HBO has produced a drama focusing on the events behind the 2008 economic crisis. The title, “Too Big to Fail” refers to the nearly fatal infection of the financial services & banking industry. As we know, governmental intervention was required to avert its demise.
Ripe for a catastrophe
The movie attempts to probe into the crux of the crisis and offers a bit of explanation concerning why the whole mess evolved. Of course, the film touches on the contributions of sub-prime mortgages, credit default swaps and unchecked greed. We know that eventually the woes of the financial sector spread to other industries including the automotive industry – one which seemed particularly vulnerable to a financial hit 2008. Old problems in that industry had surfaced, such as issues with gas efficiency, quality and intense competition from overseas.
Historically, it was not the first time that governmental support had been necessary to save an organization within the auto industry, or in other industries for that matter. (Think Chrysler in 1980 or Lockheed in 1971). Interestingly enough, the financial outcome of these interventions for government aren’t as poor as you might expect. But why certain industries – such as banking and auto – require help repeatedly points to chronic industry issues left unaddressed.
Organizational weaknesses must be addressed
After all was said and done, HBO’s effort was quite interesting. However, I felt a large part of the explanation was somehow missing.
The movie did not delve into the organizational factors which contributed to the tangled mess, that occurred long before the crisis began. Issues such as ineffective leadership, lack of risk assessment and the absence of strategic planning. Moreover, if these key organizational problems have not been addressed within the companies that were helped, have we only enabled these organizations to make the same mistakes once again? After all, hadn’t General Motors and Chrysler gone down this same road before? What needs to change for them to avoid another debacle 10 years from now?
It seems obvious that certain organizational issues have to be solved to avoid yet another repeat of the same events in the future. Here are a few issues to consider, although I am sure more could be added to the list.
- Teach leaders about the past. – There seems to be a lack of a “collective unconscious” when the gavel of leadership is passed on within these organizations. It seems that the completion of “Organizational History 101” should be required for all future leaders, in an attempt to avoid the same problems over and over again.
- Avoid “The emperor’s new clothes” scenario. – Autonomy is great – but a system of checks and balances should be in place when decisions are made. Who will challenge the decisions of upper management? (Obviously there was not a devil’s advocate present (or a PR rep) when auto execs took private jets to ask for financial support in 2008.)
- Don’t stop thinking about tomorrow – and don’t get stuck in the moment – even if things are looking really good. Thinking that a favorable environment (whether financial or product) will go on forever will undoubtedly catch you unprepared at some point. Run through various “what if” scenarios to avoid being caught off guard, for the ups and the inevitable downs. Setting strategy for possible challenges in the future is a necessity.
- Avoid making decisions solely from a ledger sheet perspective. Risky short-term financial gains may lead to long-term calamities. If making money seems too easy, be sure to evaluate the risks that may affect your organization. How will the move affect your exposure to other financial or customer challenges down the line? Will emphasis in one area leave you open to weakness in another?
- Utilize innovation to keep you ahead of the game. Establish metrics that monitor innovation within your organization and communicate progress regularly. Whether you track number of patents or customer service successes, innovation is like an insurance policy for your company – offering new directions and opportunities.
Let’s hope moving forward that lessons have been learned.
Dr. Marla Gottschalk is a Workplace Psychologist practicing in East Lansing, Michigan. Follow her on Twitter.
