Talking about strategy » competence

The crisis – ethics or competence?

Kim Warren — Fri, 10 Apr 2009 16:15:30 +0000

See http://www.strategydynamics.com/strategy-lessons. Background follows … I have been watching a long debate on the Academy of Management’s discussion list re Management Development about the role of ethics and values [or lack of] in bringing about the current crisis. That debate and many similar comments in the media seem to make a big assumption – that unethical behaviour was the main reason for the crisis, so with more ethical standards the crisis would have been avoided or substantially reduced. But apart from a few egregious examples, it is not clear that most senior execs were deliberately doing things for their own gain that they knew to be against the interests of investors, employees or customers.

An alternative view is that executives were mostly doing things they thought – but incorrectly – to be in the best interests of their organizations and their customers [as well as themselves of course]. This hypothesis is supported by the endless positive assessments of corporate prospects by analysts and other well-informed commentators, right up to the moment things went wrong. Surely all those hundreds and thousands of executives could not have hidden dishonest or deceitful behaviour from the outside world for so long?

If they were not being dishonest or unethical, then, were they in fact being insufficiently competent in the strategic management of their organizations. Government grilling of banking executives, for example, has shown that CEOs were doing things that were widely regarded as skilful, even super-clever, that neither they nor most others realised were dumb until after the event. And the banks were not alone in managing themselves into crisis, or at least into serious trouble – we now have car makers, airlines, ship-building, commercial real-estate, retailers and hundreds of other sectors in difficulties they could and should have foreseen and guarded against.

The screen-cast you will find at http://www.strategydynamics.com/strategy-lessons came about because I had reason to reflect on this question for presentations at business schools in Argentina and Brazil over the last 2 weeks.

Ethics vs. competence

Kim Warren — Sat, 18 Oct 2008 10:25:54 +0000

I took the trouble to post a query on one of the Academy of Mgmt discussion lists, asking what colleagues felt we had failed to do to allow professionals to graduate with the basic strategic incompetence [as well as financial] to bring about the current global crisis. Replies so far seem to focus almost entirely on the issue of ethics – not at all on what those people actually learned or didn’t whilst in our tender care. Whilst the ethics issues are important and challenging, we don’t know how much this contributed to the problem vs. simple incompetence … which is both clearer and more tractable. It seems unlikely that everyone involved in bringing about this crisis knew exactly what they were doing and nevertheless pursued it dishonestly.

As educators, we can’t reasonably be held responsible for immoral behaviour by our graduates, since we clearly don’t condone it!, Society at large might, though, reasonably want to know why we didn’t make sure they got the basic professional skills needed to not mess up on this huge scale.

So .. what should they have understood, why did the education we gave them fail, and what are we going to do differently to ensure the next generation don’t perpetrate the same foolishness?

The banking crisis – again

Kim Warren — Wed, 17 Sep 2008 12:59:01 +0000

I’ve gone on about this before, but it’s gone way, way worse since I last brought it up, so let’s not forget that this whole mess started with gross strategic incompetence on the part of a few dozen CEOs of ordinary banks over-selling high-cost mortgages to more-and-more people who, more-and-more, couldn’t afford it – and egged on by equally incompetent analysts lauding those same CEOs for their foolishness – and then compounded by further incompetence when those toxic loans were packaged and sold on to top-top banks who should have known far better.

Boy do we need some professional standards of strategic management amongst CXOs !