Robert Benmosche: New leader, old leadership style?

January 3, 2010

Robert Benmosche was appointed as a tough guy to do a tough job at AIG. Is such a job ‘situationally’ right for such a leadership style? To address the question, we have to take a fresh look at an old leadership theory

According to The Financial Times

Robert Benmosche has the toughest task in corporate America – keeping AIG afloat while finding some $80bn (£50bn, €56bn) to repay US taxpayers and free the insurer from government ownership. Since taking over in August , Mr Benmosche has clashed with government officials over executives’ pay, threatened to resign and halted the “fire sale of the century” – a plan to sell large chunks of the once-mighty insurer that had been blessed by the federal authorities after they first bailed out AIG in September [2008]. Mr Benmosche believes that his aggressive management style has helped stop the rot at a company that was heading for liquidation and was being lambasted by politicians for paying bonuses with federal money. He predicts it will take at least two years for AIG to sell businesses and earn enough profits to repay the government and persuade it to sell its 80 per cent stake. The authorities are not as confident. Tim Geithner, the US Treasury Secretary, recently told Congress he did not believe the government [would] be fully refunded for its largesse towards AIG. The Government Accountability Office has estimated that taxpayers will end up losing more than $30bn on the insurer.

The recent crises in financial institutions have revealed that many were led by charismatic and dominant individuals whose style in hindsight was often associated with narcissism and worse psychological characteristics. [Mandrill Management, as it has been called in earlier blogs]. There is much to be said for a direct and forceful style in times of crisis. Mr Benmosche has a chance to provide a more positive exemplar for such a style. We will follow the case carefully.

Robert Benmosche’s background

Born: 1944, Brooklyn, New York
Education: New York Military Academy; BA in Mathematics, Alfred University, NY
Career: Truck driver for Coca-Cola; two years as a lieutenant in the US Army Signal Corps. ; In 1966 worked in technology at consultancy Arthur D. Little
before joining Chase in 1979; Between 1982 and 1995 he was at Paine Webber, the brokerage house, working variously in marketing, finance, operations, human resources and sales; Moved to MetLife in 1995 as its chief executive, before retiring
in 2006. Appointed CEO of AIG in August 2009 after the corporate upheaval of the credit crunch. Hobbies: “I need to find the time to go beyond learning wine-making and jogging.”

A Note on Situational Leadership

Students of leadership will still come across the venerable theory of situational leadership. The textbook Dilemmas of Leadership traces the concept to an influential article in Harvard Business Review from the late 1950s, reprinted as a classic 25 years later. Prior to the 1950s, trait theorists had assumed there was a ‘one right way to lead organizations. By the 1950s, the older trait theories were being replaced by theories which suggested there was still a ‘one right way’, by that the ‘way’ would be influenced by context. Contingency theories have a family resemblance to situational theories. They don’t take contrasting positions. Any confusion is due more to historical differences. Contingency theories came from broader studies iof organization; situational leadership as its label implies has been limited within leadership studies, and subject to ‘appropriation’ by consultant-academics such as Hersey and Blanchard.

Situational Leadership was a movement away from earlier full-blown trait theories of ‘what leaders are’ (fixed traits) to ‘what leaders do’. There is no simple way through the ‘contingency/situational’ jungle. Rickards and Clark (Dilemmas of Leadership) suggest that any leadership theory can be studied for exploring the dilemmas which any leader has to deal with. For example, situational leadership suggests that a leader who adapts to situations may produce anxieties and lack of trust and confidence in others regarding his or her ‘authenticity’. This is a dilemma of trust in seeking the appropriate behaviours to exercise leadership influence or control.