The other day, a headline in my inbox threw me for a loop: “McKinsey to pay $573 million for role in opioid crisis.”
It wasn’t the headline itself that surprised me. The idea that the most prestigious management consulting firm in the world helped its client “turbocharge” sales of an addictive painkiller that claimed over 450,000 lives—that is not unbelievable, by any stretch.
What stood out to me was that on the same day, I had another McKinsey article in my inbox. Not an article about McKinsey, but rather, by McKinsey. And in this article, a group of senior McKinsey partners described how leaders must “fully embrace stakeholder capitalism…the idea that, their companies’ obligations to shareholders should not come at the expense of other stakeholders—that is, employees, customers, the community, suppliers, and society.”
“Huh?” I thought. “Is this the same McKinsey?”
The Cynics’ Response
Of course, those cynical of stakeholder capitalism (and there are many) would register my surprise as somewhat humorous and exceedingly naive. McKinsey doesn’t give a damn about stakeholders, and they don’t give a damn if their clients give a damn about stakeholders. They just want to stay “on trend,” and nothing is trendier in 2021 than talking about business in service of a greater good.
For McKinsey, as well as the other major firms who have signed on to stakeholder capitalism, any pronouncement about a higher purpose of business has little to do with idealism and more to do with a PR strategy. Don’t be fooled: it’s all about profit. It only ever was about profit.
The only question the cynics have is: “How could we ever have been so stupid to think that stakeholder capitalism was for real?”
A Different Question
But at the risk of naivete, I choose to ask a different question: “What will it take to make stakeholder capitalism for real?”
In other words—what will have it be different next time? I keep imagining the scene of Purdue Pharma executives and McKinsey consultants in a boardroom going back and forth about how to get Oxycontin into more hands. What will it take to have one of those consultants or executives stand up and say what no one else will: “What are we doing here? This plan will make us a lot of money, but at what cost?”
Here’s the unfortunate answer: It won’t happen. If we’re leaning on individuals to rise to the occasion in those pivotal moments, they never will. By the time you get to that moment—it’s already too late.
It’s akin to a dieter looking to shed a few pounds. If the dieter appeals purely to his individual willpower—”I will not eat the chocolates in the pantry!”—he may succeed once or twice, but eventually his appetite will get the better of him. What he needs is a new system that effectively eliminates the need for personal willpower. (E.g., a weekly grocery visit that replaces the cookies in the pantry with a healthier alternative, so the choice to have a cookie does not often materialize.)
Systematizing Stakeholder Capitalism
Stakeholder capitalism will fail if we expect individuals to make heroic, in-the-moment decisions. There’s too much economic incentive, cultural momentum, and social pressure at play in the moment that pits shareholder profit against stakeholder wellbeing. What we need instead is to design an intervention on the system itself.
If McKinsey and their ilk are for real about stakeholder capitalism, that is what we need to see. Not a halfhearted public statement (in which, they notably expressed regret but refused to take responsibility). Not just paying a settlement that amounts to a small dent in their bottom-line revenue. Not flowery pronouncements about leadership.
No—I want to see McKinsey’s stakeholder integration model. I know that they have designed countless proprietary models for efficiency and profitability. But what’s the model for doing well by customers, suppliers, the community, the environment? Don’t chalk it up to the leader’s discretion—make it a part of the system, a part of the McKinsey process.
Does McKinsey have a plan for that? This is how we know if they’re serious about stakeholders.
What We Can Do
The truth is, McKinsey may have been featured in an unfortunate headline this past week, but this work of systematizing stakeholder consideration falls to all of us. I have learned and talked a lot about stakeholder capitalism in the past year. But only recently have I reached the level of inquiry regarding how we can reflect that ideal into our practical policies and procedures.
Here’s just one small example from my coaching and consulting firm: we now begin every client session with a simple question: “Who are the stakeholders that will be affected by the work we do in this session?”
This question stops everyone in their tracks: both the client and the coach. We had gotten into the routine of focusing exclusively on the individual—the individual’s performance issues, the individual’s accountability and trust challenges. But this question forces the issue of stakeholders. It presences the impact that engagement inevitably has on the larger network of connections, of which we are all a part. And the conversations that ensue are powerful.
A simple intervention. But one that probably wouldn’t happen if we left it to individual coaches to figure out how to weave in a stakeholder mindset with each client. If it’s part of our system and process—they don’t have to.
Now, I get it. TGN Consulting has a team of 20 or so associates. McKinsey has close to 30,000. But regardless of the size, industry, or type of business we are in, this is the question we all need to ask if we actually buy into the idea of shared value creation across all stakeholders: How will we bridge the gap between the ideal and the practical? How will we go beyond telling our stakeholders we care about them, and start showing them? What systems can we begin to put in place today to ensure that tomorrow will be different?
The Time is Now
I’m not a cynic. When CEOs and titans of industry, from Larry Fink to Marc Benioff to Jamie Dimon, start talking about a new kind of capitalism, I take them at their word. I assume sincerity. And, I understand that changes don’t happen overnight.
But the fact is: time is running out. The existential threats that we face—to our planet, to our social fabric, to our democratic institutions—are encroaching. Now is the time for business to take the great leap forward and put words into action. The world is waiting and counting on business to rise to this challenge.
