Hartford Forced to Outsource Leadership

The world is entirely too full of corporate managers who think the yellow brick road to easy management and quick solutions is to simply outsource the problem to some outside “expert.” Heavy dependence on outsourcing is a clear indication of rot at the core of a company’s management. Just last week we saw a great example of this management tomfoolery in action at Hyatt Hotels. There are many other examples of the dreaded LMS disease (Lazy Management Syndrome) that could be reviewed, but they pale by comparison to the outsourcing example for the ages offered up by the board of directors at Hartford Financial Services.

At least most of those who rely on outsourcing to solve their problems attempt to find someone who has knowledge of their company and the industry in which they operate. Not the Hartford board of directors!

Challenged to find a replacement for the disastrous leadership of the exiting CEO Ramani Ayer, the board struggled for months attempting to identify and entice a qualified individual to accept the Hartford CEO role and return the company to the levels of respect, growth and success it enjoyed for nearly two centuries.

The task, as I blogged earlier, was formidable. And it was likewise immediately clear to the board that the Hartford executive management cupboard was bare. Any executives with a modicum of talent had long since deserted the leaky ship and found dry ground elsewhere. In all likelihood, those in senior management who did remain either were not talented enough to solve the problems of the company or were themselves part of the problem.

Stymied in their effort to find an internal replacement for Ayer, the Hartford board took the next logical step and began (by outsourcing the effort to headhunters) to look for a qualified individual from within the insurance industry to assume leadership of Hartford.

According to reports, the headhunters were able to identify a number of highly-qualified individuals with strong industry experience. Unfortunately, it appears that the interest level in becoming Hartford’s CEO was inversely related to the qualifications of potential candidates. The more qualified the individual was, the less interest they expressed in the Hartford job. It was reported that the Hartford board had more turn-downs than an actuary looking for love on eHarmony.

With no one inside the company considered qualified and no qualified person in the insurance industry willing to take the job, apparently the Hartford board decided the only thing they could do was outsource the CEO job to someone with no knowledge of Hartford and no experience in the insurance industry.

Stuck with the runts of the litter to pick from, it seems that the September 30th hiring of Liam McGee was about the best the Hartford board could expect to do. They hired an unemployed banker (he was forced out of Bank of America in a management shakeup in August), who has never run his own company and knows nothing of either the insurance industry or Hartford. (Of course, many may claim that might actually an upgrade for Hartford.)

At least Mr. McGee had two qualifications the other candidates lacked – he needed the job and he was willing to take it. But really, is this the best that Hartford could do? Apparently so.

Mr. McGee may be a great guy, but a number of people see the selection as odd, at best. He has never run a company – even a bank! He is a life-long banker (and you know how I feel about them anyway) who was forced out of a company – Bank of America – that has just about as many challenges in the banking industry as Hartford has in the insurance industry. It is interesting to note that after Mr. McGee was forced out of B of A, other banks did not line up to offer him a CEO job.

Well, Bank of America and Hartford have at least one thing in common:  they both accepted TARP funds from the government. As Bloomberg.com reporter Andrew Frye wrote on September 30, “At Bank of America, McGee oversaw an effort to boost credit-card lending after the 2006 acquisition of MBNA Corp. That responsibility was removed in 2008, when credit card oversight was handed to Bruce Hammonds. The bank now has the largest percentage of defaults among big U.S. credit-card lenders.”

So what we have here is an unemployed failed executive from a large bank that is struggling to survive (with some of their problems tied to areas of Mr. McGee’s responsibility) taking over a large, problem-plagued insurance company he knows nothing about in an industry where he has no experience.

This lack of knowledge and experience in the insurance industry is also drawing some comments. Brian Howlett, an equity analyst for Standard and Poor’s was quoted as saying, “We view positively what appears to be McGee’s ambitious plan to turn around Hartford. But we somewhat question Hartford’s choice of McGee, since he lacks any experience in the insurance industry.

Are we missing something here or is this simply outsourcing taken to a new and more dangerous level?

And the Moral of the Story …

The moral of the story harkens back to the old saying, “Beggars can’t be choosers!” So, when you find yourself in a position of leadership and face problems that you don’t know how to solve, then you go where most other weak managers go – you outsource and then hope for the best.

It seems as though the board of directors is banking on this approach as the only way to have any chance to save the company. That says a lot about them – how they performed their duties in the past – and about The Hartford.

2 responses to “Hartford Forced to Outsource Leadership

  1. Very interesting comment. I agree with the analysis, but question whether the issues that the Hartford is facing could not be solved by somebody outside the industry. Please note that this assumes that the person is qualified at least from the standard of having led a successful enterprise. My contention is that the blinders that the industry is know for may be at the root cause of the problems at the Hartford.
    Therefore outside help may be required to fix the problems. Thoughts?

  2. Soon to be laid off

    As an employee for over 30 years I can attest to the catastrophic dangers of excessive outsourcing! There was once a business practice of taking ownership, accountability, responsibility to resolve issues and business concerns. Rather than rely of the extensive knowledge base of long term employees companies would rather outsource. What ever happened to hands on experience…let’s not forget that hands on experience has lead to many of today’s inventions and patents. Hard work, strong ethics and determination from long term employees is much more valuable than outsourcing. With so many internal departments already outsourced within companies there is a lack of accountability and way to much finger pointing. Have you ever been involved trying to resolve a problem with multiple outsourced agencies……”he said – she said” and finger pointing resolved nothing. Unfortunately that is what too much outsourcing produces………..

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