Late this afternoon, a Reuters story hit the wire confirming that Anil Kumar, a former McKinsey Director, was no longer with the firm following an internal investigation. Reuters quotes an email note from McKinsey spokesman Michael Stewart noting that "We have concluded our internal investigation and can confirm that Anil Kumar is no longer with our firm … We are unable to go into further details about this matter as there are ongoing U.S. legal proceedings." Kumar, as many will remember from earlier this fall, was a senior McKinsey partner who was accused as part of a Federal probe investigating an insider trading scandal at the Galleon Hedge Fund.
In an earlier column on Kumar, Spend Matters provided some background his pioneering efforts in the knowledge process outsourcing (KPO) area. The same column also took a cursory glance at the culture behind directorship election at McKinsey noting among other things that “given the fact that McKinsey so heavily vets those moving into a Director level role -- on all levels, including the character of the individuals up for promotion -- that there is a reasonable chance that Kumar might be found innocent if his past behavior is any indication of the ethics he brought with him into his Director role.” In retrospect, I supposed we called this one too early.
Still, I know first hand from dozens of colleagues that have worked at McKinsey over the years that making Director is no easy feat. And it’s one that requires far more than simply what the McKinsey website suggests: “Directors are the most senior partners at McKinsey. They are typically elected director six to seven years after their partner election. They establish strong relationships with senior leaders and create opportunities for others to grow and develop. They are passionate about impact for our clients and the leadership of our firm.” Going beyond this, I know the vetting process for Directorship considers a person’s character. Trust me on this one -- I once worked for a former partner of a consulting firm which will go unnamed (scroll down for my comment) who did not make Director yet had everything going for him, except, well …
More important, however, is a point noted in the column that suggests, “one thing is most certainly for sure in this case and potentially others like it. And that is the fact that consultants should never compromise client data or trade -- or encourage others to trade -- on insider information. Granted, the compliance function at strategy consulting firms is usually not as tight as it is at an investment bank or a large accounting firm, but perhaps it should be.” This case -- not to mention the plight of Bob Moffat at IBM who also resigned in the wake of the same Galleon scandal -- suggests that companies are going to need to monitor supply risk more closely when it comes to the access professional services firms (even top strategy outfits) have surrounding proprietary internal data. After all, if you can’t trust a discrete four-person McKinsey team at $100K per week -- let alone a top partner leading an engagement! -- to provide or sell insider information on your company, who can you trust? Ironically, I don't thing this scandal will do much to help the case for knowledge process outsourcing, but that's an aside to tackle some other time.