we are starting to see a lot more of that in Australia.
“Our clients need a bit of a guide to help them see into the future, to see around corners; like a coach or a personal trainer who helps them adjust quickly.”