Morning Coffee: The macho games played by the boss of McKinsey & Co. Banks battle to be thought of as the smartest on the Street

Why would someone do this to themselves?  According to a profile article about Bob Sternfels, as he starts his second term as global managing partner of McKinsey & Co, he once went to one of the consulting firm’s offices and got staff to ask him questions while he ate progressively hotter and hotter curries, until he needed to put a wet towel on his head and gave up in pain. 

Sternfels says that it was intended as a sort of icebreaker; “the whole room got a laugh, and we had a great conversation after that”.  The idea might have been inspired by the talk show “Hot Ones”.  But people familiar with the “larger than life characters” one often meets in the investment banking industry might take the view that there’s something else going on here.

Showing off like this is crucial to a particular kind of management style – the more normal way to do it might be to invite someone for a walk-and-talk meeting, then walk so fast that they have to scurry to keep up.  Sternfels also does this, particularly when meeting lower-ranking McKinsey managers.  It’s the “Sun King” model of leadership, possibly most famously demonstrated by John Mack, where you project an overpowering aura of personal life-force and vitality, such that people can’t help but fall into line. 

The reason that people do this is that it works.  Consulting and banking are both jobs where self-confidence is vitally important – shy or nervous people don’t win mandates and assignments.  One of the key roles of the top management is to model this kind of energy for the other ranks, and that sometimes means ostentatiously throwing yourself into things where others might be tempted to ask “why am I doing this?” or “does this make any sense?”.  It’s also helpful if the showing-off involves a bit of physical discomfort, to demonstrate that the leader is also prepared to make sacrifices in an industry which often demands them.

Bob Sternfels clearly needs to build this kind of personal loyalty, given the situation he’s in.  After a hard fought battle to get a second term as managing partner (in an election which went three rounds), he has to get the firm to buy into a new strategic plan, following some lean years for revenue and redundancies.  He says that the post-pandemic overstaffing has now been largely digested and that McKinsey will be back to net hiring soon, but the wounds will take a while to heal – in a corporate culture where the usual means of reducing headcount is by more aggressive use of performance rankings, the business cycle is always emotionally intense.

So McKinsey employees can probably expect a few more stunts in the coming months. And so can quite a few bankers, as similar problems of leadership and management get addressed in the same way.  It doesn’t do to be too cynical about them; if you find yourself at the back of the room muttering “what an idiot” as a red-faced multimillionaire bites down into a Carolina Reaper, you’re in many ways missing the point.

Elsewhere, but in many ways thematically linked because there is more than one way of showing off and demonstrating prowess, it seems that some companies, banks among them, are taking the FIDE World Corporate Chess Championship a little bit too seriously.  Goldman Sachs has a guy who celebrated his promotion to Managing Director by playing a chess club match.  Google is flying one of their best players from Lithuania to New York.  And the high-speed trading firm Susquehanna International Group seems to have taken advantage of the rule allowing one non-employee member per team to bring in Sam Shankland, a full-time professional Grand Master.

Grabbing any kind of advantage that appears available is, of course, a very bankerish thing to do, but not necessarily in the spirit of the game.  Consequently, the competition rules put a limit on the number of high-rated players you’re allowed to field.  Which gives Goldman Sachs the opportunity for an even greater flex – it employs so many people rated at International Master level or better that some of them can’t get a game.

Meanwhile …

A report commissioned from EY for Citi’s wealth management unit has apparently found extraordinary levels of overstaffing compared to competitors like JP Morgan; processes are too complicated and need lots of non-client facing staff to deal with them.  No wonder Andy Sieg is getting rid of so many middle managers. (Financial News)

One of the more unusual assets in the forfeiture order agreed as part of the sentencing of hedge fund “Pharma Bro” Martin Shkreli was an extremely rare one-of-a-kind Wu-Tang Clan album.  Now it turns out he kept a copy, and a subsequent purchaser is angry. (NY Post)

People working for family offices in Hong Kong and Singapore are having to “go full CSI” in their WhatsApp groups, in order to root out fakers.  Apparently the tax and visa breaks extended to attract family office money are sufficiently generous that a growing number of chancers are pretending to represent wealthy families.  (Bloomberg)

Shikha Gupta, the former Deutsche Bank trader, is having her day in court.  She claims Deutsche reneged on a promise to pay her a bonus for her work running down their non-core assets portfolio. Deutsche says that there was no guarantee, it was 2016 and nobody got a bonus that year because there was no money. (Reuters)

The “Summer of Heat” isn’t necessarily going to be confined to Wall Street. Climate protestors have been arrested for cracking windows at JPMorgan’s London office. (FT)

Vestra Advisors is a boutique investment bank specialising in the building materials industry, with a former co-head of Citigroup’s building products coverage team among its founders.  Heka Advisors is another boutique investment bank specializing in the building materials industry, which recently hired the other co-head of Citigroup’s team. Not wholly surprisingly, the two boutiques (one American, one European) have just signed a partnership agreement to work together on global deals. (Financial News)

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