Financial Bailout and Leading Change

Friday, October 3rd, 2008

I think there is a lot that we can learn from the halting progress on the bailout of the financial institutions in the US.

Speed

Leaders told the American people that the economy was essentially sound. Then, almost on a dime, they sent a new message. “This situation could quickly dump us into severe recession or even a depression.” People wondered, “Where did that come from?” It’s no wonder then that messages to members of Congress from constituents were 100 to 1 against the bailout plan.

One of the lessons: You’ve got to make a compelling case that a change is needed before offering a plan to get out of the mess. People need to feel the urgency or else you won’t get the support you need. More...

Trust

But what if it really is an emergency? Don’t you need to act quickly? Yes, but you need people’s trust in order to do that. President Bush is one of the most unpopular presidents in modern American history. When he tried to influence Congress to support a bailout, commentators said that he “had no juice” to influence Congress and that included members of his own party. Congress’ popularity is also low. So, there appears to be no one who can convince other members of Congress and the American people that something needs to be done.

One of the Lessons: Leaders who attempt to respond to a crisis when people don’t trust them, run the risk of failing big. I find that the elements of trust and confidence are often overlooked when leaders plan to announce a big change. They assume that the current situation will be sufficient to get people’s attention and support. That rarely happens.

Leaking Vessel

Even while Congress held an open hearing with the Secretary of the Treasury, the head of the Federal Reserve, and the head of the Securities and Exchange Commission, they were meeting behind closed doors trying to work out an agreement. This seemed like a good strategy, but then the container sprung a leak. Members of both parties told the media that they were working hard to find an agreement, but that the other side wasn’t acting in good faith – “that other side was making it a partisan issue.” Suddenly, a process that appeared to be making progress was breaking down. And then the two Presidential candidates met with the President to give their opinions. Some say (although it’s hard to know for sure) that Senator McCain’s (R) announcement that he would suspend campaigning to go work on this actually set things back.

One of the Lessons: As change leadership expert John Kotter suggests, you’ve got to “protect the process.” In this instance, there was no one with the clout to make sure that the work got done without people pointing fingers at each other. This was especially troubling since some of the very leaders in both parties were the one’s rushing to the television cameras. A major risky change needs adult supervision.

Emotions

As Speaker of the House of Representatives (D) Pelosi called for the first vote on a bailout bill, she started with complaints again about the other side’s lack of support for this bill. Since the bill could only pass if members from both parties were willing to take some significant personal risk in this election year, she easily could have (or may have) lost some votes.

One of the Lessons: Keep your frustrations to yourself unless you know that a display of emotion will help make a case. Too many leaders kill progress simply because they can’t keep their mouths shut.

Since many other countries are already feeling the effects of this crisis, I suspect that we’ll see similar missteps by leaders around the world. The only possible good news is that we can learn from how others attempt to manage change. That’s not much consolation, but I’m looking for anything these days.

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