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Q: What is
the difference between a bureaucrat and an effective
manager? Brian Napoli,
Medina,
New York
A: 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 at two examples that say it all. And we’re
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 down. Indeed, picking apart and
criticizing their actions has become something of a
national pastime.
You have
ideological purists demanding to know why Bear Stearns
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 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 bailout, 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 the purchasing of
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
United States, and perhaps the world, at least for the
time being.
What’s
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 up-front 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 behavior 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 J.P. Morgan 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 down 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
candor. 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.
*****
Jack
and Suzy Welch are the authors of the international
bestseller Winning (Collins). Their latest book is
Winning: The Answers: Confronting 74 of the Toughest
Questions in Business Today (Collins). They are eager to
hear about your career dilemmas and challenges at work and
look forward to answering your questions in future
columns. You can e-mail them questions at winning@nytimes.com.
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