Blog of Jeff

I’ve been mulling over mission statements for a while because I recently found myself back in one of those long meetings where managers and consultants try to hammer out the heart and soul of an organization in 25 words or less. It’s the traditional job of creating a unique identity and framing the outer parameters of an organization’s strategy. Yet more and more, I am thinking it is really a waste of time. Corporations can be sued for violating shareholder rights if they turn down a profitable buy-out offer yet no corporation has a mission of being sold. It comes back to the idea that all corporations exist to increase shareholder value no matter what the plaque on the wall says.

Non-profits tend to agonize over mission statements even more but then managers play games spinning the descriptions of their favorite programs to fit the mission. In some cases, they violate the mission on purpose for the greater good. A classic example is the big government contract that has 75% of its money tied to something directly in the mission but requires 25% of the work be something completely outside an organization’s mission. They’re still going to take that contract 10 times out of 10 if it’s a big pot of money.

Even from a strategy viewpoint, mission statements may be more trouble than they are worth. In an age where everyone is aiming to be flexible, adaptable and nimble, does it make sense to chain your strategy to a single sentence that is supposed to last for years and years?

My new unified theory of mission statements is that every organization on the planet has one of two mission statements. You’re either an organization dedicated to selling stuff or an organization dedicated to helping people. Beyond that, there are strategic decisions. What stuff do you sell, to whom, where, when and for how much? Which people do you help, where, when, how? Those strategic decisions can be changed when necessary (or simply advantageous). Whether you are a giant government agency, a small mom and pop store, a corporation, a church or any other type agency, one of those two mission statements will apply to you.

I still believe in the conventional wisdom that you don’t want to be changing strategy on an everyday basis because it takes time for strategic changes to be implemented and measured. But I think a lot of agencies could save a lot of time and money if they just accepted that mission statements aren’t that important because, at the end of the day, they all come down to selling stuff or helping people.

I’m still mulling the bailout. I have read so many differing theories that I thought I would start categorizing them.

Theory 1 says that Henry Paulson is a brilliant investment banker from Goldman Sachs with the perfect resume to buy securities, stabilize the market and resell those securities down the road. He did the right thing in saving Fannie, Freddie and AIG while letting Lehman’s fail to purge some bad debts out of the system through the bankruptcy. Nobody else is as qualified as he is to do this work.

Theory 2 says that Henry Paulson is an idiot who has been saying the markets are fine for a couple of years, is going to hire a bunch of his billionaire buddies to manage these new accounts for the government and they are the same buddies who created these risky derivitaves in the first place. He only saved AIG because his buddies at Goldman Sachs were hooked into AIG for $20 billion. Nobody else is less qualified than him to do this work.

Theory 3 says that this issue was largely caused by too many individuals, companies and countries going into debt. Some proponents of this theory embrace the idea of the government borrowing $700 billion to attempt to fix the problem. Other proponents believe that more debt will only delay and deepen the invevitable as the only real solution is to tighten belts, accept a lower standard of living and start moving forward in a world with less credit.

Theory 4 says this issue was largely caused by the government’s policies to encourage home ownership among people who really couldn’t afford a home.

Theory 5 says that regardless of government policies, mortage companies should have had enough common sense not to make stupid loans that didn’t require down payments and had risky terms for the home buyer with the belief that ever escalating home prices would allow for perpetual refinancing and everybody would win.

Theory 6 says that deregulation allowed companies’ greed to overwhelm their common sense. Depending on their particular party, theory 6 people either blame Barney Frank and the dems for blocking Fannie/Freddie reform or Bush and company for pushing deregulation in other areas.

Theory 7 says that deregulation had nothing to do with it as many regulations that were in place were not followed. This theory is more about how existing regulations were not enforced.

Depending on my mood at the time, I find all of these theories to be believable. The one area of blame/anger that I have that never wavers is for the finance and banking committees on congress. Based on the revelations of how many donations they received from the industry they were regulating and how big this implosion was, I think everyone on those committees from both parties should be removed from those committees (ideally from office as well, but some of them aren’t up for re-election any time soon). I just don’t see how any of them can look people in the eye and say they deserve to still be there. Barney Frank is particularly annoying as he runs around trying to take credit for the bailout plan and never accepting any responsibility for his committees’ failures that led to this point.

The bailout is an interesting quandry. The first issue is that from the moment Paulson’s idea went public, the markets absorbed the idea of the bailout, making it a self fulfilling event. Once people/companies buy stock expecting 700 billion in help, there is no way to not give it to them. My general thought is pretty much the consensus opinion. It wasn’t a very good bill but the government did have to do something.

I think the best idea I saw in terms of being fair and feasible was for the government to set up a giant refinancing program through Fannie and Freddie. People would be able to refinance to a 6%, 30-year loan for no fees through the government program. It would be fair, since anyone with a mortgage could participate; it would help those financial companies higher up the food chain because many of the loans that their derivitaves are based on would get paid in full; and it would directly help people in danger of foreclosure. People who couldn’t afford their home even with that assistance would still need to move. Markets have to be allowed to adjust some.

The biggest thing that I think this will do is change the national perspective and debate on the free market, which is unfortunate, because a lot of that is misplaced. It is true that the market ran wild and better regulations might have at least slowed down or reduced the bubble. However, the government has been intervening in the housing market for years and greatly increasing its intervention in recent years. Both parties pursued policies to encourage home ownership. Mortage payments as tax shield have been inflating home prices in the US for decades. The recent push for Fannie and Freddie to get more low-income families into houses made an even bigger impact.

These policies were based on two goals. The first was altruistic, in that people believe families in homes are more independent, resilient and less needy on government assistance. The second was greed. People started smelling money and believing that this government intervention would indefinitely keep home prices climbing. One interesting piece of data that I would like to see is how many people didn’t just buy one home they couldn’t afford but multiple homes by selling one to pay for the next one with ever-climbing home prices. I’m sure there were some folks in that category and they got caught holding an expensive house that they thought they could sell if they got into trouble. But when the property nose-dived, there was no recovery in a home sale.

After a while of not blogging, I am trying to get back into it. I was going nuts thinking about how much I hate both of these candidates every day and had to stop thinking about it. Fortunately, I have found one policy difference between them that I can actually hang my hat on. Obama would like to shift federal transportation dollars away from highways and into mass transit. McCain would prefer to keep the ratio of those two as status quo. I know that a lot of mass transit projects end up bloated, disorganized and not fully used. However, the bottom line is that there is no way for this nation to reduce our fossil fuel usage without increasing the numbers of people using mass transit. I’ve travelled plenty of placed that had good mass transit systems, so it can be done.