Archive for March 2009


The Lessons of Camelot

March 19th, 2009 — 3:43pm

I have been trying desperately hard to stay away from politics. But the global financial crisis has made this impossible: virtually every business issue is singed, if not actually charred, by the blaze of the crisis. So, with the deepest of regrets …

Imagine President Obama, announcing at his press conference today that the US Special Forces had arrested Osama Bin Ladin. I would bet good money that the first question he’d get would be, “That’s great, but what about the AIG bonuses? Haven’t Americans been duped enough?”

Near the end Alan Jay Lerner’s musical Camelot, Guinevere and Lancelot offer to surrender and return to England to face justice. Arthur spurns them; his people no longer wanted justice, he says, they wanted revenge. Right now, the American people want revenge. They don’t want to be told about the contractual law, they want someone on Wall Street to feel real pain, just as they are feeling it. Bernie Madoff would have been a great fall guy, but he refused the part written so perfectly for him and pled guilty quickly. The people at AIG Financial Products Division, seen to be holding the country to ransom and getting away with it, have therefore become the focal point of public rage. They are making GM’s now departing Vice Chairman Robert Lutz (see my post “Marie Antoinette’s Soulmate”) look like a paragon of virtue. Which is why no one rebuked Republican Senator Grassley for calling on them to commit hara-kiri.

If President Obama does not display absolute, visceral rage – merely feeling angry won’t count – he seriously risks losing the people. Don’t believe me? Remember the effect on Michael Dukakis’s presidential campaign of his calm response to the question about what he would do if his wife and daughters were raped and murdered? His calmness, combined with his opponent’s blatantly racist campaign, doomed him. Today, similar conditions are present and the stakes are higher.

If Mr. Obama loses the people, the economy will slide into depression. This crisis in our networked world, as I have argued in earlier posts, was aggravated by a failure to manage as if the network matters. Ergo, resolving it will require tackling the ailings of the entire network, not just one of its nodes. Mr. Obama’s multi-sector bailouts and his plan to totally restructure multiple key sectors is exactly what is needed. But if the American people focus on only one node (AIG) of the network, he has no chance of succeeding. The good news is that as a master politician, he publicly repudiated Mr. Geithner’s position that the bonuses are a fait accompli. Now, he should take this repudiation to the next level and get some Hollywood types to teach him how to act furious on camera.

Substantively, Mr. Obama should outsource the work the AIG group does. These people are smart, but unlike Albert Einstein, they are not unique: The very products they used to peddle required them to work with equally smart people in other institutions. They are not unique! So, it is possible to fire them and simultaneously (this is key) introduce an outsourcing firm to take their place. The replacement firm could be one of the companies that participated in this market, but which currently have no (or minimal) such open contracts. If on top of this, the outsource firm were from a lower cost economy, so much the better: Wall Street can’t complain of being subject to the “market discipline” that they urge on others – and the American people would love the irony. (Incidentally, Wall Street already outsources a lot of work to India, albeit very quietly.)

Additionally, Mr. Obama should publicly and forcefully ask the organizations that provide the credentials job – CFAs, CPAs, NASD Series 7, JD, etc. – essential for a Wall Street to decertify (under morality clauses) those at AIG who brought disrepute to their profession. He should explain to Americans that this will deprive these people of their livelihoods in the world of high finance. Not quite Bernie Madoff’s fate, but definitely the equivalent of banishing Mordred from Camelot. Of course, if these people not only repaid this year’s bonus, but also contributed their entire last year’s bonus to charities that are working to help those who lost their jobs and homes, they might, just might, be able to retain their credentials.

I often tell executives that instead of battling a culture, they should focus on skillfully using the elements of the culture that can help them achieve their key goals. That’s what Mr. Obama must do now. In the final analysis, Arthur lost Camelot, as my teenager astutely told me the other day, because his knights saw peace as boring. He could not hold on to their passions and lost their support.

Mr. Obama must take steps that the Puritans of New England, the gun slingers of the Wild West, the Rhett Butlers and Scarlett O’Haras of the South and the flower people (yes, there are still many of them) of the two coasts appreciate. Stated differently, he must apply the lessons of why Camelot failed. Only then will he be able to fulfill his dream of taking the country back to Camelot for a sustained period of time.

Comment » | Business Environment, Financial crisis, Leadership, Politics

“I Wonder What the Ostrich Sees …”

March 13th, 2009 — 3:45pm

“… when he pulls his head from the sand? Probably a transport barreling towards him on the highway that was built while he wasn’t paying attention.” The Internet tells me that Stephanie Martin-Smith crafted this brilliant observation about the last US elections. It is an equally brilliant descriptor of Fortune magazine’s latest “The World’s Most Admired Companies.” Here’s why: 9 of the top 10, 19 of the top 20, 28 of the top 30 and 41 of the top 50 companies are … American!

I actually think very highly of many of the American companies on the list. I currently work with two of the top ten, and help (or have recently helped) several other companies – which rank high on the industry specific lists. I used to work for American Express and in my book, have praised Hewlett-Packard. But in the eighth year of the 21st century, to think that America has a monopoly on good management is short-sighted, if not ridiculous.

All such surveys have methodological biases. So I checked that out. Fortune essentially started with a list of 1000 large US companies and 400 large non-US companies. A bias no doubt, but minor. Then it asked “executives, directors, and analysts to rate companies in their own industry on nine criteria, from investment value to social responsibility.” This became the basis of the industry specific rankings. Finally, to create the list of the 50 most admired, it asked “4,047 executives, directors, and securities analysts who had responded to the industry surveys … Anyone could vote for any company in any industry.” Here’s one major possible source of bias: who ranked these companies? I could not find any description of their nationalities or domiciles or global experiences.

There are several reasons why this matters, but I’ll stick to the most important: Such biases give us a false sense of security about the quality of our businesses. While I think highly of many of the companies on the list, others simply don’t belong there. When one of them gets wiped out, the deliverer of the blow will be a foreign company whose position it had usurped. The wipe out will be a big surprise to many people because the judges, the editors and the companies themselves were not paying real attention to the lessons of Friedman’s Flat World or Zakaria’s Post American World. Think I’m exaggerating? Remember what Toyota and Datsun did to the US auto industry in the 1980s?

Convince yourself if you don’t believe me. If you are a world traveler and have stayed in top tier (highly profitable, innovative, socially responsible, high quality … use Fortune’s nine criteria) hotels, make your own list of the top five chains. If you fly around the world a lot, try ranking airlines. If you know much about the IT industry, do the same. You’ll end up with several European, or Asian companies (I confess I don’t know much about African or South American ones) that do not appear on Fortune’s lists. Your analysis won’t be statistically rigorous, but it will probably give you greater insights than Fortune’s will.

Comment » | Business Environment, Company Performance

Back to top