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Remembering Robert McNamara

Warren Baum wrote about the infamous reorganization study. I had left the Bank for McKinsey in 1971. The award of the World Bank study was flagged to all McKinsey offices around the world – it was the first study for any part of the UN system and would hopefully lead to many others. As a former World Bank employee, I was not put on the team for the study to avoid any appearance of a conflict of interest, but I was kept appraised of all work of the team.

Within McKinsey, the fiasco of the organization study was told as follows: When the draft report was ready, the head of “The Firm”, Marvin Bower, went to see McNamara for a pre-briefing. The report recommended, essentially, to fine-tune what the McKinsey team felt was a pretty good organization with adequate checks and balances [Projects vs. Area Departments]. McNamara’s reaction was instant and threatening [I paraphrase how it was re-told at McKinsey]: “If the report is submitted in its present form, I [McNamara] will personally ensure that McKinsey will not get another study in the UN system.” He insisted on what Warren Baum calls the “single chain of command”. Most untypically for McKinsey, the report was re-written to meet the client’s demands rather than address the issue professionally.

From a Bank member who was close to the events of those days, I later learned that, when the Board slammed the report – “not worth the paper it was written on” was reportedly one Director’s assessment – McNamara replied to his critics [I paraphrase]: “Gentlemen, don’t blame me – I chose one of the most renown consulting firms for the job. Blame them, if you don’t like their report.”

Parenthetically, I learned that, on hearing that he would not have a future at McKinsey because of the World Bank disaster, one of the McKinsey authors of the original report quit and applied with the Bank. McKinsey refused to give him a reference.

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McNamara bailed me out at my first presentation of an IFC project to the Board. The justification of the Viking Pulp and Paper Project in Aliaǧa, Turkey, was marginal. We had very sketchy market data, and the state-owned paper monopoly promised to play hardball against any private competitor. One Director had actually read the Board Report and noted that the financial projections were based on flimsy market data and asked how reliable those projections were.
“I’ll take this question, Mr. Muth,” was McNamara’s immediate reply. He had of course read the Board Report and knew that the market section was weak. He told the Board member that Max Oberdorfer (the engineer for the project) and I had done solid work and, yes, we should have mentioned in our report that the average growth rate of the Turkish demand for high-quality writing and printing paper had been 17.34 % over the last five years. This was a totally fictitious figure, probably too high by half, and McNamara knew that neither Max nor I would have dared to do what he had done: bamboozle the Board with fake precision. Two decimals suggested that he knew his facts. Had he said “about 17%”, he would have risked the skeptical Board member asking “How do you know”?
There were no more questions, and the IFC investment was approved. The Viking paper company still operates profitably – thanks to McNamara, not to Max Oberdorfer and myself.