There are few more frequent visitors to the executive suites of America’s biggest companies than the strategy whisperers at McKinsey, BCG and Bain. It helps that the corner office is often occupied by one of their alumni. Among the chief executives of America’s 500 most valuable companies, 36 spent time at one of the three prestigious consultancies, according to Altrata, a data provider, up from 25 in 2018. Household names from Alphabet and Coca-Cola to Citigroup and Visa are run by former consultants. But are they any good at the top job?
Illustration: Stephan Dybus
To answer that question, The Economist used a list compiled by Altrata of alumni of the strategy trio who have run a company in the S&P 500. We then constructed an index of these companies weighted by market value, and a benchmark that re-weights the S&P 500 to ensure the same mix of industries as those run by the ex-consultants.
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We found that since January 2010 the companies run by former consultants have generated a cumulative return for shareholders of 677%, including dividends, compared with 584% from our benchmark index (see chart). There have certainly been some notable flops over that period. John Donahoe (a former Bainie) and Laxman Narasimhan (a one-time McKinseyite) were disastrous at Nike and Starbucks, respectively. On the whole, however, consulting looks to have been a helpful training ground for the top job, particularly amid the turmoil of the past five years.
Consulting firms have long claimed to be “CEO factories”. Clever graduates are rotated through projects lasting a few weeks to a few months, exposing them to a wide range of business problems, from entering new markets to cutting costs and improving customer service. Most leave after a couple of years of punishing work, with the consultancies often helping them line up their next role.
McKinsey, the biggest of the trio, performed particularly well in our analysis. Not only has it nurtured the largest number of S&P 500 bosses, accounting for 24 of the current lot. Its alumni have also performed best in the top job, both in absolute terms and relative to their industry mix. That may be a welcome source of comfort for the firm, which has bled market share to its biggest rival, BCG, and has shed some 5,000 employees since the start of 2023 after a pandemic-era hiring binge. Indeed, its clients may be happy to take a few more consultants off its hands.
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