Thursday, April 25, 2013

On The Euro Crisis




Preamble

One cannot look into the Euro Crisis without thinking about leadership or the lack thereof. In my opinion it is a very interesting case because of its sheer size, its implications in Europe and globally, its complexity, and the number of different political leaders involved calling the shots. One can observe what it means when a collective of leaders, each one with a very different agenda, are making decisions based on the lowest common denominator. One can observe what impact it has when, instead of making the decisions based on reason and facts required for operating such a complicated currency system safely, shortsightedness, egoistic and emotional national thinking, and lack of integrity become the decisive force behind the curtain. 

On a personal note: I think a unified Europe is the very best thing that we can have for all the different European nations. The European Union is of course far from perfect, but also much, much better than the alternative of falling back into separated national states. What is required though is that everyone of the population, no matter what nationality you might have, goes behind the European idea and makes a stand for it! We cannot leave that just to our politicians. We have elected them to make it work, and not to make it dysfunctional. Complaining about that and then turning your back to such a wonderful idea is obviously not helpful for anybody. We are in the information age and everyone can be informed instantly, can learn and understand! There is no excuse for not doing it ... and then still electing our leaders based on ignorance. “People will always elect the government they deserve!” - quote attributed to Joseph de Maistre. 

It’s up to each one of us to deserve better!

The Situation (a very brief snapshot)

The Euro Crisis to me is the quintessence of the complete lack of leadership. It began as a rather, as it seemed, good idea way back in the early nineties. Also, it had a lot to do with unification of the two Germany’ s: The Federal Republic of Germany and the German Democratic Republic. France had a problem with that and made it clear that Germany had to pay a price for that, and the price was giving up the D-Mark. France thought that this would balance better the economic power of a reunited Germany. Germany on the other hand had a different problem: It had to shoulder the impact of the reunification, resulting in huge transfer payments to the former GDR. Basically everything had to be rebuilt in that part of Germany. Great Britain neither wanted the two parts of Germany being reunited, nor did they want the Euro at all. However, it was agreed that the Eurozone would certainly anchor Germany much better within the EU. Politically it was already an ambitious undertaking, given the different open and hidden agendas of the players. Economically, the Eurozone makes a lot of sense, provided you set it up right, and that is an enormous challenge, even without the political constraints and prohibitions. 

The Case

In 1992 the Maastricht Treaty was signed. It obliged most EU members of the so called Eurozone to adopt the Euro upon meeting certain monetary and budgetary convergence criteria.
 At first the necessary research was done and it became pretty clear what it would take to bolting together such a currency union. A currency union by itself is a rather complicated system, but a system nevertheless. Therefore it is possible to design this system, describing and determining the essential components required to make the system work flawlessly. Also, control mechanism must be installed enforcing the compliance with the system criteria. Granted, it is a huge project indeed. As far as we can know that was actually done and the first design took these findings into consideration. It became very clear though that not each and every country could become part of the currency union. Actually, only a few countries, comparable in their economies, would be fit to join the Eurozone in the beginning. Others might have the chance to join later once they would meet the determined criteria. There was a consensus about that between all those understanding the matter. 

And then at that point the politicians came in ...

With the political meddling an already complicated system got its complex dimension. Each one of the political leaders had and has his / her own constraints and prohibitions. First and foremost they are worried about their reelection. Once they have such a position of power, they become very reluctant to give it up. That can be seen very clearly in the handling of the creation of the Eurozone.

What one would expect from Leadership:

From Leadership, and that includes each one of the political leaders, you would expect that they listen, learn and understand the system, in this case the currency union. It does not mean that the leader has to become the specialist, far from it, the leader needs a general understanding of systems and, in this case, how currencies work, how money is created, how an economy works and its financial subsystems, ... it sounds very complicated and it actually is, depending on how deep down into the rabbit hole you want to go. A leader must understand enough to be aware of the consequences of decisions made ... or the lack thereof.

You would expect that, for instance, a prime minister / chancellor / president with the help of their specialists, the secretaries of Finance, the leaders of their Federal Banks, and their financial advisers have enough of an understanding of such matters. That’s what they have been elected for, right?
You would expect that such leaders, given the understanding of the system, would come to similar conclusions. Then, they should actually be able of making a rationale decision taking into consideration the facts, the system constraints, and the safety / security measures needed. And, as political leaders of the European Union, you would expect them that to have first and foremost the agreed upon overall goal in mind: Bringing Europe’s nations even closer together by creating the Eurozone as a tool to increase the overall prosperity for all european citizens in the long run. 

What actually happened:

Even though there was a general understanding of the leaders (at least they claimed that they understood it, however, one can never be sure ...) of the system and the overall goal for Europe, each one put on the table their very own agenda. Their “own agenda” means that there was the official own agenda and also the hidden own agenda. What was supposed to be rationale approach became an emotional and political debate ... well, more like a push and pull over the table ... kind of a “don’t confuse me with the facts” approach. How many political leaders in the EU are required to screw in a light bulb? Answer: they can’t even agree what a light bulb is ...

Meanwhile we know the result. Countries definitely not fit for the Eurozone could join anyway (“We cannot leave Spain and Italy out ...”), numbers after all were just numbers and could be changed ... especially in Greece and with the infamous help of Goldman Sachs. Control mechanisms were either not even installed, or limited in their function. People understand the matter and warning were either told to shut up (“not your responsibility”) or simply removed. Gaming the system became the sport as it seems. And sadly enough Germany, the country which was most insisting in the strict criteria, control, and penalties, was with France the first one in not fulfilling those criteria. That opened Pandora’s box. Then Greece joined and actually no one was in charge to check their numbers (“One cannot go to Greece demanding that they show us evidence how they got to their numbers”).

The irony is that, what France thought would kind of limit Germany’s economic power, actually strengthened the economic power of Germany. Especially, because Germany became painfully aware of what needed urgently to be reformed in the country, and it went through very painful reforms, resulting in an increasing economic and financial strength. For Germany the Eurozone was definitely of advantage.

Where the Eurozone is now

2008 and 2009 the biggest financial crisis broke out, the so called “Financial Meltdown”, originated in the US. The reasons for that are well known in the meantime and numerous analysis and books have been written about it. Since the large banks in Europe obviously participated in this gamble the crisis hit Europe as well and became the litmus test for the Eurozone ... and what a litmus test! Without mercy this crisis showed the failures and shortcomings of the Eurozone system. Also, it showed the failure in leadership when creating the Eurozone, and also during the last years the failure in leadership to recognize and understand the roots of the problem. On top of that the old problem of European political leaders became again apparent: their inability, unwillingness, and downright ignorance of the bigger picture of Europe. Again each one was and still is pursuing their very own agenda. The result of that we know: Greece going down, Portugal, Ireland, Spain, Italy on the brink. In hindsight not surprising at all. Germany can choose between two evils: Staying in the Eurozone and paying for everything, or leaving the Eurozone and getting back to the D-Mark. Is there still hope? No one, not even the experts, can know. Time will tell ...

Conclusion

One can look at it from many angles, yet, it is very clear that the cause of the problem is the lack of leadership. Blaming the system is all too easy. When you build it wrong and on top leaving out essential parts, you are setting the system up for failure. And that’s what the European leaders did. 
It also shows clearly that 27 leaders trying to lead and no one following does not work. It will always end up with the lowest common denominator if anything, and not with the best possible decision. On top to even reach the lowest common denominator takes up so much time you just don’t have ... especially when facing such a huge fire. 

Of course, it is easy to look into all that and find the flaws ... especially in hindsight. Being a leader is a very tough job, even more in such circumstances within the constraints of the European Union. There is no such thing as command and obey, you lead by your own example and your ability to communicate on multiple levels with each and everyone involved. It is what Stanley McChystal called: shared consciousness and purpose. 

Now let’s think about how each one of us would have performed being one of the 27 European Leaders ... 

Wednesday, April 17, 2013

On Trustworthiness




Trustworthiness is the most important quality any leader must possess. Trustworthiness is a part of integrity, trustworthiness defines the character of a leader, or the lack thereof. It is earned over time by impeccable behavior. When you make a statement, make sure that it holds ... that you stick to it. This requires that before you are making such a statement you must think thoroughly about it, understanding its implications. Statements made with a very short half life will over time undermine your credibility, hence your trustworthiness becomes questionable, to say the least. After all, who wants to follow someone with questionable trustworthiness

When you give your word, then keep it. Always. Period. Your word must be law in the universe. Treat it as such and people will respect you for that big time. Break it and very soon you will be a pretty lonely leader, leading nothing and no one anymore. 

Be careful when making commitments. A commitment is just like giving your word. When you commit to something, then fulfill it. A commitment usually involves other people besides you. However, it can also be a commitment you might have with just yourself. Either way, you must do what you committed to, no matter what. The only possibility out of a commitment would be asking those you have the commitment with to let you out. Keep always in mind though that nobody cares about your excuses. It never matters whether breaking your commitment was not intentional.

Commitments and giving your word are ingredients building your trustworthiness, building your reputation as a leader with an impeccable character. Admitting mistakes openly and not blaming others is another important ingredient adding to your trustworthiness. However, don’t call, for instance, “breaking your word” or “breaking your commitments” mistakes made, because those are not mistakes, but character flaws. 

Always remember: How you do anything in life, you do everything in life!

You might say that this applies not only to leaders, but to everyone. Indeed, it does and leadership does not only exist in organizations or corporations, leadership exists in our daily life. The mother, for instance, taking care of her family and kids and doing so with character and being an example, is as much a leader as those in organizations or corporations. 

Tuesday, April 02, 2013

On Crisis


Every now and then as a leader you will find yourself in the midst of a crisis. A crisis is that situation when you suddenly realize and say to yourself “Never had that before!” ... well, and you might add some of your very own words to that statement. The latest you know that you are in a crisis is, when everyone of your group is just looking at you for your guidance and your leadership. And a crisis gets you right at the edge of what you are capable of.

All the talent, the learning, the training you have had cannot prepare you for a particular crisis, hence, that is why it is called crisis, What your ongoing learning, training, and practicing can do, is preparing you for extreme and complex situations. That is why learning, training, practicing must be done on an ongoing basis, it never stops. Only then you will know your limits, you will know what you are capable of.

On a sunny, beautiful day, when the seas are calm, just about everyone wants to be the captain steering the ship. When the weather gets rough and extreme, only experienced captains, those well prepared having gone through and dealt with complex, extreme situations, are able to steer the ship to safety. In leadership it is no different. A crisis is usually an extreme and complex situation and it needs to be dealt with right away. Time is always of the essence. You have to assess the situation without having enough data, left alone data of comparable situations, since each crisis is unique. 

I do believe in cooperation and cocreation, in my opinion a leader is the first amongst equals, but nevertheless a leader. You will, of course, use the combined knowledge and experience of your group members, to broaden and deepen your view of the situation at hand. Yet, in such special and extreme conditions, your group will always look at you expecting your leadership. Make no mistake, in these situations as a leader you are on your own, and being a leader becomes suddenly the loneliest job of this world. Leading is hard, very hard.

A group of people can always cooperate and cocreate, being it a movement or in an organization. It requires, however, a lot of courage to step up and lead.  These leaders are the ones making a difference for the movement or organization. It is then when people realize, to say it with Stanley Mc Chrystal’s words, that leaders actually lead. They don’t follow opinions.

Google+ Walter H Groth

Google+ Followers