Hyro Blog

McKinsey’s ‘Up or Out’ policy is warning some US consultants that they should be promoted within 2.5 years or risk being managed out.

A senate enquiring into consulting firms in December 2023 exposed this ‘managing out’ process, and here is what we know.

The consulting firm places tough performance plans and indicators for their consultants. If they fall short of the expectations or are not being promoted within the average timeframe, they will be placed on performance improvement plans and likely terminated if they do not improve within an average timeframe of 3 months. After the 3 month period, staff are counselled to leave.

This places immense pressure on staff who are already working in a tough environment, usually working long hours with high pressure leading to mental health issues, burnout, and even physical sickness.

McKinsey expressed that this approach ensures they maintain their high performance bar, and continue to attract and retain top talent. They also stated that they provide a number of well-being initiatives and programs to staff to support them during their rapid developments and the expectations placed on them. They are provided with ‘Mind Matters’, a one-on-one coaching and counselling program, as well as investing in other well-being programs.

What is wrong with this ‘Up or Out’ approach?

• The consulting industry is slowing down worldwide and its unlikely that this is being considered in the performance process.
• Although indicating staff have 6 – 12 months to develop their performance, on average they are only provided 3 months.
• It creates a toxic culture of fear and unhealthy competition, not to mention the increased pressure and stress placed on individuals.
• Contributes to the increase in poor psychological safety at work which plays out in peoples personal lives and other external environments.
• It creates scandals and unethical working practices – such as providing insider information to gain government contracts.
• Does not allow for diversity and inclusion.
• They may be ‘weeding out’ poor performance but its highly likely they are letting go of valuable talent. I could not find any information that people can be re-deployed elsewhere.
• The firm indicates they support development, but there seems to be limited focus on employee development.
• It literally makes people sick.

What are some perceived benefits?

• Encourages high performance, motivating employees to continuously strive for excellence.
• Creates a competitive in house workforce, helping to maintain a skilled workforce.
• Attracts strong, resilient and ambitious talent.
• Continues consultancy firms record breaking profits year on year.

But at what cost?

These jobs are clearly not for the faint hearted and it’s no wonder consultancy firms are constantly finding themselves under fire about their toxic work environment. You might think why the firms are not worried about unfair dismissal claims with such high expectations? In Australia, the unfair dismissal high income threshold is at $167,000 (as at 1 July 2023), which most consultants at McKinsey meet. Essentially, they can get away with it.

You might say that staff are being remunerated for these challenges, they get generous pay outs and so it could be considered reasonable to be treating staff this way. But what about the future consequences? We are already in a mental health crisis across Australia and how does this type of environment contribute to this health crisis, especially if attrition is quite high at these firms?

What do you think about the Up or Out policy adopted by most consulting firms across the world? Is it worth the remuneration perks?

Have a workplace or talent related question for the team at HYRO? We would LOVE to hear from you! Contact us at contact@hyroblog.com

Want to hear more from HYRO? Subscribe to our blog and follow us on LinkedIn!