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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.

To add one other thing, part of the problem is this whole phony separation between leadership and management. The idea that somehow they are the big shots who do all of the leadership, and it is everybody else who does the scud work as managers. Nobody wants a manager who is not a leader, and nobody should want a leader that is not a manager. A leader who is not a manager does not know what is going on. Also, just one last point, we make a lot of fuss over micro-managing, meddling in the affairs of your subordinates. Macro-managing or macro-leading is a much bigger problem: people who are managing at such an abstract level that they do not know what is going on and that includes all of those bankers that bought all of that mortgage junk.

KM: They are just so disconnected from the business that they just go out there and do a lot which is not connected to which they should be focused on?

HM: Yes, they are disconnected from everything but the bottom-line and the numbers.

KM: You are saying that we should not look to American management. Is there somewhere else that we should look to?

HM: Well, I think that there is a lot of sane management around. There is still sane management in the United States, but unfortunately a lot of it has to be found outside of the publicly-traded corporations, although there are exceptions, because of the pressures. I publish with a company called Berret-Koehler and it is wonderful. I just love the guy who is running it, and they are concerned, they are committed, people are enthusiastic, they belong. So there are lots of organizations like that. Historically that was American management but they have lost it in the big corporations, or at least in most of the big corporations they have lost it. What was called Japanese management, which people forgot about, was still the idea of engaging and working with your employees. Toyota has maintained that and look at how Toyota is absolutely creaming General Motors right now.

KM: What should a manager do, what should an executive do? What is your idea of their role these days?

HM: There are lots of roles for executives, but a big one is to bring out the energy that exists naturally within their own people. They are stewards, to use a term that has been used by other people. They are stewards of the organization. Sure there is a strategy element, and a direction element and a decision-making element but a lot of it, especially in so-called knowledge-worker organizations such as high-tech and so on, is to energize or to bring out the energy that the people have naturally. This means that it is not hard to do if you respect them, and that is a big part of what I think. So, we could use a lot more modest managing. I think that we should close down MBA programs, at least with regards to the training of managers. MBA programs train financial analysts, they train people in the business functions but they are absolutely dysfunctional for management. They distort the practice of management because they take people, and I am not talking about e-MBA programs with older people, I am talking about traditional MBA programs with younger people. They take people who have not managed, or who have hardly managed and then give them the impression that they have taught them how to manage because they did a bunch of case studies. I mean, George Bush did a lot of case studies, and Iraq to him was a case study and he knew nothing about Iraq. He probably still knows nothing about Iraq. So, they are not trained to understand and respect their businesses, they are trained to flip from one case to another and it is very dysfunctional.

KM: How do you train managers then? If that is not a great way, what is the right way?

HM: You take people who are managers, number one, and you build on their own experience. You build on their own natural experience; you have them spend a lot of the time in the classroom reflecting with each other, often in small groups, on their own natural experience. We have developed all kinds of programs, we have a Masters program called the International Masters for Practicing Management, and we have a healthcare version. We have something called Coaching Ourselves where people can do it on their own, inside their own organizations and so on.

KM: We have an MBA president who will be gone in a matter of a few months, and we are going to have a new President in a few weeks although I suppose not until February technically. What advice would you have for the new President of the United States, in terms of how he manages the country, if any?

HM: It is interesting to look at the election campaign actually because if you put ideologies aside and political positions aside, and frankly you should anyways because promises are not worth a damn thing. People should not even be able to run on promises because it is all silly, we are being bribed by our own money or Americans are being bribed by their own money. If you just look at who is capable of managing the Government of the United States, look at how Obama has been governing his own campaign and the people that he is surrounded himself with. Then look at how McCain has been managing his campaign. Obama strikes me, even though both of them have virtually no management experience at all and have not run anything significant, neither did Bush before fooling around with the United States of America although he was in kind of a half-position in Texas. Obama seems to get it. You respect your people, you surround yourself with good people, you are thoughtful to begin with and you engage in dialogue, you encourage dissent and you do all of these things.

KM: Who do you think has been a good President from a management viewpoint? You have seen a lot of Presidents over the last thirty or forty years, has one struck you as being a better manager than the others?

HM: Let me take another sphere, Kofi Annan struck me as being that kind of manager. He came from within the United Nations, he had the respect of the staff, was modest, low-key, got people talking, got them sharing. A Ghanaian friend of mine says that he is very much in the tradition of the tribal elders in Ghana, who used to meet and talk things out, so he is a good example it seems to me.

KM: Then what is a way forward for the U.S.-Canadian economy with all of these troubles? Is there anything that you would suggest is the way forward?

HM: I can only comment on what other people comment on regulation, and all of those things which are obvious. You know, we got it in 1929 or after 1929 that un-controlled markets are dangerous, except we only got it domestically. Now we have to learn again that uncontrolled international markets are dangerous, but we are in a bad situation because the United Nations is not in a position to control things, the international agencies sure as hell are not going to try to impose regulations because globalization has basically been a free-range for global corporations to do whatever they damn well please with nobody controlling them. The American Government was solidly behind that because a lot of those organizations were American, but now it is coming home to roost so there have to be a lot of changes. I am not a big fan of public markets for raising capital in the stock market the way that it is now. I think that it has been horribly dysfunctional, very short-term, and very superficial. Naive and inexperienced analysts come almost dictating to corporate chief executives about what they should be doing, at least with regards to down-sizing and things like that. I think that is absolutely dysfunctional. I think that there are many more long-term, sustainable manners of raising capital through patient capital, patient capital investors perhaps the sort of Warren Buffett type of person, I do not know, through co-ops. There are amazingly successful business co-ops such as Mondragón in the Basque country that has something like eighty thousand employees and is totally a co-op. There are lots of other ways of stimulating and encouraging the private sector or the business sector without this nutty form of capitalism that we are stuck with.

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