Spero Consulting

Archive for December 7th, 2008

Does the Sum of Idio­syn­cratic Deci­sions Mean Anything?

There’s an arti­cle in the week­end edi­tion of The Wall Street Jour­nal, enti­tled, It’s a Done Deal: Mer­rill and BofA. It is sub­ti­tled, “At Thun­der­ing Herd’s Last Meet­ing, Thain Pre­sides Over Sad­ness and Anger.”

In pre­vi­ous posts we’ve already com­mented on a vari­ety of related top­ics, includ­ing our dis­like of mega-​mergers, which con­cen­trate idio­syn­cratic decision-​making and exac­er­bate moral haz­ard issues. (For merger-​related issues, see: Forced Merg­ers? Big­ger Is Not Nec­es­sar­ily Bet­ter!, Big­ger Is Not Nec­es­sar­ily Bet­ter or Idio­syn­cratic and Con­cen­tra­tion Risk, Again.) We don’t think that reg­u­la­tion or reg­u­la­tors pro­vide much over­sight or control.

Per the sub­ti­tle of the arti­cle, it seems that much of the anger was directed at the board (which does make sense since it was a board meet­ing) and we’ve com­mented about failed boards in other posts, too; see The Fail­ure of Boards to Direct and When the Going Gets Tough…Quit for example.

So, in this post, we’re restrict­ing our com­ments to a sin­gle, short para­graph from the arti­cle related more towards a human resource issue.

It seems that Winthrop Smith Jr., the son of one of the found­ing part­ners of Mer­rill Lynch, Pierce, Fen­ner & Smith spoke at the meeting. (In fact, he may have been both sad and angry.) As the reporters note, “Refer­ring to the exo­dus of long­time exec­u­tives at Mer­rill when Mr. O’Neal took over, Mr. Smith said, ‘shame on mem­bers of the board for never ask­ing any of us who loved this firm’ why they were leaving.”

In our youth, we were part of a sim­i­lar exo­dus; there were six junior col­leagues, and five left the orga­ni­za­tion within months of each other. (The other one did, too, but at a later date.) As is always the case, an idio­syn­cratic or per­sonal rea­son could be attrib­uted to each person’s deci­sion to leave: A left for fam­ily, B wanted to move to a warmer loca­tion, C didn’t like the office décor, etc., etc.

If the rea­sons were purely idio­syn­cratic, then the organization’s man­age­ment would be blame­less of poor employee rela­tions. It is even pos­si­ble that in hind­sight, some­one within the orga­ni­za­tion to try to take credit for get­ting rid­ding of the dead­wood – whether jus­ti­fied or not. (Those things are very easy to take credit for in ret­ro­spect and when the peo­ple are gone: “they couldn’t cut it” or other such comments.)

If the orga­ni­za­tion were truly blame­less, then the depar­tures could nei­ther been fore­seen nor attrib­uted to any cen­tral defi­ciency or weak­ness or dys­func­tional per­son­al­ity within the organization.

How­ever, a thought­ful, self-​critical leader should be will­ing to ask: “we’re sure that every­one has their own reason(s), but what are the odds of such an exo­dus with­out a cen­tral­ized or sys­tem­atic component?” Per Mr. Smith, shouldn’t some­one ask: “why are they all leav­ing?” One shouldn’t expect answers from exit inter­views as folks who are leav­ing have lit­tle rea­son to give more than pleas­antries at an exit inter­view, and those who do com­plain are often dis­missed as “some­one with an ax to grind” so their feed­back is never seri­ously con­sid­ered disseminated.

In all likelihood, the prob­a­bil­ity that there was/​is no sys­tem­atic com­po­nent is quite small. We have no inside knowl­edge of whether the Mer­rill board inves­ti­gated their exo­dus or not. If not, we cer­tainly empathize with Mr. Smith as it would then seem to be a case of either benign or pur­pose­ful neglect.

Of course, the pres­ence or absence of a sys­tem­atic com­po­nent doesn’t explain whether the exo­dus was jus­ti­fied or not (from management’s per­spec­tive). That is a sep­a­rate issue which will depend upon whether the observed con­se­quences were intended or not.

We talk about sim­i­lar issues in a few of our essays – par­tic­u­larly, Com­mon Man­age­r­ial Mis­takes in Decen­tral­ized Orga­ni­za­tion and the last part of Strate­gic Con­sis­tency and Man­age­r­ial Dis­ci­pline–and sev­eral posts, includ­ing Insid­i­ous Inse­cu­rity.

We’ll likely update the post when time permits.