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Prisoners of Where We’ve Been

 

While reading one of the many articles about the upheaval in the financial system, I was struck by how Lehman Brothers went bankrupt and Merrill Lynch survived to be acquired, and how a key distinction was the CEOs’ perspectives as a long-time insider (Lehman) vs. a new outsider (Merrill).

 

Albert Einstein is often quoted as saying, “The significant problems we have cannot be solved at the same level of thinking with which we create them.” There are many issues at play in the financial crisis, however the examples of Lehman Brothers and Merrill Lynch illustrate that the “same level of thinking” also can not only keep you from solving the problem, it can keep you from seeing its significance.

 

It’s important for leaders to look outside their own experience and their companies’ own experience, by seeking the input and ideas of their stakeholders – employees, customers, shareholders, etc.

 

Richard Fuld Jr., the CEO of Lehman Brothers, started at the firm as an intern in 1966 and has run it since 1994. The New York Times (Sept. 20) describes him as “a classic Wall Street trader — taking big risks, reaping huge rewards, exuding intensity and demanding loyalty.” Fuld’s “defiance and independence” and view of business as usual, said the Times, led him to misjudge the severity of the crisis and delay seeking a capital infusion.

 

John Thain took the helm of Merrill Lynch last October after the company’s former CEO was forced out. Thain spent his career at Goldman Sachs and the New York Stock Exchange before he was brought in to help Merrill sort itself out after reporting billions in losses, the first step of which was to raise money. He also made a point of reassuring investors, according to the Times, that “We’ve got fresh eyes on these problems, and we’re not wedded to believing this company has done everything right for years.”

 

“We are all prisoners of where we have been. The longer you are attached to a place, the harder it is to see it without rose-colored glasses,” says James D. Cox, professor at Duke University School of Law.

 

So how can we avoid the rose-colored glasses?

 

Create a culture of communication and accountability.

 

Start by making sure everyone in the organization has a clear understanding of its strategy, give them a clear vision of success and clear goals, and give them the skills they need. Then set them loose to find ways to get there, and be open to anyone in the company who raises a flag when things change. How? Reshape the organization if necessary and give them incentives based on the company’s performance.

 

For that matter, be open to those outside the company.  Stakeholders need to have a place at the table, or at least have input. Include customers in planning large initiatives that could affect them.

 

Here are a couple phrases you should be alert to. If you hear them in your organization, an alarm should go off telling you that the organization’s radar is malfunctioning: 

  • “We’ve always done it this way.”
  • “We know better than anyone else.”
  • “We don’t need anybody’s help.”
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