Astros GM Jeff Luhnow's cheating scandal is latest ding on McKinsey

On Monday, Major League Baseball concluded its investigation into sign-stealing by the Houston Astros in 2017. MLB Commissioner Rob Manfred announced that Astros players and some employees engaged in a coordinated scheme that violated league rules, and he suspended Astros GM Jeff Luhnow and manager AJ Hinch from baseball for one season; the team promptly fired both. (The league also fined the Astros $5 million and took away its first-round and second-round draft picks for the next two years.)

In the aftermath of the report, many have taken note of Luhnow’s pre-baseball résumé: he spent five years in the 1990s as a consultant at McKinsey & Co., the powerful $10 billion-in-revenue consulting firm whose once-sterling reputation has come under fire in the last few years.

Houston Astros general manager Jeff Luhnow speaks during a news conference Thursday, Oct. 24, 2019, in Washington. The Astros and the Washington Nationals are scheduled to play Game 3 of baseball's World Series on Friday. (AP Photo/Patrick Semansky)
Houston Astros general manager Jeff Luhnow speaks during a news conference Thursday, Oct. 24, 2019, in Washington. The Astros and the Washington Nationals are scheduled to play Game 3 of baseball's World Series on Friday. (AP Photo/Patrick Semansky)

MLB Commissioner Manfred’s nine-page letter on the Astros investigation states, “Although Luhnow denies having any awareness that his replay review room staff was decoding and transmitting signs, there is both documentary and testimonial evidence that indicates Luhnow had some knowledge of those efforts, but he did not give it much attention.” Manfred concludes, “I will hold [Luhnow] personally accountable for the conduct of his Club... Despite his knowledge of the Red Sox incident in September 2017, and receipt of both my September 15, 2017 memorandum and Joe Torre’s March 2018 memorandum, Luhnow failed to take any adequate steps to ensure that his Club was in compliance with the rules.”

In other words, Luhnow’s sin was management failure and negligence, but stopped short of active participation in the cheating.

Given what we know now about the Astros cheating scheme, a glowing two-part profile of Luhnow that ran in “McKinsey Quarterly” in 2018 looks particularly embarrassing.

‘The bleeding edge’

The profile is headlined, “How the Houston Astros are winning through advanced analytics” and calls Luhnow “the architect of last year’s World Series champions.”

In the interview, Luhnow lays it on thick about building a baseball team that was on “the bleeding edge,” and describes how he got the Astros organization to buy in to an analytics focus when he joined the team in 2011.

“The harder part,” Luhnow says, “was changing the behavior of the coaches and the players that were either on our big-league team or in the minor-league system on their way up—getting them to change their behavior and use the information to help make decisions.”

Tarnished reputation?

Luhnow is merely the latest example of a McKinsey alum in trouble.

In 2012, former McKinsey CEO and Goldman Sachs board member Rajat Gupta (he led McKinsey from 1994 to 2003) was convicted of insider trading; he served two years in prison. In 2016, Valeant CEO Michael Pearson resigned over the drugmaker’s improper reporting of its financial results, and activist investor Bill Ackman orchestrated a major shakeup as Congress investigated Valeant’s price gouging. Pearson had previously worked at McKinsey for 23 years, and in fact, half of Pearson’s six-person C-suite at Valeant were McKinsey alums, leading the Financial Times to declare at the time, “McKinsey’s fingerprints are all over Valeant.”

Following the Valeant scandal, Forbes asked, “After Valeant and Enron, should you invest in McKinsey-bred CEOs?” (Jeffrey Skilling, who served 12 years in prison for his role in the fraud at Enron, had worked at McKinsey for 11 years; in 2002, The Guardian called Enron “the house that McKinsey rebuilt.”)

In 2018, the New York Times reported on how McKinsey became wrapped up in corruption scandal in South Africa in 2016 after it struck a $120 million deal with South African consultancy Trillian to represent power utility Eskom. Trillian was run by the Gupta brothers (no relation to Rajat Gupta), who were accused of using their friendship with former South African president Jacob Zuma to illegally win government contracts. McKinsey lost clients in South Africa, and while it denied breaking the law, its global head Kevin Sneader apologized “to the people of South Africa” and the company replaced most of its South African staff.

Later in 2018, the Times reported the details of a tone-deaf McKinsey company retreat held in Kashgar, China—the city at the heart of the country’s Uighur crisis. Lately, even presidential candidate Pete Buttigieg has in turn come under fire for his time at McKinsey and for initially adhering to an NDA to not reveal who his clients were at McKinsey. (The firm in December released him from the NDA.)

Of course, the misdeeds of an executive don’t necessarily reflect on their previous employers. And no one is suggesting that McKinsey was involved in the Astros cheating scheme. (A spokesperson for McKinsey declined comment for this article.) But McKinsey alumni tend to actively promote their training at McKinsey, and apply the lessons they learned at the consultancy to the rest of their career.

Luhnow was particularly McKinsey-friendly in his time running the Astros: he hired McKinsey consultants to study and audit the team.

As the sportswriter David Roth wrote in The New Republic last month, Luhnow “was a true McKinsey consultant’s consultant, which is to say that he was secretive and a little smug. He reliably kept outsiders—a group that included, for years of his tenure, even the players in his employ—on a need-to-know basis when it came to the work that he and a ‘decision sciences’ team were doing as they collected and parsed every available bead of data that the game could provide.”

Of course, both of these things can be true: that the Astros used advanced analytics, and also cheated by using a camera to steal signs. But it’s hard now to look back at fawning articles and entire books about the team’s use of analytics and take them seriously.

Forget the analytics: some unknowable amount of the team’s success came from banging a massage gun on a trash can.

Daniel Roberts is an editor-at-large at Yahoo Finance and closely covers sports business. Follow him on Twitter at @readDanwrite.

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