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VIEWPOINTS : Donald Regan Flap Contains Lessons for Business Management : Tensions in the Top Level of Companies

March 22, 1987|WARREN BENNIS | Warren Bennis is a professor of business administration at USC and was a co-author of "Leaders," published by Harper & Row in 1985

In the beginning, organizations were exceedingly simple. There were chiefs and tribes, or kings and subjects, or owners and tenants, or bosses and workers.

With the advent of the Industrial Revolution, it got more complicated. There were stockholders, boards of directors, officers and employees.

Now it's too complicated--with stake holders and/or shareholders, chairmen of the boards and/or chief executives, corporate presidents and/or chief operating officers, assorted vice presidents, managers and employees. Naturally, the modern organization--being complicated, even Byzantine--is much more subject to trouble, or even breakdowns, than its predecessors.

As a rule, such organizational breakdowns occur in the privacy of corporate executive suites, but the whole world got to see a classic example of structural failure during the recent White House power struggle, which reached a climax with President Reagan firing his chief of staff, Donald T. Regan.

The President was criticized for his "managerial style," but actually problems resided in his managerial mode. Reagan and Regan learned the hard way that there are more weaknesses than strengths in the two-track CEO-COO mode.

Given its political bias, the Reagan Administration's choice of a corporate structure over a bureaucratic chain of command was reasonable, as was the appointment of Regan, a top business executive, as chief of staff.

But Regan's view of his role was anything but reasonable, and the basis for the subsequent firestorm.

Though Chief of Staff Regan was the White House equivalent of a COO (chief operating officer) serving CEO (chief executive officer) Reagan, from the outset he behaved like a CEO, usurping both the President's authority and prerogatives.

COOs are secondary, not primary spokespersons, yet Regan issued frequent off-the-cuff pronouncements, which were often at odds with his boss' policies and pronouncements.

Furthermore, COO Regan isolated CEO Reagan from both his staff and his constituents, which resulted in the CEO seeing the world more and more through his COO's lens.

Finally, of course, the flaws in the two men's relationship magnified the flaws inherent in the structure and brought it all down, and Regan, the quintessential corporate boss, was replaced by Howard H. Baker Jr., the quintessential bureaucratic team player.

As something like order returned to the White House, Iran and "Contragate" notwithstanding, there must have been sympathetic sighs and nods in corporate headquarters all over America, because no one knows how flawed and how basically unworkable the CEO/COO power split is better than the CEOs and COOs themselves.

Contemporary corporate structure is, at best, a jerry-built rig that emerged out of perceived need and chance, rather than choice. Like every fragile, sensitive machine, it's only as good as its parts.

The principal parts of the corporate machine are people, and people come to the job at hand with all their own sensitivities, fragilities and needs. And the higher a person rises in the corporate hierarchy, the more exposed his strengths and weaknesses are, and nowhere are these strengths and weaknesses more exposed and more tested than in the relationship between a CEO and his COO.

On paper, the differences between the two jobs are very clear. The CEO is the leader, the COO the manager.

The CEO is charged with doing the right thing, the COO with doing things right. The CEO takes the long view, the COO the short view. The CEO concentrates on the what and why, while the COO focuses on how. The CEO has the vision, the COO hands-on control. The CEO thinks in terms of innovation, development, the future, while the COO is busy with administration, maintenance, the present. The CEO sets the tone and direction, both inside and outside the company, while the COO sets the pace.

Ironically, as with Reagan and Regan, even when the CEO and COO function happily together, they can run into big trouble, as mutual admiration is not necessarily relevant, much less productive.

But when they're unhappy together, their unhappiness is reflected throughout the organization in major and minor ways, which leads to trouble, too.

No one makes it into the upper reaches of the corporate world without a very healthy ego and very strong opinions about everything.

Given this, even the most serene CEO (which may be an oxymoron) is bound to occasionally envy his COO's hands-on control, while the COO must long sometimes to think ahead, dream, innovate.

The logic here is that two heads are better than one, but I don't know any top executive who, in his heart of hearts, doesn't think that his head is better than all other heads put together.

In addition to these fundamental problems, there are other traps in the structure. What the CEO imagines, the COO makes manifest--often in ways that seem wrong to the CEO.

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