Companies and non-profits can founder when CEO successions go badly–very often because a long-tenured CEO becomes an immovable object who ultimately only gives way to an irresistible force (such as death–J. Edgar Hoover; a board in revolt–ex-Disney head Michael Eisner; or a bureaucratic coup de grace–Admiral Hyman Rickover). Disney seems to be getting it right this time, though the story refers to other companies that may be approaching an immovable object vs. irresistible force crossroads.
Way more often than we know, because organizations cover it up if they can, destructive behavior lays an organization low. A frequent cause is executive struggle, which sometimes are family feuds. Less frequently, a destructive contagion afflicts the workforce, which takes actions that threaten the very existence of their employer. The Market Basket story has all of the above. The metaphor I’m fond of is executives grimly battling to their mutually assured destruction, wrecking all around them in the process, while the rest of the organization is forced to take sides and/or is so transfixed by the spectacle that nothing gets done till its over, with the enterprise a casualty. That’s the case here. None of this makes sense unless you understand that, once unleashed, primal emotion trumps the economic rationality championed by business texts and analyzed endlessly in management journals.
The headline award goes to the blog post linked here: How to lose 172K a second for 45 minutes. That’s nearly a half billion dollars of venom. The company was DOA in under an hour. Cause of death: long dormant programming code deep within the high-speed electronic trading system rose up and sunk its fangs into the firm’s jugular. How? In just one of eight servers, a systems upgrade produced a coding glitch that inadvertently activated the long-forgotten trading-bot, whose corresponding cross-checks and controls no longer existed. So, on the day of it’s debut, 12% of the system started executing trades without being restrained by how many securities the firm actually had to trade or could buy. Then staff, trying to isolate the problem, turned off other servers, which routed more and more electronic trade orders to the renegade server operating without limits. A “normal” accident, as unstoppable as it was statistically predictable, in the ever more complex and super-velocity world of electronic trading.
Readers: Some posts will now have (706) attached. (706) posts may highlight “healthy” organizational behaviors/arrangements, as opposed to the “ER admits” dominating this site. This story, on managing “organized chaos,” is about healthy organizational living. FYI: 706 is the number of a graduate course I teach, which, not surprisingly, is called Bureaupathology. Dr. O.
Women are far less involved in corporate crime than men says this study. Criminality aside, men tend to take bigger risks more often and cut more corners than their female counterparts. No surprise that “London Whales” and “Masters of the Universe” attend “Predators Balls” in the testoterone-fueled, frat house culture so consistently described by any number of insider books about the world of high finance. A recent post here noted Harvard Business School’s attempt to get women to adopt in-your-face posturing that vault men to the top of the business world. This we need more of?
So JP Morgan Chase is ready to pony up just under a billion in fines to hopefully end regulatory action regarding trading losses of several additional billions that slipped under the radar earlier this year. It makes sense that JPMC’s managers would like to get out from under. The losses emanated in London, with New York top managers oblivious for a while which, in turn, kept the Board out of the loop, all of which tended to tarnish the bank’s reputation as a finely tuned enterprise steered by geniuses.
Arrests imminent in the bank’s multibillion dollar trading loss, says the Times. Perhaps we’ll learn how easy it is to pull off fast and loose behavior in the vaunted world of high finance, but I suspect we’ll see plea deals, as opposed to a trial that pulls the covers off what really goes on.
The pantheon of edgy CEO’s includes TYCO’s Dennis Koslowski whose sales tax dodge on artwork he purchased mirrored a fast and loose corporate stewardship that resulted in jail time. New research suggests Koslowski was not unique, those prone to pushing the boundaries – legal and otherwise – seem as likely to do it in the corporate suite as behind the wheel of a speeding car. Keep an eye on those edgy acheivers, even if (maybe especially if), their foot seems never to come off the accelerator in pursuit of outsized results.
Where to start? Corporate operator of the U.S. half of the Detroit – Windsor, Canada tunnel wants to reorganize under bankruptcy. A potential buyer of this asset in any bankruptcy sale is the fellow who operates the Ambassador Bridge over the same waterway and has Windsor city officials nervous, perhaps because of his opposition to a proposed U.S. – Canadian connection that would compete with the one he runs. So, Windsor officials’ don’t think it’s too far-fetched to fear that the wrong buyer might cement up the US side of the tunnel. Moral of the story: Government borrows, taxes and collects fees to build and operate critical infrastructure for good reasons, which this story of foundering and politicking private operators is sure to underscore.
Life imitates art–in the case Mel Brooks’ classic “The Producers”–which I’ll bet was imitating life to start with. Although this is about Broadway, the ease with which theatrical financiers can be fooled joins is of a piece with the high finance sleight of hand I’ve been commenting on of late.