Saturday, June 04, 2011


I'm traveling on a research trip in the U.S. and whilst my topic is one of organisation and the impact of change, I cannot help but notice the current "confusion of responsibility" that appears to be occurring in the mainsteam media.

All business activities evolve and all organisations are in a constant competitive struggle. One of the impacts of this change is that previously successful models are often replaced, for example the current shift from software products to software services. Unfortunately, organisations who have built around the previous model often face internal barriers which create an internal inertia to making the change necessary for future survival. Without this inertia, external disruption would not occur and today's giants of industry would generally be tomorrow's giants of industry.

Disruption is simply a consequence of management failure, it is the responsibility of management to ensure the organisation not only survives and competes today but also tomorrow. However, management doesn't operate in a vacuum and the inertia is often exacerbated by the actions of the financial markets i.e. it becomes difficult to change a successful model even though that model has a limited lifespan precisely because the financial markets are short term and see only short term value.

The pressure that the financial markets create is immense for any large organisation and ultimately those financial markets share a heavy burden of responsibility for failures caused by the pressure they exert. However, the short term view of the markets is such that this is not seen as their responsibility and long term failure is solely put down to management.

Unfortunately, the financial markets are very adept at blaming others for what is ultimately their fault. The current economic crisis caused by irresponsible lending, a merry go-round of debt re-capitalisation and excessive exposure are all the responsibility of the financial markets. Whilst you can point fingers at consumers, that's like saying a toddler shouldn't have eaten the candy you gave it and blaming the government is like blaming a parent for not providing some rule to govern your irresponsible choice.

The financial markets are entirely responsible for the economic crisis. They're equally responsible for many company failures through short-term attitude. They're also responsible for acting in a dishonorable manner when it comes to the Fed Bank - through the exploitation of quantitative easing for financial gain to the using of Fed money to recapitalize rather than increase lending.

The U.S. Gov and Public should realise that the Financial markets act on a short term basis without consideration of the long term consequences. They act with the persona of an adolescent, always blaming others, threatening to run away, demanding less rules and pointing to a lack of rules as a reason for their own reckless behaviour. They discount the long term to a frightening degree.

Short of grounding the child (the fiscal equivalent of nationalisation), the Gov should understand that the financial markets are an offspring of society and despite the threats they have to operate within its rules. Those rules should and can be gamed to encourage more longer term responsible behaviour.

The financial markets won't magically learn responsibility, that behaviour has to be taught and encouraged. Left alone, they'll just get upto the same old tricks.