Leadership, Decisionmaking and Trust

Bush and Paulson confidence and authority, or not?

As policy-makers navigate the financial crisis, the leadership styles on display are interesting. The predominant style is a single-solution approach. One idea (TARP or the Bad-Bank) is selected at a time and incremental changes are made as new information and ideas emerge. Contrast this with a more multi-solution approach where several possible solutions are put forward, strengths and weaknesses are discussed, adjustments are made and finally, one solution is chosen from among many. For example, suggestions could include TARP-style cash infusions, creation of a Bad-Bank, creation of a Good-Bank, do nothing, etc.

The single solution model has the advantages of speed and inspiring confidence in leadership. It is faster to push through a single policy measure than to discuss many and cull the best elements from each. It also gives an appearance of strength and inspires confidence when a single strategy is put forward with an air of certainty and authority. The weaknesses of this approach are that it hinders the emergence of other potential solutions, it creates an incentive for decision-makers to ignore potential weaknesses of the strategy, it is difficult to adapt if this approach fails, and the damage to confidence in leadership is more severe if the strategy proves unsuccessful.

On the other hand, if leaders adopt a more conversational multi-solution approach where many ideas are discussed and one is settled upon, the process itself lays a foundation for adaptation in response to failure. The process fosters the emergence of alternative ideas that may not emerge in a more authoritarian single-solution environment. The discourse involved in this sort of leadership model creates an incentive for the weaknesses of each possible solution to be examined. The weaknesses of this approach are that it is slower and it may not inspire the same sort of confidence as a strong leader authoritatively announcing a single solution with affirmations of certainty and assurance. On the other hand it does not lead to a failure of confidence in leadership when such affirmations are shown to be hollow.

Since a major part of the response to the financial crisis was aimed at inspiring confidence and allaying fear, it’s understandable why the confidently presented single-solution approach has predominated. At the same time, I’m not sure it is the best way to actually resolve the economic and ethical problems that face us as a nation.

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