Plenty of 'pitting' preceded Romney's profits

Published: Tuesday, July 3 2007 12:57 a.m. MDT

"He was an outstanding recruit with exceptional grades, and he was the very charming, smooth, attractive son of a former presidential candidate," Faris says. "So everybody was bending over backward to get their hands on him."

Faris's flattery paid off. Shortly after Romney left Harvard in 1975, having graduated with honors from the law school and in the top 5 percent of his class at the business school, he began work at BCG.

He approached his consultant job with the complementary skills that had been sharpened during his parallel lives at Harvard. His legal training taught him to ask challenging questions, to play the role of devil's advocate, and to use an adversarial process in an effort to get answers. Business school developed his ability to reconcile conflicting data and differing points of view. It also helped shape him as a leader and team-builder.

Companies nationwide were clamoring to hire BCG's consultants, who analyzed mountains of financial data to lower costs, improve production, and gain market share. In his new job, Romney rapidly established a reputation as a rising star.

But as the 1970s wore on, one rival firm began to eclipse BCG: Bain & Company.

'Mitt had a presence'

In 1973, Bill Bain was a top executive at BCG on track to one day take over the company. Instead, Bain broke away to start his own shop.

Four years later, Bain & Company was one of the nation's hottest consulting firms. A former colleague of Bain's at BCG recommended Romney, telling him, "I don't believe you have anybody better than he is."

Bain remained circumspect. He needed consultants who had the maturity and seriousness to win the confidence of experienced executives running big companies.

But during their interview Romney impressed Bain, not just by how he responded to questions, but also by the ones he chose to ask.

With all of his success at BCG, Romney asked Bain, how had he found the nerve to leave?

"It was a flattering question," Bain says now, still impressed despite the distance of three decades. "Mitt had a presence so that you took him seriously, but he acted as if he took me very seriously."

In 1977, Romney jumped to Bain & Company.

Most consulting firms at the time produced thick reports, made recommendations, and then moved on to other clients. The Bain way started with "strategic audits." Bain consultants compiled information from unconventional sources such as former employees and competitors, and looked at it from every possible angle.

Then came the hard part: persuading companies to adopt new strategies. Bain consultants worked closely with clients until the recommendations were put in place.

Romney embraced the firm's approach, and rose quickly. At one of his first clients, Monsanto Co. of St. Louis, Romney learned the technical aspects of the chemical business so thoroughly that he sounded as if he had gone to engineering school instead of business school, says Ralph Willard, the senior Bain partner on the account.

After two visits, Willard says, Monsanto's executives were bypassing him and going directly to Romney. The then-chief executive of the sprawling chemical company, Jack Hanley, says Romney was that good.

"Mitt's a very quick study," Hanley says. "Every contact we had, I came away impressed."

Bill Bain, meanwhile, was exploring a new frontier for his own firm — and for Romney.

His notion: combining Bain's consulting expertise with investments in promising or underperforming firms. Bain consultants found that the stock prices of its clients had risen significantly higher than those of competitors. While Bain & Company had been well paid, Bill Bain and his senior partners decided they were reaping only a small share of the value of their work.

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