Why Great Institutions Fail

[muse]

Friends, If you are like me, you often find yourself at a loss at making sense of events - It seems unbelieveable that such smart, bright, accomplished individuals who in concert direct institutions, can disappoint and fail as spectacularly as some have - and again, like me, you have found yourself why this be and how it may be avoided, the piece below offers some insight:





Why Great Institutions Fail
27 Oct 2010

Why have a surprisingly large number of great institutions, supposedly impervious to failure, from super banks and mammoth insurance companies to giant automakers recently failed?

Are these spectacular failures cyclical and thus inevitable whether due to God or man?

Or are there more universal explanations? Do governments, irrespective of political basis or party affiliation, suffer from similar symptoms and causes of colossal failure? And how responsible are human nature and man's basest instincts for fame, glory and greed in toppling even the best of institutions?

Expanding a long ago study done on "the Psychology of Military Incompetence" to today's public and private sectors, my analysis of institutional failure has led to some provocative conclusions.

On top of well-understood reasons for failure, three overarching explanations emerged with amazing clarity, relevance and applicability across a wide swath of businesses and governments. The three principal explanations of failure can be categorized as strategic incompetence, arrogance and ideology.

Strategic incompetence, simply put, is what happens when people no matter how smart or experienced, end up not knowing what they are doing, creating destructive levels of bad judgment.

Arrogance exacerbates or accelerates this destructive process especially when the chief executive or leader is insulated from or refuses to entertain alternate views and even contradictory opinions.

Ideology is likewise a cause or symptom of strategic incompetence either by providing an irrefutable yet wrong rationale for action or justifying what a leader intends to do irrespective of fact, realty and logic.

Examples are legion. The most egregious is Congress where incompetence, arrogance and ideology run amok. But Chairmen and Chief Executive Officers Kenneth Lay of Enron, Rick Waggoner of GM and Presidents George W. Bush and Barack Obama represent four of many similar examples explaining why great institutions fail.

Ken Lay's strategic incompetence rested in his vision to make Enron the largest company in the world -- not merely the largest in the energy or trading sectors. His arrogance was fed by his routine selection as a top chief executive officer or the equivalent and a compliant board of directors picked as cheerleaders not overseers. A measure of papal infallibility, Enron style became embedded in corporate ideology. Illegal trading activities and business deceptions accelerated the demise and when Enron disintegrated, it did so almost overnight.

Rick Waggoner's downfall rested in the false premise that GM's prestige and reputation were sufficient for success. Build cars and Americans will buy them irrespective of quality, design or price. Facts didn't matter. That three-quarters of all new car buyers for the next decade are currently 40 and under made not a dent on GM leadership. The company continued to design for the over 55 generation. Under the latest leadership it is unclear GM has learned its lessons -- a cost to the public of $60 billion if the bailout isn't repaid.

The sad tale of George W. Bush's two wars is well known. Seven months into a foundering administration, September 11th became the epiphany that transformed Bush's thinking.

Cajoled, convinced and possibly coerced by Vice President Dick Cheney and other neo-cons into believing Saddam Hussein and Baathist Iraq were the principal enemies, Bush embarked on the ideologically driven view that by imposing democracy in Iraq, the geostrategic landscape of the region would be transformed and become a great victory for the West. With the extraordinary success of first routing the Taliban from Afghanistan, arrogance took hold and the administration became convinced Iraq would be a cakewalk.

As a result, the Bush team expected a short war and short occupation with little need for planning to turn Saddam's autocratic state into a functioning country under the rule of law. The Iraqi army was disbanded; de-Baathification pushed with maximum ferocity; and Iraq exploded. The pieces are still not put back together. Ideology fanned by arrogance led to strategic incompetence of unprecedented scope.

Obama's handling of Afghanistan has followed a similar pathology. Pakistan as the main center of gravity was ignored in practice. Making Afghanistan Obama's war as a means of attacking Bush's follies in Iraq and presenting the candidate as the tough guy strong on defense was judgment at its worst. Unfortunately, the same flaws are obvious in many of Obama's domestic programs and legislation overpowered by the destructive engines of strategic incompetence, arrogance and ideology.

In prior columns, the tragic disfiguration of American politics from seeking good governance to the more craven purpose of winning re-election was identified as one of the main factors in assuring failure. And for too long, strategic incompetence, arrogance and ideology have been dominant in our national DNA both inside and out of government.

An inoculation and cure don't appear to be in sight. But in a future column, analysis of why some great institutions succeed might prove a good first step.

Harlan Ullman is chairman of the Killowen Group, which advises leaders of government and business, and senior adviser at Washington's Atlantic Council.


Harlan Ullman is Senior Advisor at the Atlantic Council, Chairman of the Killowen Group that advises leaders of government and business, and a frequent advisor to NATO

 

[Markus]

Obama's handling of Afghanistan has followed a similar pathology. Pakistan as the main center of gravity was ignored in practice. Making Afghanistan Obama's war as a means of attacking Bush's follies in Iraq and presenting the candidate as the tough guy strong on defense was judgment at its worst[/B].

What is the statement in bold supposed to mean?

Pakistan is center of gravity of what? (Terrorism?)

Is Mr. Ullman (advisor to NATO) trying to tell that Pakistan (and not Afghanistan) should be the center of military operations?

Please correct me if I am wrong.

 

[muse]

Easy Prickly Indian friend, easy -- Muse is not the author of the piece - please attempt to understand events, there is no reason to be so quick to go the gun -- center of gravity of terrorism? yeah sure, whatever floats your boat.

However; keep in mind what the thread is about - Why Great Institutions Fail and keep in mind what Dr. Ullman's studies suggest:

The three principal explanations of failure can be categorized as strategic

incompetence, arrogance and ideology

Do you think your question and the presuppositions behind it can be compartmentalized within incompetence, arrogance and ideology? I think so and urge you to first seek to understand the topic before you shower us with ideas popular among a section of opinion amonst Indian friends when they encounter the word, Pakistan.

Do be a good chap and think.

 

[Markus]

^ I am not pointing anything at you Mr. Muse.

It was a nice article but just that but I am just asking the meaning (and its implications) of that one statement that Mr. Ullman is pointing out.

Nothing against anybody, really.

But I understand that this thread points somewhere else, so I take back those questions, many of them, I now feel are even very disturbing to answer.

 

[muse]

Managing the West's Decline



Is the world balance of power shifting away from the West and moving to India and China? That's what a number of geopolitical sages are discussing in think tanks from Moscow to Beijing to London to Washington.

In a joint SOS piece in the November-December issue of Foreign Affairs, former U.S. Deputy Treasury Secretary Roger Altman and the President of the Council on Foreign Relations Richard Haass, warned U.S. leaders to curb "the current debt addiction -- or global capital markets will do it for them." An age of austerity and draconian belt tightening -- and sudden decline in U.S. power – is upon us. Gridlocked Congress, fiscal train wreck, climbing without a rope, all the stuff of headlines the world over.

The political move to center stage of satirical humorist Jon Stewart with his mass "Rally to Restore Sanity" is seen by some as throwback to the collapse of Germany's post-World War I Weimar Republic.

But where can the United States afford to disengage and leave heavy geopolitical lifting to regional powers? In some key areas, U.S. power remains indispensable for the indefinite future. The Persian Gulf and its huge oil resources are at the top of the list.

North Korea, faced with total economic collapse, is unpredictable and makes a U.S. Army division-plus an indispensable tripwire in South Korea. Everything else is marginal -- and debatable.

America's global military footprint (outside of Iraq and Afghanistan) tops $250 billion a year. There are still 200 U.S. military facilities in Germany 65 years after World War II. U.S. military hospitals for U.S. casualties in transit from Afghanistan and Iraq as an intermediary stage home are important. All else is marginal. If CENTCOM and SOCOM can be in Tampa, Fla., why not EUCOM in Norfolk, Va., where NATO's Atlantic command is based?

World War II hastened the end of the British Empire but it took several decades to manage its decline. The partition of India and the creation of Pakistan in 1947 triggered a bloodbath that took 1 million lives.

There were several more last gasps of empire before a British government decided in October to live within its means, slashing defense to where it could no longer be used to defend the Falkland Islands against another Argentine invasion, as it did successfully in 1982.

In the mid-1950s, British-controlled Aden was the world's largest bunkering port, servicing traffic in and out of the Red Sea and Suez Canal. But in 1967, Britain took another drubbing as it exited Aden, then, a year later, London, under Laborite Harold Wilson, gave up all its commitments and obligations east of Suez, from the canal to the Persian Gulf to Singapore. It took another 10 years to turn over Hong Kong to its original owner.

From Oman, at the entrance to the Persian Gulf, all the way up to Kuwait, Britain kept the peace until 1972 with the British officered "Trucial Oman Scouts" for a total annual outlay of $40 million. The Nixon Doctrine succeeded Pax Britannica in the gulf and the Shah of Iran became America's proxy.

Instead, the shah was overthrown in 1979 and a hostile, obscurantist religious dictatorship has kept the rest of the gulf in psychological thrall ever since.

The French empire unraveled with 16 years of rearguard fighting (1946-54; 1954-62) -- eight years in Indochina, followed by a six-month break before another eight years of warfare in Algeria. World War II hero Charles de Gaulle rode to the rescue and managed decline by putting France on the road to modernity -- with nuclear weapons and a new high-tech vision of the future (that produced the Caravel and the supersonic Concorde).

Is the time at hand for a new leader to manage the decline of the modern American empire? Iraq was clearly an expensive geopolitical illusion, a weird concoction of motives, inspired by neocons who thought they were making Israel more secure.

Precisely the opposite was achieved. Seven years and $1 trillion later, Iran now has more influence in Iraq than the United States. Its agents are also dropping off the occasional million-dollar bundle to keep Afghan President Hamid Karzai's chief of staff sweet and compliant.

Psychologically, Prime Minister Nouri al-Maliki is more beholden to Tehran these days than to Washington. After the United States coughed up $1 trillion it didn't have to fight the Iraq War, Baghdad still has less electric power today than it had under Saddam Hussein.

None of our modern knuckle-headed empire builders, who thought they perceived Israel's interests more clearly than the rest of the country, understood that Saddam Hussein, albeit a cruel dictator, was our best defense against Iranian expansionism.

In 1980, Saddam had taken on the evil empire next door. But Iran's obscurantist zealots used teenagers with golden keys to paradise to walk across Iraqi minefields and a million dead and eight years later, the two gulf giants fought themselves to a Mexican standoff.

The decline of the American empire may be hastened by another war in the gulf -- this time triggered by Israeli and/or U.S. bombs on Iran's nuclear installations. President Mahmoud Ahmadinejad appears to be pushing his luck by moving Iran's frontiers to Israel's borders -- with Hezbollah to the north in Lebanon, Syria to the east and Hamas in Gaza to the south.

Iran's medieval hawks have convinced themselves an asymmetrical gulf war would speed up the end of what they call "American imperial colonialism."

The burdens of a global Pax Americana have shunted domestic priorities off center stage. Long postponed and now increasingly urgent infrastructure projects are pending.

Bridges, roads, railroads, airports (from runways to terminals to air traffic control), schools, hospitals, all have deteriorated to what author Arianna Huffington's new book describes in the title -- "Third World America." Some $1 trillion worth of urgent infrastructure is in arrears.

The once acclaimed Acela Express in the eastern corridor is an embarrassing joke next to the high speed trains of Europe, Japan and China. A bullet train that covers the equivalent mileage of Washington-New York in 90 minutes made its debut last week on China's rapid rail network of 4,617 miles.

At the same time, the United States is awash with unemployed -- pushing 18 million if one includes those who have given up looking and whose benefits have run out. Surely this points to a domestic Marshall Plan for a high-tech renaissance. But the current political rumblings -- from the Tea Party to ultra-liberal kibitzing -- leave little hope for a quiescent phase of historical reawakening.

Meanwhile, China continues to spread its worldwide influence -- without the military. Its new supercomputer just beat America's, with a speed of 1.4 quadrillion operations per second.

Arnaud de Borchgrave, a member of the Atlantic Council, is a senior fellow at CSIS and Editor-at-Large at UPI

 

[Urbanized Greyhound]

Muse sir happens to dig up some really thought-provoking and critical articles .....but hardly anyone's interested in discussing /debating fine points of philosophy here....

Strategic incompetence, simply put, is what happens when people no matter how smart or experienced, end up not knowing what they are doing, creating destructive levels of bad judgment.

Arrogance exacerbates or accelerates this destructive process especially when the chief executive or leader is insulated from or refuses to entertain alternate views and even contradictory opinions.

Ideology is likewise a cause or symptom of strategic incompetence either by providing an irrefutable yet wrong rationale for action or justifying what a leader intends to do irrespective of fact, realty and logic.

all three points are really contemplatible ....

imho : Obama is a perfect example of Strategic incompetence.....a leader in an alien situation who has no clear cut plan for Afghanistan and who is currently oscillating from one plan of action to another.....add this to making Premature announcements and we have a completely ineffectual strategy in a dismal state of affairs ...
this pretty much goes for all his strategies..from his economic ones when he promised to reverse the economic down turn and restore jobs ( blue /white collar ) to the American public , but cannot act upon them effectively with all major companies looking to maximize profits by cost-cutting and so refuse to stop outsourcing even at the extent of completely shifting their base of operations to another convenient country.

Even on his middle-eastern diplomacy in an attempt to win over the muslim world ,he alienated Israel and the powerful jewish lobby.In his far eastern diplomacy ,he portrayed a picture of a weak president to an increasingly belligerent China.



The second point imho to certain extents does more good than harm if controlled .Because in any organization their will inevitably be a variety of opinions and perspectives and it would be impossible and futile to try and accommodate all .However a capable manager /head of organization would spot it very early if he is deviating from his stated objective , and subsequently re-strategize...

subordinates often are at a loss to understand actions of their superior , and at times they have ego clashes. However with rational thinking if strategies are found to be effective , they should have the capacity to accept a particular way , even if they have different opinions .Good and able leadership helps in this respect.


the third point ideology is a real danger...because it involves personal antipathy and emotions in a field which relies on rational thinking and cool and calculative approaches.A person biased because of certain reasons /circumstances has his judgement clouded...case in example Bush junior . Subsequently he would rush into a situation which may be best negotiated or indeed left alone altogether......



(would have commented on each and every point in the article but for time constraints ....with thanks and regards to Muse sir once again )