AI is reshaping how McKinsey makes money

• AI is changing the nature of consulting work and the way firms charge for their services.

• Consulting giant McKinsey said that a quarter of its fees are now driven by outcomes-based pricing.

• Clients are increasingly looking for support on complex, multi-year projects, the consultancy said.

McKinsey & Company says AI is reshaping what it offers clients and how it charges them.

“We’re doing more performance-based arrangements with our clients,” Michael Birshan, managing partner of the UK, Ireland, and Israel at McKinsey, told reporters at a media event in London earlier in November.

Consultants have traditionally billed clients based on a project’s scope and duration, with a portion of their fees tied to the number of billable hours worked by the team.

Now, rather than saying, “Here’s a scope, what’s the fee for that?” clients are coming to McKinsey and saying, “Here’s the outcome we’d like to get to,” and the fee will be mostly contingent on the performance McKinsey can deliver, Birshan said. Some fixed cost components remain.

About a quarter of McKinsey’s global fees come from this pricing model, he said.

Outcomes-based pricing didn’t start because of AI, but the type of work AI transformation demands suits it, Kate Smaje, global leader of technology and AI at McKinsey, told Business Insider in an interview.

The shift in pricing developed over the past several years as McKinsey started doing more multi-year, multidisciplinary, transformation-based work for clients, though the proportion of 20% “is probably more recent, the last few years,” and they expect it to increase, she added.

Clients who were undertaking “big career bets” appreciated the company saying, ‘Hey, look, your scorecard with your board is our scorecard, and we’re both successful when this transformation works, so let’s share in the upside,” said Smaje.

Success is typically measured against a scorecard that includes factors such as investor targets, hitting revenue or profit goals within a set timeframe, operational measures, and customer satisfaction scores, she said.

AI is changing what clients want from consultants, and McKinsey is “really rethinking the nature of the work that we do,” Smaje told Business Insider.

People may still think of consultants as delivering straight strategy advice, but that now makes up less than 20% of the company’s work, she said. Instead, clients are turning to them for “deep implementation expertise” and multi-year transformation projects that require support across the business from data to workforce policies.

“We’re not a supplier, we’re not a vendor, we’re a genuine partner,” Smaje said.

The changes unfolding at McKinsey reflect the broader shift across the consulting industry, as AI disrupts talent strategies, organizational structures, and business models at leading firms.

Raj Sharma, EY’s global managing partner for growth and innovation, told Business Insider in January that the power of AI agents is forcing his firm to reconsider its commercial model.

Similar to McKinsey, instead of charging clients based on the hours and resources EY might spend on a project, Sharma said AI agents may call for a “service-as-a-software” approach where clients pay based on outcome.

“This is a moment where many of the fundamentals of the professional services model are coming under challenge,” Smaje said in the media briefing. “The fastest learners that are going to win in this space.”

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