Smart Moves: AIG Boots McKinsey and Cuts Convention Costs
American International Group’s newest CEO Robert Benmosche has been on the job slightly less than two months, one of which was allegedly spent sampling wines at his villa in Croatia. Nonetheless, he’s made two public relations moves that help the beleaguered insurer - both inside and outside the company.
Bloomberg News says Benmosche has given consultant McKinsey & Co. its marching orders. One of the world’s best-known, but most arrogant business consultants, McKinsey got a mandate in March by then CEO Ed Liddy to dispose of most of the once-trillion-dollar AIG empire. That impractical plan, dubbed “Project Destiny,” was to be used by Liddy to accomplish this. Liddy is long gone, and Project Destiny is “going to become dusty,” Benmosche told employees.
As for McKinsey, Benmosche says AIG already has “too many advisers” and “forgot to look in our own backyard for skills.” Those words resonate with AIG’s 116,000 employees who didn’t take kindly to an outsider coming in and telling them that they’re incompetent. Especially when the problem occurred in its London AIG Financial Products unit, which most of these employees knew only vaguely and understood even less.
Benmosche’s fighting words about revamping and reviving AIG by using its own staff means a lot to those who’ve been slaving under death threats and Congressional carping because of bonuses they never even received.
As for McKinsey, no one will miss it. The firm has a reputation for sending in whiz kids to demean current management and then take over the company themselves, a la Jeffrey Skilling, who took over energy giant Enron and sent it crashing into bankruptcy.
On the external front, Benmosche again showed that he’s more sensitive to public opinion than Liddy. Last year AIG held a big blowout for top U.S. financial advisers, costing $1.27 million, right after it took the federal bailout package of $182 billion. Arguably you have to spend money to make money, and AIG personnel weren’t the beneficiaries of the largesse. But from a PR standpoint it didn’t look good and led to further scandals, such as the $70 million in bonuses given mostly to AIG Financial Products employees.
The Associated Press reports that this year AIG will spend only $30,000, with sponsors and attendees picking up the rest of the tab. That way everyone enjoys himself.
Ed Leefeldt is an award-winning investigative and business journalist who has worked for Reuters, Bloomberg and Dow Jones, and is the author of The Woman Who Rode the Wind, a novel about early flight.
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