McKinsey, Balfour Beatty: Is it so Hard Coming Up with a Good Excuse These Days?

Excuse the sardonic headline, but the month of April was one for the record books. Just when you thought that communication consulting was finally getting the respect it deserves, you realize that some senior leaders and their attorneys haven’t heard a word PR pros said. Given the number of crises, investigations and hearings these days, it’s amazing that corporations aren’t better prepared for questions they’ll get when under congressional and other scrutiny. For example:

  • During a hearing of the House Committee on Oversight and Reform last month about the opioid crisis, the managing partner at McKinsey and Company, under fire for advising both Purdue Pharma and the Food and Drug Administration, was asked why a McKinsey employee included a smiley face in an email discussing revised language about the painkillers. Bob Sternfels responded with this astounding sentence in his attempt at an apology: “I completely agree that a smiley face is totally inappropriate.” The committee members didn’t buy it.
  • During a congressional hearing, also last month, which was examining thousands of complaints about military housing, a representative of a company that provided housing, Balfour Beatty Communities, told senators: “Things go wrong…we're not perfect." This after the committee released a report citing hundreds of cases of neglect of tenants’ complaints of mold and hazardous conditions and after being investigated, found guilty and fined for fraudulent reporting, in 2019.
  • In the same month, BlueTriton­–formerly Nestle Water, owner of Poland Spring, Arrowhead, and others­–attempted to defend itself in a lawsuit. In court it stated that its brand promise of being environmentally friendly is nothing more than “aspirational” and “puffery.”

This month we’ll focus on two of the more knuckle-headed apologies we’ve heard of late: McKinsey and Balfour Beatty.


McKinsey & Company

The ultimate irony about the McKinsey & Company flub is that one of its specialty practices is crisis response. Either they’re not eating their own dog food, their advice is terrible, or the truth is so awful they’re just hoping to get out of the hearing room alive.

As noted above, the hearing focused on the role McKinsey played in simultaneously advising the FDA and pharmaceutical companies that the FDA oversees. It advised its pharma clients on ways to best market their addictive pain killers.

One of the most damaging exhibits in the hearing was a campaign that created an award program to incentivize salespeople to push more opioids. It featured a picture of Donald Trump, a particularly damning image during a hearing in front of a Democrat-led committee.)

McKinsey’s clients included Purdue, Johnson & Johnson, both of whom have settled multi-billion-dollar lawsuits related to the opioid crisis.

The committee investigating McKinsey found that at least 22 McKinsey consultants consulted with opioid manufacturers on how to interact with the FDA and advised the regulator on approving drugs and monitoring their safety. Internal McKinsey documents show that the firm cited its connections to regulators when seeking more work at pharmaceutical companies, according to the New York Times.

In early April, Senate Democrats asked the inspector general of Health and Human Services to investigate possible conflict-of-interest charges, which McKinsey denies.

What made that denial more egregious is that under questioning from Rep. Caroline Maloney (D-NY), Sternfels denied knowing how much McKinsey made from its contract with Purdue, even though the number was readily available in documents that the firm provided to the committee.

The outcome probably was the consulting firm’s worst nightmare. House and Senate lawmakers are readying legislation requiring more stringent FDA standards governing conflicts of interest in federal contracting.

Balfour Beatty Communities

You’ve probably never heard of Balfour Beatty Communities (BBC) unless you’re one of the 150,000  members of the U.S. military that pays rent checks to it monthly. Or you’re one of the various government oversight bodies that has investigated the company over the years. BBC owns and manages residential properties on 55 U.S. military installations.

Four months ago, BBC pled guilty and agreed to pay $65 million in fines and restitution after the Air Force Office of Special Investigations and the Department of Justice found that it had systematically faked maintenance records.

In another example of a bonus system gone wrong (i.e., Wells Fargo), the company was incentivized based on completed repairs. Rather than actually taking care of the problems, the company kept two separate sets of books, according to a Reuters investigative report. The accurate records revealed reports of asbestos, leaks and mold that hadn’t been fixed. However, reports filed with the Air Force claimed near-perfect repair performance, with rewards of millions in “performance-incentive fees.” Those who didn’t make their numbers were threatened with termination.

One might have assumed that problems ended with a fine and a guilty plea. But, a report by the Senate Committee on Homeland Security and Governmental Affairs, released April 26, 2022, concluded that essentially nothing had changed. The company ignored complaints and questionable record-keeping continued. That report led to a Senate Armed Services hearing where lawmakers heard horror stories from numerous military families.

Under questioning from Sen. Jon Ossoff (D-GA), BBC’s president of facility operations, Richard C. Taylor, rejected the idea that the company had systemic problems. He then admitted, “We don’t always get it right the first time…we’re not perfect.” After that, Taylor cited favorable customer satisfaction ratings.

It might have worked, had Senator Ossoff not pointed out that BBC had similarly “high” customer satisfaction ratings when it was convicted of cooking the maintenance books from 2013 to 2019. Moreover, the investigation found there were “numerous examples of inaccuracies and omissions in Balfour’s internal work order data tracking system after 2019, when the company initially vowed to correct these problems.”

The investigation showed the company “did not prioritize health and safety concerns of its residents or take steps to fix the problems,” Ossoff said.  More troubling, he said, the subcommittee found that Balfour appeared to continue to engage in such misconduct while under Justice Department investigation and even after it pled guilty and was fined more than $65 million.

Rather than apologize or acknowledge problems, Taylor chose to challenge one family’s photographic evidence that mold had caused its daughter to contract severe skin rashes. In the world of crisis management, that’s a tactic called blaming the victim. It almost always leads to more negative outcomes.

And this time was not an exception. At the end of the hearing there was bi-partisan agreement that additional oversight was required. Even the ranking Republican on the subcommittee, Ron Johnson (R-Wis.), not a fan of government oversight, was aghast. “The question that kept going through my mind throughout the investigation is…'Fool me once, shame on you. Fool me twice, shame on me.’” He then voiced support for legislative action to fix the problems.

As a research and measurement professional, nothing annoys me more than bad data. So, when I see repeated cases of bad data used to justify awful behavior against U.S. military members, it is particularly unforgivable.