Bailout: In Business 101, Wouldn't You Fire the CFO, CEO and Board?

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I spend a good deal of my time looking at business practices. One of the consulting jobs I'm often hired for is to look at a problem and, by using my business process training, recommend a path that will actually accomplish a goal.


In looking at the U.S. bailout process over the last several days, I came to the conclusion that something must be incredibly broken because the process can't work. Even if it passes, the bailout will have such poor support that the result in economic terms might actually be worse.


The reason is trust, or the lack of it. This isn't just between the voters/taxpayers and the government -- this is within government itself. These concerns would be just as valid in business. If you don't trust the person bringing forth the proposal, it won't succeed, regardless of whether people are scared into verbally approving it.


Let's talk about business process in the face of a U.S. government that appears to lack basic controls.


Firing the CFO


Let's think for a moment what would happen in a typical public company if, after weeks of indicating things were basically in reasonable shape, the CFO dropped in on the board and indicated they needed to give him a blank check for more money than the company actually had or the company would fail.


In most (I would argue virtually all) companies, the board would demand the CFO be fired and probably go after the CEO as well. It wouldn't discuss the plan, it wouldn't vote on the plan, it wouldn't accept the plan, and it wouldn't trust the CFO (in particular) and the executive staff to tie a shoe, let alone handle that kind of money.


Yet, in government, there apparently has been little call for a staffing change. The board (the legislative branch of government) proceeded to work on a plan proposed by someone they clearly didn't trust and then after spinning their wheels for days didn't pass anything.


You would think they could have determined that this inability to pass the bailout was evident before they started negotiating and that, before they started to look busy, they would actually work to create an environment where they could agree by first re-establishing trust.


The first step would be to get someone in that the board and the stockholders could trust (I'd recommend Apple board member and CEO of Harwinton Capital Jerry York, because he actually turned IBM around), and then the second step would be to develop a plan. Skipping the first step should always result in failure.


Building Consensus


Boards can often be contentious. In general, I prefer a board that asks questions and sticks to their guns over one that rubber stamps what any executive, no matter how good, wants to do. However, if the board can't come to agreement, that can be a serious problem and often you will get people on a board who spend way too much time trying to dodge their own responsibilities and find others to blame.


When you have a catastrophic failure like the one the United States is experiencing, everyone is partially at fault. The responsibility lies with the board, or legislature, for inadequate oversight, and the operating staff for inadequate management. However, this is like the Titanic heading for an iceberg -- all the initial effort must be put into avoiding disaster because it won't matter who is at fault if the ship hits it, and people seem to be forgetting that the ship could sink.


Once the danger has passed, finding those responsible for the mess and holding them accountable may need to be part of the process, but trying to do that while attempting to build consensus will only assure that consensus isn't built.


If any party, including the chairman of the board (in this case the speaker of the House), works against this process he or she is part of the problem and needs to be removed. The board would, and should, vote for a change so that the person in charge is actually focused on saving the company and not on political positioning or avoiding blame. All are to blame and the focus must be on saving the entity, be it a ship, company or country. Anything else is simply not going to accomplish what must get done.


Wrapping Up


If we had this situation with the U.S. government in any public company, you would typically either have a purge or the firm will fail. We've clearly watched a number of financial institutions demonstrate what can happen if corrective action isn't taken in a timely fashion. The only question that remains for many of us is whether the U.S. Congress and Executive Branch will do what must be done to assure the United States doesn't become an example of truly horrid management practices. Sometimes, to fix something, people need to be replaced.


The bailout process indicates that a lot of people, in both political parties, should, voluntarily or not, find other lines of work.


And I do think that fixing a problem right is vastly more important than fixing it fast. If you don't have the right people, you can't fix any problem right. And that, my friends, is Business 101.