The right kind of leadership and the right expertise

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From my previous postings, it may be clear that I have an interest, even a fascination, with the ongoing discussions of job creation  by people in positions of leadership about job creation.  I posted a question on LinkedIn last week asking how many of our senators and representatives in
Washington, DC have a background suggesting experience in creating jobs.  I raised the question because evidence indicating such experience seems thin after more than two years of conversation about economic recovery and the need to reduce unemployment through job creation.

Since several people responded that I raised a good question and nobody seemed able to answer the question, I spent part of my 4th of July weekend reviewing the biographies of each member of the U.S. House of Representatives and Senate, as found at house.gov and senate.gov.  The chart below shows the combined number from both chambers.

In these charts, I use the term “politician” to mean anybody whose indicated background includes only positions involved in negotiating and defining public policy or having no experience other than in those positions since 1980.  I use the term “entrepreneur” to mean experience owning, building, or starting a small business.

The data shows that 300 of 538 current officeholders in the House and Senate are almost equally divided between politicians and attorneys. 111 of our national legislators were businesspeople or entrepreneurs prior to election to public service and five more were accountants (one of which was also an entrepreneur); among the “Other” is one senator who was both a physician and an entrepreneur. Twenty were either physicians or nurses with two among the “Other” identified as dentists and one each of the “Other” an optometrist, a scientist, and a psychologist. Twenty-nine educators, eight engineers (one of which was also an entrepreneur), fourteen farmers, twelve members of the military, eight members of the law enforcement community, four community organizers, three homemakers, and three journalists round out the remaining non-“Other” legislators.  The “Other” include a football player, ordained ministers, community organizers, communications professionals and journalists, an entertainer, a health administrator, an ironworker and a millworker.

My research on leadership suggests that our culture shapes our perception of appropriate roles, practices, and behaviors of leaders.  My research also seems to indicate that the roles that we fill or play in life shapes our individual interpretations of culture, which itself reflects or defines our norms and values, and, therefore, influences how we view the world and how we lead in it.  We can expect, therefore, that
politicians view the world differently from attorneys who view the world differently from farmers and businesspeople and accountants and ministers.

It seems that the question we should ask ourselves, before we cast our votes, is does this person have the worldview and the background necessary to solve our problems and do we need people to develop solutions or are we better served by people whose background is in policy or in law? I realize that the problems of today are not necessarily the problems of yesterday or of tomorrow, but would we be better served by staff who know how to write policy and legislators who know how to fix things and make things work?  It appears that, when job creation and economic recovery is essential, we have too few elected leaders who have ever created jobs or stimulated a local or national economy and an abundance of people who should know how to negotiate and convince and write policies and laws. Does the United States have the right leadership with the right expertise?

The following four pie charts show the breakdown for democrats and republicans and for each of the two chambers. I leave it to the reader to draw your own conclusions.

 

Living beyond our means

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The May 23, 2011 issue of Time magazine presented data on the national debt of 10 major economies. The presentation by Josh Sanburn includes an assessment of the risk of each country defaulting on its national debt,  based on Moody’s credit ratings, which seem to be based first on the portion of debt held outside the country and second on the size of the debt compared to the country’s Gross Domestic Product (GDP). Japan and the United States are the only two of the ten countries not in Europe.

The level of debt combined with the significant foreign ownership, except in Japan, of that debt may indicate a tendency for these Westernized economies and cultures to live beyond our means. As individual nations, we have increasingly chosen to spend more than we earn or produce. At some point, this becomes unsustainable. When the United States may reach that point has been a subject of debate in recent weeks as the U.S. Congress considered, and has now chosen, to raise the debt ceiling.

Reports that the debate has simply been political grandstanding are disturbing. The issue is serious and significant. Resolution is feasible.

The United States and other nations can reduce current spending levels, a decision which is politically challenging in an era of near-perpetual campaigning for national and local elected office. The alternative most discussed is raising taxes to bring budgets more in balance, another politically dicey proposition. A third alternative, which receives little attention, is to raise GDP. The lack of attention may result from the difficulty in achieving this.

Raising GDP requires increased production, which requires increased demand and increased disposable income at a macro level, which, on average, requires the same at the personal level. The months, now years, since the fanfare-accompanied stimulus packages in many of these same economies suggests that legislators and their staffs know how to write legislation but know very little about job creation. They know how to create public-private work programs and how to buoy failing companies until those companies regain sustainability, but seem to know little about stimulating innovation, creation of sustainable jobs, and growing GDP.

Elected representatives in the United States and elsewhere seemingly need a wakeup call in the form of a dose of reality. Leadership does not require legislation or legislative expertise, but effective legislation seems to require leadership. Regardless of ideology, philosophy, or party affiliation, if the current course is unsustainable, then somebody needs to change something. Academically and pragmatically, leaders are agents of change; maintaing the status quo requires no leadership. In representative forms of government, citizens elect other citizens to lead the community or nation in the right direction. All elected representatives assume the role of change agent. The direction and scope of the change is the significant variable.

If we, whoever we may be, do not like our current direction or it’s consequences, we need leadership. We do not need rhetoric or politics or slogans or grandstanding. We need change, feasible, sustainable change. We need leaders who define and collaborate and negotiate a new direction that most of us can accept, if not embrace. Then, those of us who elected people to positions of leadership need to follow, to let our leaders lead, and to hold them accountable to lead as we elected them to do.

Righting the Economy – Economic Reovery

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In the May 30, 2011 issue of Time, Fareed Zakaria presented a compelling analysis of the causes of and solutions to the sorry state of the United States economy. Mr. Zakaria referee to a global recession and, almost simultaneously, made a case for the economic downturn being less than global. Data from an on-going study of leadership with participants from more than fifty countries supports statements by Mr. Zakaria that some countries and economic sectors have suffered less, if at all, during the so-called global recession than others. Leaders hoping to change the current course of the United States economy can learn from these other leaders.

Mr. Zakaria identified five areas for leaders’ attention: manufacturing, retraining, growth industries, small businesses, and immediate needs. Each of these areas is more discussed than acted upon by leaders in the United States. Leaders wring their hands over lost manufacturing jobs and take few effective steps to stimulate the technical, skilled manufacturing jobs that the United States can sustain and that are difficult to send offshore. Leaders have talked about retraining as essential to economic recovery for several decades, but the talk receives inadequate translation into policy and funding to prepare people who lost jobs for new positions in potentially new industries.

Healthcare, especially tourism related to healthcare, media production, and general tourism stand out for Mr. Zakaria as growth industries. While worthy of exploration and strategy development, other industries must have comparable potential. Leaders in the United States should convene public fora to stimulate thinking about and planning for new growth opportunities for the economy. Small businesses are well-known job stimulators. Leaders need to examine and, where possible, remove barriers to small business growth. At some point, perhaps the definition of small business needs to be stratified so that companies that employ ten or twenty people do not have to compete with companies employing several hundred people for small business set-asides.

Mr. Zakaria recognized the need to get people in the construction and housing sectors back to work. Housing, with apparently systemic or systematic problems with realistic valuation and demand, may not be addressable quickly. Infrastructure, on the other hand, with frequent mention of “shovel-ready” projects dating to at least 2008, should be straightforward for leaders willing and able to lead. Roads, bridges, airports, and other infrastructure elements are in obvious need of repair.

The United States taxpayers invested, or authorized through their representatives the investment of, approximately one trillion dollars, give or take a couple hundred billion, to stimulate the economy. Some day we may learn what stimulation actually occurred, if any, and be able to compare where the money went with where long-term gains might have been seen.

Leading in the Economic Recovery

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An ongoing study of leadership roles, practices, and behaviors explores distinctions between individuals who disclose that they personally or their companies were financially harmed in the recent economic downturn and those who indicate that they or their companies experienced no financial harm. The responses vary by country.

Economic harm seems more likely among residents of Europe and North America than in Africa, Asia, Australia, or South America. Respondents from North America to date see 70% of 280 reporting financial harm while residents of Europe to date see 58% of 36 reporting a negative financial impact from the economic downturn. Africa, Asia, Australia, and South America reported 43%, 47%, 42%, and 71% respectively. If leading during economic recovery is different from leading at other times, and residents of Europe and the Americas are more likely to have experienced economic trauma than residents in the rest of the world, then we might expect leadership in Europe and the Americas to look differently than leadership elsewhere as the economic recovery proceeds.

Two somewhat universal themes emerge from research and experience. The first theme is that leaders rise to the surface. People display leadership that is disconnected to the position that they hold. When looking for leaders in organizations, we should not limit our search to people in somewhat traditional positions of leadership. It may be that future holders of positions of leadership come out of the ranks of leaders whose leadership is unrelated to their position. At the moment, these leaders have followers and these followers, rather than organizations or communities, give them power or authority based on the value that they bring.

The second theme is related to this added value. One value that leaders consistently add is a vision for the future that followers find compelling, attractive, and attainable at some level. As much as so many people promote the idea that people are afraid of change, the reality may be that the fear is of specific changes and that certain change is not only tolerable but desired at a visceral level. Leaders communicate a vision for a changed workplace or community or world that a critical mass of followers crave, or at least find positively exciting.

To find the leaders, look for the followers. To understand why they are leaders rather than somebody else, look for the vision.

Job Creation and Recovery

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It appears to me that the public discussion, at least coming out of politicians and the press in Washington, DC, seems to be missing several key points in the encouragement of businesses to create jobs.

For 25 years, I have, among other things, helped companies and government entities to improve productivity and operational and financial performance. For decades, companies have pursued improved productivity, leaner operations, and more efficient processes, with less waste, less rework, and less labor content. Consultants like me have helped government entities and companies in most, if not all, industries tie staffing levels to demand for products and services. I’ve helped insurance companies align staffing with sales activity, policies in force, and claims caseload. I’ve helped an accounts payable department in a government entity tie staffing to incoming bills to be paid. I’ve helped startups understand the timing of when to add staff, add executives, expand offices, and open new offices, all tied to workload.

Of course, I have done many other things but the point is that the mindset of people in the US economy is geared to connecting hiring to increased workload and demand for products and services. For fifty or sixty or more years, companies have been trained to avoid speculative hiring and to not add staff until existing staff is “fully” utilized with an acceptable level of overtime.

Government entities may have the luxury of hiring without corresponding demand for goods and services, but for-profit companies no longer feel they have that option. In this economy, it may not be reasonable to expect companies in the US to hire until demand for goods and services improves. Perhaps that is the intent of the various economic stimulus packages, but the connection, other than providing cash, between stimulating the economy and stimulating hiring is cloudy, perhaps as indicated by the tepid hiring and slow recovery.

If the federal or state governments want to stimulate hiring, the stimulation needs to be directed at demand and not simply at providing funds to act on assumed demand. The large cash hordes in so many companies may be the best indication that cash is available but demand is growing weakly, if at all.