America: Failure by Design

Oct 8, 2013 | Ideas, Ideas for Organisation, Ideas for Strategy, News & Updates, Sri Lanka

President Obama – who one month ago threatened to unleash the might of US military power on Syria – now stood before the world’s media, powerless to prevent the second government shutdown in US history. The current crisis is a consequence of an outdated organisational model that can no longer function in today’s political climate. In a similar way, there are many outdated models in Asia designed for eventual failure. The crisis in the US demonstrates that power and wealth alone are not enough to guard against irrelevance. Our organisational models, be it political or business, must remain open to redesign if we want to stay relevant and thrive in the modern age.

Organisational Models have Expiry Dates

The US model of government was designed to provide checks and balances to ensure that no branch of political authority would ever have unbridled power. But the founders of the US never foresaw the day of 24/7 media coverage; that to be elected to power, you need to raise nearly US$1 billion for sufficient airtime; that to be ‘relevant’ you have to be good at giving sound-bites regularly to undermine your opponent rather than focus on developing sound policies quietly for the long term. In other words, the current malaise is due to an outdated design that can only be resolved if both of the major political parties, come to a consensus to redesign the political system so as to govern in a sustainable way, with responsibility and not focus on winning elections and the airwaves. But as the crisis demonstrates, this is almost utopian as no party wants to compromise. On the 1st of October, when the US government began its shutdown, China – the rising power from across the Pacific – celebrated its national day. For all of America’s ingenuity, our generation is witnessing the decline of America as a political power. The US, by virtue of the existing model of governance will probably become another Italy, full of incredible entrepreneurial talent but saddled with a political system that can no longer produce the solutions needed for today and the future.

While America goes on inflicting damage to its own international standing, another global institution – one far older than the US – the Roman Catholic Church is embarking on a significant organisational redesign in order to make it more responsive. Pope Francis – upon his election as leader of the Church – appointed eight Cardinals (Cardinals are the highest ranking prelates in the hierarchy) representing different regions from the world to advise him on how to reform the church’s organisation. In a wide-ranging interview with a leading Italian publication, La Repubblica, Pope Francis provided clues as to how he intend to reform the scandal-plagued church by strongly criticizing the goal of the existing structure as ‘vatican-centric’ which was at times led by ‘narcissistic leaders’. The current structure, Pope Francis declared, is no longer relevant for the reality of the Church and needs to be changed. At the conclusion of the three-day meeting between Pope Francis and the eight Cardinals, the Vatican announced that one of the most likely changes would be the rewriting of the constitution, Pastor Bonus, which guides the governance of the church. Pope Francis understands that inspiring spiritual words can only go so far. He knows that real change can only be achieved by redesigning the organisation so that it will be stripped of unnecessary things and become an effective servant once again, inspired by its original intent.

Narcissism, the cause of all downfalls

Corporate America, too has been distracted by another form of ‘narcissism’, the opinion of Wall Street. The need to produce higher profits and a better share price have resulted in shorter tenures for CEOs. Quarterly reports are now watched like scores on a baseball game with many analysts passing judgements like commentators on the pitch. But unlike a baseball game, managing turnaround in any large corporation is difficult and requires time. This has forced companies like Dell to go private in order to restructure itself and emerge as a stronger force again. In a similar way, even though Microsoft tripled its revenues under the tenure of Steve Ballmer, its share price has never reached the heights as seen during the reign of Bill Gates. From a fund-raising channel, the stock market has become the beast which undermines sustained and sensible leadership. This trend has affected Asia too, and a number of businesses in the region are now seriously debating the merits of being listed on the stock exchange.

In Asia, we paid the price once for our ‘narcissistic ways’ during the crisis of 1997. The thought then was, this is Asia’s moment and nothing can go wrong. So we allowed the cheap credit to spread and welcomed the investments, even though there was no way that anyone could pay for it. In the end, the ’97 crisis happened, and it forced many Asian economies to restructure. Millions of people lost their jobs, even governments were overthrown. Indonesia, for example, was one of those countries which experienced tremendous change, the Suharto dictatorship fell and the country had to accept an IMF bailout before it could recover. But now that the growth is back, many Asian organisations seem to be forgetting about this painful episode and taking growth for granted. This is dangerous because if we do not evolve our organisational models again, we could be setting ourselves up for another fall.

Lessons from America for Asia

If the largest global economy with some of the brightest minds in the world can fail like this, then Asian organisations must stay vigilant, remain humble and evolve our organisational models so as to achieve sustainable success. Based on Consulus’ work with a variety of Asian organisations, here are three ways on how you can evolve your model and redesign it to remain effective:

1) All organisations need to schedule a regular review

All organisations should conduct a thorough study on how they exercise power and leadership at least once every decade. The review should be done with a clear reference point, the purpose of the organisation and its goals. From there, it is then necessary to do an in-depth study of how people are participating or receiving the services needed. This study, should also identify the roles of leaders at different levels in terms of how they exercise leadership and service to the customers or constituents.

The problem is, many Asian organisations assume their models will always be relevant so they do not plan periodic reviews to assess effectiveness. But over time, due to the need to protect one’s interests, people always tend to find some ways to introduce extraneous rules and frameworks that protect and guard their own interests. These creeping ‘weeds’ of new rules and policies, once they are not ‘trimmed’ through a scheduled and objective analysis, eventually blocks out the air and light which has inspired the growth thus far. This is what is happening in the US, from health-care reform to gun-control, politicians are able to game the system so well – in order to protect interests groups – that people are losing their faith in the system. Therefore it is necessary to acknowledge that it is human nature to protect your own interests. So the organisation must set up mechanisms to act as a counter-weight against the interests of different groups in order to establish a viable common space to encourage growth again.

2) Too many cooks really do spoil the boil

The next challenge is making sure that you design a model that does not have competing centers of powers. Because you might want to appeal to the enlightenment of the human mind but you are also setting up the stage for confusion and reckless competition. This is what is happening in the US; even though more than 700,000 federal workers will be out of work; even though the health-care plan was passed through legitimate means; their competing power centers prevents each other from arriving at a breakthrough as it has encouraged political competition to rise to unsustainable levels.

This is an important lesson for Asia to take note, that in setting up a system for longevity, it is critical to design a process that allows one clear center to lead. Many Asian organisations have competing centers too, primarily in family-run entities. Titles do not mean a lot in in this part of the world because in many situations, real power is usually in the background. Asian leaders must develop institutional practices that will trust one leader to fulfill his or her term. Asia can ill-afford to adopt the acrimonious format of US politics as this slows down development. China’s rapid growth is in part due to the Communist Party’s ability to structure a predictable and peaceful transfer of power. It is not a democratic model, but it helps to reduce uncertainty and it enables their institutions to plan for the future. Consider this, President Obama has spoken a lot about improving America’s aging infrastructure but China, a young industrial power is several years ahead of the US in that endeavor. Anytime, when you need to use rhetoric to argue for something sensible then something is really wrong. So President Obama is right, but the system in place does not allow the most powerful man in the world to do his job.

3) Develop leaders with a shared purpose

In the long run, the cause for decay in most organisations starts from how they have groomed their leaders for succession. If leaders can only rise by competing and tearing each other down, then this eventually becomes the only way to run the organisation. In a more competitive environment, it is actually more fruitful if leaders know how to build teams, make useful compromises to get things done. Sometimes, doctrine is being used to suppress people rather than provide hope. An organisation fails when it is unable to perform necessary services in a sensible way. When it needs to justify its failed actions by rhetoric and when its actions fail to inspire better ideas.

This is why it is so sad to see where America is going. For a nation of inventors and visionaries, it is now limited by organisational design. Asia now has this opportunity to learn from this experience and develop a different generation of leaders. Corporate America is already showing the way, with Apple, Yahoo and Microsoft all emphasizing the need for leaders who are team players. Microsoft, as a company which has not been known for encouraging teamwork, has even restructured the company to ensure collaboration. This is a significant mindset shift and something President Obama and Speaker Boehner might want to look at if they do not want to be known as the leaders who set America on the track to becoming a failed political state.

Read the full article here.

This article is part of a weekly column called Shaping the World where Lawrence and Shiraz share insights and ideas about building innovative Asian Brands. It is published by one of the leading dailies in Sri Lanka, Ceylon Today.

Lawrence Chong is the CEO of Consulus, an innovation consultancy specializing in helping Asian companies transform their business models to rise up the value chain through business design, organisational development and designing new brand experiences. Consulus’ country representative in Sri Lanka is Shiraz Latiff who is also the CEO/Lead Consultant  of Hummingbird International, a regional knowledge house specializing in coaching, consulting & outsourcing through global partnerships & collaborations. 

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