Fallback strategies make for good governance. Or do they?

January 23, 2008

_42974117_stormtroopers_66pic.jpgThere have been several examples of fallback thinking in our UK leadership stories recently, including cases at The Royal Mail, The Treasury, and most recently at Liverpool Football club. We examine why developing a fallback strategy may be a matter of creative leadership

Every Military leader learns of the benefits of a fallback strategy. Lao Tse wrote of the merits of providing a fallback strategy for a defeated enemy, a golden bridge permitting an enemy to retreat thus avoiding the possible lose-lose outcomes of follow-up actions.

Business School cases are taught with a vocabulary of risk management, which is way of elevating fallback thinking to a management philosophy.

Engineers are familiar with the lugubrious message which passes for Murphy’s law, or Sod’s law (‘what might go wrong will go wrong’; ‘toast always falls with the buttered-side down and hitting the carpet’). Awareness helps them bear in mind what might be also called the worse case scenario.

So fallback thinking is always a good thing?

I am very much in favour of fallback thinking, but would like to explore its consequences a little more deeply.

Let’s agree that leaders benefit from facing up to unpleasant possibilities. It was the failure to face such realities that prompted Bob Woodward to label his work on the Bush Administration as an examination of a State of Denial. That example indicates the well-known human tendency to escapism, which can have serious consequences for leaders of all kinds. The Tavistock School and Clinic developed a whole social scientific model on such behaviours, which are related to the more popular concept Groupthink.

Then what’s the problem?

Real-life examples show that theory often fails to anticipate all the problems facing leaders in action. The most recent example is the case at Liverpool Football club and its American Owners.

Tony Barrett of the Liverpool Echo [Jan 14th 2008] broke the story.

Tom Hicks and George Gillett held a secret meeting with Jurgen Klinsmann to line him up as the next manager of Liverpool FC. Hicks today insisted the talks would not have resulted in the immediate dismissal of Rafael Benitez and that Klinsmann was only “an insurance policy.”
He told the [LIVERPOOL] ECHO: “We attempted to negotiate an option, as an insurance policy, to have him become manager if Rafa left for Real Madrid or other clubs that were rumoured in the UK press … Or in case our communication spiralled out of control for some reason.”

Sensible? I leave readers to decide. There was general consensus elsewhere by football commentators that the action had made things worse, and had undermined the position of the incumbent manager.

Then there’s the case of The Post Office, facing enormous challenges of change, and headed by a dynamic Chairman. Last year he was linked with stories of transferring his attentions to the possibility of becoming the new Chairman at Sainsburys. The government (at the time of Tony Blair’s premiership) drew up a fallback plan.

Robert Peston reported from unnamed sources that

The Government has appointed head hunters to find a new chairman. The search for a deputy chairman is regarded by some in government as insurance in case Mr Leighton decides to quit early. He is frustrated by ministers’ reluctance to transfer 20% of the business to Royal Mail staff.
“Allan Leighton is always threatening to resign and one day it might just happen” said a government source.

Insurance again.

I noted at the time

Suppose this is a game of three dimensional chess? Allen Leighton is leading the Government forces in a battle to implement its wishes. Those nasty forces resisting his attacks are led by the Union leaders. Leighton wants more help from the Government. He becomes powerful enough to be dangerous. What if he threatens to resign at the most telling moment to devote more time to other business interests? He has been associated with stories of his interest in acquiring Sainsbury’s for several years (and it seems the stories are coming to the boil again this month) … This is why it’s three dimensional chess.

Then there’s another recent story, concerning The Treasury’s fall back strategy of nationalizing Northern Rock. I argued that it was another example of a game of political chess.

… Mr Darling does not want to nationalize Northern Rock. Neither do the shareholders. But if The Chancellor can convince enough shareholders that he might be forced into a nationalization by their further opposition, it may help avoid the outcome none of the main players really wants.

Creative leadership issues

These recent cases suggest that leadership stories can be read and deconstructed in terms of the actions of those at the heart of the story to achieve goals, which might include actions to block the goals of others. In the vocabulary of creative leadership
the complex strategic ‘map’ can be explored as a series of desired actions or how to do’ statements. This will vary among stakeholders.

If we are examining the possible actions for the principals or owners, (be it Liverpool Football club or The Post Office) possible goals (How to ..) might be

‘How to protect my interests, if the leader quits’
Or ‘How to develop ‘insurance’ if the leader’ quits
Or ‘How to keep the leader in place’
Or ‘How to increase chances of a smooth leadership transition’
Or ‘How to have a back-up position’
Or ‘How to show [ ] that we are not bluffing.

The creative leader (according to this kind of approach) ‘searches widely and chooses wisely’. Searching widely avoids the trap of being locked into preconceptions. Choosing wisely commits to less obvious ideas and actions discovered in the search process.