On Wall Street, the cult of McKinsey continues to flourish. Long considered the management consultancy of choice by bankers and brokers, McKinsey's image has been further burnished in recent years by the success of several ex-employees who have made the leap to the securities industry. Prominent among them are Phil Purcell, chairman and CEO of Morgan Stanley Dean Witter and Larry Linden, a partner at Goldman Sachs.
To their names, now add a third: John Cecil, a former McKinsey director who resigned in 1994 to become chief administrative officer of Lehman Brothers. Taking the reins of a deeply troubled institution, Cecil has helped engineer one of Wall Street's more dramatic turnrounds.
Over the past 12 months, Lehman's share price has surged nearly 150%; it now trades at around $77. In March, Lehman reported first-quarter profits of $1.44 a share, a 24% gain from a year ago. During the same period, the firm's return on equity rose from a dismal 4% to 17%. It has been a robust performance across the board; in the first quarter, Lehman even managed to top the league table for domestic M&A business, not considered one of its strong points.
The bull market has clearly given Lehman a boost, but having the 43-year-old Cecil on board has helped it even more. "If he isn't the strongest number two on the Street, he is certainly one of them," says Sally Krawcheck, a brokerage analyst with Sanford Bernstein. Within Lehman, Cecil hasn't been officially designated second-in-command to chief executive Richard Fuld; he simply has his title and a place on Lehman's 13-member operating committee (as well as a six-member committee-within-a-committee that is also chaired by Fuld). For all the accolades Cecil wins from outsiders, he maintains a low profile around the office. "I'd be surprised if a lot of people here even know what he looks like," says one Lehman executive.
Cecil joined McKinsey in 1980 after graduating from Harvard University with a law degree and an MBA (he did his undergraduate work at Princeton). He worked primarily in the firm's financial services practice. One former colleague describes Cecil as "smart, confident, and very analytic, a typical director".
He served as a consultant to American Express when Lehman was still under its umbrella, and even sat in on the 1994 meeting at which Amex CEO Harvey Golub told Lehman executives that the investment bank would be spun off. Later, Cecil found himself thrust into the role of mediator when relations between Fuld and Lehman's managing partner, the late Chris Pettit, began to fray.
At a firm with no shortage of personal fiefdoms and inflated egos, he was an outsider, assigned a most unenviable task: cutting costs and cleaning house.
With Cecil providing the strategic blueprint, Lehman has exited the retail business, dropped its commodities arm and begun to focus on establishing a stronger presence in high-yield securities, derivatives, and emerging markets.
"John isn't loud, he isn't forceful and he isn't a cheerleader," says one insider. "He did not tell people how to run their businesses, he just gave them the tools to do it." Says Krawcheck: "He has put this firm on the financial straight and narrow."
At a time when even the premier bulge-bracket houses are considered potential merger candidates, Lehman, a notch below them, is given little chance of surviving on its own. Yet Fuld and Cecil have insisted their aim is to keep the firm independent. Most analysts now seem inclined to take them at their word. Mike Steinberger