|Headquarters||Boston, Massachusetts, U.S.|
Number of locations
|Products||Management consulting services|
|Revenue||$2.3 billion (2015)|
Number of employees
Bain & Company is a global management consultancy headquartered in Boston, Massachusetts. It is one of "the big three" management consultancies (also known as MBB). The firm provides business advice on issues like mergers & acquisitions, corporate strategy, re-structuring, finance, or operations.
Bain was founded in 1973 by former Boston Consulting Group VP William Bain. In the 1980s the firm grew internationally. Bill Bain later established the investment company Bain Capital. Bain experienced several setbacks and financial troubles from 1987 to the early 1990s. Mitt Romney and Orit Gadiesh are credited with returning the firm to profitability and growth in their sequential roles as the firm's CEO and chairman respectively. In the 2000s, Bain continued to expand and create additional practice areas focused on working with non-profits, technology companies, and others. It developed a substantial practice around working with private equity firms.
The idea for Bain & Company was conceived of by founder William Bain during his time at the Boston Consulting Group (BCG).Bruce Henderson had expected that Bain would succeed him as CEO eventually. However, Bain was frustrated by the wait for Henderson's retirement, the firm's project-based approach to consulting, and the refusal of management to help clients execute on the firm's advice. Bain resigned to start his own consulting firm in 1973.[a]
Mr. Bain started Bain & Company with six former BCG consultants from his apartment in the Beacon Hill neighborhood of Boston. Henderson accused Bain of stealing BCG's clientele. Within a few weeks, Bain & Company was working with seven former BCG clients. This included two of BCG's largest clients, Black & Decker and Texas Instruments, for whom Mr. Bain was responsible at BCG.
Bain & Company grew quickly, primarily through word-of-mouth among CEOs and board members. The firm established its first formal office in Boston. This was followed by a European office in London in 1979. Bain & Company was incorporated in 1985. The firm grew an average of 50 percent per year, reaching $150 million in revenues by 1986. The number of staff at the firm tripled from 1980 to 1986, reaching 800 in 1987. By 1987, Bain & Company was one of the four largest "strategy specialist" consulting firms. Employee turnover was 8 percent annually compared to an industry average of 20 percent. Some of the firm's largest clients in this period were National Steel and Chrysler, each of which reduced manufacturing costs with Bain's help.
In the late 1980s, Bain & Company experienced a series of setbacks. A public relations crisis emerged in 1987, due to a controversy involving Bain's work with Guinness. Tension was growing over the firm's partnership structure, whereby only Mr. Bain knew how much the firm was making and decided how much profit-sharing each partner received. The stock market crashed the same year, and many Bain clients reduced or eliminated their spending with the firm. There were two rounds of layoffs, eliminating about 30 percent of the workforce.[b]
The Guinness share-trading fraud began with Britain's Department of Trade and Industry investigating whether Bain's client Guinness illegally inflated its stock price. Bain had helped Guinness trim 150 companies from its portfolio after a period of excessive diversification, and expand into hard liquor with the acquisition of two whiskey companies, growing profits six-fold. During this time, Bain made an exception to company policy by allowing a consultant to serve as an interim board member and head of finance for Guinness. Bain & Company was not accused of any wrongdoing and no charges were pressed against Bain for the manipulation of the stock price, but having a Bain consultant work as both vendor and client drew criticisms of Bain's handling of a conflict of interest situation.
In 1985 and 1986, Bain & Company took out loans to buy 30 percent of the firm from Mr. Bain and other partners for $200 million and used the shares to create an Employee Stock Ownership Plan (ESOP). These shares of the company were bought at five times Bain & Company's annual revenue, more than double the norm, and cost the firm $25 million in annual interest fees, exacerbating the firm's financial troubles. Mr. Bain hired former U.S. Army general Peter Dawkins as the head of North America in hopes that new leadership could bring about a turnaround, but Dawkins' leadership led to even more turnover at the firm. Bill Bain also attempted to sell the firm, but was unsuccessful at finding a buyer.
Mr. Bain brought in Mitt Romney to lead Bain Capital in 1983.[c] Bain Capital was an independent private equity firm that would buy companies that Bain Capital consultants would improve and re-sell. Many of Bain's partners invested in Bain Capital's funds. Romney was appointed interim CEO of Bain & Company in 1990 and is credited with saving the company from bankruptcy during his one year stint in the position. Romney allowed managers to know each other's salaries, re-negotiated the firm's debt, and restructured the organization so more partners had an ownership stake in the firm. Romney convinced the founding partners to give up $100 million in equity. Bain and most of the founding partners left the firm.
In 1993, Romney organized an election to appoint new leaders the following year, leading to the appointment of Orit Gadiesh as chairman and Tom Tierney as Managing Director. Gadiesh improved morale and loosened the firm's policy against working with multiple companies in the same industry, in order to decrease the firm's reliance on a small number of clients. By 1993, Bain & Company was growing once again and Mitt Romney left to pursue a career in politics. The firm went from 1,000 employees at its peak, to 550 in 1991, back up to 800. The firm opened more offices, including one in New York in 2000. From 1992 through 1999, the firm grew 25 percent per year and expanded from 12 to 26 offices. By 1998, the firm had $220 million in annual revenues and 700 staff.
Bain created two technology consulting practice groups, bainlab and BainNet, in 1999 and 2000 respectively. bainlab was originally founded as Bain New Venture Group. It helped startups who otherwise might not afford Bain's fees and accepted partial payment in equity. In February 2000, Gadiesh was elected for her third consecutive term as the firm's chairman, and Tom Tierney was replaced by John Donahoe as managing director. Around 2000, the firm became more involved in consulting private equity firms on which companies to invest in and collaborating with technology consulting firms. By 2005, Bain had the largest share of the market for private equity consulting.
Bain & Company does not publish its revenues, but it is estimated to have experienced double-digit annual growth in the 2000s. Although the market for management consulting was declining, the Big Three management consulting firms like Bain & Company continued to grow. Bain expanded to new offices in other countries, including India in 2006. Like the other big consulting firms, it began working more with governments. Bain maintained a "generalist" approach to management consulting, but created a separate specialist business unit for IT and technology. In 2012, Bob Bechek was appointed CEO and was later ranked as the most-liked CEO in Glassdoor employee surveys.
Bain & Company provides management consulting services primarily to Fortune 500 CEOs. The firm advises on issues such as private equity investments, mergers & acquisitions, corporate strategy, finance, operations, and market analysis. It also has departments focused on customer loyalty, word of mouth marketing, and digital technology. Most of its consulting is on corporate strategy. Bain is known for having long-term engagements and getting involved in the implementation of their advice. Typically a Bain & Company team may include a vice president that manages the client relationship, a manager to oversee the team, and a number of associates, consultants and interns that perform the analysis.
In 2000, The Bridgespan Group was created to work with non-profits and to facilitate pro-bono work for staff. Later in the 2000s, Bain introduced service packages for specific areas of expertise, such as the supply chain. The firm also became more heavily involved in consulting with private equity firms, advising on what companies to buy, facilitating a turnaround, and then re-selling the company. In early 2006, Bain started selling its "net-promoter score" system, which tracks customer sentiment.
Initially Bain & Company would only work with one organization in each industry, in order to avoid conflicts of interest, but this practice was loosened in the 1990s, after William Bain's departure from the firm. Bain began accepting equity as payment in some instances in the 1980s and later started providing free consulting during a trial period. Compared to other consulting firms, Bain is more focused on proving its worth through immediate stock and profit increases.
Bain & Company claims a typical engagement increases the client's profits by 5-10 times the amount spent on its services. A March 1989 audit by Price Waterhouse found that the market value of Bain's clients increased an average of 456 percent over nine years. The "Bain Index," which tracks the collective stock prices of Bain clients, grew in stock price by 319% from 1980 to 1987, compared to 141% growth in the Dow Jones Industrial Average.
According to Fortune Magazine, Bain asks clients to make long-term commitments to the firm and consultants often become deeply embedded in their clients' daily operations. Sometimes consultants are acting as though, and treated as if, they are a member of the company's own senior management. Often clients become reliant on Bain & Company, who has consultants integrated throughout the company's key functions. Additionally, Bain's deep involvement in the client organization can create conflicts with middle-management, whose jobs are displaced by Bain consultants. This is sometimes called the "transplant-reject syndrome."
Bain & Company is known for being secretive. The firm is sometimes referred to as the "KGB of Consulting." Clients are given codenames. Employees must sign nondisclosure contracts, promising not to reveal client names, and are required to adhere to a "code of confidentiality."
Bain employees are sometimes called "Bainies." It was originally a pejorative term, but was adopted by employees as an affectionate term. According to Fortune Magazine, were Bain & Company a person, "it would be articulate, attractive, meticulously well groomed, and exceedingly charming. It would exude Southern gentility. But it would also be a shrewd, intensely ambitious strategist, totally in control."
Bain is often placed among the top best places to work in annual rankings by Glassdoor and Consulting Magazine. Bain primarily hires MBAs from prestigious business schools, but it is one of the first firms to hire consultants with a Bachelor's degree. The firm is organized primarily by geographic office, with each location acting somewhat independently. It also has a mix of overlapping functional (such as M&A, technology, or loyalty) and industry (financial services, healthcare, etc.) teams. An elected worldwide managing director is allowed up to three, three-year terms under the firm's bylaws. Bain is unusual in the management consulting industry in that new consultants are not required to specialize in an industry or practice area.
Even in these bad economic times, the top three have also been increasingly working with governments around the world - in healthcare, for example, and helping to support struggling and restructuring industries (BCG has been an important adviser on the US automotive rescue).