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McKinsey PST – Problem Solving Test
You Need to Prepare for the McKinsey Problem Solving Test
First, I recommend you train on the GMAT test. You could also look at this one, from Kaplan. However, you should know that the McKinsey Problem Solving Test is far more complicated than the GMAT. Then, I recommend you to professionally train for this specific challenge, which is also a great workout for Potential Test of Boston Consulting Group. Finally, the PST is largely above the standards of other consulting firms’ tests that use computer tools to pre-select candidates.
The PST is a particularly daunting challenge for many candidates. It requires serious training in order to pass the selection bar in the first strategy consulting firm, McKinsey. The selection is based on time management, on computational capabilities, common sense and business sense, and logic.
Some candidates think they are being prepared by the selection tests to become MBA students. This is not the case, as the PST McKinsey is one level above in terms of complexity. Preparing for the PST will also be a great workout to validate your level calculation, quantitative reasoning, etc.
Here is an excerpt of 3 questions among the 78 contained in the book of preparation to the PST:
Your client is an Insurance company, XEO, present in +10 countries. XEO has mainly three lines of business (LoB):
1) Motor Damage: covers the costs that might arise if the client/another person’s vehicle happens to be in an accident.
2) Personal Property: protects the client’s home and property. Should there be an accident, home insurance will help to restore the situation to what it was before.
3) Bodily Injury: provides coverage in case the client causes an accident in which another person is hurt. It covers the damages that the client is legally responsible for, and provides a legal defence if someone sues the client for damages.
The CEO wants you to focus on claims management optimization, working on three dimensions: pay-out (amount reimbursed to client), process costs, and customer satisfaction – which is currently assessed too low.
Some additional data: Costs vs. premiums
Which of following statements best describes the demand of XEO’s CEO?
1) XEO needs to invest in claims management and client satisfaction.
2) XEO needs to decrease its claim costs without hurting client satisfaction.
3) XEO needs to decrease its claim costs and improve its client satisfaction.
4) XEO needs to align on best practice in the insurance industry regarding efficiency of its claims process and customer satisfaction.
Which of the following points is NOT a valid reason for justifying potential low performance of XEO in claims management on one of three dimensions cited by the CEO in a given country compared to competitors in this country?
1) XEO’s workforce in the claims department suffers from a higher turnover than competitors in the country.
2) Legal requirement for handling claims require more complex process than in other countries, increasing claims’ costs.
3) XEO’s monitoring system and process is less structured than the competitors on Customer Relationship Management, Commissioning, and process control.
4) XEO’s pay-out level is higher on average than the competitors.
Which of the following points would best explain the potential low performance of XEO in claims management on the costs dimensions cited by the CEO in a given country X compared to XEO’s performance in other countries?
1) Customer satisfaction is higher outside of country X.
2) Legal requirement for handling claims require more complex processes than in other countries, increasing claims’ costs.
3) XEO’s monitoring system and process is less structured than the competitors on commissioning and process control.
4) XEO’s pay-out level is higher in country X.
Answer to question 1
The graph shows that pay-out and process costs are between 60 and 70% of the costs associated with claims: these two demands from the CEO are, therefore, in direct connection with a problem of costs reduction. It, therefore, excludes proposal 4.
– Proposal 1 deals with investments, which the client has not spoken about at this stage.
– Proposal 2 aims at maintaining the customer satisfaction rate, but it is insufficient because this rate is considered too low today.
– Proposal 3 aims to align client performance with good industry practice, which is a possible approach less restrictive than proposal 2.
Answer 3 is exact.
Answer to question 2
Caution: it’s asked to reason over competitors in a given country here.
Also, the question is to find the proposal that does not explain the under-performance of XEO in one of the three dimensions relative to the competition. For example, if a proposal explains one of the dimensions it is valid here.
– Proposal 1 concerns mismanagement of HR, which typically leads to the underperformance of both client process and satisfaction.
– Proposal 3 deals with a lack of performance monitoring, particularly with respect to customers and processes.
– Proposal 4 explains that the pay-out level is superior to the competition.
– However, proposal 2 impacts the competitive panorama and does not explain a poor performance against the competition!
Answer 2 is exact.
Answer to question 3
This time you are asked to reason by comparing the internal performance of XEO across different countries on the dimensions of costs, pay-out and processes cited by the CEO. All things being equal, on the other hand, we consider that the underperforming on a given lever are equal, for example 10% of turnover increase compared to 10% of pay-out increase, otherwise we cannot, obviously, respond to the question.
According to the previous graph, the pay-out amount firstly impacts the management of claims on their cost component.
– Proposal 1 deals with customer satisfaction, which is the only lever not directly related to the costs on the 3 dimensions cited by the CEO.
– Proposal 2 deals with the legal aspects concerning the process. This cost item is less impactful than the pay-out.
– Proposal 3 cites a lack of performance monitoring, particularly with respect to the commission rates and processes. Even combined, these two items are lower than the costs associated with pay-out.
Answer 4 is exact.
To train on the other 75 questions that will lead you to success for all the pre-selection tests, buy the book on the PST McKinsey I propose to you! It will be excellent preparation for you!