Dominic Barton, Global Managing Director, McKinsey & Company – Wharton Leadership Lecture

The first question for you would be for everyone to understand what the 29 years have looked like at McKinsey for you. So in one minute, what is the arc of your career? So you started in 1986. Where did you start and what were your key stepping stones? And then we'll dive into a couple of those as well. Well, first of all, I just I want to say what an honor it is to be with all of you guys. This is as Jay said and Paola said, this is an incredibly important source of talent for McKinsey and company and has been so I hope we can convince as many of you as possible to join just to be open with you. That's why I'm here. And again, some of the very best friends in the firm, including Vick Hoelter, very best friends not in the firm, but in the world are Wharton grads. I don't know how you let him in, by the way, I don't know what standards were going on at that particular long time ago. But anyhow, so it's wonderful to be here. In terms of the career, you got to keep me focused because I could lather on for a while here. I don't think it was an arc. Actually, I think it was a valley at times. That's a nice way to look at it. I started high. I went low. But I started in 1986 in Toronto. I really joined McKinsey, to be honest with you, because I didn't really know what I wanted to do. And I was doing more an academic path. I was doing economics. I was doing an MPhil in economics in Oxford. I was going to do my PhD. And I kind of figured that I was an interest in industrial economics and everything I was doing was mathematics. And I figured, I don't think there's many CEOs that probably sit and write equations to figure out. But I didn't really know. And I thought, why don't I come to McKinsey, I'll come for two years, get as much experience as I can, and then go back to the academic world. That was kind of my thinking. And then I was told, you know, McKinsey serves, you know, we do serve CEOs and so forth. I had this kind of idea that when you joined, you'd immediately begin serving a CEO. And you know, my first study was actually to figure out how many pieces of Kentucky fried chicken should go in a lunchbox. So I thought, you know, you guys at McKinsey tell me you're working on the biggest problems on earth, and I'm trying to figure out whether it's four pieces or three, right, as sort of a... What was the answer? So that was, it was four. Took about six months to figure that out. Yeah, yeah. But anyhow, so that was the start. And then it's really been a, you know, it's truly been a journey in the sense of I love the work. I just, I love the, I love the fact that, you know, the work is interesting, it was the variety. There was times where it was very painful, but you have mentors, you have people that help you out, friends that are critical. And basically, I started in Toronto, and the more I worked in the firm, the more curious in a sense I got. And that's what led me eventually to different stages, and I want to bore you with the detail too. I went and decided I wanted to go to Asia for a bunch of different reasons. I just wanted to learn and see more. One thing I like about McKinsey, and I think by the way other firms do this too, but we push is you're always learning. Just as soon as you get comfortable with something, you go to the next level, and I love that. In my role now, I just feel I'm always learning, and that just keeps you alive. My view, I was saying, if you're not growing, you're dying, and you're growing, you're learning. So that's kind of been the philosophy, and then... And you were, so you were hired into Toronto, you spent how many years in Toronto? About eight years. Eight years, and then you moved to Sydney? Actually, when I was a project manager, I moved to Sydney sort of after three years, because I was, again, told McKinsey's about mobility. One of my best friends happened to live in Sydney. That was the reason I decided to go to Sydney, no other reason than that. We made up some reason about how Canada and Australia are quite similar in industry structure, but that frankly was the reason why I went. And so I was there for a year, and then came back to Canada. And there I noticed, I did a lot of work actually in North America. Actually, Vic and I worked together as associates in Hartford, Connecticut, and we, by the way, we were led by, at that time, by Betty Vandenbosch, who was a woman project manager who was probably the best project manager leader I've actually ever worked with. We literally did nine till five. We did not start before nine, we didn't finish, and we were actually, had nothing to do. We took up rowing together on the Hartford River. We seriously, and it was the oddest thing. But anyhow, but when you travel to different regions, you see the variety, the different type of work. And in Australia, that was very pivotal for me because there were two pieces of work that I did there that taught me a lot. One was we worked with Paul Keating, who was the treasurer at the time, and sort of minister of finance or treasury secretary equivalent. And this guy was an unbelievably bold, wild thinker about what he wanted to do. We would have these dinners with him, which actually had nothing to do with the project. We were trying to simplify the tax system. I'll never forget, the first dinner he said to me, if you have half a brain, there's only six of us, and he goes, I doubt you do, but if you have half a brain, you should move to Asia because that's where the future is. I mean, this was in 1989, at the time, going, wow, this is... The second dinner, he thought, his idea, which we were all talking about, was we should merge Canada, Ireland, and Australia into one country, because you get the euro. And I remember at the time, I was so excited by this idea. The managing director at the time was a guy named Fred Gluck, who was all about... He was about knowledge and ideas. He was from Bell Labs as a background. He built a lot of our practices and pushed us. So I called him up. It was about 11 o'clock at night. It was about 9 o'clock in the morning, New York time. I said, I've got this big idea for you. He said, well, who are you again? I said, it's Dominic Barton. He said, well, what's your idea? And I said, I think we should merge these three countries. And it was in silence. And then he said, could you tell me that again? Because it's a little early in the morning here. I said, what's about merging? He goes, Dominic, that's your name. I was thinking about giving a friend of mine a name at that point. He said, if you're excited by the idea, I'd suggest that you leave the firm and pursue it. And then he hung up. I was like, oh my god, this is... What about ideas? In Australia, it was another time when I thought I was being demoted or wasn't doing very well. I worked for a guy named John Prescott, who was the new CEO of BHP. And he'd gone from running a $100 million shipping company to running a $25 billion business, literally overnight. And the problem is he was running a $25 billion company like he ran the $100 million. And so things were going crazy. His daughter wasn't speaking to him anymore. People were getting ticked off because he wanted to sign off every letter. And this is before email. I'm afraid to say how old I am. So I saw all his mail. And it was just me. I worked basically with his secretary for three months. And I learned so much about what a CEO's job is like. Because I saw everything, absolutely everything he did. And at the time, I thought, boy, I didn't have a team. I was a project manager. You're supposed to have a team. I didn't have a team. I was working with the executive assistant, not the CEO. He wasn't there that very much. I didn't meet with him. But I learned so much about leadership from watching John, who's still a close friend to this day, work through this. Learn leadership himself. Learn leadership, because you see it. You see the stuff that's coming in and the issues. Anyhow, so when you move, that happens. If you think back to your first 10 years at McKinsey, help us understand one of the toughest moments for you. The toughest moments were obviously failure. It's probably in the topology or something. But many people that are joining McKinsey, and I'd argue any people getting into the school here, you've obviously done well or you wouldn't be here. You've done well through life. And so to be told at times that you're not actually doing that well can be a bit of a shock to the system in where you are. And so I'd say one of the things that I found tough about the periods is when you do have setbacks. And sometimes what you learn too is life's not fair. But that's normal. CEOs have to deal with that. Leaders have to deal with it. But that's easier said than done. And that's something I found. One of the setbacks that you've been public about is that it took you three tries to be elected partner. Can you share a little bit about what went through your mind? Yeah, I mean, normally after somewhere between five to seven years, the people you work with, other partners, it's very much a global partnership. So people have to be elected globally. So wherever you're working, whether it may be infrastructure practice or a region or a function, will say, we think Dominic's ready. And the first time I went forward, the feedback came back from the committee that's just, we think you've got a lot of intrinsic capability, but there's a lot of things that you need to show that you haven't shown. We're not sure about the depth of your client relationships. We don't think you're very straight at it. You kind of go around, you're a conflict avoider. You don't kind of go straight. You got to be tough. You got to go at it. So what was meant to be kind of, we'll do a look for you and then it probably wouldn't happen, but it would happen six months later, became we better wait 18 months. So the delays that came back saying, well, you got to rework on some things. And then, but everyone was sort of keen. The second time was more embarrassing in a sense because it was quite public in a sense. People knew I'd been around. I'd been a senior engagement manager for quite some time at that point. And I came back and that was a, the message that came back there was, we've looked at you and we're just not actually sure you do have the intrinsics. We don't think you're a good problem solver, which is kind of like telling someone in the church that you're an evil bastard type of thing. You know, it's just, it's not a very nice thing to have set right. And so, and that time it actually got personal because my father-in-law at the time sort of came to me, I respect deeply sort of said, I'm not sure business may not be your thing, right? Like maybe you should just face up to it. You've been told twice. I mean, you sure? And my wife basically went to see the office manager without telling me and had a breakfast and said, listen, Dom, you're going to realize is a stubborn son of a bitch. He won't take no. So just tell me and I'll sort him. So just, but you got to tell me because we can't really put up with this. And then the third time it happened, but I think I had a lot of, let me say splinters in my back as I went over the bar. I think I sort of scraped over, but you just, so it was not a, the part, and there's another very close friend of mine, Steve Bear, who joined me after I joined, but I remember I was, he wanted me to sort of celebrate his election when I hadn't been elected. And again, it's a minor thing, but when you're that close and people, I could tell when they're looking, we're going, well, this is kind of awkward. Isn't that disguised? And it was, but then you realize that that's a lot, things don't work in straight lines and you work through it. I'm a little more comfortable in retrospect than I was going through it. And what happened in that period was I decided after that time, I'm not going to, I got quite stressed because you do, I, you know, normally when I tried things that had worked out, this one wasn't working. I was working hard to try and make it work. And I finally realized, you know what? I'm going to set my own bar and I'm going to make it higher than McKinsey. I don't care. I'm going to do what I think and decide. And that was more, I realized I have to have my own, I keep, why am I keep trying to jump through hoops with other people, say, I'm going to decide what I want to do. And if it works, it's great. If it doesn't, I'm going to go somewhere else. And that was a bit of a breakthrough point because in my life, I'd been very much, I wouldn't say a box ticker and hoop jumper, but I did kind of get focused on what, how do you get an A? And I don't think that's, you know, probably more information than you wanted, but that's. If we were to fast forward to 2009, you were elected managing director globally of McKinsey. We don't have a CEO. We have, we have a managing director. Almost immediately you were thrown into the galleon scandal. So that involved Rajat Gupta, someone who sat in your chair prior, was a member of Goldman Sachs board. Help us understand what was going through your mind at the time, what was going through the firm's mind and what was your leadership lesson during those formative hours? It was a pretty 2009. I remember, I think with Vic, we were just all coming into our roles at a new team. And it was probably July 1 of that year I took on the role. And it was actually a very tough time, as you know, in the economy. So, you know, we get affected too when the economy's not going well. The idea that consulting does well when things are right or really good or really bad. There is some linkage to how, how the, so we also were having to take our own medicine on that front, which is something that I'm not known for. We had to do it. And that was with the team, Vic, a guy named Tom Barkan and others. We were doing this. And then it was October that this occurred. And all I can tell you, it was the biggest shock. You just can't imagine. It was actually before Rajat happened, we had another person, just to be with Neil Kumar, who was the first person, again, a senior person. It would be one thing if it was a new or junior person. These were 25 year plus people that had an insider trading, right? That, you know, we were, McKinsey & Company is about trust, right? At the end of the day, if people don't trust us, we can't work. And so I can't think of a more challenge. So that was a very big deal issue. And I remember, Vic, you remember when we first heard that, for example, when Neil got arrested, I didn't know, we didn't know what it was for, whether it was for terrorism or for insider. We just couldn't figure out which it was. And then it sort of came out this way. And that just put us into, you know, shock. And I would say that our alumni were the most angry at first. They were really angry. I mean, just like, what the hell is going on here? What are the values? This is our... And it taught me a number of things. I won't bore you through all the detail. And also with Roger, you know, I think one is when, is you better, you know, you have to expect the unexpected, as everyone says. But I think the other part is you just have to be completely, don't hide anything. Just be completely open. And I, that's what I, so I'd had advice, you know, you better don't say very much. We wait till you find out. My view is, I'm just going to say what I feel, how it, because it's honest, if you know what I mean. And I've never gone through this before. And if you're honest and authentic without trying to be authentic, you'll just be, people pick it up and then know that you're serious about it. And so I actually communicated much more about it whenever I had a chance to, than tried to hide it. So I remember doing recruiting. A couple of things I remember. I'll never, that, so that was October when Anil was, I said I was living in London and I just moved to London and we had a, it was the first meeting I was going to go to at number 10 Downing Street. Gordon Brown was the prime minister. And I'll never forget, it was another breakthrough point. I was waiting, you go through a gate to get into the place where number 10 is and it was raining. And, you know, it's managing director, not CEO. Ian Davison, it isn't kind of a transition where Ian would introduce me to someone. You're just all, all of a sudden, you're it. So I didn't know the place that well. I was going in and all over the financial times, all over the newspaper, McKinsey & Company, you know, Insider Trade, it was just everywhere. And I remember standing there in the rain going, should I go in? You know, like, because this is probably not the best time. I shouldn't, I was sitting there just going, I think I'll just go back home and have a hot chocolate. I just didn't, and I remember I said, you know, goddammit, I'm going in. I just, I went in and people were very warm in that, you know, clients, they were very, they were, I said, because they said, you know, some of them really were going, how's your day been? I said, well, I've had a pretty tough day, actually. And then people would tell me about things they'd gone through and they were advising me. But so I think part of it is you just have to, you know, these things, volatility occurs. You've got to be very open. I think the other thing is you better spend time understanding of what really happened. And that's what we've spent a lot of time doing. I think the other thing we realize is McKinsey & Company is a human firm. We have human beings. We have people that do bad things. And what we got to do is make sure we help each other, try not to do that. We get, we enforce it with each other. I also learned a lot about trust and verify. We have a very values-based, we put in now systems so that we can, you know, expense systems that we look at to check if someone's gone, if someone's more than two standard deviations off with a peer group, they get audited. It's just automatic things to check because we did a lot of closed file reviews. So it was learning a lot too about the, if you will, the human condition and what happens to people. Unquestionably a crucible moment. You also had, you stated quite publicly when you became managing director that you wanted to meet two global leaders every day that you were at work. So a public sector, global leader, a private sector, global leader, a social sector, global leader. It's now been six years. Yeah. Have you been able to live up to that ambition? And what did you learn from that? It's a habit. I mean, one, as you said before, I'm a sort of student of leadership. So I like to, it's an amazing opportunity in this role. I said I could be a monkey with a webcam. It doesn't, it's not about me. It's about, but you get to meet incredible people. You know, I joined McKinsey, as I said at the very beginning, to do external. I was interested in the work and having an impact, making it all that stuff. That's what drives me. I didn't want to be doing internal work. I always say to our guys, do you want to, do you want to be the treasurer of the ski club or do you want to ski? I actually like skiing, you know, and so as part of the rule was, I wasn't too global. It was two CEOs or government leaders a day. And that means, by the way, if I can't meet them physically, I phone them, right? If I, and so I've done that every day for the last six years. And you learn, it's a, you learn so much. I ask a lot of questions. You know, what are the top three things you worry about? What do you wish you learned now about leadership that you wished you'd had at the beginning of your career? Who do you admire? You know what I mean? Are there some consistent themes that cut across? Lots, yeah. But very consistent across regions, across industries, across functions, if you will. You know, one of the biggest for CEOs, if I ask them, you know, what do they wish they'd known earlier? Would they, or would they wish they'd done earlier? Always. I've never, I've not heard a single leader not say this. Those that are toward the end of the career, they would have moved faster on people. They would have taken people out faster. They would have moved people up faster. They would have spent more time on people. People is a big one. The other one that's interesting is ambition. They would have been more ambitious for their organization. And I, I realized that too, because it takes, it actually takes you a couple of years to get used to being in the role. Because when you're in it, people are, you don't really have legitimacy, in my view. And I think that's even for CEOs, particularly I'd say for CEOs that are just appointed. and so you're always, you know, if I think about it, there were people when I was taking on the role that were on that partner election committee that didn't elect me for probably very good reason. Probably going, I wonder how this is going to turn out. You know, because it's a, and you have to, it takes a while. But if you don't get moving, your time's up. And so being ambitious for your organization, dealing with people, communicating. Another one is, another theme I've heard is compartmentalization, which is, you know, you get so many issues coming at you, and some of them are, can paralyze you. And one of them I remember was from a Liberty Mutual insurance company. And the CEO there told me, he said, you know, if I did it over again, I didn't know how to compartmentalize. And he goes, in my first three weeks of my job, I would have kicked you out of my office if I was seeing you. And I said, that's good feedback to have to come in. And he said, it's nothing to do with you. I'd been told by my general counsel we're being sued for six billion dollars. And he goes, everything I saw was six, was that plate sort of going six billion. I couldn't, you know, water six billion dollars to quote six billion. He goes, now I'm talking to you. And he goes, I have six of those, like plates, but I'm focused on you. So the ability to be able to, I've got a big issue in a park, it'll work, but I'm going to focus. That's a skill that you need to, it's a skill you need to learn in leadership. You don't learn from books, right? You learn from experiences. So those are some of the things. Who have you drawn inspiration from? A lot. So many people. I have mentors. I'm a huge, you know, I probably have 30 mentors. Half of them are McKinsey people, half of them are clients. But then there's leaders you meet. I mean, you know, Alex Gorski, who's at J&J. I don't pretend I know him really well, but I look at how he, I look at how open he is to ideas and to challenge. But he has a view about where he's doing, you know, where he's going, the size of the scale of what he's doing. Herman Gref at SpareBank in Russia has a view about business, but also society. You know, I've seen him with President Putin telling him what he thinks should happen and not happen and so forth, taking risks. Lubna Olyan, who's a, you guys probably not have heard of her, but she's a Saudi woman who's part of a family that's running one of the largest investment firms in the world, probably about $35 billion. Incredibly courageous, tough. Warm, but you see her in different situations. So there's a lot of these leaders that you don't hear, there aren't written a lot about, but you get a lot of, you watch and you learn or you try to. As we finish this section of the discussion, can you articulate how the firm has changed over your six years and where you want to take it over the next three years? I mean, I've had learning from these CEOs, if you will, about being, wanting to be ambitious early on. I put forward several themes that I'm still keen on. One was relevance because I would like McKinsey to be a preeminent firm. I don't mean that in an arrogant way, but I think we should be, there's many preeminent institutions, but we're hiring extraordinarily good talent that we therefore, that talent deserves that we're working on the most important issues globally and locally. So relevance was a big theme and I'll come back to that in a second. Innovation or modernization was another one. I mean, I think we're very good at telling our clients what they should do and here's the medicine you should take. We don't like taking it ourselves. So, you know, we don't, you should change, we don't need to change. You know, it's kind of a, but we need to innovate how we do our client service, which we've done a lot of. We talk a lot about that and then on our people side of it too. One of the things I'm, there's two measures I look at, I obsess about if it is, one is the offer accept rate. If we make an offer to someone, what percent accept? We're at about 86%, which is about a 20 year high. So please, if we make you an offer, please join us. But I care because that's a signal. It's 90% here. Okay, let's say, yeah. And then the other number I look at is what do people do when they leave McKinsey? And we have about 438 people of our alumni today that are running billion dollar plus companies. You can add up the next 10 organizations in the New G and they don't, it doesn't add up. So sometimes I say, I'm the oldest one around here. I'd say the really good guys go, or good women go. I'm still here. But that, but I really, it's very important that we're developing leaders, right? That we, and that same was in government roles. We have about 50 in cabinet roles. So those are areas and we have to keep doing our people model the same way we've done it for the last 10 years. We have to change it. So it's relevance, modernization. And then it's really our partnership because we're now a 1600 person partnership. This gets to values. It gets to, you mentioned something that's very important to me up front. You know, I'm, I'm not a CEO. I'm a, it's a managing partner because we have 1600 people who believe they're the CEOs, which is one hand, it's a pain in the ass because it's hard to get things. You can't, you don't tell people what to do. If you do, you're, you'll be in serious trouble. But it creates, it's an incredible leadership bench because then you've got people out there deciding what they want to do, what type of clients they want to serve, what type of practice they want to build, how we hire people. It gives you incredible strength that way. But we have to work it because if we don't work on that, how partners work together, what makes us feel good about being in one place, our values, those are the three areas. And so I'd say we've been on the reach and relevance. It's, our view is in our 108 locations, for example, my view is if we don't know the 50 people that matter, that doesn't just mean business people, it's government academics, media analysts. And by knowing people, it doesn't mean, hi, how are you? It's that one of those 50 people has a McKinsey person's number on speed dial. That's a relationship, in my view. That's kind of the, so we've got to be relevant. That means we're doing things in society. We don't just do work, we help, we play a broader role. That's been a big push. And I think we're making some progress. I mean, people, you'll have to decide on how far we are. Innovation has been a very big one. We've just been hammering on the innovation side. And not because we need to, because, but I think we, I think I've learned and from enough through seeing other companies and organizations go through that, if you don't challenge yourself, you, you will get challenged in a big way. So we are just hammering the innovation, fees at risk, providing software for clients, dedicating people to organizations to do turnarounds. There's a range of different things. And we've, we're investing in technology companies. We're building technology companies. We're partnering with people we never would have partnered before. So those are, that's an area we just have to hammer. That's about 12% of our fee activity now. I'd like it to be 40. And I think we're on a track to do that in the next three years. So those are areas. Final question for you. So we have students in this room that are anywhere from 18 to probably 35. And they're thinking about their careers. If you were to offer your advice from your position, what is the advice that you would give to the folks sitting here? Well, this probably sounds too motherhood and apple pie, but you know, one of the things I would say is a bit like with the CEOs is I'd be very ambitious. I don't mean that in a sharp elbowed way about it's about me or, you know, but be ambitious about what you want to do. If I think back on my time, I was quite insecure, not because of anything that McKinsey did, or by the way, any firm did. It was just, you're nervous about, are my ideas legitimate? Do I have to wait a little while longer? Part of the reason I want to join McKinsey, I didn't want to wait until I was this old to make decisions. I wanted to get moving early. But I would be, I would be quite ambitious about what you want to achieve. You know, how do you want to distort the earth, hopefully in a positive way? Really think about that. It's like an egg, polish that egg, but don't make a big deal about it and say I want to be this or that, but work it. So I think being ambitious is very important. I think the second one, and this is again where I get to, is take risk. And that's easy for me to say, you know, but take risk. And I'll just, I'll shut up on this one, but the one, we did some work looking at McKinsey people and we looked at cohorts of McKinsey people over a 40 year period. People joined, we looked at what they did over that time frame and there were a more fulfilled group, or you could say successful group, than less successful. It doesn't mean anything's wrong, it was just they were more successful. And we looked at that and we looked at all sorts of variables. What school did they go to? What was actually their parents educated? We went into, we did so much analysis, it wasn't funny. What sort of studies did they do? The one single differentiating factor, the one in all of that, was the more fulfilled people had more bad luck than the less fulfilled, which kind of sounds counterintuitive, right? How could that be the case? It did more successfully, more bad. They took more, they had more at-bats, they tried things. And the important thing is you've got to pick yourself back up. You have to be resilient, that's part of life. But many people are afraid, even in the case where you sort of, I would have this about moving to a different country to go, if you do that, it's going to delay your career. You're not sure what's going to happen. We do all sorts of crazy stuff to each other, right? And I often find sometimes it's your friends that are the most conservative. Will you be careful? What do you do that? That might not happen. And I think it's, so take risk and talk to people about the risk you're taking to get views on it, but then go for it. And if you're not pushing yourself, so it's a little bit, you're just like, then I don't think you're fulfilling your potential. Because you would not be here if you don't have massive potential. And so those are two things I'd say.