Checks and balances is one of the most important principles for making decisions and getting things done in a highly complex organization. While we primarily associate checks and balances with the US system of government, I believe that it equally applies to any other complex organizational system. It implies an organizational structure and a set of procedures to ensure that no one unit or individual has too much power over major decisions, especially those decisions that, if wrong, could have serious consequences. It forces the different parts of the organization to cooperate. It trades off short term efficiency and speed in favor of the longer term stability of the institution.
Most large companies have set up some form of check-and-balances organizational structure, often embodied in the separation of line and staff management. There is a built-in contention system in such an organizational structure. In addition to supporting the line functions, the staffs serve as the checks-and-balances of the company, making sure that the activities of all departments and individuals follow the company’s strategy and are in compliance with business, legal and regulatory requirements.
But, if not properly managed, the system of checks-and-balances can lead to a business that is overly bureaucratic, slow to react to marketplace changes, and unable to keep up with faster moving competitors. In his excellent book “Who Says Elephants Can't Dance?: Inside IBM's Historic Turnaround,” former IBM Chairman and CEO Lou Gerstner wrote about the bureaucratic culture that contributed greatly to the near-death experience IBM went through in the early 1990s. Lou called it A Culture of “No.”
“I think the aspect of IBM’s culture that was the most remarkable to me was the ability of any individual, any team, any division to block agreement or action. . . One of the most extraordinary manifestations of this no culture was IBM’s infamous nonconcur system. IBMers, when they disagreed with a position taken by their colleagues, could announce that they were nonconcurring. . .”
“At any level of the organization, even after a cross-unit team had labored mightily to come up with a companywide solution, if some executive felt that solution diminished his or her portion of the company - or ran counter to the executive’s view of the world - a nonconcur spanner was thrown into the works. The net effect was unconscionable delay in reaching key decisions, duplicate efforts, as units continued to focus on their pet approaches, and bitter personal contention, as hours and hours of good work would be jeopardized or scuttled by lone dissenters. Years later I heard it described as a culture in which no one would say yes, but everyone would could say no.”
The book then goes on to explain the steps he took to transform the outdated IBM culture. This cultural transformation played a major role not only in the survival of the company but in its ability to move forward and regain a leadership role in the IT industry.
Unfortunately, Lou Gerstner’s succinct description of IBM’s dysfunctional Culture of “No” could be read as a description of Washington’s current environment, especially the culture of the US Congress.
The US system of government set up by the Founding Fathers is based on the separation of powers under which the state is divided into different branches, each with separate and independent powers and areas of responsibility. The system of checks and balances is critical to the success of ours style of governance. Its key objective is to prevent any one branch of government from becoming too powerful at the expense of the others, and to induce them to cooperate and compromise. The notion of checks and balances has become embedded in the culture of the country, not just as it applies to the federal government, but also to the balance of powers between federal, state and local governments.
It has proven to be a brilliant system of government. Not only has it endured for over two centuries, but it has done so while adapting to the vast changes that the country has undergone during that time, including its massive growth in size, population and power; the vast diversity in the composition of its people; and the highly different political beliefs, social mores and market conditions it has experienced through all that time. Its success is largely due to its built-in flexibility to adapt to vastly varying conditions.
How will our system of government evolve to help us address the major challenges we face as we now transition to our emerging 21st century information society and knowledge economy? Job creation continues to be a serious problem given our jobless recovery. Healthcare, education and immigration require major reforms. The digital technology revolution marches on. So do the forces of globalization. Addressing these major challenges requires a fair degree of collaboration between the executive and legislative branches.
How do you do so with a US Congress that seems to have embraced its own version of the Culture of “No”? Congress looks more like the United Nations General Assembly, than the legislative body of of the most powerful country in the world. Perhaps the reason why it’s so hard for Congress to get much done is because the America it represents is almost as balkanized as the world represented at the UN. If the polarization of Congress is indeed a reflection of an increasingly polarized America, the situation is not likely to change anytime soon.
How should government evolve to better adapt to this polarized environment? Having thought about this for a while, I would look for innovative approaches to governance in two very different places: by exploring the transformation of management models in business over the past twenty years; and by re-examining the thinking of the Founding Fathers over two hundred years ago.
Companies, especially large, global companies have been moving away from the hierarchic, centralized management models that prevailed in much of the last century and are embracing a more distributed organizational style. The foremost reason is the need to become more flexible and adaptable in response to fast changing technology advances and market conditions as well as the heightened competitive pressures brought about by globalization.
A highly centralized organization may have worked well when technology and markets changed slowly. But, such top-down governance models do not work so well today, especially for global companies that need to react fluidly to dynamic market conditions all over the world. It is hard for people back in headquarters, no matter how competent and committed they might be, to stay on top of what is happening in the far-flung units of their company.
The expertise is out in the field, where the rubber meets the road, as it were. That is where people know what is really going on and what they should do about it. The experts in the organization are those people closest to their products and services, their clients and their markets. Sam Palmisano, IBM’s Chairman and CEO from 2003 to 2011 often referred to this style of governance as lowering the center of gravity.
For a few years now, I have been wondering how this business shift from a centralized to a distributed organizational style might apply to government. While business and government clearly have different objectives, many of the challenges involved in managing a complex, fast changing organization are similar. If large global companies have had to embrace a more distributed management style, why not large, complex governments? Could such a shift in style help governments derive some of the benefits that have been working well for business?
These questions regarding the balance between centralized versus distributed government are not new. They have been debated in one form or another ever since the birth of the Republic. The early days of the US government saw fierce political battles between the Federalists, led by Alexander Hamilton who advocated a strong national government, and the Democrat-Republicans, led by Thomas Jefferson and James Madison who favored states’ rights and a more limited federal government.
The more I think about it, the more I feel that the most important checks-and-balances discussions may be in re-thinking the relationship between the federal government and states and cities. Given how big, complex and polarized the country has gotten, perhaps we need to embrace what some have called a New Federalism. Such a New Federalism should aim to find a reasonable working balance between the Federal government and states and cities. It should devolve back to the states and cities some of the autonomy which they lost to the federal government in the decades since the New Deal. But, at the same time, it should move away from the anti-government philosophy of the past three decades embodied in Ronald Reagan’s phrase from his first inaugural address: “Government is not the solution to our problem; government is the problem.”
Regardless of their political affiliation, mayors and governors are generally more pragmatic than members of Congress. Mayors
and governors have to deal with the real daily problems in their
communities, whether it is schools, transportation, unemployment or
natural disasters. When the real world intrudes, there is less time for ideological debates.
It has never been easy for the different factions in the country to agree on major issues. It seems to be getting even harder now and is likely to stay that way well into the future. So, for pragmatic, not ideological reasons, we should let different regions modify policies so they best fit the needs and desires of their citizens. We should be flexible and accept the wide variations that are likely to result across different regions of the country.
As has always been the case, there are certain functions that can only be handled by the Federal government, including foreign relations, national security, responses to national disasters and major R&D initiatives. In addition, the Federal government should work closely with states and cities providing leadership, expertise, coordination, funds and whatever else is required to help them implement their various programs. And, every so often, lines in the sand will be crossed by a state that will require strong federal intervention, as was the case in the conflict between Alabama Governor George Wallace and President John Kennedy in June of 1963. Hopefully, such events will be very rare.
Effective governances requires a culture of pragmatism over ideology. And when it comes to highly complex, distributed organizations, it would appear that the further away you get from headquarters, or Washington, the more pragmatic the governance. Above all, we need to explore fresh, innovative approaches to keep the country moving forward into the 21st century.