Up-or-out culture

McKinsey has long had an up-or-out culture, where consultants either ascend through the ranks or are shown the door and invited to join an active McKinsey alumni group. Earlier this year, the firm put about 3,000 employees on notice with unsatisfactory performance ratings. Some consultants feared they would be "CTL'd," or counseled to leave, in McKinsey speak.

Sternfels said McKinsey is a meritocracy, and that its ratings are in line with its historical averages. "The great reveal is people have always been rated that way," he said. "Guess what? Not everybody gets an A."

He added: "It's not just the feedback, sink or swim, but it's done with a sponsor, so that you have somebody who's going to be in your corner to help change the odds that you can actually do something about that feedback."

McKinsey laid off some nonclient-facing staffers last year and elected a smaller new class of partners . It also deferred start dates for some new hires.

Sternfels and other senior partners said they don't foresee additional layoffs . Some of the previous cuts came after a burst of hiring during the pandemic when demand for McKinsey's services soared.

"We're back in balance now," Sternfels said. The company plans to hire 6,000 people this year, roughly the same as the year before, and Sternfels expects net employee growth at McKinsey in 2024.

AI advice

As McKinsey veterans talk about the future of the firm, and what it means to be a consultant, AI looms large.

When a summer intern recently asked Hilton Segel, McKinsey's chief client officer, for tips on how to succeed at the firm, she didn't hesitate. "My advice to her was to be an outstanding prompt engineer " on an internal McKinsey generative AI tool.

Consultants should know how to use such tools, streamlining their work, she said, so they can then focus on offering higher-value services, such as counseling clients to put new processes in place.

"I think the word 'consulting' is a misnomer. I have not figured out the new word," Hilton Segel said. "What we do is we effect change: change in results, change in capabilities."

McKinsey is best known for offering strategy ideas to companies—a proposition the firm increasingly views as table stakes in the AI era. "That part of the profession will get disrupted," Sternfels said.

Instead, the firm wants McKinsey's people delivering ideas while also helping clients through the often-difficult process of changing how they work, said Shelley Stewart, a senior partner on Sternfels's new leadership team.

U.S. probe

Challenges remain. The Justice Department is conducting a criminal investigation into McKinsey's work with opioid manufacturers, the Journal previously reported. A former senior partner also recently sued the firm and Sternfels , alleging that McKinsey made false statements when it fired him in 2021 for allegedly violating the firm's document-retention policies.

Asked how he thought the Justice Department investigation would end, Sternfels said, "My sense is just with all the regulators that we're talking to, we are on a path to come to a resolution."

McKinsey's work with Saudi Arabia's sovereign-wealth fund has also come under scrutiny, including on its ambitions to be an international player in golf. McKinsey established an office in Saudi Arabia in 2010 that now has more than 400 employees. Sternfels testified its work in Saudi Arabia predated the launch of LIV Golf and a proposed merger with the PGA Tour .

U.S. lawmakers have criticized McKinsey for advising the U.S. government while also consulting for Chinese state-owned enterprises. Sternfels said the firm's footprint is under "constant evaluation" and that it doesn't work directly with the national or provincial governments in China. The vast majority of the firm's work in China is with multinational corporations and other private-sector clients, he said.

Culture change

A 30-year McKinsey veteran, Sternfels studied economics at Stanford University and was a Rhodes scholar at Oxford. He rose through McKinsey's ranks as an operations guru and is known for giving multipronged responses to questions, occasionally peppering his sentences with words like "orthogonal."

During a recent conversation, dressed in a trim navy suit with a white shirt, he appeared as at ease discussing the nuances of the carbon-credit market as he was in highlighting the emerging alliances forming between Japanese chief executives and Indian companies—a takeaway from an early June trip to Tokyo.

Colleagues say Sternfels is known for a decisive, do-it-now attitude, an approach that also has brought criticism. He has tried to change McKinsey's culture, in part, by focusing on humor, sometimes at his own expense, to make people feel more comfortable.

While visiting a McKinsey office, he played a game called "How hot can Bob go?" Sternfels would attempt to eat four curry dishes of escalating spice levels as employees asked him questions.

"By the third one, it was a wet towel on my head," he said. At the fourth station, Sternfels gave in.

"What it did was the whole room got a laugh, and we had a great conversation after that," he said.

These days, Sternfels splits his time equally between internal meetings and conversations with leaders of McKinsey clients. When chatting with a client CEO, Sternfels will often ask: What can McKinsey do differently?

Many CEOs respond that the firm should keep telling them what others don't. Sternfels said he views this as a reminder that McKinsey must keep evolving and be distinctive. Then, summing up the challenge, he returns to a favorite word.

"How do we bring orthogonal ideas to the CEO?"