{"text":[[{"start":9,"text":"McKinsey plans to cut the share of profits that partners take home in cash in an overhaul designed to simplify its pay structure, boost its capital and protect the firm from turmoil in the consulting industry."}],[{"start":20.9,"text":"The elite consultancy has told partners to expect a greater proportion of their pay in the form of equity, allowing the firm to bolster its capital cushion, according to people familiar with the changes. For some partners, the changes could affect tens of thousands of dollars."}],[{"start":35.849999999999994,"text":"The revamp — codenamed Project Acorn — will benefit younger partners by also bringing forward some pay that would previously not have been allocated for several years."}],[{"start":45.39999999999999,"text":"McKinsey is rethinking its pay structure because clients are increasingly tying fees to the savings or performance improvements consultants achieve, and the trend is accelerating as AI revolutionises the industry. The firm is pitching its nous to clients in how to use AI to overhaul their businesses."}],[{"start":63.39999999999999,"text":"Consultancies may not be paid in full for projects for several years — and if agreed targets are not met, McKinsey will get paid less — meaning cash flow could be more volatile and unpredictable."}],[{"start":75.69999999999999,"text":"Consulting groups are embracing outcome-based pricing to counter client scepticism about whether they add value, and because AI is also starting to do the work of young consultants who traditionally billed by the hour."}],[{"start":88.49999999999999,"text":"The take-home pay of McKinsey partners is typically comprised of base salary, performance bonus and a portion of the profits."}],[{"start":96.64999999999999,"text":"This share of annual profits is called the “additional award” and amounts to millions of dollars for the most senior partners. McKinsey has historically held back a few percentage points of overall remuneration in the form of equity, with the proportion increasing by seniority, but the vast majority is always paid in cash."}],[{"start":116.25,"text":"As a result of Project Acorn, the proportion of the additional award diverted into equity could be increased by an estimated 3 to 5 percentage points, said one person familiar with the matter. A partner might be paid 90 per cent of the additional award in cash, for example, instead of about 95 per cent previously."}],[{"start":136.15,"text":"The figure will vary and could be lower or higher depending on capital needs in a given year, they added."}],[{"start":142.1,"text":"The overhaul has taken more than two years to finalise, amid intense internal debate. An earlier version, dubbed Project Oak, would have sought more capital from the most senior partners, but the proportion of their pay diverted to equity will be capped under Project Acorn."}],[{"start":159.9,"text":"“We didn’t shift the principle of how partners are earning. It was just a way of changing the timing, essentially,” said one person. “We tried to give a lot of support to partners to understand that they can trust the principles of this.”"}],[{"start":171.95000000000002,"text":"The new structure replaces a complex multiyear system of payouts that had grown unwieldy, according to many partners. The new system is designed to be more popular with partners because they get paid earlier."}],[{"start":184.45000000000002,"text":"The overhaul means that new partners in particular no longer have to wait for years to be paid for the outcome-based projects in which they are involved, something that could have put McKinsey at a competitive disadvantage."}],[{"start":195.65,"text":"The new system also increases flexibility for McKinsey’s management to adjust remuneration to make investments in technology in the future. The firm had “disproportionately” preferred to form alliances with AI companies rather than build or acquire its own technology, though this could change, the people said."}],[{"start":214.55,"text":"McKinsey said that, “as a private firm, we don’t discuss partner compensation, but we continue to evolve how we attract, develop, excite and retain the world’s best talent”."}],[{"start":232.1,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1778889555_1751.mp3"}