The Great Mystery of Governance

Revealing how strategic decisions are crafted at the top of major consulting firms

Spécialisation conseil : les étudiants d’Audencia participent à un concours d’articles

Dans le cadre de leur spécialisation dans le secteur du conseil, les étudiants d’Audencia participent à un concours d’articles portant sur les enjeux liés à l’organisation des cabinets de conseil et aux carrières dans ce domaine. Chaque semestre, le sujet est différent, les étudiants sont invités à développer un point de vue réflexif sur les tendances du secteur, en lien avec les apports du cours. Les étudiants sont appelés à trouver un angle intéressant et original sur le thème qui leur est imposé, à interviewer un ou plusieurs professionnels du conseil sur ce sujet et à en tirer des conclusions argumentées pour y porter un regard nouveau.

Have you always wondered how governance is established and applied at the world’s leading management consultancies? How does the co-optation system to become a partner work? What are the strategies for becoming a partner? You have searched the internet without a satisfactory answer, and even ChatGPT hasn’t been able to reveal the mystery?

Thanks to an interview with an ex-AT Kearney partner who has risen from obscurity to shed light on the secrets of consulting firms, this article will provide the answers you have always been looking for.

In the unlikely case, you have not heard about Kearney yet, here is a short “Kearney history lesson”.

Kearney is one of the oldest consulting firms still in business, founded in 1926 by the co-founder of McKinsey. Back in the days owned by its partner Kearney was bought and owned by the American IT services company EDS from 1995 to 2005. It was the first time in history that an IT giant bought a consulting firm! The purpose was to create an integrated value chain from consulting to IT services. However, a culture clash emerged between EDS, with its Taylorism approach to work, and Kearney, with its culture of autonomy. This lack of freedom for consultants led the group to return to the classic operating method of strategic companies: partnership.

I/ “The independence deeply anchored in Kearney´s DNA."

The way the partnership works is founded on the concept of “one partner, one vote”. But how are decisions made within this structure, how do partners agree on a consensus, who can decide what, and how is it possible that every single partner gets their opinion heard?

Who makes decisions: 
A board is elected by Kearney's partners for decisions that are non-strategic and have a limited impact. The democratically elected board is responsible for the daily business, which includes non-strategic and limited-impact decisions. But who makes the decisions with high impact?
High-impact decisions include, for example, the strategic orientation of the acquisition of companies and capital-impacting decisions. A conclave takes these decisions. The conclave comprises all 350+ partners gathered to make high-impact decisions. During this meet-up, all partners get the possibility to debate about the decision to be taken. Every partner is heard and can express their opinion. After the debate, a vote takes place under the credo “one partner, one vote”; every partner has the same decision-making power no matter the seniority or revenues generated for Kearney.
Managing partner and partner, is it all the same?
Partners within a country elect a managing partner, who obtains a mandate to manage a geographic office. This mandate includes the responsibility to manage budgets, hire senior profiles, and communicate with the international board. 
You may be wondering how to become a dynamic decision-making partner at Kearney? 
Partners at Kearney and in every consulting firm operating on the partnership model must buy equities from the company to become partners. The amount of money to be invested is usually a 6-digit number. Current partners must nominate future partners to have the chance to be elected, though not all partners have the same voting impact: “It depends on the importance of each partner in the governance of the group."
The system for becoming a partner is still very classic and has changed little over time. It involves demonstrating “in-depth expertise in a specific field, excellent leadership and project management skills, and the ability to generate significant results for clients and the firm.” 

II/ How do different ownership types impact you as a consultant?

A consultancy solely owned by its partners sounds like a good thing, consultants work for highly motivated partners who are incentivized to ensure their team unchains the highest performance. But is it better to work for a solely partners-owned consultancy, or is it better to work for a consulting company owned by shareholders, including profit and cold-hearted investment fund managers? This article will end by presenting to you a final reflection on the advantages of different ownership models and their impact on employees, which is especially interesting if you are a curious aspiring consultant or are currently working in consulting.
As a consultant, you can work under several types of ownership. Here we introduce some main types of ownership including partnership, company-owned model, publicly traded companies and private ownership
According to our interviewee, the partnership model “allows the firm to maintain greater flexibility in its strategic decisions, and its independence from the financial markets enables it to focus on long-term value creation.” If you are looking for a long-term career in a consulting firm, this model could be an excellent fit for you. Indeed, these kinds of companies are investing in the future by creating new services that do not maximize the short-term ROI.
Another ownership model that Kearny met during EDS ownership is the Company-owned model. This way of operating allows for synergies between the parent company and the subsidiary. For example, Marsh & McLennan Companies acquired Oliver Wyman to offer a broader range of services. Indeed, already specialized in risk assessment, insurance, HR, and financial services, Marsh & McLennan now offers management, economic, and brand consultancy. This collaboration can allow economies of scale and better client retention by redirecting clients to various other services the firm provides. If you are looking for a diversified career, the company-owned model is a great fit, as it can offer various career shifts within the same corporate structure.
Being in a publicly listed company enables faster growth thanks to capital increase. Accenture is owned by 90% of various owners and pension funds. Today, the consultancy is unsurprisingly the biggest consulting firm in terms of turnover as a result of this model. A significant benefit is that you can acquire interest bonuses without being a partner. Though this model has its disadvantages, these kinds of consultancies tend to make short-term decisions, have to bear the cost of dividends, and suffer from outside pressure from shareholders. 
Finally, some charismatic leaders can achieve great success stories, like M.Courtecuisse, who owns 82% of Sia Partners. This system allows quicker decisions but relies on one man, which can make the firm unstable for future power transfer.  
You now have all the information you need for a successful path toward becoming a partner one day. Make your choice wisely and consider the different ownership models.

Interview version française

An interview with P.V. a 3 years consultant at ex-Bain&Company and 4 years ex-partner at  Kearney

Comment fonctionne la hiérarchie chez kearney, ce cabinet a-t-il des particularités ? Le système pour devenir partner a-t-il évolué durant tes années passés chez Bain et Kearney ?
Les grands cabinets de conseil en stratégie, tels que Kearney et Bain&Co, ont généralement une structure hiérarchique similaire. Voici une description générale de cette organisation :
1.    Consultants juniors/Analystes : Ce sont les membres les plus juniors de l'équipe. Ils sont souvent recrutés directement après l'obtention de leur diplôme universitaire ou de leur MBA. Leur rôle principal est de soutenir les projets en effectuant des analyses, des recherches et en préparant des présentations.
2.    Consultants confirmés/Associés : Après avoir acquis de l'expérience, les consultants juniors peuvent être promus au niveau d'associé. Ils prennent en charge une plus grande responsabilité dans la gestion des projets, la coordination des équipes et l'interaction avec les clients. Ils jouent un rôle clé dans la résolution des problèmes et la formulation de recommandations.
3.    Managers/Senior Managers : Les managers sont des consultants expérimentés qui supervisent plusieurs projets et équipes simultanément. Ils sont responsables de la gestion des relations clients, de la direction des équipes de consultants et de la garantie de la qualité des livrables. Les senior managers ont une expérience plus approfondie et jouent souvent un rôle de mentor auprès des consultants plus juniors.
4.    Partners/Associés-Directeurs : Les partners sont les membres les plus haut placés de la hiérarchie. Ils sont souvent des experts reconnus dans leur domaine et ont une responsabilité globale dans la direction stratégique du cabinet. Ils supervisent les grands projets, développent de nouvelles opportunités commerciales et prennent des décisions clés pour le cabinet.
Il convient de noter que la structure précise peut varier d'un cabinet à l'autre, mais cette organisation en plusieurs niveaux est courante dans l'industrie du conseil en stratégie.
Une particularité de Kearney est son modèle de partenariat, où les partners détiennent une part du capital du cabinet et participent activement à la gouvernance et aux décisions stratégiques. Ce n’est pas le cas de tous les cabinets (certains sont détenus par des fonds par exemple, comme Alix Partners) et dans de nombreux cabinets tous les partners ne possèdent pas forcément de parts de l’entreprise.
Le système pour devenir partner est toujours très classique et a peu évolué. Généralement, il implique de démontrer une expertise approfondie dans un domaine spécifique, d'excellentes compétences en leadership et en gestion de projet, ainsi qu'une capacité à générer des résultats significatifs pour les clients et pour le cabinet. Les partners sont cooptés selon différents processus selon les cabinets, mais cela reste le même principe à peu près partout (c’est particulièrement collégiale et une cooptation forte pour Kearney, au regard de l’importance de chaque partner dans la gouvernance du groupe.
Pourquoi kearney n’est pas côté en bourse ?
Au cours de longue histoire (création en 1926), Kearney a connu plusieurs formes de gouvernance et de détention de son capital. Depuis le début des années 2000, le cabinet est redevenu indépendant, propriété de ses partners, sur le principe de gouvernance “d’un homme, une voix”. 
Le principe d'indépendance est profondément ancré dans l'ADN du cabinet depuis cette date, C'est une des principales raisons pour laquelle Kearney reste une entité privée. Cette structure permet au cabinet de maintenir une plus grande flexibilité dans ses décisions stratégiques et son indépendance  vis-à-vis des marchés financiers lui permet de se concentrer sur la création de valeur à long terme. 
Comment sont prises les grandes décisions ?
Pour la gestion quotidienne et certaines opérations déléguées, les partners élisent un Board. Le mandat de ce Board est limité aux opérations non stratégiques et sous un seuil d’importance.
Pour les grandes décisions (orientations stratégiques, acquisitions de sociétés, opérations de capital etc.), les partners se réunissent en conclave (il y a environ 350 partners dans le monde) et votent après avoir débattus. 
Pour certains sujets, et par souci d'efficacité, le vote peut être de déléguer à un sous groupe de partners l'exécution de l'opération ou d’une stratégie, selon certaines contraintes et limites. 
Au quotidien, les partners sont réunis en bureaux géographiques, dont ils élisent un Managing Director, qui reçoit une mandat de gestion locale (gestion budgétaire, embauches de séniors, communication avec le Board etc. 
Peux-tu comparer l’organisation de Kearney et celle d’autres cabinets de conseil ?
En dehors de la gouvernance corporate, assez particulière à Kearney du fait de sa taille limitée, de sa structure de partenariat plein et entier, et de sa volonté farouche d’indépendance, le reste du fonctionnement et de l’organisation de Kearney est très comparable aux autres cabinets de conseil. 
Les partners sont organisés selon trois dimensions afin de couvrir l’ensemble du marché: un axe géographique (le marché du conseil reste un marché principalement local), un axe sectoriel (les problématiques des banques ne sont pas celles des sociétés pharmaceutiques) et un axe fonctionnel (une typologie de projets particulier, comme les acqusitions, ou l’optimisation des achats). 
Les consultants plus juniors ne sont pas spécialisés, mais sont généralement rattachés principalement à une géographie. Au fur et à mesure qu'ils acquièrent de l'expérience, ils choisissent les sujets sur lesquels ils souhaitent se concentrer. 
Impact de la gouvernance sur le quotidien du métier de consultant :
Y’a-t-il des directives à respecter sur la RSE ?
Sur la RSE, il y a une certaine prise de conscience mais les cabinets ne sont pas à la pointe du tout
Y’a-t-il des directives à respecter pour le recrutement pour la diversité ?
Les cabinets voudraient fournir des efforts mais sont prisonniers de leur système. Il y a en moyenne très peu d'écoles cibles pour le recrutement (dans les cabinets de conseil en strat), donc très peu de diversité. Si l’on voulait vraiment régler ce problème de manque de diversité il faudrait le résoudre au niveau des écoles, pas au niveau des cabinets. 
A part ça les cabinets sont nettement meilleurs que dans le passé sur les ratios homme femmes, et en particulier au niveau des partners. Ça c’est quelque chose que j’ai vu changer en 7 ans. La direction pousse aujourd’hui pour donner des promotions aux femmes, en tout cas largement plus qu’avant. Et même au niveau du recrutement, on cherche à recruter des femmes même si elles représentent toujours une minorités des personnes postulant en conseils en stratégie.
As-tu une idée pourquoi elles restent une minorité des candidats.
Honnêtement je ne sais pas, c’est surement comme en finance, c’est un milieu que tout le monde pense masculins et les filles sont peu encouragés ou même n’ont pas forcément l’envie d’y travailler. Les mentalités évoluent sur ce sujet mais ça prend du temps à se voir dans les candidats. 
Y’a-t-il eu des changements de règles aux sujets des heures travaillées par les consultants ?
Non, aucun changement. On essaie de pas tuer les gens à la tâche mais ça fait partie du travail, et il est impossible de faire ce métier à un certain niveau d'excellence sans travailler énormément. 
Au sujet du recrutement, les profils et les compétences recherchées ont-ils changé ? 
Non de ce côté aucun changements. Nos clients paient très cher pour nos conseils en stratégie et les écoles de nos consultants servent d’argument d’autorité. Ça pourrait être bénéfique d’avoir des étudiants d’horizons différents mais nos clients ne l’accepteraient pas ils paient pour ce qui est pour eux l’excellence et ça a peu de chance de changer à l’avenir.

Interview English version:

An interview with P.V. a 3 years consultant at ex-Bain&Company and 4 years ex-partners at Kearney
How does the hierarchy work at kearney? Does the firm have any special features? Did the system for becoming a partner evolve during your years at Bain and Kearney?
The major strategy consulting firms, such as Kearney and Bain&Co, generally have a similar hierarchical structure. Here’s a general description of this organization:
1.    Junior Consultants/Analysts: These are the most junior members of the team. They are often recruited directly after graduating from university or MBA programs. Their main role is to support projects by carrying out analysis, research and preparing presentations.
2.    Senior consultants/Associates: After gaining experience, junior consultants can be promoted to associate level. They take on greater responsibility for managing projects, coordinating teams and interacting with customers. They play a key role in problem-solving and making recommendations.
3.    Managers/Senior Managers: Managers are experienced consultants who supervise several projects and teams simultaneously. They are responsible for managing customer relationships, directing teams of consultants and ensuring the quality of deliverables. Senior managers have more in-depth experience and often act as mentors to more junior consultants.
4.    Partners/Associates-Directors: Partners are the most senior members of the hierarchy. They are often recognized experts in their field and have overall responsibility for the firm’s strategic direction. They oversee major projects, develop new business opportunities and make key decisions for the firm.
It should be noted that the precise structure may vary from firm to firm, but this multi-tiered organization is common in the strategy consulting industry.
A particularity of Kearney is its partnership model, where partners hold a share of the firm’s capital and actively participate in governance and strategic decisions. This is not the case for all firms (some are owned by funds, such as Alix Partners), and in many firms not all partners own shares in the company.
The system for becoming a partner is still very classic and has changed little. Generally speaking, it involves demonstrating in-depth expertise in a specific field, excellent leadership and project management skills, and the ability to generate significant results for clients and the firm. Partners are co-opted according to different processes at different firms, but the principle remains the same almost everywhere (it’s particularly collegial and strong co-optation at Kearney, given the importance of each partner in the group’s governance.
Why isn’t kearney listed on the stock exchange?
Over its long history (founded in 1926), Kearney has experienced several forms of governance and ownership. Since the early 2000s, the firm has once again become independent, owned by its partners, based on the “one man, one vote” principle of governance.

The principle of independence has been deeply rooted in the firm’s DNA ever since, and is one of the main reasons why Kearney remains a private entity. This structure allows the firm to maintain greater flexibility in its strategic decisions, and its independence from the financial markets enables it to focus on long-term value creation.
How are major decisions made?
For day-to-day management and certain delegated operations, the partners elect a Board. The board’s mandate is limited to non-strategic operations below a certain threshold.
For major decisions (strategic orientations, company acquisitions, capital transactions, etc.), the partners meet in conclave (there are around 350 partners worldwide) and vote after discussion. 
For certain subjects, and for the sake of efficiency, the vote may be to delegate to a sub-group of partners the execution of an operation or strategy, within certain constraints and limits. 
On a day-to-day basis, the partners meet in geographical offices, from which they elect a Managing Director, who receives a local management mandate (budget management, hiring of senior staff, communication with the board, etc.).
Can you compare Kearney’s organization with that of other consulting firms?
Apart from corporate governance, which is quite specific to Kearney because of its limited size, its full partnership structure, and its fierce desire for independence, the rest of Kearney’s operations and organization are very comparable to those of other consulting firms. 
The partners are organized along three dimensions in order to cover the entire market: a geographical axis (the consulting market remains a mainly local market), a sectoral axis (the problems faced by banks are not the same as those faced by pharmaceutical companies) and a functional axis (a particular type of project, such as acquisitions, or purchasing optimization). 
The more junior consultants are not specialized, but are generally attached mainly to one geography. As they gain experience, they choose the subjects they wish to concentrate on.
The impact of governance on the day-to-day work of consultants:
- Are there any CSR guidelines to follow?
There is a certain awareness of CSR, but firms are not at the cutting edge at all.
- Are there any recruitment guidelines on diversity?
Firms would like to make an effort, but they are prisoners of their own system. On average, there are very few target schools for recruitment (in strategy consulting firms), so very little diversity. If we really wanted to solve the problem of lack of diversity, we’d have to solve it at school level, not at firm level. 
Apart from that, the firms are much better than they used to be in terms of male-female ratios, especially at partner level. That’s something I’ve seen change in 7 years. Management is now pushing for promotions for women, at least much more than before. And even at recruitment level, we’re looking to recruit women, even if they still represent a minority of applicants for strategy consulting positions.
Do you have any idea why they remain a minority of applicants?
Honestly, I don’t know. It’s probably like finance, where everyone thinks it’s a male-dominated field and girls aren’t encouraged or even necessarily want to work in it. Mentalities are changing on this subject, but it’s taking time to be seen in candidates. 
Have there been any changes in the rules concerning the hours worked by consultants?
No, not at all. We try not to kill people on the job, but it’s part of the job, and it’s impossible to do this job at a certain level of excellence without working a lot. 
On the subject of recruitment, have the profiles and skills you’re looking for changed? 
No, not at all. Our clients pay a lot of money for our strategic advice, and our consultants’ schools serve as an argument of authority. It could be beneficial to have students from different backgrounds, but our clients wouldn’t accept it - they pay for what they consider to be excellence, and that’s unlikely to change in the future.

Article by Julien Poux, Vincent Schädlich, Dizi Yu