Lightweight Oil executives produce worthless disaster plans

This week the executives of the other major oil companies (besides BP) presented their oil spill contingency plans to Congress. Several things were immediately evident: the plans were all grossly inadequate and carelessly done, they were all developed by the same outside consulting firm and they were essentially carbon copies of BP’s nearly useless plans.  In other words, they were empty “cover your ass” documents rather than serious contingency plans. Some people may find this surprising. From my experience, it’s what we can and should expect from the vast majority of large, public institutions because of a universal and deeply flawed process for selecting their leaders.  

Successfully choosing a leader is the single most difficult management job; even for those well qualified and trained to do so. Batting averages greater than 500 (50%) are exceptional for the best of executives choosing subordinates. Boards of Directors seldom have the collective experience or time to conduct effective searches. For the most part, Board members are risk adverse professionals who tend to make safe personal choices, choices for which they can’t criticize themselves or be criticized by others even when they make tragic errors. Avoiding risk generally means promoting an heir-apparent from within (Tony Hayward, Lloyd Blankfein, Pope Benedict XVI) or hiring away a “successful” CEO from a comparable institution. 

This selection process naturally produces carbon-copy executives and empty plans in nearly all large institutions including oil companies, financial companies, tobacco companies, the military, the Catholic Church, etc. These executives are people who successfully maneuvered through mind-numbing bureaucracies while developing attractive “reputations.” Those who are chosen to lead fit a mold: mediocre, short term thinkers with similar work experiences, outlooks, temperaments and personal incentives. Disaster response, creative thinking and fundamental changes are outside their limited range of interests or competencies. 

These executives followed a common path to the top:

1. They always followed orders and met the cultural expectations of their organization. They went along to get along. Early in their careers they were faced with a choice: they could make a difference or get promoted; they chose to get promoted. (Those who attempt to make a difference make waves for senior management and fellow workers who then deal with them as  disloyal; troublemakers, heretics, or whistle blowers)
2. They were tapped for greatness (fast-tracked) by more senior persons early in their careers.
3. They carefully accumulated “status” symbols like degrees, awards, medals, etc.
4. They avoided collecting demerits by taking risks and failing.

Because they share motives and conditioning these executives also share common outlooks and capabilities.

1. They are culturally conditioned to administer their organizations as they are, not to deal with major changes either inside the organization or in the outside world. Their sole power structure comes from those who report to them and their boards of directors, who expect behavior consistent with past behavior. Should top executives initiate major changes, control of their companies becomes less certain and more difficult. (More importantly it risks their personal compensations). Leaders can’t operate in isolation, they need loyal power bases.
2. They see the world from the tribal perspective of their organizations. (Even after they go elsewhere as in the case of Larry Summers and Robert Rubin whose pro Goldman Sachs tribalism has helped to undermine real financial reform)
3. They rightly understand that relative size a marketplace is the dominant factor for survival and for growing profits. They focus almost entirely on that aspect of their business. (Much as a beautiful woman might rely solely on her beauty rather than develop her mind or personality)
4. They consider their leadership positions to be appropriate rewards for years of loyal service.  
5. Their first order of business  (as CEOs) is to gain control of their Boards of Directors.
6. They manipulate their Boards into paying inflated salaries, providing expensive perks, agreeing to golden parachutes and rewarding them with extravagant bonuses for last year’s performance.. (Over the last 50 years entire industries have been thus manipulated so that Boards now justify such parasitic compensation as “competitive”).   

In short, the carbon-copy leaders (Tony Hayward, Lloyd Blankfein, John Sculley, Steve Balmer, etc.) of most major organizations are mediocre bureaucrats, high on tactics, administrative skills, and personal survival skills, but low on strategy and real leadership. They are in their jobs for money and prestige, not to take personal risks or make a difference. In fact, the more executives are paid, the greater the numbers of unqualified applicants who maneuver for those jobs and the less likely an effective leader will be chosen.

We, the public, are foolish for relying on these executives to plan for disasters or to care about the “little people” either inside or outside their organizations, or to expect their boards of directors or stockholders to make essential corrections. These executives and their companies need tough, and far more personal regulations from governments. (OK, we don’t know how to pick government leaders either, but the government is the only tool we have, and to do nothing is to embrace social chaos.)

Some major organizations do have the kind of leaders we might hope for, but they are usually selected by different processes. Some of the best and brightest like Steve Jobs, Bill Gates, Henry Ford, etc. self-select by starting and managing their own organizations. They didn’t bother to accumulate the symbolic qualifiers of leadership like college degrees or work their way through middle management. They pay themselves minimal sallies and bonuses and rely on ownership and corporate success for eventual payoffs. These executives are impatient, driven by ideas, and often ruthless in pursuit of objectives. They repeatedly take risks, even after initially succeeding, which make them unattractive to professional king makers (as demonstrated in the classic ouster of Jobs for Sculley by the professional board of Apple).  

Other competent leaders come from Board searches which select executives of highly successful smaller competitors (minor league managers); executives who’ve been tested in the marketplace, not coddled by corporate culture and size. These executives bring in a different cultural perspective and reach outside the organization to bring in enough other key people to modify the corporate culture and re-energize strategic planning.  

Edwin Lee  6/17/2010

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