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(originally published by Booz & Company)


Business Success from the Bottom Up

S+B: What do the corporate scandals of recent years say about the current state of management?
When the CEO of Merrill Lynch loses billions of dollars and then leaves the company with a $161 million severance payout, it’s fairly sad. He should have been fired for his incompetence and not given a dime. People at all levels, including those at the very top, should be paid based on performance and held accountable, and they should be fired for underperformance. I would tell employees at orientation: “We’ve got a strange company here. You have to progress, or you’re out. You will be held accountable. You’ll have ownership. You’ll become a businessperson and grow. If you don’t take care of the business, the people around you, and your safety, you’ll be fired.” We fired more people for not progressing than for almost any other reason.

Today I think we create systems with the potential for people to take advantage. Many organizations post mission statements on the wall. But they are just taking up space, because nobody within the organization owns them, and no one is held accountable. You see it every day.

Yet in a high-performance system, as a manager, you have to see your employees as professionals and demand that they perform accordingly. When you start saying, “Everybody can now hold one another accountable, including the top guy,” it makes people nervous. Accountability is tough. But if you’re up-front about it, lay it out, and enforce it, this approach works. Ninety-seven percent of your people want to do the right thing. It’s when you let the 3 percent drag it out while the others are working hard and performing that morale and performance deteriorate. The 3 percent becomes 6 percent. Then the 6 percent becomes 12 percent. And this cannot last.

Author Profile:

Laura W. Geller is deputy managing editor of strategy+business.
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  1. William J. Holstein, “Reining In the Overpaid (and Underperforming) Chief Executive,” s+b Leading Ideas Online, 2/19/08: Corporate governance expert Nell Minow explains the relationship between outlandish severance packages and the risky financial instruments linked to subprime mortgages.
  2. Art Kleiner, The Age of Heretics: Heroes, Outlaws, and the Forerunners of Corporate Change (1998; forthcoming, Wiley, 2008): Provides a history of participative management.
  3. Ralph Sink, “My Unfashionable Legacy,” s+b, Autumn 2007: Sink’s column, detailing his career as a proponent of high-performance systems.
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