Why large Organizations have lousy leaders

I’ve found few exceptions to this observation: Large, hierarchical organizations over 30 years of age are poorly led, a drag on their societies, and unable to adapt. This applies to diverse organizations like Goldman Sachs, J.P. Morgan, BP, General Motors, the US Army, Penn State University, the Catholic Church, many governments, and most political parties. I believe there are structural causes for such pathetic leadership. These institutions have structured themselves to promote only those individuals who will protect and defend them. Potential leaders of change were the impatient, disruptive subordinates who either left in frustration or were expelled for cause. They were heretics and whistle blowers who directly threatened statuses, perks and self-images.

Promotions through middle management are filtered by five criteria (listed in their order of importance): 1. Perceived loyalty to the immediate superior and that superior’s status within the organization, 2. Perceived loyalty to the existing system as defined by senior management, 3. Likability, 4. Seniority, and 5. Apparent competence, usually equated to an accumulation of the system’s merit badges and an absence of accountable failures.

This  promotion process effectively stabilizes the inner workings of an institution and makes relationships among its members predictable and enduring.  Mediocre executives may administer with ease, so long as neither the mission nor the organization needs to change. Those who have reached the top are old (in their 50s or older), cautious, semi-competent administrators, supported by slightly younger, risk-averse subordinates awaiting their turns. The statuses and perks within these organizations go to those who play the game and get along. Subordinates are rewarded for impeding change, covering up organizational failings, and avoiding risks associated with altering the mission or initiating reforms.

Change, innovation, and bold leadership normally come from small, youthful, informal establishments with self-anointed leaders in their twenties or thirties who are intensely focused on their missions and thrive on taking risks. They attract subordinates who provide critical abilities and passionately pursue the institutional objectives. In the early years, a natural filter attracts worthy applicants and discourages most of the others: the organization is risky, ill-defined and without a history of success.

An ugly reality about innovative startups is that most of them fail or become members of the living dead. A venture capitalist friend told it to me this way: “When a successful VC invests in 10 companies, on average two or three of them will succeed and make him a hero. Three will fail. Worst of all, four will become very attractive small businesses which suck up his time.” I will add that the three which succeed will eventually join the next generation of large, hierarchical organizations run by lousy leaders who replace the founders.

An old bureaucracy will be poorly led until its culture embraces uncertainty, youthful bulls, and institutional failures. I can’t see that happening in the military, Goldman Sachs, Wells Fargo, BP, or the Catholic Church; just to mention a few. They will have to fail drastically before they might renew themselves. It’s tragic for society that some businesses and financial institutions have been allowed to become “too big to fail.” They need to be broken up until they’re small enough to fail and then prevented from growing through mergers and acquisitions.

How to select and develop capable leaders

Almost everyone sucks at selecting potential leaders (as opposed to selecting prudent administrators) because they use the wrong criteria. Potential leaders are too young, too aggressive, make too many mistakes, and are usually arrogant and obnoxious. They are out to accomplish something on their own and don’t want to report to others. They aren’t trying to be selected by others; they do the selecting.  Most of them won’t be successful. And few can predict who will and who won’t succeed. It is easy to identify Steve Jobs as a winner after the fact. However, Continue reading

Ethically challenged Jason Conger cheated for headlines and votes

I recently attended the State Candidates Forum sponsored by the League of Women Voters and was disappointed by Jason Conger’s unethical antics.

There were four candidates on the stage, two for the Oregon House and two for the Oregon Senate. Conger is Bend’s Republican incumbent in the House. The moderator posed a series of questions which each of the four candidates was to answer within 90 seconds. Time-keepers raised a yellow card when15 seconds remained and a red card when time was up. On his first answer, Conger talked past the red card; not a significant or unique violation, but a harbinger of what was to come.

While answering a later question, Conger pivoted from a legitimate reply to challenge Nathan Hovekamp about his so called “attack ad” that claimed Conger had voted for special interests. Conger stood self-righteously over a seated and fittingly silent Hovekamp, glaring down at him until his time ran out. Conger’s actions clearly violated the forum rules. The moderator should have told Conger “you’re out of order,” but he said nothing. Conger evidently realized that he could get away with cheating. He immediately blew off the next question and directly challenged Hovekamp a second time, standing over him and glaring down as a long silence dragged on.  Again, the moderator said nothing. Finally, Hovekamp responded by citing two bills Conger had voted for. At that point, the moderator mumbled something about this not being a debate and ended the discussion. I thought I was watching yet another NFL game with substitute referees. (By the way, if you think that Conger’s first challenge was spontaneous instead of calculated, then I have a bridge I want to sell you. Conger may be ethically challenged, but he is clever, and he is not stupid.)

Later on the moderator asked an unintentionally ironic question: “Why is there so little civility in the Legislature?”  He could have looked in the mirror and at Jason Conger to answer it for himself. Civility requires voluntarily adhering to rules of conduct, which are fairly administered by competent moderators, referees, or chairpersons. Civility, like fair play, is undermined when the media, supporters, and general public reward or ignore incivility or cheating, instead of holding the offender’s feet to the fire. The Bend Bulletin, which has endorsed Conger, rewarded him with headlines for his performance and nary a word about his unethical behavior.

Essential qualities of a great President

Two weeks ago, on 60 Minutes, Mitt Romney and President Obama were each asked, “what are the essential qualities of a leader.” Both responded with remarks about a personal vision, which is important but secondary. Their answers provide clues to past triumphs and troubles in the Obama Presidency, and to the tragic course which a Romney Presidency would take. Allow me to explain.

The most essential quality of a great leader is an ability to recruit and effectively manage outstanding people, including his lieutenants. This conclusion was reached long ago by others besides me. For example, in The True Believer, Eric Hoffer says:  “The most decisive (quality) for the effectiveness of a mass movement leader (is)… above all, the ability to evoke fervent devotion in a group of able lieutenants” (p 115). The majority of leaders settle for mediocre and incompetent loyalists because they are easier to manage during a crisis.

Three decades ago, while CEO of Pro-Log, I wrote A Framework for Managing. It describes how quality people are the most strategic and important resources for sustained success and profits are the most tactical. It also explains that subordinates are a small subset of the people whom a top executive must recruit and manage. A chart from that essay is shown in Fig. 1.

No individual, particularly in politics, business or sports can lead by themselves. A college football coach cannot accept any old group of players and assistant coaches to develop a winning team; he must recruit and manage excellent people, including athletic directors and alumni. Complex systems, like football teams, companies or governments, require a network of capable lieutenants who provide information and advice, develop scenarios, and execute plans in specific specialties.  A great leader attracts, selects, and supports the most qualified people available, even those who don’t fully accept his vision or exhibit blind loyalty to his cause. A President who accepts retreads or limits himself to docile loyalists eventually brings disaster. George Bush the younger comes to mind. (By the way, being the “great decider” which Bush touted as important is, at best, a tertiary quality.)

Abraham Lincoln understood the principles of great leadership. His Gettysburg Address and Emancipation Proclamation generated public support for Continue reading

Myth Romney rides again!

Mitt Romney should change his name to Myth Romney. He has amply demonstrated that his entire political world is myth-based rather than data-based. A few days ago I pointed out that Romney hadn’t done his homework on foreign issues. The recently released video of his private fund-raiser, in which he claims that 47% of citizens are (parasites) sucking off the government, demonstrates that he hasn’t studied domestic issues either. This myth about citizens isn’t even original… it comes from Grover Norquist’s book “Leave Us Alone” (published in 2008) in which he divides the public into “takers” and “leave us alones” with a mere handful of undecided. Both Romney and Ryan are disciples of Grover Norquist, who is apparently the brains of the outfit.

Maybe it’s just me, but I prefer a fact-based leader with whom I may disagree to a myth-driven follower who is too lazy, too shallow, or too dumb to use objective information.

Book Review: The True Believer: thoughts on the nature of mass movements

Why would you want to read a 60-year-old book about fanatics and their followers, written by a self-educated itinerant farm-worker and longshoreman? Because, in a mere 168 pages, The True Believer by Eric Hoffer clarifies —more than any other book or social theory that I know of—  the nature of today’s religious and political mass movements, including the Catholic Church, Christian fundamentalists, China’s cultural revolution, Iran, Al Quaeda, the Arab Spring, Birchers, Birthers, and Tea Party loyalists. It is a mental searchlight and a unique pair of glasses, which illuminate and clarify today’s political and religious movements. It is an easily understood yet scholarly work which you will read, re-read, savor, contemplate, and treasure.  In the 1950’s Dwight Eisenhower brought The True Believer and its author Eric Hoffer to the nation’s attention. In 1983, Ronald Reagan awarded Eric Hoffer the Presidential Medal of Freedom.

Eric Hoffer is is so succinct, simple, and profound that writing about him must fail to do him justice. So, I’ll let him speak for himself. Here are a few thought provoking quotes, from among the hundreds of gems in his book.

Faith in a holy cause is to a considerable extent a substitute for the lost faith in ourselves.” (p14) Hoffer makes the case that followers in mass movements are fleeing their frustrated lives.

A man is likely to mind his own business when it is worth minding. When it is not, he takes his mind off his own meaningless affairs by minding other people’s business.” (p14)

“When people are ripe for a mass movement, they are usually ripe for any effective movement, and not solely for one with a particular doctrine or program.” (p16) “all mass movements are interchangeable”… they compete for the same followers.  (p17)  Hoffer’s examples include how readily Communists converted to Fascists and vice-versa. My conclusion is that all extremists are blood brothers. Hoffer points out that the opposite of any extremist is a moderate; extremists frequently change causes, but seldom do they become moderates.

In pre-war Italy and Germany practical businessmen acted in an entirely “logical” manner when they encouraged a Fascist and a Nazi movement in order to stop communism. But in doing so, these practical and logical people promoted their own liquidation.” (p19) Would someone kindly send copies of this book to the Koch brothers and Mitt Romney?

The milieu most favorable for the rise and propagation of mass movements is one in which a once compact corporate structure is, for one reason or another, in a state of disintegration.” (p42)

The vigor of a mass movement stems from the propensity of its followers for united action and self-sacrifice.” (p 59)

Hatred is the most accessible and comprehensive of all unifying agents.”  “Mass movements can rise and spread without belief in a God, but never without a belief in a devil. Usually the strength of a mass movement is proportionate to the vividness and tangibility of its devil. When Hitler was asked whether he thought the Jew must be destroyed, he answered: “No…We should have then to invent him. It is essential to have a tangible enemy, not merely an abstract one. ” (p91)

Finally, it seems, the ideal devil is a foreigner. To qualify as a devil, a domestic enemy must be given a foreign ancestry.” (p93) Sound familiar? Anyone we know who is intensely hated by people who deny his citizenship and charge that he is a Muslim?

That hatred springs more from self-contempt than Continue reading

Sloppy-poppy Romney has not done his homework

It seems to me that Mitt Romney has failed to do vital homework on his foreign and economic policies. Prior to his presidential campaign, he had years of leisure-time in which to travel, study, consult and develop coherent and carefully developed strategies and policies. His performance on the campaign trail is evidence that he didn’t prepare himself. His trip to England and Israel earlier this year was pathetic as evidenced by his ham-handed remarks about the Olympics and the Palestinians. (During his visit to Israel, his old pal Netanyahu effectively endorsed him and has subsequently done his best to embarrass President Obama.)  Romney’s outburst about Libya and Egypt, before getting the facts, was tragic, desperate, and irresponsible for someone who wants to be President. His whining remarks about China smack of merely being against whatever President Obama does rather than stemming from a coherent strategy.

What would he do after he labeled China as a currency manipulator? How would he get them to play by the rules? Institute tariffs? Stop trade? Pay off our debts to them? Send in the Marines? He should be able to answer those questions if he has a strategy; otherwise he is just huffing and puffing for votes.

Certainly China is a currency manipulator. They’ve manipulated their currency and maintained tariffs since I did hi-tech business with them in the 1980s. They have cleverly used duties and currency manipulation to suck manufacturing jobs out of the US. However, I applaud their prudence. The responsibility of the Chinese government is to develop China, not to protect us against our own follies.

For more than two decades Continue reading

Five steps to a healthy Postal Service

Congress should stick to its role as a marginally competent board of directors and stop micro-managing the Postal Service into oblivion.

For 30 years, a meddling Congress has been driving the Postal Service from health into bankruptcy while ignoring the three major drivers of its collapse: Congressional mandates, defined-benefit plans for postal workers, and declining mail volume. Clean up the first two and the declining mail volume could be managed by competent executives and dedicated workers empowered to modernize and expand the system. I’ll suggest a cure that Congress can and should enact.  For details of the financial situation I suggest reading “The Cost Structure of the Postal Service: Facts, Trends, and Policy Implications,” released July 20, 2011 by the Office of the Inspector General

Congress mandates unnecessary services. To subsidize special interests, it compels delivery of 2nd and 3rd class mail at a loss. It limits any increase in the price of stamps to the rate of inflation and ignores more rapid increases in operating costs such as transportation. In 2006, it mandated that the Post Office pay $5.5 billion each year into Federal coffers until 2020, ostensibly to pre-fund health care costs for the next 75 years. (Gross revenues for the post office were only $63 billion in 2011). This last piece of micro-management was passed unanimously by Congress. It should have been obvious to any member with a business background that this would accelerate a financial crisis while doing nothing to solve the long term issues of fiscal soundness. It did, however make Congress look better. Through the magic of bookkeeping, it reduced the Federal deficit by $5.5 billion each year!

Defined-benefit plans, like the health care benefits for retired Postal workers, are intrinsically unsustainable because Continue reading

We cannot save other nations!

My friend Dean is a recovering alcoholic. He uses the support of his family, his Catholic faith and AA to stay on the wagon. He has led a productive and inspiring life for the last 40 years. Long ago he told me this part of his story: “When I was drinking, my family and friends tried to rescue me; I took everything they did to help me and used it to sink lower. One day, I looked in the mirror and said to myself: I don’t want to do this anymore. From that moment on, all their love and support were critical to my recovery.”

His message was an “aha!” moment for me:  We cannot save other people! —no matter how much we care for them or how clearly we see their path to temporal or spiritual salvation. We can help them only when and where they chose to lead themselves.  The idea that we, as individuals or as a nation can “save” other people or nations is one of the most pernicious and destructive ideas floating around. If we could save others, they would be unnecessary for themselves, the ultimate in human degradation!

As clear as this reality is to me, it seems to be a truth hidden from those bent on saving unwilling people or nations.  We are mired in Iraq and Afghanistan, and Continue reading

Grover Norquist and his Pledge of Mass Destruction

Grover Norquist is a 55-year-old, lightly bearded, chubby-faced, bespectacled, lobbyist with a Harvard MBA and an unusually keen sense of humor. However, his control of elected officials is no laughing matter. He is the most powerful Republican in Washington D.C. He is significantly more focused, cleverer, and more dangerous than his fellow conservative lobbyists Karl Rove and Dick Armey. He has labored behind the scenes for three decades to impose his own answer to Ronald Reagan’s silly sound-bite: “government is the problem.” He is systematically crippling government until it is too feeble to interfere with his life. This year, he can push the Federal government off a fiscal cliff!

He quietly manipulates a voting majority of 238 House Republicans and a blocking minority of 39 Senate Republicans, who have signed his Pledge to Taxpayers (see Fig 1). They dutifully follow his orders on taxes and other issues in return for mountains of money, conservative credentials, and Hero awards.

In the budget battles of 2011, his pledge-takers in the House and Senate stonewalled reforms, and accepted a one-year, not-repeatable postponement of fiscal disaster. They increased the legal borrowing limit in exchange for budget cuts and a temporary extension of the Bush tax cuts. Earlier this year, they delivered an ultimatum to the President and to the other members of Congress: either enact their drastic budget reductions and cripple government, or they will deadlock negotiations and let the default alternatives do it for them.

We’re in for a heap-of-hurt unless enough Republicans in the House and Senate repudiate their pledges, throw off Norquist’s shackles, and represent their fellow citizens like responsible individuals. The prospects for wholesale revolt are dim. The November election could make things even worse by putting pledge-taker, Mitt Romney, in the White House.

We will analyze the Pledge to Taxpayers and explore its manipulative and deceptive features. We’ll present a body of evidence that it is a pledge to Grover Norquist and not to taxpayers. We will explain the inducements which persuade rational adults to sign it. We will contrast it to the Congressional Oath of Office which Continue reading

Is government by consensus kaput?

The US Constitution was designed by a diverse group of individuals representing the varied interest of 13 colonial governments. During the Constitutional Convention they negotiated, persuaded, and compromised as individuals and ad-hoc groups coalescing around specific issues. There were no political parties. They reached a consensus among themselves on how to balance Federal and State interests.  It turns out that their group consensus still needed tweaking. After submitting the Constitution to the States, they had to add the Bill of Rights as a necessary condition for ratification by Massachusetts, Virginia and New York.

Consensus is not unanimity
Every system, every regulation and every law is a compromise of some sort. The best compromises are consensus ones, which bring rich pools of perspectives and talents to the decision-making processes and produce trade-offs which sustain overwhelming and enduring public support. That is as true for business as it is for government. Consensus is vastly superior to autocratic fiat or to majority-votes manipulated by party loyalties, special interests, extremist views, or infantile pledges like the one made to Grover Norquist. When consensus decisions are compared to inaction or to special-interest alternatives, they provide more benefits to more people for a longer time.

Consensus is not unanimity; every consensus omits some constituents. There is no way around it. The Constitution left slavery intact to gain the support of Southern States. Nor, is it possible to reach immediate consensus on all issues. Sometimes, it is necessary to act on a timely basis and pick up the pieces later. However, the most effective and self-sustaining government produces enough consensus solutions to maintain overwhelming public support without coercion.

Laws enacted by majority-votes along party lines are not products of consensus, especially when votes are coerced by party loyalties or special interest lobbies. They create significant opposition and reduce the overall support for government itself.

A healthy government has a reservoir of good will, which enables its citizens to accept some clunker laws or expedient decisions as part of a compromise process. When too many win-lose decisions come out of government, a public backlash festers and grows. This is what we’ve gone through for the last 30 years or so, with the active participation of Republicans and Democrats. We’re now at a point where the system itself is in danger, and extremists are taking advantage.

The Constitution specifies a structure for government meant to sustain diversity, negotiations, and compromises. To that end it, it divides the Federal government into three branches, each with defined roles limited by checks and balances. It also defines checks and balances between Federal and State governments and between governments and citizens. It specifies a wall between church and state, which respects and supports a diverse community of competing religious and secular priorities. All of these checks, balances, and walls can be breached by a determined and organized political army supported by a frightened public seeking simple solutions to complex problems. Self-government, at its core, requires vigilance and a respect for compromise by citizens and elected politicians.

Political parties undermine consensus
The Constitution wasn’t designed for a nation with two political armies struggling for control of government. Its framers were overwhelmingly opposed to political parties because they understood, largely from England’s politics, that party loyalties frequently conflicted with the best judgments of individuals and the common good. Even so, they didn’t ban them. Human nature, the desire for expediency, and the comfort of the herd have left us struggling with two major parties since Jefferson’s Presidency.

Both parties, by their very existence, have altered and weakened constitutional government. They make it easier to pass laws with coerced party-line votes, but more difficult to reach consensus before doing so. To enhance their own stability, they gerrymander safe districts which shut out independents and centrists and over-represent extremists. These districts enable party hacks and party extremists to Continue reading