The December issue of Harvard Business Review highlights the management practices of Robert McNamara. The article says that his career is relevant, because although "it is tempting to think of today's problems as qualitatively different from those that confronted past generations," HBR does not succumb to the temptation. According to the article, "the broader questions about the purpose and the aims of management remain the same."
Nothing fundamentally has changed!
That such a statement can be written by a professor of management and then published by a leading management journal is revealing about the time warp in which management today finds itself: HBR is more comfortable in the world of 1965 than in the world of 2010.
The article points out that McNamara's mantras were "maximize efficiency" and "get the data". Although it notes that McNamara would have done well to make more effort to get more impartial data, it doesn't question that the goal is to maximize efficiency. That's because that's still the anachronistic goal of the traditional management that is practiced in many established organizations today.
Nevertheless we can learn some important lessons for modern management from the career of this man, although the lessons are rather different from those in the HBR article. This may be because the HBR article was written by an academic, Professor Phil Rosenzweig, who has spent almost his entire life in academia and suffers from the handicap of never having worked with McNamara.
As it happens, I actually met and worked with McNamara when he was President of the World Bank. Here is what I learned.
* * *
In the pantheon of the twentieth-century managers, McNamara stands out: dashing, analytical, and quick. President John Kennedy called him the smartest man he’d ever met. After a brilliant career at the Ford Motor Company, of which he became head in 1960, McNamara was the U.S. secretary of defense from 1961 to 1968 and president of the World Bank from 1968 to 1981.
McNamara transformed the World Bank from a small, sleepy, financial boutique into a large, bustling, modern corporation, expanding lending more than tenfold in the course of his thirteen-year tenure. He dramatically increased the World Bank’s role in agriculture and education and opened up new lines of business in health, population, nutrition, and urban development. He articulated a new role for the World Bank in alleviating global poverty, passionately calling attention to the plight of the poorest 40 percent of the world’s population who had been essentially untouched by development lending.
On his arrival at the World Bank in May 1968, McNamara quickly took charge. John Blaxall, a young economist at the time, recalls being summoned to McNamara’s office shortly after his arrival, being handed a stack of annual reports, and asked to assemble multiyear financial statements—something that hadn’t been done before. McNamara penciled in his left-handed scrawl on a white-lined pad the headings that he wanted. The columns across the top were the past five fiscal years, and the rows were the standard balance sheet and income statement items. How soon could he have it ready? Blaxall gave him a date and observed with concern that McNamara carefully wrote it down.
Within six weeks, McNamara had a set of tables covering all major aspects of the Bank Group’s activities, with totals for each five-year period and detail for the past five years. Blaxall recalls McNamara poring over the sheets full of numbers, exclaiming with some animation: “This is really exciting, John!”
McNamara then asked the senior managers in the President’s Council of the bank to fill in the numbers for the next five years for the activities under his responsibility. The immediate reaction was that it couldn’t be done, to which McNamara replied that they should do it anyway—and have it ready within a month.
It is not surprising that the five-year lending plans submitted by the geographical units had little correspondence to the five-year plans prepared by the technical units. And the financial projections put forward by the disbursement department were unrelated to either.
It was at this point, in early summer 1968, that McNamara announced to the senior managers that in the future, the World Bank would have only one sheet of music from which everyone would play. Ensuring the necessary consistency would be a key role of the programming and budgeting department. The game plan was not a narrative but rather a set of standard tables—a bunch of numbers—through which McNamara managed the organization for the next thirteen years.
Some elements of the World Bank’s activities, however, weren’t captured by McNamara’s standard tables. One occasion in particular brought this home to me. This was in the late 1970s when McNamara had agreed to come to one of the staff meetings of the Western Africa region, where I was working. He offered to answer any question.
Being an incautious kind of person, I spoke first and asked him the question that was on everyone’s lips at the time: was there any tension between his policy of pushing out an ever-increasing volume of development loans and improving the development impact of the projects that were being financed by the loans? In effect, was there a tension between quantity and quality?
His reply was chilling. He said that people who asked that kind of question didn’t understand our obligation to do both: we had to lend more money and we had to have high quality. There was no conflict. People who couldn’t see that didn’t belong in the World Bank.
And so the meeting moved on to other topics.
Years later, project audits would confirm the very tension that people were concerned about in the late 1970s. The audits documented that McNamara’s push to rapidly expand lending was accompanied by a declining quality of projects. What’s worse, economic studies also revealed that the push for more lending contributed to a ballooning debt problem in the developing countries, a debt crisis that was a precursor of the 2008 global financial meltdown.
But more fundamentally, what that incident in the late 1970s brought home to me was that this style of management, dazzling as it was, prevented discussion of real issues in the workplace. It was striking to see how McNamara’s internally contradictory statements were made to stick by the sheer force of his presentation. He staked out positions on both sides of the issue. Yes, he stood for quantity, and yes, he also stood for quality, and if there was a quality problem, no, it wasn’t his responsibility. Someone else must be responsible.
When a CEO is talking like that, and very forcefully, it is no longer possible to discuss openly the issue of whether the organization is pushing too much lending out the door.
We can exonerate McNamara of lying when he said that there was no conflict between pushing out more and more lending while maintaining the quality of loans. In his heart of hearts, I’m sure McNamara believed it deeply. He just wasn’t interested in finding out whether it was true. It was a statement of will rather than a statement of fact. He was exhibiting a lack of attentiveness to the truth. He was bullshitting. He was doing it very eloquently and forcefully, but it was bullshit.
The point here is not to pick on McNamara as an individual. The issue isn’t the individual bullshitter. If you had asked any of the other legendary managers like Jack Welch or Harold Geneen a similar question, you would have gotten a similar answer. These managers stayed above the fray by denying that there was an issue, or if there was one, it wasn’t their responsibility.
The issue is institutionalized bullshit. Institutionalized bullshit systematically drives out truth, and truth is what is needed for consistently achieving the complex goal of delighting clients.
When you have a CEO denying that there is any tension between pushing out lending and the quality of the loans and impugning the integrity of anyone who raises that question, it’s difficult for anyone to discuss issues openly. If they do, it is their integrity that will be put in question. They will be seen as rocking the boat and not being team players. As a result, most people go with the flow and lose any possibility of achieving high performance. A few courageous people may speak out about the issue and point to the truth. But those people are rare, and their career in the firm is typically not long.
The level of opaqueness that McNamara epitomized and institutionalized is of course endemic in any bureaucracy. The cover-your-backside routines operate up and down the hierarchy. From a 21st Century viewpoint, the problem is that this kind of institutionalized bullshit isn’t good enough any more.
This is precisely why HBR is wrong when it says that today's management problems are not qualitatively different from those that confronted past generations.
In today's marketplace where the customer is in charge, the mantra of "maximizing efficiency" doesn't work any more. Instead, organizational survival depends on continuously innovating and delighting clients. That wasn't necessary in 1965 because big organizations were in control of the marketplace and the airwaves. You could get by with producing the same old products, just a little more efficiently and occasional upgrades. Institutionalized bullshit was good enough, even if the quality problems that are building up in the background would come back to haunt the firm years later.
Fortunately, that era is over. Quality problems are apparent much more quickly. Today you need a kind of radical transparency where all the insights and possible impediments are systematically revealed and dealt with, if you have to any shot at delighting clients.
This degree of transparency doesn’t happen by having good intentions, or giving speeches, or issuing plastic cards with lists of values or putting up posters with value statements. It happens by instituting practices that systematically expose and remedy issues and impediments.
To learn more about the thirteen practices that establish and reinforce radical transparency, read chapter 8 of The Leader's Guide to Radical Management: Reinventing the Workplace for the 21st Century, now available in bookstores.