Wealth Shift: The Decline of Ethics in America
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Lesson #3 – The Blame Game

In the movie, Cold Mountain, Ruby, the country girl who shows up to help Ada take care of the farm while the men are off fighting the Civil War says, “They call this war a cloud over the land. But they made the weather, and then they stand in the rain and say, ‘Shit, it’s raining!’”

Amen to that.

Last year Warren Buffett went on record (once again) to say that the credit crisis in this country is far from over and that the weakness of the dollar due to a negative balance of trade (i.e. we buy more from foreign countries than they buy from us), combined with rising commodity prices at home, is going to have a significant long-term downward effect on U. S. corporate earnings.

But has Buffett been rewarded for accepting responsibility, shooting straight, and trying to help people become more realistic about their expectations? Not just no, but hell no. In the time since Buffett first began speaking on the subject, Berkshire Hathaway’s share price has traded off by greater than 60%.

Yes, the stock market is down in general. But Berkshire Hathaway’s stock is down even more, in part because investors aren’t particularly happy to be on the receiving end of a heavy-handed dose of Buffett realism. And investors aren’t the only ones to be found cringing in the corner. CEOs and investment bankers everywhere don’t want to hear Buffett talking negatively about the state of the American economy. Why? Because Warren Buffett, “The Oracle of Omaha”, is a spoiler.

“Oh really?” you may say, “and how is that?”

Well, since a spoiler is someone who always tells the plot in advance, a spoiler makes it impossible for someone else to come along later and say, “Gee, I never even saw that coming!”

Executives in particular need to resist the temptation to pretend that they were clueless about the handwriting that was written all over the walls of their own companies for everyone and their dog to see. (Apparently, both the executives and their dogs were blind.) They need to stop idealizing their situation in one press release or conference call only to blame external circumstances for the bulk of their problems in the next. It never ceases to amaze me how, when things go south in a company, executives are always so quick to blame either the economy or “unforeseen circumstances” for their misfortunes, even in the face of analysts who have been commenting on the possibility of just such a negative event for months (or even years) beforehand. What is the problem, here? Are executives so dazzled by their own skills at dissembling that they’ve forgotten the truth entirely?

Companies think they are being clever when they hide the truth about their operations and either gloss over, or fail to disclose entirely, pertinent information about the company and its operations. This often turns quarterly reporting and investor conference calls into reputation-damaging games of hide and seek.

Yes, transparency and full disclosure may affect the price of your stock (and thus the value of an executive’s options), but taking advantage of the nooks and crannies of a financial statement to hide your white elephants does nothing but damage your reputation once the elephants are discovered.

It would be so refreshing to hear to a conference call in which management stops aggrandizing its accomplishments and actually listens when an analyst tries to give them good advice that is obviously the result of years and years of following a large number of companies in that particular industry. Time and time again you hear executives in conference calls poo-pooing analysts who are actually trying to be helpful. In the fall of 2007 I was listening to a Coldwater Creek conference call in which the company was reiterating its intention to move forward full-steam ahead with plans for opening more retail stores in spite of a weakening economy. Furthermore, sales had been off and the company had clearly made a recent shift in the design of their women’s wear. One analyst in particular was obviously trying to indicate to management that, in her opinion, Coldwater Creek needed to rethink their expansion plans and also their shift in design from a conservative to a more bohemian look. She was shot down by the company’s management in such a way that I’d imagine she and others did what I did the following day -sold my entire position in the company. There are none so blind as those whose egos will not let them see, and Coldwater Creek’s share price has traded off by greater than 85% since that conference call occurred.

An interesting and rather amusing side note resulting from the sub-prime debacle in America is that companies have recently begun using the extreme magnitude of the bad news that is being reported by the banks and home builders as a shield for coming clean on their own messes. Almost every day you will see a company announcing a deeper loss than previously expected, or a revision to their future financial targets. With banks reporting tens of billions of dollars in write-downs, what’s a paltry little hundred-million dollar accounting error by comparison?

While executives may be able to get away with blaming the economy and other external forces for their company’s poor performance, they simply have no excuse whatsoever for blaming employees. The monkey is not entirely on the employees’ backs for failing to rise to their greatest potential.

“But my employees are all a bunch of lazy losers!” you might say. “They’re far too stupid to help me solve any of the problems of this company.”

And yet, they are so very creative at finding ways to Wealth Shift, are they not?

Looking again in the mirror, we have to resist the temptation to take the easy out. It is so much easier to simply write someone off than it is to take the time to mentor them properly. And the reason for this is? Very few people have really good mentoring skills.

For one thing, most people would rather talk than listen. But it’s only by listening – really listening – that we can find out what someone else’s goals are and then help them to develop and implement an action plan for achieving those goals.

Here’s a prime example of exactly what I’m talking about:

The other day I was speaking to a mid-level manager at the Horseshoe Bay Resort in the Texas hill country. I asked her what her dream was with respect to her future with the company. She said the resort was going to be opening up a new restaurant in two years and she wanted to be the general manager of that new restaurant. I asked her what she felt she needed to do in the interim to be able to position herself for the job. She said one thing she needed to do was to learn how to read restaurant financial statements. I asked her what her action plan was. She looked blank. Another person piped up, “Maybe you could take a course.” She looked a bit overwhelmed. Had I been her boss and not a disinterested third party, I might have taken this for a lack of motivation, but I knew the real problem was that she was wondering in her head where she was going to get the time to take the course and still do her job. So I said, “Would you like me to teach you? I’d be happy to show you how to read a restaurant financial statement. That way you wouldn’t have to learn every single thing about accounting, only what you need to know specifically to run a restaurant.” Her head came up and she nodded. “I’d love that!” she said.

I then asked her what else she felt she needed to do. She said she needed to try to find some more good employees to bring along underneath her and fill her shoes when she moved into her new position. What a good answer! It showed me she was a thinker. Again I asked her what her action plan to make that happen was. Again she was clueless. I asked her if she ate out at all, and she said she didn’t because she couldn’t afford it and rarely had evenings off. I asked her if the company was willing to reimburse her for her meals out, would she be willing to give up her evenings off to find and recruit the talent she was looking for. I made it clear that if she said “yes” she would also be responsible for mentoring those new employees. Without a moment’s hesitation, she said “Yes!”

Finally I asked her how she felt now that we had talked. She said, “I feel excited!” And then she looked at me shyly and said, “Are you really going to teach me how to read a restaurant financial statement?”

Of course I will. And while all this may have simply been a role-playing exercise because I wasn’t her boss and had no authority whatsoever to implement the plan we came up with, I still have to wonder, “Where the hell is her boss and why hasn’t he or she had this kind of conversation with her already?”

Often we see employees wandering around rudderless and automatically jump to the conclusion that they are lazy, unmotivated losers who can’t see the obvious two inches in front of their face. But perhaps the real reason our employees are wandering around rudderless is because they haven’t yet been given a rudder! Or even worse, their rudder simply doesn’t fit our boat and we refuse to acknowledge it!

We need to stop pre-judging people and pigeon-holing them. We need to stop thinking, “once a bus boy always a bus boy.” We need to stop thinking that good management is about forcing our employees to do our bidding without question, comment, or buy-in. It is demoralizing as well as de-motivating. I know it’s so much easier to play the blame game then it is to actually mentor and ascertain “fit”, but isn’t it high time we actually got paid for doing the job we were hired to do?

Over the course of my career I’ve observed that one of the reasons people fail to mentor properly is that they are afraid of raising unrealistic expectations in their subordinates (aka, giving meaning to their pitiful existence!). But you don’t have to worry about raising unrealistic expectations in someone merely by sitting down and asking them what they want out of their career (or even their life). Your responsibility in the conversation is to listen and offer appropriate support, not make promises you have no intention of keeping. Still, if you like what you have heard in the meeting, dedicate a few resources to one of their ideas. Revitalize their spirit. Get them on record as to their ambitions and create an accountability relationship wherein they accept your responsibility for reminding them of their goals from time to time.

Too often in performance reviews the manager talks and all the employee is required to do is listen. The manager lists all the ways in which the employee has screwed up, or screwed off, or failed to live up to the manager’s expectations. In other words, the manager plays the blame game. The employee’s eyes wander and the manager gets even more pissed off, assuming that the employee must be worthless because he or she can’t even pay attention long enough to complete a performance review!

This is not, and I repeat not, the way such an interview should be conducted. The point of a review, any review, is to assess whether the relationship is still a fit for both parties involved. If, after listening to an employee’s hopes and dreams about his or her future with the company the manager still sees a “fit”, then by all means help your employee set goals and agree to meet back at regular intervals to check on the employee’s progress. If not, then don’t hesitate to talk about an exit strategy. Whatever you do, don’t use an interview simply as an excuse to vent and get someone back in the status quo line (despite the fact that this is always, always the easiest way to manage people).

Do the hard work to find people to populate the company who “fit” and who actually want to be there. Be proactive and jettison those who don’t. Solicit feedback about how well you are doing in the mentoring process. If you want to know if an employee thinks you’re an asshole, don’t say, “You don’t think I’m an asshole, do you?” Instead, try saying, “I’m a real asshole, aren’t I?” State as a fact the thing you fear most, and then see how quickly (if at all) your assertion is denied.

Don’t blame your employees for your failure to inspire them to follow one of your action plans if you haven’t gotten them to agree to do so. Don’t assume they will follow you blindly. Don’t blame them for your failure to ask them whether they see any holes in your action plan that might affect their willingness to help you implement it. Remember, they don’t drive the train -you do. They are not in a position to tell you what they think is wrong with your plan, the way you are implementing it, or even the way you are coming across to them as a person. You have to be the one to ask. And if you fail to ask or try to shove it down their throats and it fails, then you have nobody to blame but yourself.

I had to learn this lesson the hard way. I was working as the CFO for an equipment company with an enormous amount of potential, and I had what I thought were numerous good ideas for taking it to the next level -particularly in the area of selling parts. I decided that in order to get buy-in on a new bar-coding inventory system that I was desperate to put in place, I’d show up on January 1st, bring donuts and coffee, and help all the parts people take inventory. My idea to “get down and dirty” with the employees fell flat on its face because of something I said while taking inventory that got misinterpreted entirely. (I learned about the error I had made when a friend in the company came to see me about the “perceptions” people were having of me.)

Apparently, one of the major hurdles I had needed to overcome (and which I had failed to overcome because I didn’t even know it existed), was the fear that my presence was instilling in the older workers who knew nothing at all about the newfangled technology I was trying to put in place. They were scared that my sudden presence in the organization meant that they were all about to be fired! For some reason, when I said that I wanted to get rid of the “old” inventory system and bring in a “new” one, this slotted right into their worst nightmare and all the older people jumped to the conclusion that I was talking about them! Here I was, thinking I was being perfectly clear about my objectives for the company. While I was talking about replacing the old ledgers, they thought I was talking about replacing the old people! I still find this incident incredibly silly to this day, but, seriously, this just goes to show how screwed up communication can become if you don’t properly work the crowd to get buy-in (and I mean the entire crowd, even the older people!).

We say we want people to be independent thinkers, yet we manage them to be lemmings instead. Look at the sub-prime mortgage crisis in this country. Look at all the people in the food chain who never questioned anything. We may think we want to surround ourselves with people who will just put up and shut up, but oftentimes what a company needs most is to populate itself with people who won’t.

The quickest way to get the people in your organization to take responsibility for their behavior is to prove to them that you are willing to take responsibility for yours. But we live in such a litigious society these days that nobody is willing to accept responsibility for their mistakes. We are worried that, if we admit to having made an error, it will be immediately used against us in a court of law. And so we pass the buck and the blame onto someone else.

I just love the following quote by the famous attorney, Richard “Racehorse” Haynes, which aptly illustrates my point:

“Say you sue me because you say my dog bit you. Well, now this is my defense: My dog doesn’t bite. And second, in the alternative, my dog was tied up that night. And third, I don’t believe you really got bit. And fourth, I don’t have a dog.”

Rather than simply admit they may have been wrong and take their lumps, executives usually take this page from Haynes’ playbook. In response to any allegation of wrongdoing, executives are taught to develop several scenarios simultaneously and test each one out on whoever will listen to see which one will work the best when the matter comes before a jury.

Let me clue you in. If you have to change your story over and over again, it means you aren’t going to end up telling the truth. It means you are going to end up with a fantasy version of the truth -the one that best covers your ass. And, in the meantime, your credibility with the people who count most in your life will migrate right out the window.

Executive Summary: Be scrupulously honest, no matter what – your credibility is on the line. Take only the credit that belongs to you, and pass along to others the credit that belongs to them. Don’t let your ego run amok and grab all the glory and rewards for yourself. Be proactive. Take the blame before anyone else asks you to for things that are your fault, and only pass the buck when it truly deserves to be passed. Take your licks when they are due you, even if it means giving up money to do it. Mentor, mentor, mentor. Make it your goal to grow team thinkers, not a bunch of brainless sea monkeys. The blame game is contagious. Only when you take full responsibility for your own actions will your employees be inspired to do the same.


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