Bain & Company
is a management consulting
firm headquartered in Boston, Massachusetts
. It has been named by Consulting Magazine
as the "Best Firm to Work For" every year from 2003 - 2008.
Bain & Company was established in 1973 by seven former partners
from the Boston Consulting Group
headed by Bill Bain
Under Bain’s direction, the firm implemented a number of unconventional practices, by traditional consulting standards, in its early years. Notably, Bain would only work with one client per industry to avoid potential conflicts of interest. Partners did not carry business cards and clients were referred to only in code names, further demonstrating its reputation for enforcing client confidentiality. And the company preferred to win work by boardroom referrals rather than marketing itself, sometimes landing clients by offering several weeks of work at no cost until proving the results of its services.
What differentiated Bain & Company from its competitors was its focus on generating profitable results for clients through the implementation of its recommendations. The firm specialized in bringing rigorous fact-based analysis directly to CEOs, and its consultants preferred to work on increasing a company’s market value rather than simply handing clients a list of recommendations. To win business, Bain showed clients the increase in stock price of Bain clients relative to the Dow Jones industrial average
The firm’s founding was followed by a period of growth in the late 1970s and early 1980s, and the firm opened offices in London, Munich, San Francisco and Tokyo.
Another innovative consulting approach that Bain pioneered was aligning its incentives with its clients’ results and occasionally taking equity in lieu of fees. An estimated 10% of revenue is from equity or success fees. This model proved successful for both Bain and its clients. For example, the firm took an ownership stake in fruit processor Del Monte Foods while working to revamp the company’s strategy. "Coming into a leveraged buyout situation is never easy," says Del Monte CEO Richard Wolford. "Knowing Bain and their desire to deliver results, they probably would have provided ongoing support regardless. But the fact they own a stake doesn't hurt."
Bain & Company should not be confused with but has affiliations with Bain Capital, a private equity firm founded in 1984 by former Bain & Company partners, including former Massachusetts governor and 2008 U.S. Presidential Candidate Mitt Romney, T. Coleman Andrews III, and Eric Kriss.
After a successful start, the company found itself facing a growing list of challenges in the late 1980s. In the midst of sluggish business conditions and overstaffing, Bain also faced the dilemma of having to turn away business due to its one-client-per-industry restriction. Competition increased as other firms copied Bain’s implementation-focused strategy.
However daunting these external challenges were, it was internal infighting that threatened to tear the firm apart. Bain was incorporated in 1985 and over the course of two years, the Employee Stock Ownership Plan (ESOP) was established, after which senior executives borrowed against their equity for cash, leaving the firm with a heavy load of debt.
As business slowed, the debt load began to squeeze the firm.
1990s to present
Facing financial duress, former Bain & Company partner and former candidate for the Republican nomination for the 2008 US presidential election, Mitt Romney was asked to rejoin the firm as interim CEO. Bringing along two lieutenants from Bain Capital, Romney began traveling to all the Bain offices to rally employees.
The Boston Globe points out that “Over several weeks, Romney managed negotiations with the banks and among the partners,” and that “The moment came when negotiations produced a package in which [Bill] Bain and the founding partners would give up control of the firm, turning back $30 million they had taken from the ESOP and $100 million in notes they held against the firm.”
Romney’s plan involved "a complicated restructuring of the firm’s stock-ownership plan, real-estate deals, bank loans, and money still owed to partners. To avoid the financial crisis that a buyout would have triggered, the group of founding partners agreed to return about $100M cash and forgive outstanding debt..
Although in the role for just one year before returning to Bain Capital, Romney’s work had three profound impacts on the firm. First, ownership was officially shifted from the owners to the firm’s 70 general partners. Second, transparency in the firm’s finances increased dramatically (e.g., partners were able to know each other’s salaries.) And finally, Bill Bain relinquished ownership in the firm that carried his name.
Within a year, Bain bounced back to profitability without major partner defections, and the groundwork was laid for a period of steady growth. In 1993 the head position was split into two roles – a Managing Director and a “non-executive” chairman of the board. Orit Gadiesh, named Bain’s first chairman in 1993, was fundamental in maintaining Bain’s culture. After spending two years in military intelligence for the Israeli army and earning a degree in psychology from Hebrew University, Gadiesh enrolled in the Harvard Business School and graduated as a Baker Scholar. As a junior partner during the turnaround she had been instrumental in keeping senior partners from leaving the firm, and as chairman she became the first female to lead one of the major consulting firms. Gadiesh was known throughout the firm for her passionate leadership and "True North" philosophy, which the firm still embraces. For the past several years, she has landed among Forbes' list of the "100 Most Powerful Women in Business" and is on the board of several organizations, including the World Economic Forum.
Under Gadiesh and MD Tom Tierney, Bain simultaneously loosened its restrictions around the one-client-per-industry policy, by assuring clients that the firm's strict internal Professional Standards prohibited the circulation of client data internally, and expanded its presence worldwide throughout the 1990s. The firm grew by 25 percent per year, expanded its number of offices from 12 to 26, and increased partnership from about 70 to nearly 200.
In 1997, the consulting firm Value Partners brought a suit against Bain regarding the defection of its Brazilian partners and office. The case went to trial in federal court in Boston. After a five-week trial, the jury found Bain liable for unfair competition and tortious interference, and awarded Value Partners $10 million in compensatory damages (the full award requested). The trial court, after awarding another $2.5 million of interest, denied all of Bain’s post-trial motions.
The 2000s began with Bain guiding its clients through the “New Economy” of e-commerce. The collapse of the dotcom, coupled with a general slowdown in the economy as had been faced in the early 1990s. The slowdown was painful on all of the major consulting players; however, Bain’s previous experiences with contraction left the firm zealous in avoiding layoffs. The firm weathered the economic downturn and emerged from it in a position of strength by investing in its leadership ranks with internal promotions and key external hires. Subsequently, the economic recovery has been followed by another period of sustained growth. In 2007, the firm expanded its number of worldwide offices to 37, with the opening of offices in Kyiv, Moscow, Helsinki, and Frankfurt in Europe, and worldwide consulting staff increased to approximately 2,700.
The new millennium also brought changes to Bain’s traditional “generalist” approach to solving clients’ business issues. The firm developed areas of specialization with its deep industry “Practice Areas” in order to better serve the varying needs of its increasingly diverse multinational and local client base. Through targeted industry hires, Bain added industry experts to each of these new Practice Areas, significantly raising its profile in fields such as Financial Services, Healthcare, IT and Media and Entertainment industries.
Bain's major competitors include McKinsey & Company, Booz & Company, and Boston Consulting Group. The firm also competes with specialist boutiques such as Monitor Group.
In a Financial Times
interview, Bain partner Bill Neuenfeldt
identified the desired qualities in potential hires as “intelligence, integrity, passion and the ambition to make a difference.” In addition to these basic requirements, an entry-level "associate consultant" is typically a recent college graduate with an enthusiasm for problem solving and an analytical skill-set. No specific major is required, though a demonstrated interest in economics and business can be valuable. The AC role lasts for two years, after which outstanding ACs are promoted to senior associate consultants and can either work in a Bain office abroad or for a client.
Bain repeatedly scores high in employee 'Best Places to Work' rankings, which are generally sponsored by regional newspapers or magazines. Recent awards include:
- Press Trust of India Limited – “Best Places to Work for MBA Grads” (2007);
- Fortune – One of the top “100 Best Companies to Work For” (2007);
- The Great Place to Work Institute – “The Best Workplace in France” (2007);
- Financial Times – “Best UK Workplace ‘Laureate’” (2007);
- BusinessWeek – One of the top “50 Best Places to Launch a Career” (2006);
- Consulting Magazine - #1 “The Best Firms to Work For 2007" (also 2002-2006);
- Financial Times – “#1 “Top 10 Places to Work in Europe” (2006, 2007);
- Financial Times – #1 “100 Best Workplaces in the UK" 2006
Bain also recruits online via podcasts and Second Life, which includes a “virtual recruitment center," complete with networking areas, auditorium and information stands where visitors can watch videos and slide shows and download information.”
Bain's new hires have been recognized for embracing environmental innovation through their "Green Team" concept.
Several Senior Bain & Company Partners have used the firm’s analysis coupled with their personal experience across industries to write a number of books on common issues faced by firms and their executives in today’s business environment. These books exemplify the type of results-based focus that is the basis of the consultancy and include the following publications:
- The Loyalty Effect: the Hidden Force Behind Growth, Profits and Lasting Value was written by Bain & Company partner Frederick F. Reichheld and was published in 1996. In it Reichheld reveals the fundamental business philosophies of successful companies that base their business strategies on loyal relationships. With concrete advice that has stood the test of time, he analyzes the true economics that drive long-term business success, and his startling conclusions and examples of loyalty leaders show how even a small improvement in customer retention can sometimes double profits.
- Loyalty Rules: How Today’s Leaders Build Lasting Relationships is the 2001 sequel to Reichheld’s international bestseller, The Loyalty Effect. In its pages, Reichheld provides the acid test for leadership in today’s volatile business environment and finds that most leaders deserve failing grades. Reichheld uses vivid stories to illustrate how superior leaders create networks of mutually beneficial, trust-inspiring partnerships between customers, employees, suppliers and investors, demonstrating that the most effective leaders build these relationships upon six bedrock principles of loyalty: Play to win/win, be picky, Keep it simple, Reward the right results, Listen hard and talk straight, and Preach what you practice.
- Profit from the Core: Growth Strategy in an Era of Turbulence is a 2001 book by Bain & Company’s Chris Zook and James Allen in which they argue that a timeless strategic principle-building market power in a well defined core business-remains the key source of competitive advantage and the most viable platform for successful expansion. Based on a ten-year study of 2,000 companies conducted by Bain & Company, the book identifies three factors that differentiate growth strategies that succeed from those that fail: 1) reaching full potential in the core business; 2) expanding into businesses adjacent to that core; and 3) preemptively redefining the core business in times of market turbulence. Explaining how leaders can adapt their strategies in response to a rapidly changing business environment, the book concludes with guidelines for becoming sustained value creators—companies capable of successfully refining and redefining their core businesses over the long haul.
- Aligning the Stars: How to Succeed when Professionals Drive Results is the 2002 work of Bain & Company’s Thomas Tierney and Jay W. Lorsch in which they examine the professional service industry, a rapidly expanding, trillion dollar field whose primary competitive advantage is found in its professionals and how they are managed. From strategy to organization to culture, it offers customized insights for businesses in which professionals drive bottom-line results and long-term company success. By describing how to attract, retain, motivate, organize, and lead the stars that shape a company's destiny, this book provides valuable lessons for the current and future leaders of every talent-driven business.
- Beyond the Core: Expand Your Market Without Abandoning Your Roots: In his 2003 sequel to Profit from the Core, Chris Zook answers the question of what happens when your core business hits a wall. In Beyond the Core, Zook outlines an expansion strategy based on putting together combinations of adjacency moves into areas away from, but related to, the core business, such as new product lines or new channels of distribution. Beyond the Core shows how to find and leverage the best avenues for growth—without damaging the heart of the firm.
- Mastering the Merger: Four Critical Decisions that Make or Break the Deal was written by David Harding and Sam Rovit in 2004 and examines the fact that today’s corporate deal makers face a conundrum: Though 70% of major acquisitions fail, it’s nearly impossible to build a world class company without doing deals. This book simplifies the process by focusing on just four key imperatives that can dramatically improve M&A success before executives finalize the deal. Based on more than 30 years of in-the-trenches work on thousands of deals across a range of industries—and supplemented by extensive Bain & Co. research—Harding and Rovit reveal that the best M&A performers channel their efforts into (1) targeting deals that advance the core business; (2) determining which deals to close and when to walk away; (3) identifying where to integrate—and where not to; and (4) developing contingency plans for when deals inevitably stray. Helping executives zero in on what matters most in the complex world of M&A, Mastering the Merger offers a blueprint for the decisions and strategies that will beat the odds.
- The Ultimate Question: For Driving Good Profits and True Growth was published in 2006 and was written by Fred Reichheld in order to examine why companies fail to achieve the ambitious growth targets their CEOs set for them, boosting short term earnings but alienating customers in the process. Reichheld’s most recent publication shows how to reverse this equation, turning customers into promoters who generate good profits and true, sustainable growth. This strategy is based around the simple question “Would you recommend us to a friend?” and forces the company to track performance through the customer’s eyes using something called the Net Promoter Score, the single most reliable indicator of the company’s ability to grow. The Ultimate Question shows how companies can measure this score, help managers improve it and create communities of passionate advocates that stimulate innovation.
- Unstoppable: Finding Hidden Assets to Renew the Core and Restore Profitable Growth (2007) by Chris Zook shows managers how to face an uncertain future by looking deep within their organizations and finding undervalued, unrecognized or underutilized assets that can serve as new platforms for sustainable growth. Drawing on more than 30 interviews with CEOs from companies such as De Beers, American Express, and Samsung, it shows readers how to recognize when the core needs reinvention and how to deploy the "hidden assets" that can be the basis for tomorrow's growth. Building on the author's previous books, Profit from the Core and Beyond the Core, this book shows how any company in crisis can transform itself to become truly unstoppable.
For more information please see: www.harvardbusinessonline.hbsp.harvard.edu
Notable current and former employees
- Paul Achleitner — CFO of Allianz
- Bill Bain — founder of Bain & Company
- Joshua Bekenstein — MD, Bain Capital
- Greg Brenneman — CEO of Quiznos
- Jane Brock-Wilson — MD, Berkshire Partners
- Kenneth Chenault — CEO of American Express
- Scott Cook — founder of Intuit
- Gary Crittenden — CFO of Citigroup, Inc.
- Tom Darden — CEO of Cherokee Investment Partners
- David Dominik — MD, Golden Gate Capital Partners
- Jesse Rogers — MD, Golden Gate Capital Partners
- Pete Dawkins — CEO of Primerica Financial Services
- John Donahoe — CEO of eBay
- Andrew Feinberg — CEO and President, NetCracker
- Anne Glover — co-founder of Amadeus Capital Partners
- Murray Hennesy — CEO, Avis Europe
- Jonathan Kraft — president of the New England Patriots
- Eric Kriss — co-founder of Bain Capital
- Jane Mendillo — President & CEO, Harvard Management Company
- Federico Mioli — President, Ducati
- Scott Olivet — CEO, Oakley
- Larry Orr — MP, Trinity Ventures
- Vivek Paul — Partner at TPG (Texas Pacific Group)
- Nick Prettejohn — Chief Executive, Prudential Assurance UK and Europe
- Kevin Rollins — former CEO of Dell, Inc.
- Mark Sarvary — Executive Vice President and President of Campbell North America
- Dr. Dietmar Scheiter — CEO, TA Triumph-Adler AG
- Jill Smith — CEO and President, Digital Globe
- David Soskin — CEO, Cheapflights Limited
- Peter Tornquist — Senior Managing Director, CVC Capital Partners
- Mark Vadon — founder and CEO, Blue Nile
- Meg Whitman — former CEO of eBay
Politics and public service