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John Galt[_2_]
March 16th 09, 03:17 PM

America's monumental failure of management


From Monday's Globe and Mail

March 16, 2009 at 12:00 AM EDT

"If you always do as you always did, you will always get what you always
got." So goes an old saying. And so goes the American economy.

The problem has become the solution. Americans are now getting from
their government what they got from their corporations. The automobile
companies are collapsing because of their short-term perspectives and so
the government has provided one bailout projected to last a few weeks,
and here comes another.

We call this a financial crisis or an economic one, but, at the core, it
is a crisis of management. To understand this, consider the mortgage

How could these mortgages have come to exist in the first place and,
worse, how could they have spread to so many of the bluest of blue-chip
financial institutions? The answers seem readily apparent. Those who
promoted these mortgages were intent on driving up sales as quickly as
possible for the benefit of their own bonuses, the ultimate consequences
be damned. In fact, they sold off these mortgages as quickly possible.
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But how could any serious financial institution have bought this junk -
or, more to the point, tolerated a culture of people too lazy or
disinterested to realize it was junk? That, too, is simple: These
companies were not being managed. They were being "led" - heroically, no
doubt - for short-term spectacular performance. The executives didn't
know, and the employees didn't care.

What we have here is a monumental failure of management. American
management is still revered across much of the globe for what it used to
be. Now, a great deal of it is just plain rotten - detached and
hubristic. Instead of rolling up their sleeves and getting engaged, too
many CEOs sit in their offices and deem: They pronounce targets for
others to meet, or else get fired.


And the new U.S. administration? It rushes in with dramatic actions,
paying out "cash for trash," deeming the movement of massive amounts of
money around the economy, much of it to prop up dying businesses in the
short run. More quick fixes for an economy brought down by quick fixes.

The problem has been evident for a long time. Executive compensation,
the most evident manifestation of this legal corruption of management,
was labelled scandalous by Fortune magazine more than 20 years ago, and
repeatedly ever since, to no avail. While America escalated its love
affair with leadership, its corporate leaders singled themselves out for
increasingly obscene pay packages, all the while extolling the virtues
of teamwork and sustainable enterprise.

Alongside this came all that "downsizing": Fail to make the targets, no
matter how profitable the company remained, and out the door went
thousands of employees, those "human resources." So conveniently called,
in fact, because while managers have to be careful about human beings,
they can dispose of human resources like any other resources.

But at what cost? Rather high, because these people carried out much of
the critical knowledge of their companies, as well as those companies'
hearts and souls. A robust enterprise is a community of human beings,
not a collection of human resources.

We have been told how productive the American economy has been. Well,
check the way productively is calculated: Firing great numbers of
people, and expecting those left behind to carry the load before they
burn out, is productive, indeed - until the longer-term consequences
show up. They have been partly showing up in the massive U.S. trade
deficits. The U.S. economy is collapsing because the American
enterprises - and worse still, the country's legendary sense of
enterprise - have been collapsing.

To get bailed out yet again, the auto companies have to offer plans. No
problem: American companies specialize in making plans. It's the
execution that's been the problem. (Remember those grand auto shows,
with all their exotic cars that never made it to market? That was
"planned obsolescence.") These companies couldn't succeed by doing, so
how are they supposed to succeed by planning? The only thing we know for
certain is that these plans will result in many more layoffs. That's
some way to fix an economy.

What we have is a government that palliates: It provides geriatric
medicine to its oldest, sickest enterprises in a country that requires
pediatric and obstetric medicine for its young and vibrant enterprises,
the ones that create the jobs, not eliminate them.

We hear now about "too big to fail." "Too big to succeed" is more like
it. General Motors has been going slowly and painfully bankrupt for
decades, managerially as well as financially. The new money will only
put off its demise. Americans will have to face this reality sooner or

From where I sit, management education appears to be a significant part
of this problem. For years, the business schools have been promoting an
excessively analytical, detached style of management that has been
dragging down organizations.

Every decade, American business schools have been graduating more than a
million MBAs, most of whom believe that, because they sat still for a
couple of years, they are ready to manage anything. In fact, they have
been prepared to manage nothing.


Management is a practice, learned in context. No manager, let alone
leader, has ever been created in a classroom. Programs that claim to do
so promote hubris instead. And that has been carried from the business
schools into corporate America on a massive scale.

Harvard Business School, according to its MBA website, is "focused on
one purpose - developing leaders." At Harvard, you become such a leader
by reading hundreds of brief case studies, each the day before you or
your colleagues are called on to pronounce on what that company should
do. Yesterday, you knew nothing about Acme Inc.; today, you're
pretending to decide its future. What kind of leader does that create?

Harvard prides itself on how many of its graduates make it to the
executive suites. Learning how to present arguments in a classroom
certainly helps. But how do these people perform once they get to those
suites? Harvard does not ask. So we took a look.

Joseph Lampel and I found a list of Harvard Business School superstars,
published in a 1990 book by a long-term insider. We tracked the
performance of the 19 corporate chief executives on that list, many of
them famous, across more than a decade. Ten were outright failures (the
company went bankrupt, the CEO was fired, a major merger backfired
etc.); another four had questionable records at best. Five out of the 19
seemed to do fine. These figures, limited as they were, sounded pretty
damning. (When we published our results, there was nary a peep. No one
really cared.)

How much discussion has there been at Harvard about the role it might
have played in forming the management styles of graduates who, over the
past eight years, have been running America and what used to be its
largest company? The school is now reviewing its MBA program, but the
dean has made it clear that questioning the case-study method will not
be on the agenda.

In this, we have America's problem in a nutshell: the utter absence of
collective introspection, whether it be the current crisis, the
relationship between the Vietnam and Iraq debacles, even what might have
contributed to 9/11, as well as the way it has been compensating and
educating its corporate "leaders." The country seems incapable of
learning from its own mistakes.

Put differently, the U.S. appears to be in social gridlock. Thanks to
vested interests and their powerful lobbyists, as well as an economic,
individualistic dogma that has been embraced so thoughtlessly, it is
business as usual in America. And beyond: Our planet is becoming as sick
as many of these corporations, yet we are being implored to get back to
consumption. Fix the problem now; continue to forget about the future.
Except this time, we may be consuming ourselves.

No country in the world has been more admired for its capacity to
change, to learn with the times. This remains true of technological
change; but, on the social front, America seems incapable of changing.

Will Barack Obama be able to change that? I hope so. I fear not. A huge
infusion of money may merely stave off the financial crisis while the
management crisis continues to fester, masked by this very money. The
dean at Harvard said recently that "we must be involved ... in fixing
the problem." The U.S. government thinks likewise. How are the
perpetrators of this mess supposed to get us out of it? Maybe the rest
of the world will have to wake up, finally, to the realization that
continuing to follow America's lead may be the worst possible strategy.
Do we really need to continue to get what we already have?

March 16th 09, 04:30 PM
too many govt. regulations of the auto industly , coupled with forced
affirmative action programs and heavy taxes and the imposition of the
NAFTA and GATT treaties are what is hurting these companies

"THE BLACK HAND" is the name of the international
terrorist group that is causing all the problems.