One of life’s bleaker pleasures is watching the efforts of the management consultant, McKinsey, as it continues to try to ingratiate itself with the Beijing regime and yet, as a rent-seeker doing business in the West, offers its services as a guide toward allegedly enlightened management.
And so, (via China Daily from March 25):
“The next China is China.” This statement from Joe Ngai, chairman of McKinsey China, has sparked a heated discussion in the business community about global growth trends and China’s economic prospects.
In a recent interview with China Daily, Ngai said: “If you want to look for the next China, if you want to look for growth, growth is right here. It is in China.”
According to a projection by the McKinsey Global Institute, if China’s GDP annual growth rate maintains at 2 percent in the next decade, the cumulative growth total will be equivalent to India’s current GDP. If China’s GDP annual growth rate can reach 5 percent, the cumulative growth in total will be approximately equal to the current GDP of India, Japan and Indonesia combined.
“Where do we get the confidence? We have the confidence because the macro (fundamentals) have not changed. Why do we invest in China? We invest in China because there’s a growing middle class, there’s a transition towards services, even consumption is going towards more quality consumption as we have seen,” Ngai said.
“I do think that in the next ten years, if you are a global CEO looking at the world and thinking about where to find growth, you cannot ignore China,” he added.
The China head of the global consulting firm said that the most important factor for the Chinese economy is confidence.
How’s that working out, I wonder.
Li Yuan, writing in the New York Times (August 21):
When their government abruptly ended its harsh Covid measures in December, many Chinese expected a robust rebound from pent-up demand. Eight months later, China is instead facing an accumulation of bad news: record youth unemployment, a deep housing slump, stagnant spending, even deflation.
That’s a shock to many Chinese who are used to an economy that kept on expanding and living standards that rose with it. Now they’re contending with slowing businesses and shrinking personal fortunes.
I talked to over a dozen business owners and consumers, as I have been doing for years, and I can report: Their confidence in the future of the economy and the country is at a nadir. If they had hoped for a rebound, that hope has been extinguished. They worry that it’s the beginning of something they don’t dare to imagine and fear that the government doesn’t have solutions. The bad news just keeps coming.
Oh well.
Oh yes, via the Financial Times (July 23):
Management consultancy Bain is telling new China hires to wait until as late as 2025 to start their jobs, while roughly half of McKinsey staff do not have paid client projects to work on. Boston Consulting Group’s China team has been holding strategy sessions on how to revive its flagging business, according to half a dozen people close to the firms. . . .
McKinsey is also struggling to land new projects, with many staff working on proposals or other work that cannot be billed to clients, three people close to the firm said. “Being at McKinsey China feels like being on a sinking ship,” said one junior consultant. McKinsey told the Financial Times it had a “solid client and recruiting pipeline” in China.
Okay.
Meanwhile, some distance away from its work in a country run by a genocidal dictatorship, McKinsey continues to push supposedly socially responsible ESG, a possibly safer source of revenue.
In an article for its Mind the Gap (“curated reads for Gen Z—and their Z-curious colleagues”), the authors, two McKinsey partners, give advice on how to avoid losing out to “climate quitters.”
In the same way that eco-conscious Gen Z consumers make purchases based on a brand’s environmental, social, and governance (ESG) claims, some Gen Zers may also make employment decisions based on their personal sustainability beliefs.
Adding to the labor lexicon, “climate quitters” are those employees who leave their jobs or turn down job offers because they feel that an employer fails to meet their ESG expectations. . . .
To keep eco-minded Gen Z employees engaged, employers could consider ESG policies that signal their commitment, both internally and externally. One example could be to tie ESG outcomes to executive pay.
That, of course, would be a hook designed to interest the managers who would be reading this material.
This article in the Financial Times (which I also cited in last week’s Capital Letter and will doubtless quote from again) explains why:
A growing number of blue-chip US companies are using environmental and social factors to decide bonuses for top executives, but investors are worried the metrics are being gamed to increase payouts.
Three-quarters of S&P 500 companies have disclosed that environmental, social and governance metrics contributed to executives’ pay, up from two-thirds of companies in 2021, according to data from The Conference Board and Esgauge, an ESG data analytics firm…
“We are sceptical of ESG metrics being used in compensation,” said Ben Colton, head of stewardship at State Street Global Advisors, which manages $3.79tn. “Oftentimes they are very subjective, fluffy and easily gamed.”
To be sure, there are investors who disagree, but this rings true:
Unlike financial metrics tied to earnings or share price performance, it is almost impossible for outsiders to tell if ESG pay metrics are worthwhile “or merely line CEOs’ pockets with performance-insensitive pay”, two Harvard researchers said in a January 2023 paper.
Spoiler: They are not worthwhile.
Other suggestions from McKinsey:
[R]egularly sharing reports on how successful a business is with meeting its ESG goals, offering employees resources that help them to be more eco-friendly, or making physical workspaces more sustainable. (Meatless Mondays, anyone?)
As for the last of those suggestions, no, just no, unless, that is, an employer wants to come across as insufferably preachy as well as grotesquely intrusive.