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A Crisis of Management not Economics Add to ...

Karl Moore: This is Karl Moore Talking Management for the Globe and Mail. Today I am talking to Henry Mintzberg, a McGill University professor in Management. Good afternoon Henry.

Henry Mintzberg: Good afternoon Karl.

KM: We are currently living in very turbulent times. What is your take on what has happened over the last six months?

HM: As you may expect, I have a management lens through which I look at these things. I really think that it is significantly a management problem, more than an economic problem or financial problem. If you look at the sub-prime issue, there were two things that were indications of management gone wrong. One is the short-term nature in how people manage. So, write those mortgages as quick as you can, cash in and get the heck out which is a very short-term perspective with people who are mismanaging. This is partly because they do not care about the long-term and partly because they do not care about their own institutions or customers, they care about themselves. Then, they sold these sub-prime mortgages to people who were not doing their homework, who were not managing their companies. If you look at the things that these people bought, it was so absurd. People were not managing their companies. They were not managing their companies, in the sense of realizing how bad these things were that they were buying but they were not managing their companies in the sense that the people in their companies were not sufficiently awake or aware or on their toes, or even remotely concerned to realize how bad this junk was. So everything was short-term and everybody is under pressure and everybody is meeting their targets for each short-term period and so they were not managing. It is a management problem from beginning to end, and I do not think this is a banking problem or a finance problem. I think that this attitude towards management pervades the entire economy, at least for publicly traded corporations that have to meet these ridiculous short-term needs. The idea of share-holder value maximizing stock price is one of the worst things that ever happened to the American economy because maximizing share holder value means pumping up the price of the stock real quick and not worrying about the long-term consequences.

KM: So, if we should not focus on share-holder value then what should we focus on, as managers?

HM: We should focus on building institutions and we should focus on building strong institutions and focus on building those strong institutions through what I prefer to call community-ship. In the United States particularly, they just make such a huge fuss over leadership, it has become an absolute obsession. Everything is leadership, leadership, leadership. It is not coincidental that the more fuss that Americans make about leadership, the worse their leadership is whether it is corporate or political or anything else. Their leadership is dreadful in recent years and with all of this fuss on leadership. Leadership is about individuality, leadership is about me. Even if leadership is designed to encourage and to bring along other people and engage other people, it is still the individual driving it. So, show me a leader and I will show you all kinds of followers and that is not the kind of organizations that we want. That is not the way that we build things up. I think that we need to put more emphasis on what I prefer to call, there is no word for it but I use the word 'community-ship', which is the idea that corporations and other organizations, when they function well, are communities. People care for each other, they worry about each other, they work for each other and they work for the institution and they feel pride in the institution. You get that in young organizations such as Google or others like this because they are growing, they are energetic, but in the older organizations we destroy it. All of the down-sizing has destroyed community-ship; it has destroyed a sense of belonging because nobody knows when they will get fired next. A lot of those firings were not because the companies had their backs to the wall, they were because they were not making quite as much profit as they were before. So, people are managing the bottom line as if it is the top line; they deem how much profit they are supposed to make and then they run around firing people to make it. Of course it has a dreadful affect on the company though. For one thing, the people who are leaving are the ones who carry the culture, they are the carriers of the culture and they carry a lot of the information of the organization. They have been trained for years and they have experience. All of a sudden they are out of the door and all of that is lost. So, you have destroyed the whole sense of community. I think that the worst thing about the American economy today is not what has happened, it is the total depreciation of so many publicly-traded corporations and they are just going down the drain. The American economy is dreadfully weak and the famous American management is absolutely dysfunctional now with the whole emphasis on leadership, on short-termism. Management is dreadful and I would not recommend to anybody anywhere in the World that they copy the style of management and leadership that has become popular.

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