Bain & Company
From Wikipedia, the free encyclopedia
Categories: Companies established in 1973 | Companies based in Boston, Massachusetts | International management consulting firms | Privately held companies of the United States | Performance consulting firms | Economics consulting firms
Bain & Company is a management consulting firm, headquartered in Boston, Massachusetts, which is recognized as one of the leading business institutions in the world. It has been named by Consulting Magazine as the Best Firm to Work For in 2003, 2004, 2005, 2006, and 2007. Its slogan is "Helping make companies more valuable." As mentioned in a Harvard Business School case study, "In addition to its exceptional growth record, Bain distinguishes itself from competitors like Boston Consulting Group and McKinsey with its notion of results-oriented consultancy."
History1970sBain & Company was established in 1973, by a group of seven former partners from the Boston Consulting Group headed by Bill Bain. Under Bill Bain’s direction, the new Boston-based firm implemented a number of unconventional practices, by traditional consulting standards, in its early years. Notably, Bain would only work with one client per industry to avoid potential conflicts of interest[1]. Partners did not carry business cards and clients were referred to only in code names, further demonstrating its reputation for enforcing client confidentiality. And the company preferred to win work by boardroom referrals rather than marketing itself, sometimes landing clients by offering several weeks of work at no cost until proving the results of their services[2]. What differentiated Bain & Company from its competitors was its focus on generating profitable results for clients through the implementation of its recommendations. The firm specialized in bringing rigorous fact-based analysis directly to CEOs, and its consultants preferred to work on increasing a company’s market value rather than simply handing clients a list of recommendations[3]. To win business, Bill Bain liked to show clients the increase in stock price of Bain clients relative to the Dow Jones industrial average[4][5]. Bain's Web site boasts that their clients "outperform the market 4 to 1." The firm’s founding was followed by a period of explosive growth in the late 1970s and early 1980s. With revenues increasing at a rate of 40 to 50 percent a year, the firm opened offices in London, Munich, San Francisco and Tokyo and firmly established a global presence in the consulting field. Another innovative consulting approach that Bain pioneered was aligning its incentives with its clients’ results and occasionally taking equity in lieu of fees. An estimated 10% of revenue is from equity or success fees. This model proved successful for both Bain and its clients. For example, the firm took an ownership stake in fruit processor Del Monte Foods while working to revamp the company’s strategy.[6] "Coming into a leveraged buyout situation is never easy," says Del Monte CEO Richard Wolford. "Knowing Bain and their desire to deliver results, they probably would have provided ongoing support regardless. But the fact they own a stake doesn't hurt." The first consultancy of its kind to establish a private equity practice, Bain & Company is well-known among the money set, offering services like due diligence, IPO preparation, portfolio profit improvement and revenue enhancement, geared toward leveraged buyout and venture capital firms. It is important to note that Bain & Company, the consultancy, should not be confused with Bain Capital, the private equity firm. The latter was founded in 1984 by four former Bain consultants including former Massachusetts governor and 2008 U.S. Presidential Candidate Mitt Romney. The two companies are completely separate entities and have no insight into each other’s activities.[7] 1980sAfter a successful start, the company found itself facing a growing list of challenges in the late 1980s. In the midst of sluggish business conditions and overstaffing, Bain also faced the dilemma of having to turn away business due to its one-client-per-industry restriction. Competition increased as other firms copied Bain’s implementation-focused strategy. However daunting these external challenges were, it was internal infighting that threatened to tear the firm apart. Bain was incorporated in 1985 and over the course of two years, the Employee Stock Ownership Plan (ESOP) was established, after which senior executives borrowed against their equity for cash, leaving the firm with a heavy load of debt[8]. As business slowed, the debt load began to squeeze the firm. 1990s to presentFacing financial duress, former Bain & Company partner and former candidate for the Republican nomination for the 2008 US presidential election, Mitt Romney was asked to rejoin the firm as interim CEO. Bringing along two lieutenants from Bain Capital, Romney began traveling to all the Bain offices to rally employees. The Boston Globe points out that “Over several weeks, Romney managed negotiations with the banks and among the partners,” and that “The moment came when negotiations produced a package in which [Bill] Bain and the founding partners would give up control of the firm, turning back $30 million they had taken from the ESOP and $100 million in notes they held against the firm.” Romney’s plan involved "a complicated restructuring of the firm’s stock-ownership plan, real-estate deals, bank loans, and money still owed to partners"[9]. To avoid the financial crisis that a buyout would have triggered, the group of founding partners agreed to return about $100M cash and forgive outstanding debt.[10]. Although in the role for just one year before returning to Bain Capital, Romney’s work had three profound impacts on the firm. First, ownership was officially shifted from the owners to the firm’s 70 general partners. Second, transparency in the firm’s finances increased dramatically (e.g., partners were able to know each other’s salaries[11].) And finally, Bill Bain relinquished ownership in the firm that carried his name. Within a year, Bain bounced back to profitability without major partner defections[12], and the groundwork was laid for a period of steady growth. In 1993 the head position was split into two roles – a Managing Director and a “non-executive” chairman of the board. Orit Gadiesh, named Bain’s first chairman in 1993, was fundamental in maintaining Bain’s culture. After spending two years in military intelligence for the Israeli army and earning a degree in psychology from Hebrew University, Gadiesh enrolled in the Harvard Business School and graduated as a Baker Scholar. As a junior partner during the turnaround she had been instrumental in keeping senior partners from leaving the firm, and as chairman she became the first female to lead one of the major consulting firms. Gadiesh was known throughout the firm for her passionate leadership and "True North" philosophy, which the firm still embraces. For the past several years, she has landed among Forbes' list of the "100 Most Powerful Women in Business" and is on the board of several organizations, including the World Economic Forum[13]. Under Gadiesh and MD Tom Tierney, Bain simultaneously loosened its restrictions around the one-client-per-industry policy, by ensuring clients that the firm's strict internal Professional Standards prohibited the circulation of client data internally, and expanded its presence worldwide throughout the 1990s. The firm grew by 25 percent per year, expanded its number of offices from 12 to 26, and increased partnership from about 70 to nearly 200[14]. The 2000s began with Bain guiding its clients through the “New Economy” of e-commerce. The collapse of the dotcom, coupled with a general slowdown in the economy as had been faced in the early 1990s. The slowdown was painful on all of the major consulting players; however, Bain’s previous experiences with contraction left the firm zealous in avoiding layoffs. The firm weathered the economic downturn and emerged from it in a position of strength by investing in its leadership ranks with internal promotions and key external hires. Subsequently, the economic recovery has been followed by another period of sustained growth. In 2007, the firm expanded its number of worldwide offices to 37, with the opening of offices in Kyiv, Moscow, Helsinki, and Frankfurt in Europe, and worldwide consulting staff increased to approximately 2,700. The new millennium also brought changes to Bain’s traditional “generalist” approach to solving clients’ business issues. The firm developed areas of specialization with its deep industry “Practice Areas” in order to better serve the varying needs of its increasingly diverse multinational and local client base. Through targeted industry hires, Bain added industry experts to each of these new Practice Areas, significantly raising its profile in fields such as Financial Services, Healthcare, IT and Media and Entertainment industries. Steve Ellis is Bain’s Worldwide Managing Director. He is responsible for overseeing the firm’s 38 offices and over 3,700 employees. He joined the firm in 1993 from a Silicon Valley strategy consulting firm he co-founded in 1989. He was formerly the Managing Director of Bain’s San Francisco and Palo Alto offices and a leader in the firm’s Global Technology, Media & Telecommunications and Private Equity Practices.[15] CompetitorsBain's major competitors include the Boston Consulting Group, McKinsey & Company and Booz Allen Hamilton. The firm also occasionally competes with specialist boutiques such as Monitor Group or diversified consulting firms such as A.T. Kearney. Bain vs. Value PartnersOn the morning of Friday, October 31, 1997, Value Partners had an office in São Paulo, Brazil with three Brazil-based partners, more than 20 other professionals, and another 14 employees in various support functions. Late in the afternoon, the head of the firm received a devastating telephone call from his three partners in São Paulo: they announced that they were leaving to join the rival company, Bain & Company, together with the entire office. A team of Value Partners’ Milan-based partners rushed to São Paulo that weekend to assess the damage. On Monday, they arrived at an office in utter disarray: no partners, no senior consultants, no secretaries, no office manager. Confidential files — including proprietary work product, client presentations and pitches, internal financial information, strategic and operational planning documents, and personnel records — were gone. For nearly five months prior to their departure, the Brazil-based partners had planned, and negotiated in secret with Bain, to defect to the rival firm and to take the entire office with them. Value Partners sought to redress its grievances in two ways: a criminal inquiry in Brazil into the activities of the three former partners, and litigation in the U.S. (asserting claims under both Brazilian and Massachusetts law) against Bain for its role in planning, and aiding and abetting, the theft of the office. After lengthy discovery complicated by (a) the international dimensions of the litigation; (b) extensive motion practice, including Bain’s unsuccessful motions to dismiss the case on forum non conveniens grounds and for summary judgment; and (c) a “trial within a trial” involving expert proof as to the claims and relief available under Brazilian law, the case went to trial in federal court in Boston. After a five-week trial, the jury found Bain liable for unfair competition and tortious interference, and awarded Value Partners $10 million in compensatory damages (the full award requested). The trial court, after awarding another $2.5 million of interest, denied all of Bain’s post-trial motions. RecruitingThe main entry points for Bain & Company are at the Associate Consultant, Consultant, and Industry Hire levels. In a Financial Times interview, Bain partner Bill Neuenfeldt identifies the desired qualities in potential hires as “intelligence, integrity, passion and the ambition to make a difference.”[16] In addition to these basic requirements, the Associate Consultant (AC) is typically a recent college graduate and is expected to have an enthusiasm for problem-solving and an analytical skill-set. No specific major is required, though a demonstrated interest in economics and business can be valuable. The AC role lasts for two years, after which outstanding ACs are invited to stay for a third year and become a Senior Associate Consultant (SAC). This third year can be spent at a Bain office abroad ("transfer"), or working for a client ("externship"). Demand is very high for the entry-level AC position, making it difficult to attain for college graduates and is high on the list of preferred jobs for many Ivy League grads. Bain also offers an internship ("Associate Consultant Intern") for undergraduates in between their junior and senior years. The Consultant role is a more senior role; most consultants join Bain with an MBA, either directly from school or from industry. In some cases, Consultants are former Bain ACs who went to business school and are returning to Bain. Unlike the AC role, the Consultant role is a longer-term career path, feeding the firm's management ranks, with Consultants eventually moving to roles of Manager and Partner. The consultant role also offers great flexibility in terms of six-month transfers and other opportunities. Also like the AC role, demand is quite high and Bain typically draws the bulk of its consultants from top-tier schools. Bain employees receive approximately 105 hours of training annually, starting all of its associate consultants off with two weeks of orientation in their local offices, followed by a 10-day global training event in Cape Cod.[17] Other global training sessions, conducted by some of Bain’s best managers and partners, are held every 12 to 18 months at places like Cancun, Barcelona and Phuket.[18] Bain repeatedly scores high in employee 'Best Places to Work' rankings, which are generally sponsored by regional newspapers or magazines. Recent awards include:
| ||||||||||||||||||||||||||
