McKinsey & Company

In December 2024, McKinsey agreed to pay $650 million to resolve DOJ investigation into its work advising Purdue Pharma on boosting OxyContin sales—adding to roughly $1 billion in total opioid-related settlements. In December 2025, the firm announced plans to cut 5,000 jobs (10% of its 40,000-person workforce) as revenue stagnated at $15-16 billion for the fifth consecutive year. The twin crises reveal what happens when reputation-based preferential attachment faces credibility collapse: the mechanism that compounds advantages reverses to compound losses.

For decades, McKinsey operated on the same preferential attachment dynamics as Sequoia Capital. Strong reputation attracted better applicants, enabling selective hiring (acceptance rates below 1%), which produced better client work, enhancing reputation further. MBA graduates competed for McKinsey offers not primarily for salary—multiple firms paid equivalently—but for the resume signal. A McKinsey background opened CEO tracks, private equity partnerships, and board seats that Big Four consulting experience did not. This created a self-reinforcing loop where talent concentration justified premium pricing ($2-5 million per engagement), funding further talent investment.

Credibility collapse occurs when accumulated reputational damage crosses a threshold where the signal flips from positive to negative. The October 2024 Congressional investigation revealed McKinsey concealed consulting work for Chinese state-owned enterprises while receiving $480 million in US military contracts—the national security equivalent of Purdue Pharma advising on addiction while consulting for recovery programs. Senator Rubio called for banning McKinsey from federal contracts. By February 2025, multiple procurement officers at Fortune 500 companies began requiring board-level approval for McKinsey engagements—adding 6-12 weeks to sales cycles and creating veto points that didn't exist in 2023.

The biological parallel runs through cleaner fish species that occasionally cheat by eating healthy tissue instead of parasites. Individual cleaner wrasses that cheat get expelled by host fish and marked by other potential hosts through chemical signals. But when a cleaner fish species develops widespread cheating, the entire mutualism collapses—host fish avoid all members of the species, even honest cleaners. McKinsey's South Africa corruption charges (September 2022), Saudi Arabia disclosure violations (2024), and China conflicts (2024) created pattern recognition among procurement departments: the brand now signals risk rather than quality.

The 5,000-person layoff represents autophagy—organizational self-consumption to preserve core functions during starvation. Revenue flatlined despite consulting market growth of 4-6% annually, meaning McKinsey lost market share while total demand expanded. The firm cannot cut to growth: reputation repair requires demonstrating reformed processes, which demands investment in compliance infrastructure and engagement quality controls. But investment requires cash flow that evaporating revenue cannot fund. McKinsey faces the credibility collapse trap: restoring reputation costs more than degraded reputation can finance.