What is the difference between a bureaucrat and an effective manager?
—Brian Napoli, Medina, New York
Talk about perfect timing. Given recent events, we don’t really have to write a word to answer your question; we only need to point to two examples that say it all. And, we are pointing in the direction of chairman of the Federal Reserve Ben Bernanke and treasury secretary Henry Paulson.
With all the pressure on them, these government officials had every reason to act like your typical rigid, unimaginative bureaucrats over recent weeks. Instead, they demonstrated not just effective management but also exemplary leadership.
Now, you could stay up all night arguing about the merits of what Bernanke and Paulson have done since the economy first started slowing. Indeed, picking apart and criticizing their actions has become something of a national pastime.
You have ideological purists demanding to know why Bear Stearns Companies Inc. wasn’t allowed to go bankrupt, and its executives and shareholders weren’t made to suffer a more brutal flogging. Their share price drop from $160 (around Rs6,400) to $10 wasn’t punishment enough.
You have some members of Congress and advocacy groups demanding to know why, with all that money flying around for a corporate bail-out, the federal government didn’t also pour $30 billion into some kind of homeowner’s rescue fund.
And, you have the usual coterie of pundits putting forth their own hodgepodge of fixes, demanding to know, for instance, why the Fed plan didn’t involve purchasing mortgage-backed securities from government-backed agencies.
Who knows which of these “solutions” would have been better than the Bernanke and Paulson plan of attack, if any. All we know is, their approach worked. It averted an immediate crisis that would surely have had cataclysmic implications had it played out, and it stabilized the financial system of the US, and perhaps the world, at least for the time being.
What is just as impressive to us—and back to your point—are the management qualities displayed in the execution of this feat: courage, swift action and upfront communication.
Sure, these are not the only skills involved in leading effectively. But they are critical at all times and, in a crisis, imperative.
Take courage. If there is one behaviour bureaucrats uniformly shun, and too many managers tend to avoid, it is gutsiness under fire. You’ve seen the drill. Something in your organization blows up—an old product is recalled, or a new one tanks, or whatever. Blame starts flying and the higher-ups start calling for a quick fix.
The bureaucratic types in the crowd immediately go into hiding, fearing that whatever they suggest, especially something bold or creative, will get shot down in the heat of battle. The mere possibility of criticism makes them cower.
By contrast, Bernanke and Paulson, facing flak from every direction, jumped right into the line of fire. Seemingly out of thin air, they brokered the audacious buyout of Bear Stearns by JPMorgan Chase. And, a few hours later, for the first time since the Depression, in a move they surely knew would instigate all sorts of sound and fury, they opened the discount window to investment banks. Talk about...nerve.
Talk about speed: Again, a marked departure from bureaucratic conduct and a hallmark of effective leaders. Some might argue that Bernanke and Paulson waited too long to start adjusting the discount rate but, when they did launch the process, it moved along fast, coming down 375 basis points in the space of six months, with nearly every decrease surpassing the market’s expectations. Noisy concerns over inflation might have slowed the Fed every step of the way; they didn’t. Now, when managers—and, in particular, bureaucratic ones—find themselves embroiled in a crisis, the last thing they usually do is to get out in front with frank communication about what they are doing and why. Instead, they typically huddle in windowless “war rooms”, surrounded by quaking lieutenants, trying to figure out how to silence the barking dogs.
Here’s where Paulson, in particular, showed real stuff. Drawing on the credibility he earned running Goldman Sachs, one of the few firms that has so far managed to escape the credit crisis, he addressed the public frequently and with candour. His message inspired confidence, but stayed firmly anchored in reality. Bureaucrats don’t do that, ever.
Obviously, the economic crisis is not over yet, and only time will tell how right Bernanke and Paulson were, economically speaking.
Managerially speaking, however, there’s no doubt about it. They made all the right moves.
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Jack and Suzy are eager to hear about your career dilemmas and challenges at work, and look forward to answering some of your questions in future columns. Jack and Suzy Welch are the authors of the international best-seller, Winning. Campaign readers can email them questions at firstname.lastname@example.org. Please include your name, occupation and city.
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