The CEO myth in politics

It is frequently a misfortune to have very brilliant men in charge of affairs. They expect too much of ordinary men.

Thucydides

With the dust settled on the last American election, let me return to it and to what are, at least for me, some intriguing facts about its result. First and foremost is what I call the myth of the CEO in politics. In the present economic circumstances, Romney appeared to have the perfect CV. Successful entrepreneur, outstanding manager in difficult circumstances. In one word: the fixer. The perfect CEO in chief. What appeared ideal on paper, however, didn't sway the American public. The second aspect, is what does the whole process tell us about the selection process of our leaders. Not only in the US but elsewhere in the Western World. My belief is that there is a growing disconnect between the qualities necessary to run successful campaigns and the qualities needed to govern and that the selection pool in politics is experiencing a significant deterioration in western democracies.

Before, just one word about the outcome of the US election. A lot has been written about how the Democrats are poised to win every election given the new demographics of the country. The same thing was written after the 2004 election, but in that case for the benefit of Republicans. I don't think either prediction is true. In this election, minority vote went up but...many white voters also stayed at home. On the other hand, voting allegiances of entire ethnic groups can change over time. Prior to the 60's, the party of blacks used to be the Republican one given its anti-slavery past. With Johnson, and the civil rights legislation, the Democrats gained the blacks but lost the South. So things can change in a very dramatic way. Also, Obama is both black and son of an immigrant. Those two characteristics are difficult to replicate at the same time in the future. So sorry to disappoint, but elections will most probably continue to be hard to predict. More worrisome for the US (and the world) is, however, that governing is increasingly difficult in a country where only the presidential election  is won on the political center but even here the outcome is increasingly dependent on base turnout and not on swing vote which, by the way, Romney won handily. Also, in Congress, especially in the House due to the redistricting process of the last 30 years, only a small percentage of elections are truly competitive meaning that most representatives are radicals from both parties and thus hardly prepared (and open) to the art of compromise necessary to elaborate and implement policy. Both factors are an expression of the increasingly polarisation of the political scene and they will make solving the challenges that the US faces much harder to overcome. I will leave it for now as this whole theme deserves a much deeper analysis but don't fool yourselves: Obama second mandate will most probably disappoint the same way the first one did.

Let's go back to the CEO myth. At first glance, CEOs and entrepreneurs (let's concentrate on the successful ones of course) seem to have the skills and the experience to be outstanding Prime Ministers and Presidents. They are familiar with the need to make decisions, are used to manage large organizations and different constituencies (shareholders, employees, etc...) and they have a work rate beyond any reproach. The actual record of CEOs in power is however much less encouraging. Romney, for example, had a much less stellar performance as Massachusetts Governor than he pitched during the election which showed in the huge loss margin against Obama in that same state.

Do we need to speak about the performance of Berlusconi in Italy? That's a quick one. The other example is Pinera in Chile who also received few praises for its performance in office. And what explains this phenomena? As with most complex things in life, there are several factors that can explain each and every one of these cases. Also, governing in modern democracies has become much harder for anyone, CEO or not. The extreme media pressure and exposure and the quick news cycle has meant that the political system is increasingly porous to pressure and there is just no time to make thoughtful (and thus sound) decisions. On this aspect, I always give the example of the Cuban missile crisis where Kennedy spent around 3 days  without speaking to the press. That isolation probably saved the world as it allowed a compromise to be reached with the Russians. Can we expect today that Obama would enjoy the same luxury should a similar crisis occur? I am afraid to answer that one. The demise of ideologies has also meant in almost all western democracies, the political debate is more and not less virulent and personal. The first hundred days in office where a new leader would enjoy respite and almost an open hand to govern without much opposition is today a thing of the past. This all true, but I also believe that although the skills that make a successful CEO can obviously help you in office they are far from sufficient.  

In most well run companies the implementation of decisions is a fairly straight forward process. The CEO decides and it gets executed. The reason is that the incentives in the organization (normally profit related) tend to be fairly well aligned so that there is a coherence in the Principal/Agent connection. In other words, the delegation of authority necessary in every large organization still allows for Agents to faithfully follow the Principal's decision. As anyone that has worked in a large organization knows, this is not perfect (yes, welcome to the brave world of corporate politics) but is still fairly efficient in successful organizations.

Politics is, however, a different ball game. Politicians can have a hard time in executing decisions, as bureaucracies have a life of their own. Just remember that wonderful English show Yes Prime Minister and the Humphrey character and you know what I am speaking about. Politicians have tried to circumvent this problem by having larger and larger appointed cabinets (that tend to replace the higher echelons of public administration in the decision making process) but this doesn't generally solve the problem. In many cases it just gets larger because overtime it completely corrodes the quality of the public administration. In particular in countries where public service tradition and quality was lower to start with, say Southern Europe, this whole issue is even more acute. More than a decision maker in chief, a successful political leader has to be a chief persuader in chief. Authority is derived from perceived political legitimacy which is increasingly a very fickle commodity and in today's world constantly in play. CEOs are used to decide but have very little habit in persuading. In fact, the testorone laden alpha male (or female) typical CEO is much more prone to the silver bullet illusion (that one decision that will change everything) than with the slow grinding process of persuading and gradual and incremental change that is needed to implement policy. What also people tend to forget is that different technical advices can produce the same end result but just have very different political consequences depending on which constituencies you decide to piss off and in which sequence you do the piss off. Running a company is definitely a much more uni dimensional game. The last aspect, is that in politics surrounding your decisions in a coherent political narrative is paramount for success. Thinking that the time in office is just an infinite sequence of decisions which you technically address is I believe the wrong approach but one that is very familiar to the CEO frame of mind. Without an overarching political vision, decisions just get lost in the political fray.

One last word on the qualities necessary to campaign and those needed in government. With the increasing sophistication of political campaigns, none more than in the US, substance (and wisdom) quality can be an impediment to the sound bite world of campaigns. So we might be in the process of increasingly electing the wrong kind of leaders. Also, and this is particularly true in Europe, political parties are increasingly made up of just professional politicians that have hardly known anything else other than politics. The thinness of their resumes and experience are not conducive to sound public policy specially in the framework of the demoralized and diminished quality of public administrations. If one thinks about the immense challenges we all face, this is a truly depressing picture.

  

Democracies and our political systems do need to address urgently how we are selecting our leaders and how we improve the decision making process so that on, average, we get good quality decisions. Unfortunately, CEOs are no silver bullet answer to this challenge. But help is still desperately needed.