China

These two consulting engagements, roughly 50 years apart, can arguably be labeled milestones for the 78-year-old McKinsey & Company, whose evolving client offerings have long served as a compass for industry. Whereas in the last century American companies hungered for knowledge concerning the business operations and organizational challenges related to expansion across a regionally diverse European continent, today Chinese companies hunger for skills and the management experience required to ensure success globally. Hence Lenovo's acquisition of IBM's personal computer business, a deal which some have characterized as a kind of global swap, wherein IBM outsources its PC business to Lenovo and the Chinese tech firm outsources its management and sales to IBM. In short, the deal grants Lenovo access to skills and management experience that doesn't exist locally.

A Grand New Mission

Take your pick: Whether it's China's overheated economy, shaky banks, or stifling government bureaucrats, there is no shortage of perceived hurdles to overcome as China prods its corporate giants to become global beacons of capitalism. McKinsey estimates that if the demand for executives required by greater China's annual GDP growth mirrors that of GDP growth in Japan or the U.S., China will need to produce somewhere around 75,000 globally capable executives over the next five years.

"When you look at the macro talent challenge facing China, it's obvious that it cannot be met by simply acquiring talent. It has to learn to develop its own executive talent," says Andrew Grant, head of McKinsey's Greater China office. Grant currently pegs the number of globally capable Chinese executives at between 3,000 and 4,000.
The resulting China talent gap is posing a major challenge to industry and the consulting firms that serve it. For while the talent void has encouraged many companies in Greater China to turn to outside providers of IT and consulting services, the consulting firms themselves continue to feel the pain as they suffer high attrition rates for both junior and experienced talent. "Our data indicates an increasing rise in unmanaged attrition, in particular our top performers in several parts of our organization," reads an internal memo sent last fall to Accenture partners from the head of the firm's Asia Pacific region. While the memo was addressed to the firm's Asia Pacific partners, the firm's workforce turnover in China is reported to be especially sharp.

Certainly, Accenture is not alone. When it comes to clients poaching consulting talent, China is testing the famously sturdy patience of consulting firms. It's a dynamic that has arguably made consulting firms the top manufacturers of seasoned talent in China and one that is now leading McKinsey to embrace a role unlike any its profession has known before.

The most visible evidence of that role is expected to surface sometime within the next 12 months, as Chinese students begin rotating into McKinsey consulting engagements in order to complete the "learning by doing" portion of an executive education curriculum being designed to potentially matriculate thousands of Chinese graduates annually, say people familiar with the curriculum's ongoing development. Included among those known to have a hand in formulating different portions of China's executive curriculum are Tsinghua University (the so-called "MIT of China"), Harvard Business School, and a number of multinational corporations, including British Petroleum and Wal-Mart.
While Grant says that he cannot comment on his firm's participation (or on any of its clients) in such a curriculum, he does not hesitate to discuss some of the conceptual thinking behind other widescale talent development efforts such as how McDonald's currently uses its McDonald's University to season and school thousands of people on its front lines annually.

"We actually think that some of those concepts can be tailored for executive talent … clearly they have to be taken to a higher level, but China just is not going to get there with the mechanisms it currently has in place and the scale that exists," says Grant, who further agrees that China appears extremely well suited for a number of leadership initiatives first discussed in a context other than China at last January's World Economic Forum.
Be that as it may, McKinsey's involvement in the new Chinese curriculums may well be an evolutionary step for the firm. And one akin, perhaps, to the decision that led McKinsey to begin recruiting directly from graduate business schools some 50-plus years ago. In essence, that decision solidified the firm's professional approach, making apprenticeship a cornerstone of the firm's culture. The firm has in the past attempted to tout the success of its graduate school recruitment program by telling graduate prospects that as many as a quarter of the firm's senior directors had joined the firm directly off a college campus. Meanwhile, the firm's reputation as a leadership factory is already well established given the number of McKinsey alumnae that have achieved the rank of CEO in many industries.

Not Just Consultants, But Teachers

"The true added value of consulting professionals lies less in what they know than in what they do," writes David Maister in his popular business school text, Managing the Professional Service Firm. The substance of Maister's assertion is that while knowledge can be codified and easily shared, professional skills can be learned only through apprenticeship. And so it is in China, where global consulting firms long known for their portfolios of knowledge offerings are seeking to win favor with a new class of global clients by better leveraging the powers they have long owned but seldom used to enough advantage.

Paul DiPaola, partner in-charge of Bain's Greater China office, says that while Bain's approach to apprenticing talent in China is identical to what happens in its other Bain geographies, the response to that approach by clients is far greater.
"I walk into a client presentation at a local client here in China, and there will be a hundred people in the room. It feels almost like an auditorium. It's truly amazing," says DiPaola, who believes that the hunger for knowledge among the Chinese is allowing Bain consultants to nurture their mentoring skills. "Chinese clients use every consulting engagement as a way of training their own people. An engagement is really both about strategy and about training the local team, which means that our guys not only have to be good consultants, but also good teachers, good trainers, good mentors — that's the difference here in China."

DiPaola believes that the accumulated experience that resides within the top three strategy houses — Bain, McKinsey, and Boston Consulting Group — has given the firms a unique position in a market thirsting for knowledge.
 "Given their professional experience, through which they have closely observed many business organizations, plus their understanding of working in teams, consultants could make excellent business school teachers — even deans," says Warren Bennis, university professor and founding chairman of the Leadership Institute at the University Southern California's Marshall School of Business in Los Angeles.
"Schools of architecture have their students working with them on real buildings. Law schools have casework as part of their curriculum. You can't call yourself a professional without having some experience in the real world," says Bennis, who recently highlighted the professional deficiencies of MBA programs at large in a Harvard Business Review article he coauthored with James O'Toole titled "How Business Schools Lost Their Way."
"There's just a lot of accumulated experience in the big three strategy firms. People have an enormous battery of historical casework and benchmarks to look at. And that's all now coming into play here in China," says DiPaola.
John Wong, senior vice president and regional chair for Asia, The Boston Consulting Group, says that the firm today approaches its work in China in much the same way as it does that in other parts of Asia and the world. "Though the content is very different in each country, the way you think of your team, the organization, the set metrics, and making sure that the people achieve what they've supposed to achieve is the same," says Wong.

Not the Stick, But the Carrot

However, that's not to say that the strategy houses haven't struggled with their own ongoing talent challenges.

From the start, India held certain advantages over China when it came to recruiting consulting talent. In the late '80s and early '90s, as American industry looked ever eastward, McKinsey, Bain, BCG, and others found a growing supply of Indian recruits wielding MBAs from American universities. The supply of Chinese recruits wielding such MBAs was comparatively far smaller. No surprise, given the country was all but closed to foreign trade until 1992. (Tsinghua University would establish China's first MBA program in 1991.) The lack of Chinese recruits holding MBAs created a hurdle for the firms eager to enter China. Without a common Western academic standard, the firms found themselves struggling to maintain a caliber of talent equal to that found in their firms' other geographies. What's more, the firms found their Chinese hires were often "highly mobile" demonstrating little loyalty to the firm and perhaps not fully grasping the value of an apprenticeship culture.

"Chinese executives are taught that employees are assets, but that they are expendable in the same way as a piece of equipment, and the point that is missed is how this has continued to undercut employee loyalty and productivity in China," says Bonnie Kabin, director of global education and certification for WorldatWork, an association for compensation and benefits professionals (many from large, multinational corporations).
"We know from our membership the types of challenges that, say, Pepsi and General Mills have faced as they break into China, and these are no different from what our consulting firm members are facing. It's compensation systems and how they are different in other parts of the world. It's performance management and 'How do we use the carrot and not the stick?,'" explains Kabin, whose recent work has involved organizing compensation and benefit training programs for Chinese executives.

As for management consulting firms such as McKinsey, the differences between Chinese recruits and Western-style ones have led the firm to develop a more customized approach for indoctrinating Chinese talent. To better support its Chinese hires the firm has created a program originally dubbed "China House" where Chinese talent initially receive some English training before joining teams of McKinsey consultants in Frankfurt and New York. Given a large part of the program's intent is to foster cultural exchange, about one third of the roughly 50 China House recruits are European.

The Leadership Accelerator

At a recent McKinsey & Company roundtable, John Thornton, former chief operating officer for Goldman Sachs and director of global leadership at Tsinghua, shared his observations of Chinese students as follows: "Only about 20 percent of the students I was teaching were hired by foreign companies. I tried to figure out why more of them weren't hired. And here's my view. They don't get hired because they are not fully-baked Harvard Business School graduates. They have raw talent that you've got to work at making into the kind of talent that's effective."

To date, Tsinghua University has sought to remedy China's MBA void through a string of different alliances with multinational corporations and western universities. However, the approach has remained largely piecemeal and nowhere near adequate to meet the needs of China's booming economy. To date, while McKinsey's contribution to what has been called "lifecycle management education" has yet to be fully revealed, the firm is being viewed by some as a catalyst for helping to get the different existing executive education programs aligned and into a more scalable curriculum.

Back in January at the World Economic Forum, David Fine, a partner from McKinsey's Johannesburg office, facilitated a session that explored how to accelerate leadership development for black South Africans.
According to a description of the session's discussion posted on the WEF's Web site, Fine detailed research revealing that South Africa needs to increase the number of the country's black leaders fivefold — a mere arithmetical problem, perhaps, when compared to the complicated math that will be needed to solve China's far more complex challenges.

Sapient's Workforce Reborn in India

Different From China, India Presents Its Own Unique Hiring Challenges

Sapient launched a strong hiring push from its India offices in late 1999, at a time when 90 percent of its headcount was based in the United States. Today, roughly half of the firm's 2,300-plus employees are based in India, thanks to the firm's acculturation to the country's unique recruiting process.

Students are allowed to accept only one offer, and, perhaps even more jarring for U.S. consulting firms recruiting in India for the first time, specific compensation offers tend to be public.
"So when you go to IIT Delhi, your offer is actually documented in your presentation," notes Austin Cooke, Sapient vice president, hiring. "And every single candidate at IIT Delhi is given the same offer." That's certainly not the case at U.S. universities and business schools, where students weigh several offers that tend to be individually massaged according to their skills and negotiating positions.

Those two major differences significantly affect how consulting firms recruit talent in India. An early time slot is vital during the day of the formal presentations consulting firms conduct on Indian campuses. "So much rides on getting what they call a great 'slot' on campus day," Cooke explains. "The earlier you are in the queue for on-campus interview day, the more students there are to see what you have. As they take offers, they're out of the candidate pool."
The size of a company's salary offer and the amount of time a company has participated in the campus day presentation at a particular university influence its time slot. Cooke says that the recruiting model makes on-campus brand-building critical; if students are not familiar with a company, they're less likely to turn down other offers so that they can learn more about a company during its formal presentation.
But Cooke also has grown to appreciate the system. "In some ways, I now like it better because money has less of an influence on where people decide to go," he notes. "The money is a given, so they can really focus on the firm's culture, work, clients, and people."

That said, Cooke also appreciates the fact that Sapient's campus day slots at different universities have steadily risen in the past six years. "It would be very difficult to show up in India today and try to do campus recruiting," he adds.
The process may resemble shopping for a Saturn, but Cooke and other consulting recruiters who have struck talent gold in India say that the end result feels more like bringing home a new Lexus. — Eric Krell