“Budget U-turn raises doubt over competence for Brexit challenge” is the front page headline in today’s Financial Times. The FT doesn’t have a reputation for melodrama, so its reference to competence is worthy of our attention.
We need our Prime Minister and Chancellor to behave competently not only in the Brexit negotiations but also because we need them to be in sync generally, like in any CFO/CEO relationship.
In leadership terms, there were three reasons for the U-turn chaos, and these can easily occur in CFO/CEO relationships. They are also avoidable.
First, Mrs May and Mr Hammond did not have a shared purpose in respect of their budget. If they did, they would have together faced down their critics. They would have owned up in advance to breaking an election pledge on the basis that Brexit has changed the game and they would have “toughed it out”.
But the concern about their relationship is not the error – anyone can make a mistake – but it’s the manner of it. Mrs May has not understood that leadership is about convincing us that her vision is good for us.
In business and politics sometimes you have to ask for forgiveness, not for permission. We would have forgiven her for breaking an election pledge if she’d asked for our forgiveness in the context of a clear vision for the future. But she didn’t.
Consequently, she and her Chancellor were at cross purposes. His objective was to balance the budget, and hers wasn’t clear, save that we know what it’s not: it’s not Mr Cameron’s purpose. The problem with that position is that it was Mr Cameron’s manifesto that got her elected and one which, inconveniently for her, explicitly excluded tax hikes.
Second, if a CEO and CFO lack a shared purpose, it follows that their strategy cannot be right. Mr Hammond’s strategy was to pay for the social care problem by increasing taxation.
Mrs May’s strategy is to do whatever she feels is the right thing to do as she sees it irrespective of whatever has happened before, or whatever anyone else thinks. This is a common strategy amongst political and business leaders. It’s not always wrong and works in time of war, but we’re not at war.
An example of this strategy from my mother country was Prime Minister Eamonn De Valera who famously, or infamously in my view, said: “When I know what the Irish want I will look into my own heart.”
We all know CEOs who behave like this, and they can make life very difficult for everyone, especially, their CFOs. Their approach is not a strategy because a strategy demands conscious behaviour and this is unconscious behaviour. If it were conscious, they wouldn’t do it.
Third, the U-turn exposes the lack of clarity regarding their respective roles. It is very common for CEOs and CFOs not to adhere to their role definitions and with dire consequences.
The primary role of a CEO is to create an environment in which others can do their best work. This role includes “having the back” of the CFO, whose role is to “own the numbers”. To Mr Hammond’s credit, he did try to own the numbers, but his CEO didn’t have his back. His days are now numbered, and so are hers, but for different reasons.