Financial Times

Bailing out greedy business leaders

By Dinesh Weerakkody

The fact that we live in a global village and globally wired was amply demonstrated when the world got together to celebrate Barrack Obama’s triumph in the US elections on November 5. Today economic changes in one part of the world, affect others.

The fact that financial ministers from around the world got together and collaborated to stabilize the global economy indicates the connectedness of the world we live in. Therefore economic up- and down-turns have a direct impact on the quality of leadership and the contribution of talented people to manage the ups and the down turns. In up and down markets more than ever leadership really matters.

Good leaders have the ability to make good decisions about how to manage in turbulent times. For example Asian firms with the best CEOs will discern what needs to be done, respond quickly, and recover faster than the others.

Leaders also offer stability and continuity in times of change. At the onset of the crisis, many firms were relieved at the bailout where many governments intervened to avert a serious economic crisis and to prevent a total collapse of some of the economies and companies. However, the better firms that were being managed ethically and with high integrity are now realizing that the bailout was not an asset crisis, but a leadership and management crisis. If leaders cannot learn lessons about how to lead effectively with more accountability, more customer focus, more learning, and higher integrity then the financial crisis will only repeat itself in a few years.

Leadership improvement will be the long-term challenge for organizations to grow, focus on the products or services that add most value to their customers and in general learn how to serve the community ethically. Companies also need to build capacity to manage through demanding times and increase capacity to manage disruption and risk. This means slowing down or scrapping projects that don’t deliver value, streamlining processes to be more efficient, increasing productivity of the workforce and make bold and difficult decisions.

Sometimes a bad economy allows managers to face and make tough decisions that might otherwise be avoided or put off and also look for new opportunities. In bad times, weaker companies struggle more than strong ones. Strong companies can become stronger through mergers and acquisitions, aggressively serving customers, and by introducing new products.

The best companies have already prepared for these challenges ahead and can survive while the wind blows over. Good leaders should continue to do what good leaders do: know the business, align business practices to business conditions, get everyone to contribute to business discussions, build the quality of leadership within the company, integrate management practices around a desired culture or capability, and measure success rigorously.

At the same time leaders must ensure that the basic and administrative work is done well by having good technology to manage cost. In principle, people who perform better and give more to the organization should get more back from the organization. Obviously, external factors such as financial markets affect firm success, but managers still make decisions and have control over how to respond to these external conditions.

In general leaders who clarify and make accurate decisions will be more successful and should be rewarded appropriately. The principle of pay for performance exists and therefore practiced in both up and down markets.

Therefore the concept needs to be practiced on both ends to drive performance. Leaders will have to come to appreciate the poor man’s concerns so that they can design policies that support what needs to happen. Likewise we need political leaders who spend less time on their personal and family wellbeing and more time listening and responding to Citizen Perera’s concerns. We need fewer debates on what they can deliver and more candid conversations about what is wrong and how to fix it. And in the midst of an economic crisis that many see as the worst since the great depression in the last century, we need to go beyond bailouts and demand better leadership from both business and government leaders.

In fact, Congressional Democrats in the US are urging Bush to find as much as $50 billion to rescue the big three carmakers. If Bush props them up, every badly run company in the US will beat a path to its door and he would in effect help to bail out a bunch of greedy failed corporate leaders out of their misery.
It’s hard to support that theory now that a man like Barrack Obama has been elected in a country dominated by white people to sit in the most powerful job on earth and to bring about ethical change.

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