There is a growing tide of frustration and futility with various leadership groups whether they be governmental or business. This is one of the reasons the “occupy” and “Arab spring” movements have come into existence. In my 32 years of adult life, I have noted that great leaders should be applauded as they can make a positive difference. Yet, the number of leaders who do not fit this bill outnumber those who do. And, even when you do have a leader who has potential greatness, his or her efforts may be thwarted or watered down by others who have other agendas.
A major concern of mine is when people who are at the lower end of the economic strata are impacted by poor decisions of leaders or decisions that do not pan out as intended or are not given time to succeed. Oftentimes, the less fortunate pay the price for these failures through corporate downsizings or fewer goods and services. For example, a major reason for the financial crisis is due to poor stewardship at the leadership levels, where banks chased short-term profits via returns on riskier mortgages or mortgage securities. Consistently, across the sequence of events, the risk was misrepresented and understated from lenders fudging numbers to make a loan work, house buyers who did not question the terms of the variable mortgage, banks believing if they bundled bad risks together would be less bad, and rating agencies who stamped AAA ratings on these mortgage-backed securities as they were sold to investors looking for more return.
Yet, when the house of cards fell, tens of thousands of people were let go by a bank to pay for the sins of the leaders. This also happens in merger settings, when companies cannot figure out how to grow organically, so they merge with another entity and take out tens of thousands more. This latter point is important as it is not unusual for leaders to not know enough about their business to understand how to grow it. Or, they do not have the patience to wait for the investment to turn into a profit and abandon the efforts too soon. One of my clients used to say “we step over quarters to pick up nickels here.” So, when these events occur, there is a tendency to go to what they know and cut headcount. In my mind, you cannot shrink to greatness and usually headcount reduction or buying your own stock back are signs of weakness. This is another reason I favor high dividend paying stocks, as I trust leadership less to know what to do with reinvested profits not paid out as dividends.
Unfortunately, the leadership vacuum is worse when we look at governmental leaders. The extreme cases occur in the dictatorships where the leaders go well beyond graft and skim off the top. For example, the fact Hosni Mubarak had US$ 80 billion in wealth should be a telling sign, especially when most of Egyptians live off less than US$ 2 a day. This is a key example of why Arab spring occurred. However, beyond the extreme cases, we can look to the western world for poor leadership.
With the lack of collaborative dialogue and polarized posturing, even the best of leaders have a hard time functioning. Yet, the best leaders choose not to run. I have mentioned before about the sad slate of GOP candidates, when the best one, who believes in global warming and evolution, has no chance of being elected. I am fearful one of the others might win, and given their poor stewardship over issues, this troubles me greatly. So, what we are left with in governmental leadership are people who don’t understand or take the time to understand the subtleties of our complex problems. They miss the interconnections of issues and potential solutions. This is why collaboration is paramount.
In the US, economic disparity is shameful. We have about 50 million Americans living in poverty and the increases in salary and wealth for the more highly paid have dwarfed those who are at the lower-income levels. As noted earlier, the pursuit of profits is more short-term in focus, as we don’t have the patience to wait. Plus, less enlightened leaders pursue profits through cheap labor. This is why textile plants have been closed in England, New England and now the South and those jobs have moved to China and Vietnam.
The answer to this kind of problem (or any problem) is multifaceted, so be wary of panaceas. They do not exist. We cannot create another problem with our solutions. We need to think longer term about our solutions and build a plan to get there. We have to think beyond elections and ask ourselves “what do we need to do?” The answers are less black and white and more shades of gray. So, our leaders have to be good listeners and facilitators of discussion. They cannot be threatened by people asking questions. An old CEO once said “you have two ears and one mouth, use them in that proportion.”
This last point is vital as no one can lay claim to all of the ideas. We have to collaborate and we have to listen to those closest to the problems. In business, this would be customers and those who serve them. In government, this would be the constituents and those who are helping serve them. We need to listen less to the lobbyists who are biased in their views. They are a data point, but that is all they are.
So, with our imperfect people, we cannot expect perfect leaders. But, what we can hope for are leaders who will listen, collaborate and lead. If they do the first two, then they can make up for any shortcomings.