McKinsey & Company has a decentralized organizational structure with mostly self-managing offices, committees, and employees. There are also functional groups and geographic divisions with proprietary names.
Department
Type of Structure
Structure Details
Advantages
Drawbacks
Corporate Leadership
Hierarchy
McKinsey & Company’s corporate leadership operates within a hierarchical structure. It includes the Global Managing Partner, senior executives, and various global functional departments such as strategy and corporate communications.
– Clear lines of authority and accountability. – Efficient decision-making process. – Well-defined roles and responsibilities.
Potential slow decision-making due to multiple levels of approval. Limited flexibility in responding to rapid changes in the consulting industry.
Practice Areas
Functional Structure
McKinsey organizes its consultants into practice areas or industry groups, such as healthcare, technology, or finance. These practice areas follow a functional structure, with specialized teams focusing on specific industries or sectors.
– Specialized expertise in various industries and sectors. – Efficient management of client projects within practice areas.
Potential challenges in cross-functional collaboration between practice areas for multidisciplinary projects.
Functional Practices
Functional Structure
McKinsey also has functional practices that follow a functional structure. These include areas such as operations, organization, and marketing. Consultants within these practices specialize in specific functional areas across various industries.
– Specialized expertise in functional areas across industries. – Efficient management of projects requiring specific functional expertise.
Potential challenges in cross-functional collaboration between industry practice areas and functional practices.
Geography-Based Units
Divisional Structure
McKinsey divides its operations into geographic regions, such as North America, Europe, and Asia. Each region has its own leadership team responsible for client service and business development within that region.
– Tailored approach to different markets and regions. – Quick adaptation to local market conditions. – Specialization in serving clients within specific geographic areas.
Coordination challenges between regional units. May result in variations in client service approaches across regions.
Research and Knowledge
Functional Structure
McKinsey’s research and knowledge functions follow a functional structure. Research teams gather insights and knowledge across industries and sectors, which consultants use to inform client projects.
– Specialized expertise in industry research and knowledge gathering. – Efficient knowledge management and dissemination within the organization.
Potential challenges in aligning research efforts with the specific needs of client projects.
Human Resources
Functional Structure
The Human Resources function at McKinsey operates with a functional structure, focusing on HR-related functions such as talent acquisition, training, and employee relations. HR teams handle HR matters across the organization.
– Efficient management of human resources and talent-related activities. – Specialized expertise in HR functions.
Potential challenges in cross-functional collaboration with consulting practice areas and industry groups. May not align with specific industry or practice divisions.
Founded in 1926, McKinsey & Company is the oldest and largest of the so-called “Big Three” management consultancies. The company was initially started as a partnership before a restructuring saw it become a private corporation in 1956.
Today, McKinsey still mimics aspects of a partnership with employees referred to as partners and assigned a mentor.
The company also has a flat hierarchy, with the Managing Director (or Managing Partner) elected by a vote of senior directors and able to serve a maximum of three, three-year stints.
With the exception of company budgeting, McKinsey is a decentralized company. It is overseen by multiple committees and offices with each having its own area of responsibility.
What’s more, consultants are afforded a reasonable degree of autonomy.
While the company has offices in more than 130 cities and 65 countries, it does not have a true headquarters. Instead, a pseudo headquarters is usually maintained in the home office of the present Managing Partner.
In the sections that follow, we’ll unpack McKinsey’s structure in more detail.
Shareholders Council
McKinsey’s Shareholders Council is simply its board of directors who establish the company’s policies and strategic direction.
The council is comprised of the Managing Partner and 30 senior partners around the world who are elected by their peers.
Some of these key personnel include:
Bob Sternfels – Global Managing Partner.
Gassan Al-Kibsi – Senior Partner, Middle East.
Pooneh Baghai – Senior Partner, Toronto.
Laura Corb – Senior Partner, New York.
Andrew Grant – Senior Partner, Auckland.
Acceleration Team
According to McKinsey, the Acceleration Team “is a global leadership body that accelerates the delivery of our client service and people mission.”
To support the company’s overall health and performance, the team also connects leaders from different regions and key capabilities.
The 21-member team, which includes Global Managing Partner Bob Sternfels, each heads what other companies would call functional groups. These include:
Innovation and Technology.
Diversity, Equity, and Inclusion.
Legal.
People, and
Finance.
Office Membership
A team of senior partners manages the company’s global offices under the following six geographic divisions:
Asia (ex-China).
Greater China.
Eastern Europe, Middle East & Africa.
Europe.
Latin America, and
North America.
Practice Leadership
McKinsey’s practices are in place to assist clients with various endeavors such as sustainability, organizational performance, and transformation. Some practices have one leader, while others have multiple leaders. Some of the leader’s responsibilities include developing the company’s people and delivering client impact.
Practices are segmented into two categories:
Capabilities – such as Digital, Growth, Marketing & Sales, Operations, Risk & Resilience, and Strategy & Corporate Finance.
Industries – such as Advanced Industries, Consumer, Financial Services, Energy & Materials, Insurance, and Life Sciences.
Comparison with Top Related Companies
Boston Consulting Group (BCG): BCG also employs a matrix organizational structure, but with a stronger emphasis on practice areas (e.g., Healthcare, Energy) and functional capabilities (e.g., Data & Analytics). While both firms encourage a degree of office autonomy, BCG tends to have more centralized strategies for development and deployment of its consulting frameworks than McKinsey’s approach, which is highly decentralized.
Bain & Company: Bain uses a more centralized functional structure compared to McKinsey, focusing intensely on delivering a consistent consulting approach across its global offices. Bain’s approach fosters uniformity and tightly integrated operations, whereas McKinsey’s decentralized model allows for greater local customization and flexibility.
Deloitte: As one of the “Big Four” accounting firms, Deloitte incorporates a broader service offering, including audit, financial advisory, tax, and consulting. Deloitte’s structure is highly divisional, with clear separations between services. This is in contrast to McKinsey’s structure, which is less segmented and allows for more fluid movement between different consulting practices and geographic areas.
Similarities and Differences
Similarities: All these firms utilize a form of matrix structure that enables them to operate globally while maintaining expertise in specific industries or functions. They prioritize high levels of expertise and adaptability to client needs.
Differences: McKinsey’s decentralized structure allows greater autonomy at the office level, potentially leading to more tailored solutions for clients. In contrast, firms like Bain and BCG have slightly more centralized approaches, which may contribute to consistency but could limit local office flexibility. Deloitte’s structure, while also global, supports a wider range of professional services beyond management consulting.
Implications
Adaptability and Client Service: McKinsey’s structure supports exceptional adaptability and customization in client service, which can be particularly advantageous in complex, multi-national projects. However, this might come at the cost of consistency in the approach and methodology used across different offices.
Innovation and Collaboration: The decentralized nature of McKinsey’s structure fosters innovation and allows its consultants to develop solutions that are highly specific to each market or client. This setup encourages collaboration across different functional and geographic divisions but requires robust communication channels to ensure alignment with the firm’s overall strategy.
Talent Development and Retention: McKinsey’s approach to decentralization can be highly appealing to potential hires, offering diverse opportunities within the firm. It allows employees to navigate through various industries and functions, fostering a broad development path, which is a key factor in talent retention and satisfaction.
Key takeaways:
McKinsey & Company has a decentralized organizational structure with mostly self-managing offices, committees, and employees. There are also functional groups and geographic divisions under proprietary names.
McKinsey has a 30-member Shareholders Council with current Managing Partner Bob Sternfels at the helm. The 21-member Acceleration Team heads what other companies would call functional groups.
Various partners are involved in the management of the company’s global presence with operations divided into six key regions. Other partners are involved in the Practice Leadership team and are responsible for delivering client impact and developing the company’s people.
Key Highlights:
Decentralized Structure: McKinsey & Company operates with a decentralized organizational structure, characterized by self-managing offices, committees, and employees. Consultants within the company enjoy a reasonable degree of autonomy.
Shareholders Council: McKinsey’s board of directors is known as the Shareholders Council. It includes the Managing Partner and 30 senior partners from around the world, elected by their peers. This council establishes company policies and strategic direction.
Acceleration Team: The Acceleration Team is a global leadership body that supports the company’s client service and people mission. It connects leaders across regions and capabilities. The team’s members head functional groups in areas like innovation, diversity, equity, legal, people, and finance.
Office Membership: Senior partners manage McKinsey’s global offices, which are organized into six geographic divisions: Asia (ex-China), Greater China, Eastern Europe, Middle East & Africa, Europe, Latin America, and North America.
Practice Leadership: McKinsey’s practices assist clients in areas like sustainability, organizational performance, and transformation. They are led by partners responsible for developing the company’s people and delivering client impact. Practices are divided into capabilities (Digital, Growth, Marketing & Sales, etc.) and industries (Advanced Industries, Consumer, Financial Services, etc.).
In a functional organizational structure, groups and teams are organized based on function. Therefore, this organization follows a top-down structure, where most decision flows from top management to bottom. Thus, the bottom of the organization mostly follows the strategy detailed by the top of the organization.
In a flat organizational structure, there is little to no middle management between employees and executives. Therefore it reduces the space between employees and executives to enable an effective communication flow within the organization, thus being faster and leaner.
Project portfolio management (PPM) is a systematic approach to selecting and managing a collection of projects aligned with organizational objectives. That is a business process of managing multiple projects which can be identified, prioritized, and managed within the organization. PPM helps organizations optimize their investments by allocating resources efficiently across all initiatives.
Harvard Business School professor Dr. John Kotter has been a thought-leader on organizational change, and he developed Kotter’s 8-step change model, which helps business managers deal with organizational change. Kotter created the 8-step model to drive organizational transformation.
The Nadler-Tushman Congruence Model was created by David Nadler and Michael Tushman at Columbia University. The Nadler-Tushman Congruence Model is a diagnostic tool that identifies problem areas within a company. In the context of business, congruence occurs when the goals of different people or interest groups coincide.
McKinsey’s Seven Degrees of Freedom for Growth is a strategy tool. Developed by partners at McKinsey and Company, the tool helps businesses understand which opportunities will contribute to expansion, and therefore it helps to prioritize those initiatives.
Mintzberg’s 5Ps of Strategy is a strategy development model that examines five different perspectives (plan, ploy, pattern, position, perspective) to develop a successful business strategy. A sixth perspective has been developed over the years, called Practice, which was created to help businesses execute their strategies.
The COSO framework is a means of designing, implementing, and evaluating control within an organization. The COSO framework’s five components are control environment, risk assessment, control activities, information and communication, and monitoring activities. As a fraud risk management tool, businesses can design, implement, and evaluate internal control procedures.
The TOWS Matrix is an acronym for Threats, Opportunities, Weaknesses, and Strengths. The matrix is a variation on the SWOT Analysis, and it seeks to address criticisms of the SWOT Analysis regarding its inability to show relationships between the various categories.
Lewin’s change management model helps businesses manage the uncertainty and resistance associated with change. Kurt Lewin, one of the first academics to focus his research on group dynamics, developed a three-stage model. He proposed that the behavior of individuals happened as a function of group behavior.
OpenAI is an artificial intelligence research laboratory that transitioned into a for-profit organization in 2019. The corporate structure is organized around two entities: OpenAI, Inc., which is a single-member Delaware LLC controlled by OpenAI non-profit, And OpenAI LP, which is a capped, for-profit organization. The OpenAI LP is governed by the board of OpenAI, Inc (the foundation), which acts as a General Partner. At the same time, Limited Partners comprise employees of the LP, some of the board members, and other investors like Reid Hoffman’s charitable foundation, Khosla Ventures, and Microsoft, the leading investor in the LP.
Airbnb follows a holacracy model, or a sort of flat organizational structure, where teams are organized for projects, to move quickly and iterate fast, thus keeping a lean and flexible approach. Airbnb also moved to a hybrid model where employees can work from anywhere and meet on a quarterly basis to plan ahead, and connect to each other.
The Amazon organizational structure is predominantly hierarchical with elements of function-based structure and geographic divisions. While Amazon started as a lean, flat organization in its early years, it transitioned into a hierarchical organization with its jobs and functions clearly defined as it scaled.
The Coca-Cola Company has a somewhat complex matrix organizational structure with geographic divisions, product divisions, business-type units, and functional groups.
Costco has a matrix organizational structure, which can simply be defined as any structure that combines two or more different types. In this case, a predominant functional structure exists with a more secondary divisional structure.
Costco’s geographic divisions reflect its strong presence in the United States combined with its expanding global presence. There are six divisions in the country alone to reflect its standing as the source of most company revenue.
Compared to competitor Walmart, for example, Costco takes more a decentralized approach to management, decision-making, and autonomy. This allows the company’s stores and divisions to more flexibly respond to local market conditions.
Dell has a functional organizational structure with some degree of decentralization. This means functional departments share information, contribute ideas to the success of the organization and have some degree of decision-making power.
eBay was until recently a multi-divisional (M-form) organization with semi-autonomous units grouped according to the services they provided. Today, eBay has a single division called Marketplace, which includes eBay and its international iterations.
Facebook is characterized by a multi-faceted matrix organizational structure. The company utilizes a flat organizational structure in combination with corporate function-based teams and product-based or geographic divisions. The flat organization structure is organized around the leadership of Mark Zuckerberg, and the key executives around him. On the other hand, the function-based teams are based on the main corporate functions (like HR, product management, investor relations, and so on).
Goldman Sachs has a hierarchical structure with a clear chain of command and defined career advancement process. The structure is also underpinned by business-type divisions and function-based groups.
Google (Alphabet) has a cross-functional (team-based) organizational structure known as a matrix structure with some degree of flatness. Over the years, as the company scaled and it became a tech giant, its organizational structure is morphing more into a centralized organization.
IBM has an organizational structure characterized by product-based divisions, enabling its strategy to develop innovative and competitive products in multiple markets. IBM is also characterized by function-based segments that support product development and innovation for each product-based division, which include Global Markets, Integrated Supply Chain, Research, Development, and Intellectual Property.
McDonald’s has a divisional organizational structure where each division – based on geographical location – is assigned operational responsibilities and strategic objectives. The main geographical divisions are the US, internationally operated markets, and international developmental licensed markets. And on the other hand, the hierarchical leadership structure is organized around regional and functional divisions.
McKinsey & Company has a decentralized organizational structure with mostly self-managing offices, committees, and employees. There are also functional groups and geographic divisions with proprietary names.
Microsoft has a product-type divisional organizational structure based on functions and engineering groups. As the company scaled over time it also became more hierarchical, however still keeping its hybrid approach between functions, engineering groups, and management.
Nestlé has a geographical divisional structure with operations segmented into five key regions. For many years, Swiss multinational food and drink company Nestlé had a complex and decentralized matrix organizational structure where its numerous brands and subsidiaries were free to operate autonomously.
Nike has a matrix organizational structure incorporating geographic divisions. Nike’s matrix structure is also present at the regional and sub-regional levels. Managerial responsibility is segmented according to business unit (apparel, footwear, and equipment) and function (human resources, finance, marketing, sales, and operations).
Patagonia has a particular organizational structure, where its founder, Chouinard, disposed of the company’s ownership in the hands of two non-profits. The Patagonia Purpose Trust, holding 100% of the voting stocks, is in charge of defining the company’s strategic direction. And the Holdfast Collective, a non-profit, holds 100% of non-voting stocks, aiming to re-invest the brand’s dividends into environmental causes.
Samsung has a product-type divisional organizational structure where products determine how resources and business operations are categorized. The main resources around which Samsung’s corporate structure is organized are consumer electronics, IT, and device solutions. In addition, Samsung leadership functions are organized around a few career levels grades, based on experience (assistant, professional, senior professional, and principal professional).
Sony has a matrix organizational structure primarily based on function-based groups and product/business divisions. The structure also incorporates geographical divisions. In 2021, Sony announced the overhauling of its organizational structure, changing its name from Sony Corporation to Sony Group Corporation to better identify itself as the headquarters of the Sony group of companies skewing the company toward product divisions.
Starbucks follows a matrix organizational structure with a combination of vertical and horizontal structures. It is characterized by multiple, overlapping chains of command and divisions.
Tesla is characterized by a functional organizational structure with aspects of a hierarchical structure. Tesla does employ functional centers that cover all business activities, including finance, sales, marketing, technology, engineering, design, and the offices of the CEO and chairperson. Tesla’s headquarters in Austin, Texas, decide the strategic direction of the company, with international operations given little autonomy.
Toyota has a divisional organizational structure where business operations are centered around the market, product, and geographic groups. Therefore, Toyota organizes its corporate structure around global hierarchies (most strategic decisions come from Japan’s headquarter), product-based divisions (where the organization is broken down, based on each product line), and geographical divisions (according to the geographical areas under management).
Walmart has a hybrid hierarchical-functional organizational structure, otherwise referred to as a matrix structure that combines multiple approaches. On the one hand, Walmart follows a hierarchical structure, where the current CEO Doug McMillon is the only employee without a direct superior, and directives are sent from top-level management. On the other hand, the function-based structure of Walmart is used to categorize employees according to their particular skills and experience.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
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