Not every CEO is a paragon of business acumen. I know it’s hard to believe. But it’s true nonetheless.
No, this isn’t a piling-on column about Carly Fiorina’s departure. That would be an I-told-you-so — an ungraceful and mean-spirited exercise. (I did, however, give you a pretty strong hint in my 9/16/2002 epistle.) This column is about a different subject: Why many CIOs, trying to institute a strong, systematic, process-driven approach to IT governance, find more resistance in the executive suite than anywhere else.
We’re going to take the long way round, though. I hope you aren’t in a hurry.
The story starts in 2000. The geniuses then running General Motors (many of whom are the geniuses now running General Motors) struck a deal with Fiat … negotiated, according to one account, over a long weekend … to swap equity and become global partners. The agreement contained a time bomb, guaranteed to win this year’s Business Bizarro Award: A “put option.” It means Fiat can compel GM to acquire it whether GM wants to or not — an inverted hostile takeover. How hostile is it? For $8 billion or so, GM will acquire more than $10 billion in long-term debt. And, even worse, a large pile of Fiats.
How could something like this happen? Unencumbered by actual specific inside knowledge of the players, I’m free to express strongly held opinions about what went wrong, namely:
- Big-concept thinking: It’s an old joke: “The view from 50,000 feet,” translates to “Wrong.” In announcing the deal, the companies listed four opportunities: Reducing materials costs; strengthening both companies’ engine activities; increasing the efficiency of financial services operations; and exchanging technologies and using common platforms.The opportunities were certainly there. But to take advantage of any one of these opportunities, the two companies would have had to collaborate in a complex program of difficult business change. Even with strong leadership, complex programs of difficult business change fail more often than they succeed. This deal’s success relied on four of them. Executed concurrently.
- Falling in love with the deal: As George Patton pointed out about dying for your country (let the other SOB do it), when you do big deals, you want the other side to fall in love with them. The moment you do, you’re doomed.GM is a car company, and the people running a car company should have recognized that we’re talking about Fiat — considered a joke among those who value good cars. But then, General Motors sells the Lumina. So maybe the right lesson comes from HP after all: When a company with a weakness buys another company that shares that weakness, it doesn’t create a strength.
- Attitude of privilege: Privilege, you’ll recall, means “private law.” You can bet GM’s middle managers complete a non-optional due-diligence checklist before any major initiative can move forward. Smart CEOs understand that the due diligence process exists because it’s a good idea. Those who enjoy the experience of privilege figure it’s a good idea for everyone else. Had GM’s executives followed their own process, someone would have raised a hand to say, “Uh … boss? Did you know this is in here?”
Whether GM’s leadership suffers from these defects or some other set of defects instead is uncertain. That it’s just about the worst-performing car company in the world, other than Fiat, of course, is not. Nor is it in doubt that this criticism is entirely gratuitous, irrelevant to the point of this column. So let’s get to it:
Large organizations need strong processes to guide their major activities. If you’re the CIO of a large IT organization, you need them for more than the internal, day-to-day business of IT. IT governance — the means through which the company sets priorities and allocates resources, and which smaller companies can deal with through informal relationships and internal deal-making — needs a strong set of processes and guidelines to prevent chaos once large size happens.
Big-concept thinking and “generic acumen” can wound your attempts to institute strong, systematic processes. The attitude of executive privilege is worse. It’s frequently fatal. Business executives, including many CIOs, by the way, enjoy having the authority to help their friends bypass the unpleasantries of the corporate bureaucracy — the usual synonym for governance processes of all kinds.
More sophisticated executives understand that the best way to help their friends isn’t to help them around the process. It’s to help them work the process.
And even more important, to make sure the process is workable, and works.