It’s been a year since Lehman Brothers fell - hard. Now the stories are beginning to surface, many of the “silent problem” type that I present in my book, “Without Warning.” What is now surfacing is not a surprise, nor is it surprising. The story is simple. Smart people were “locked in” to pursue a path of increasing risk as a means of increasing profits and revenue. And individuals that didn’t buy in were asked to leave or shut-up. For instance, a recent article over at the New York Times titled, Tales From Lehman’s Crypt tells part of the story.
He recalls vividly the days in early 2007 at Lehman when his financial models began to throw up more warnings showing delinquencies and defaults, and he remembers colleagues on his desk raising questions about loan quality. But he said the firm’s ranking as the top loan originator on Wall Street, not to mention the pressures put on the desk by Lehman’s growth-obsessed leadership, made it difficult for even the most senior executives to raise questions, even a senior vice president like Mr. Linton. He says he has no qualms about his work at Lehman or its economic aftereffects. “Anyone at our level who had a different view from senior management would find themselves going somewhere else quick,” he says. “You are not paid to rock the boat.”
In effect, Lehman and everyone that worked for the organization was “Locked In” to a strategy that was laying golden eggs, at least up to the point when the goose died. What are a few of the key learnings from Lehman’s fall? I’ve come up with three.
- If an organization is structured for compliance, in essence, it’s structured for failure.
- Arrogance is a dangerous attribute - for any leader. See my previous post Do They Believe Money Is Silent
- Previous business success is a weak predictor of future business performance.
Today, Lehman is history. Billions lost. Careers failed. Families decimated. Yes, Lehman had a multitude of silent problems inside their organization. A real leader would have encouraged these silent problems to be surfaced, heard, and possibly acted upon. Instead, they were discouraged and squeelcheed. And eventually, it was the silent problems that eventually became a Without Warning event that killed Lehman when it was at the height of its power and influence.
Bottom Line: The lessons from Lehman’s rise and fall is applicable to any business, large and small.
Tags: lehman
