Jamie Dimon's Empowerment Problem

Over the last several months, Jamie Dimon, JPMorgan CEO, has received a barrage of media attacks resulting from the actions of Morgan’s Chief Investment Office (CIO). The office presided over significant losses attributable to a precarious investment strategy and, according to the August 31 edition of The Huffington Post,¹ an investigation of possible wrongdoing is ongoing. A recent Wall Street Journal report revealed a new leader has been appointed to run the unit and it was returning to its 'core mandate of conservative investing.'⁹ Many believe that since the problems occurred on Mr. Dimon's watch, he should be punished … with some calling for his removal.

This week’s post is not so much a defense of Mr. Dimon but rather a defense of empowerment, a basic leadership principle. According to Hughes, Ginnett, and Curphy, empowerment is an essential leadership skill that contains elements of worker delegation with the dual goal of allocating work and employee development. Empowered workers benefit organizations in many ways.⁵   

It would seem that Mr. Dimon has sullied his reputation for doing exactly what we expect of leaders. That is, CEOs need to make certain the "right people are on the bus."² Once the correct people are hired, then, depending on their level of task "readiness," the leader would adapt his or her degree of empowerment.³ Hersey and Blanchard's Situational Leadership model offers practitioners a pathway to calibrate the level of empowerment based on how far down the learning and willingness curve the individual worker is positioned. Their model is practical in its approach and states that greater degrees of empowerment should be afforded to those with higher levels of skills, willingness and confidence. In fact, skills and abilities are essential requirements for the empowered worker.⁵

This is logical until there is a problem. Most recognize the dilemma between leading through others and the opposing expectation of maintaining an encyclopedic knowledge and control of what is happening in the organization.  However, most know that JPMorgan and other businesses are too complex, rendering it impossible for a single person to be fully involved; this is why the principle of empowerment is fundamental. When a leader empowers, it gives the worker the freedom to apply his or her skills and abilities to their tasks and diminishes the need for close management supervision. The opposite of empowerment behavior is called micromanagement. The micromanager is hyper vigilant in his or her oversight and often exceeds the boundaries of common sense, leaving the worker to feel "why didn't she just do it herself." In my experience, I can recall a project team's unwillingness to make a decision without checking with the senior leader first. Sometimes the leader's behavior arises out of a deep-seated fear of being asked a question that he or she cannot answer. In other instances, it is the leader’s belief in his or her superiority. Of course, leaders also use this approach when they lack confidence in their underlings.

Micromanagement seems to be acceptable when it leads to business success. For example, Marissa Mayer, Yahoo's recent CEO appointee, has been characterized as a micromanager.⁴  Because she was successful at Google, some think that her constant involvement was a good thing. Of course, the unanswered questions are: To what degree did she use this approach and was it used in a way that developed her people? Did she over control or just step in when she had a particular expertise that she could apply? Further, did she leave behind a staff that needs constant guidance? In the project team situation described earlier, we felt like we did not matter. We debated for hours on decisions that we knew could be overturned in an instant. Eventually we stopped this practice and spent less time trying to optimize our decisions. Instead, we pushed the decision upstairs because we knew they would make it anyway.

Dimon, Mayer and all leaders are faced with this dilemma. That is, they must make a deliberate decision about how much to be involved vs. how much to empower. Dimon's failure may have been based on his degree of monitoring. Some reports suggested that he did not have systems in place to divulge lurking potential problems in the CIO. Much like the leading indicators in our economy, leaders need reporting mechanisms that forewarn of dangers.

Empowerment is not about handing over tasks and letting that person or team be responsible for the outcome. Instead, it is about sharing responsibility. Some leaders confuse the concept of empowerment with "assign and walk away" or laissez faire. For example, I witnessed a leader who delegated a large enterprise project, and the only mechanism for staying informed was a weekly verbal update. Unfortunately, the updates were always rosy. When colleagues started to tell him separately there were problems, he chose to ignore the input because he trusted his subordinate. You probably can guess the eventual outcome.

Dimon's leadership style has attractive and unattractive features, according to the excerpts provided below. He seems engaged and empowers without giving up the reins completely. According to the reports, his recent disgrace appears to be how he favored the Chief Investment Office. That is, he diminished his supervision just for that area.⁶ Thus, it seems he chose a laissez faire style with this group. It is unclear why. Maybe it is a form of groupthink where he was so into this group and their prior successes, he became unable to objectively assess their work. This is similar to the project example described earlier.

Leaders need to deal with the dilemma of leadership that calls for empowerment while actively remaining involved. If the leader fails to calibrate his level of involvement, he or she can fail. Jamie Dimon lost his way by allowing too much latitude (laissez faire) with the Chief Investment Office. The problem manifests when a leader operates at the extremes of too much involvement or no involvement at all. Too much involvement and he or she becomes a micromanager. Too little involvement and he or she is no longer behaving as a leader. Leaders need to find the balance based on the situation and the preparedness of the followers.

Please feel free to make comments.

 Here is what the popular press has said about Dimon:

"Jamie Dimon enjoys a reputation as a risk-averse manager who conducts exhaustive reviews of operations in every corner of the bank.... Dimon treated the CIO differently from other JPMorgan departments, exempting it from the rigorous scrutiny."⁶

"[outspoken]...blunt...savvy.... consummate networker...."⁷

"Dimon rebuilt into a powerhouse one of the most precarious financial institutions, Bank One..."₇

"Spend a week, a day, or even a good hour with Jamie Dimon alongside his troops and you realize, yes, the crowd belongs to him. The bond is palpable, and typically long-lasting. But it isn't just his natural showmanship that employees respond to. There is something else entirely -- and that's what lies at the heart of this study in leadership.... That's not to say Dimon is a saint. He is, in fact, an insanely demanding, emotional manager who often drives his troops crazy."⁸

References

¹ Henry, D. and E. Flitter (2012) London Whale to Haunt JPMorgan Chase, Jamie Dimon for Months. Huffington Post, Retrieved on 9-2-12,   http://www.huffingtonpost.com/2012/08/31/london-whale-jp-morgan-jamie-dimon_n_1845957.html?view=screen

² Collins, J. (2001). Good To Great. New York, N.Y., HarperCollins.

           

³ Hersey, P. and K. H. Blanchard (1995). Situational Leadership. Leader’s Companion: Insights on Leadership Through the Ages. J.T. Wren. New York, Free Press: 207 - 211.

           

⁴ See Efrati, A. and J. Letzing (2012) Google's Mayer Takes Over as Yahoo Chief. The Wall Street Journal  Retrieved on 9-2-12, http://online.wsj.com/article/SB10001424052702303754904577531230541447956.html

⁵ See Hughes, R.L., R.C. Ginnett, et al. (2009). Leadership: Enhancing the Lessons of Experience. New York, N.Y., McGraw Hill Irwin. Empowerment section, pp. 524 - 530.

           

⁶ By Schatzker, E., Kopecki, D., Keoun, and Harper, C., Businessweek, June 14, 2012. Jamie Dimon's Risky Business.  Retrieved 9-7-12 from http://www.businessweek.com/articles/2012-06-14/jamie-dimons-risky-business

⁷ Raghavan, A., Forbes, Nov. 12, 2009.  Master Banker, Master Schmoozer. Retrieved 9-7-12 from http://www.forbes.com/forbes/2009/1130/power-09-worlds-powerful-people-jpmorgan-chase-master-banker.html

⁸  Tully, Shawn, Fortune, July 22, 2002. The Jamie Dimon Show: He's tough. He's loud. He's irrepressible. He's above reproach. And he's just what Bank One needed. Retrieved on 9-2-12 from http://money.cnn.com/magazines/fortune/fortune_archive/2002/07/22/326269/index.htm

⁹ Berthelsen, C., Wall Street Journal, Sept. 7, 2012. JPMorgan Taps 'Whale' Unit Head