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While the government works to reform the disability insurance agency and restart welfare debt collections, management consultancy McKinsey has amassed significant influence. By Rick Morton.

McKinsey and the NDIA

This is a story about how a company whose own associates call it “the Firm” is slowly reshaping Australia’s welfare agencies.

There are others like it – Boston Consulting Group, Bain & Company and so on – but none that match McKinsey for elite status or self-confidence.

Those familiar with the Firm say its strategy of “corporate imperialism” is deliberately subtle. Its reach is wide, powerful and, in Australia at least, gaining influence in the public service.

Take the National Disability Insurance Agency.

While the NDIA was under Stuart Robert’s control, the minister made no secret of the fact he was a fan of the McKinsey approach. Privately, he has told McKinsey staff he likes the way they work. He sought a meeting at his office in parliament with Angus Dawson, the consulting giant’s Australian managing partner.

Gossip among McKinsey subordinates was that the pair shared cigars and whisky, although a spokesman for Robert categorically denies this “wild assertion”. Dawson’s media spokesperson said it was “untrue and inaccurate”.

In the middle of 2019, Robert hand-picked senior public servant Martin Hoffman to work with McKinsey on a six-week, $1 million project to rebrand the Department of Human Services as Services Australia.

A few months later, Hoffman was appointed chief executive of the NDIA. From there, a number of senior staff joined the agency from McKinsey. The Saturday Paper does not suggest anything inappropriate in this – just that the consultancy has contributed to the careers of a number of people working in the NDIA.

The first and most senior is Oliver Bladek, who moved across in late 2019 from Westpac where he served only a few months after 15 years at McKinsey. Bladek was contracted to the role of deputy CEO – design, digital and strategy.

McKinsey associate partner Hassan Noura was plucked directly from the consulting behemoth and installed as general manager – strategy and priorities about April last year.

As revealed by The Saturday Paper, Noura has since been promoted to lead the agency’s budget razor gang, known as the Sustainability Action Taskforce.

Andrew Goldberg joined the agency one month later, having worked in the years before as a business analyst and associate at McKinsey, for Facebook, and as a ministerial adviser to the Coalition government. He is currently acting as branch manager – strategy.

The last to join the disability agency is former McKinsey management consultant Scott Poynter, who started under Oliver Bladek in November 2020.

As well as these positions, there are 214 labour hire contractor positions in the executive level one and two bands of the agency, although it is not disclosed where these people come from.

In a statement to public service news site The Mandarin in October last year, the agency characterised these so-called “executive placement program” positions as necessary because the staff have “specific skills”. A spokesperson said they were hired “with the aim to impart these skills across the agency”.

And the McKinsey skill set is valued beyond those contracted or hired directly by the NDIA. In 2019, four agency employees were enrolled in an invitation-only, six-month “McKinsey executive leadership program” (ELP) for “high potential, seasoned executives” – for which the government agency paid travel costs.

These are valuable not only for the staff but for McKinsey itself. The Saturday Paper understands the ELP and other leadership programs are a central part of the company’s client development playbook: they are a link to new contacts and closer relationships.

For a company that bristles at being seen as commercial or “selling” itself to clients, leadership programs are a more dignified way of ensuring work and contracts continue to flow. Not only do they make their existing clients look good – staff development is important, after all – but the next generation of organisation leaders are inducted into the McKinsey way of life.

It’s McKinsey’s own version of soft power. The company mystique – that it is the most exclusive club in town – is central to this project. Those who have spent any time in the Firm tend to invoke its name with reverence.

In a farewell post on LinkedIn, Oliver Bladek detailed the top 10 lessons “I’ve learned about showing up as a leader after my time at the Firm”.

“I wouldn’t trade my time at the Firm for anything,” he wrote.

More than 100 former colleagues and acquaintances left their comments, many of them also referring to the “Firm” despite no longer working there.

“Our work together in Vancouver was a blast,” Bladek wrote in response to one, “was sad not to see you return back to the Firm.”

In another post, Bladek shared his insight on how to change an organisation: “Embarking on a transformation is one of the most critical decisions a CEO will ever make … It requires big commitments both internally and externally and puts the spotlight on her or his ability to lead and deliver.”

All of this combines in an intoxicating way, especially for newly minted chief executives. Hiring McKinsey is shorthand for budgetary prowess and power.

And McKinsey charges a premium for its services. Historically at least, its work is as much as 25 per cent more expensive than direct competitors.

In 2017, before Hoffman joined, the NDIA gave McKinsey a $5 million contract to perform a “pricing review” of the disability scheme. This work introduced some new flaws – therapy prices, specifically – and McKinsey was brought in the following year to fix its own work, accruing another $4 million for the effort.

These contracts did not go to tender. In 2018 McKinsey completed four additional consulting projects, worth almost $4 million.

Conversations with people in the room reveal the extraordinarily close working relationship between the Firm and agency leaders. On some very small projects, senior people would be briefed three or four times. Other times, the consultancy contributed significantly to responses on policy.

“As would be expected,” a spokesperson said, “NDIA directors are keenly interested in significant work undertaken by the agency. Where consultants are engaged for such work, directors may receive briefings or be involved in workshops facilitated by those firms. Occasionally this may occur individually, but more often, executives would be present. It would be incorrect to imply that this has only occurred with McKinsey and that such interactions are inappropriate.”

One significant project involving McKinsey is the so-called “Scheme Work of the Future”, for which a $1.1 million contract was awarded and began in June last year.

According to a previous statement from the NDIA, this project (labelled phase 1, 2 and 3) is “part of the agency’s ongoing future planning work, to consider what the NDIS will look like four years from now”.

As The Saturday Paper has previously revealed, this project raised the option of automating so much of the NDIA workload that some 1200 planners could be either terminated or redeployed under its recommendations. Central to this is the establishment of robo-style, or automated, independent assessments.

The recommendations also dramatically recast the role of “partners in the community”, which employ thousands of workers from the charity and non-government sector to deliver disability support planning and gatekeeping.

An NDIA spokesperson said Hoffman has been briefed by both agency and McKinsey staff in relation to this project. The changes that are suggested are in line with how a consultancy would recommend cost-cutting inside a business, only they relate to a government service for people living with a disability.

On Tuesday, Martin Hoffman attempted a conciliatory tone as he and senior executives including Oliver Bladek appeared before a joint standing committee hearing on the government’s proposed mandatory “independent” assessments.

“On behalf of the agency let me begin by saying I understand and acknowledge that the proposals we are discussing here have caused real fear, concern and upset in the disability community,” Hoffman said in his opening address.

“I deeply regret that our genuine attempts at communication and consultation have evidently not to date been sufficient or appropriate.”

Meanwhile, McKinsey is working on another significant project, this time for Services Australia. Several months after the NDIA “Scheme Work of the Future” contract, McKinsey received a $1.9 million work order to help relaunch welfare debt recovery after a pause during the pandemic. In November, this contract more than quadrupled in size to $8.6 million.

Services Australia general manager Hank Jongen, whose minister was Stuart Robert at the time, said in a statement to The Saturday Paper: “We engaged McKinsey to provide strategic support, including finalising business and system requirements, workforce modelling and data analytics.

“We then varied the contract to support additional assistance, including program design, operational improvements and revised workforce and analytics packages.”

Since November, following the debt-pause, the department has raised debts from some 700,000 people. “The total value of all overpayments with a current repayment plan in place,” Jongen said, “is about $1.87 billion.”

In a consultancy like the Firm, this would be known as healthy “market share”.

This piece was modified on May 12, 2021, to clarify that McKinsey is involved in a project to restart welfare debt collection, rather than to restart robo-debt.

This article was first published in the print edition of The Saturday Paper on May 8, 2021 as "McKinsey scale".

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Rick Morton is The Saturday Paper’s senior reporter.