http://features.blogs.fortune.cnn.com/2012/01/15/bain-fortune-1987/
Editor’s note: Every Sunday, Fortune publishes a favorite story from our magazine archives. This week, we turn to an April 1987 item on the management consulting firm Bain & Co., which counts former Massachusetts governor and Republican presidential hopeful Mitt Romney as an alumnus (and former CEO). Romney co-founded the spin-off investment firm Bain Capital in 1984. The following story takes a close look at some of the benefits and pitfalls of the consulting firm’s famously aggressive business approach.
FORTUNE — On a January morning four years ago, 30 sleek, immaculately turned-out executives sat tensely at a ring of tables in a large conference room at the Hyatt Rickeys Hotel in Palo Alto. They had flown in from all over the world for a regular partners’ meeting of Bain & Co., a Boston-based management consulting firm. Their attention was riveted not on a discussion of the firm’s revenues but on a speakerphone placed on a table in the center of the room.
Rising out of the ether was the voice of John Theroux, Bain’s managing partner in London. He was describing a palace coup in progress at Guinness PLC, one of Bain’s largest clients. Ernest Saunders, the Guinness managing director who had hired Bain, was trying to unseat Deputy Chairman Anthony Purssell, the man who had brought Saunders in to head the company. Because it was in the Bain firm’s interest to have its man indisputably in charge, Theroux was seeking advice on how to help Saunders consolidate his position.
For the next two hours the partners were canvassed for ideas on how to place Purssell in such an untenable situation that he would have to quit. Ultimately a strategy was devised. ”It was quite cold-blooded,” recalls a partner who attended. Within the month Purssell was out, and Saunders was alone at the top.
The creator of ”relationship consulting,” Bain has built its business on the close ties that it develops with chief executives. Among the comparatively few people who know its work, the firm has become noted for the enormous power it wields with clients, for the cloak-and-dagger mystique that surrounds it, and for the shrewd, suave people it employs. Starting salaries in excess of $60,000 lure the sharpest, most presentable MBAs from Harvard and Stanford.
The brainchild of one man, William W. Bain Jr., 49, Bain & Co. has created a new type of management consultant, the quasi-insider, privy to his client’s secrets, who works directly with the CEO. to help put into effect the consulting firm’s recommendations. As the Guinness affair was to show, it’s a concept that can be pushed too far.