A dangerous client
“A report for Credit Suisse into the implosion of Bill Hwang’s hedge fund Archegos should spawn a term: Zurich Syndrome. This would denote the psychological capture of bankers by a dangerous client they have fooled themselves into trusting.”
Financial Times 30Jul21
Something dreadful happened to Credit Suisse, something no 21st Century company, let alone a bank, should allow to happen. They let themselves trust someone totally unreliable. How could that happen? And, more importantly, who is “they”. Credit Suisse is a big business. Did the Chairman fail? Or the CEO? Or the Board? Or who, exactly? You will have your views, I am sure. I had mine until I came to delve into the story a bit more and had a chance to hear the inside tale.
I then did what has become known as a pivot. It may be what Credit Suisse has to do as well. I realised that division of responsibilities was the prime suspect. A division that is being repeated every minute of every day and night right round the world. Of course, it doesn’t always have $5.5Bn consequences. Often it is simply the bankrupting of a business, or the failure of a railway network system, as in Britain, or the corruption of health services as in many developing countries.
Much derision has been directed at the line management system. I, too, doubt linear thinking when creativity is required, which is often. But the introduction of a matrix management system has to be approached cautiously and with clear responsibilities if the equivalent of the Archegos quagmire is to be avoided. The responsibility for the correct placement and tightening of every nut and bolt in a Boeing aircraft is not directly the CEOs. It is the responsibility of the person doing the job. And it is the responsibility of the inspector of that job to check that it – or a proper sample of it – is correct.
The inspector’s boss, in turn, has his or her responsibilities for the competence of the people working under them. The CEO has the responsibility of seeing that the culture of the business is honesty and trust. If it isn’t, his neck should be chopped. The Chairman or President is responsible for the Board, the conduct of the CEO and the relationship of board-level company matters with the press. The only people who can fire him are the shareholders or the other members of the board.
Crystal clear line management responsibility is crucial for any business – especially such sensitive businesses as banks and aircraft builders. Of course, everyone should be able – and be encouraged – to speak to anyone in the business if there is something they can learn to improve their job or the way they do it. You don’t need dotted lines for that, you need common sense. It goes wrong when these, largely technical, connections are by dotted line with the message that the individual reports to two people. Then you are up the creek.
I have seen it happen so many times when lines of authority are blurred. Clever and dangerous employees exploit the dual boss situation. Honest employees are confused and genuinely don’t know to whom they should report. ‘Authority’ is often lazy about who really is responsible – until a huge loss or a plane crash. Then they wrangle forever about ‘who is to blame’, holding up compensation payments that many people rely on in a crisis.
At a time of such flux in how and where – and, indeed, if – people work, we need very firm and confident management taking the tough decision about the need for control and the need for being worker friendly. I started with a quote from the FT and I’ll end with another from the same article…
“if …. risk appears to belong to compliance officials rather than client handlers…….., an accident is waiting to happen.”
Common sense is waiting for a chance to speak.
If you’re sensible you will give her that chance.