While many editors at Conde Nast will be tasked with the difficult job of slashing 25% of their annual budgets as part of McKinsey’s recommendations, it appeared as if there would be no title closures, at least in the short run. A number of mags on life support (W is down roughly 50% in ad pages this year) seemed to get a stay of execution.
I tweeted earlier my disdain for Conde Nast's decision to axe four publications when I found out it was based on a McKinsey analysis. A few people told me they hadn't heard of this process.
My skepticism is based on the "difficult job of slashing 25% of their annual budgets." This smacks of the "overhead value analysis," also known as the "activity value analysis," that McKinsey conducts.
I went through one of these during my tenure at Mattel (1984-1988). Several McKinsey consultants (most of whom never worked a day in a non-consulting company after getting their Harvard MBAs) descended on Mattel. Department managers were designated team leaders. Our job was to list every activity performed by every employee in the department, then determine which activities were of low value. The employees who spent most of their time on low-value activities were laid off.
The goal is simple: cost reduction without fear of retaliatory lawsuits. If the company can document that you were let go because the activities you performed were not valuable, you'd have a hard time claiming age, sex or any other kind of discrimination.
At Mattel, McKinsey promised a 50% reduction in overhead costs and, by God, we hit that target. The problem is, within months many of those who were laid off were brought back as contractors, or their position replaced with someone else, because (and don't be too shocked) the work they performed really was necessary.
During and after the process, I had contact with dozens of people from other companies who had the same experience. McKinsey, usually working directly with the CFO, sends the CFO to other CFOs that have used the process. "Yep," the former client/CFO will say, "they sure did cut our overhead!" Nobody talks to HR, though, to find out how traumatic the experience is or how many positions are brought back within the next year or two.
Another horrific consequence is that none of the remaining employees have a shred of confidence that strong performance and hard work will save their jobs. How hard you work, how well you perform, how great your evaluations have been -- it's all meaningless in the Overhead Value Analysis, where it's just the nature of the work you perform that counts. Employees forever after the exercise wonder when the other shoe is going to fall on them.
There's also the fact that the process essentially freezes employees. Innovation grinds to a halt as everyone collectively holds their breath. At Mattel, it was a NINE-MONTH process, and my role as a team leader required that I put in an additional 30-40 hours per week on top of my regular job. Other team leaders had the same experience.
I haven't even addressed the way McKinsey advised we communicate the process to employees, which involved what turned out to be flat-out falsehoods. My own credibility as a communications director suffered because things I told employees, based on McKinsey's input, turned out to be untrue.
I'm not critical of McKinsey in general. It's a large firm that handles a lot of varied assignments and offers a lot of different services. Their research is top-notch (I cite it often). But if you find out your company has brought them in for the value analysis exercise, consider finding a new job earlier, not later.
