No bias for crass action

Contra the media and the bruised egos in the financial sector, the academic mindset is well suited to the Bank of England governorship

June 28, 2012

Credit: Elly Walton

Who should replace Sir Mervyn King as governor of the Bank of England? A lot of the talk has been about particular individuals and their links with the chancellor or the prime minister. But what sort of person might be suitable for the role, and should that person be another academic? Until this issue was raised in the media, many of us had probably forgotten that King had ever been a scholar (a professor of economics at the London School of Economics in his mid- thirties). Once an academic, commentators seem to assume, always an academic. Does that make someone unfit for a major leadership role?

Can you transpose leadership success from one domain to another? Army officers have been appointed as the chief executive officers of NHS trusts; people with a track record in banking have been appointed to senior retailing roles. There is a widespread assumption that anyone with private sector experience can be sent in to "save" a public sector organisation from itself. But many of these transfers have failed: people who have had great success in relatively simple business environments can be left visibly out of their depth when suddenly immersed in the complexity of the public sector.

King was a non-executive director of the Bank of England for a year, then chief economist and executive director for six years, then a deputy governor for six years. He was not parachuted in directly to become governor: he knew his way around the organisation, knew the people involved and knew where most of the bodies were buried by the time he took the top job. So, although he had been an academic earlier in his career, he must have been well on the way to "recovery" by the time he became governor.

The implication of asking whether his successor should be an academic is that such work may make a person unfit to do powerful jobs. Do academics suffer from paralysis by analysis? Can those whose profession is a synonym for useless (as in "an academic point") be expected to do grown-up jobs where livelihoods depend on making good decisions in time? Was the relative inaction of the UK and the US in the face of the looming financial crisis in 2008 related to having academics in powerful positions on both sides of the Atlantic (with Ben Bernanke, a tenured professor at Princeton University, chairman of the US Federal Reserve)? By contrast, both China and Australia were more active in damping down their housing bubbles.

Readers of Times Higher Education may react to this stereotype in the same way as to the assumption that we are all about to have three months' holiday: we did not get where we are today without making some decisions and doing some work. But we do not display the "bias for action" that the scholar Sumantra Ghoshal suggested was how effective managers achieve results and stop wasting time. As the philosopher William James pointed out, academics allow themselves null hypotheses; those who take action do not. Academics value not knowing, seeing it as scope for development rather than a guilty secret.

King has been criticised for lacking a bias for action. For example, he was seen both at Lords and at Wimbledon last summer as the financial system wobbled. Such is the cultural emphasis on inputs rather than outputs that some said he should have been in the office. Of course, the idea that top people can waste no time and be productive 18 hours a day is absurd, but they should at least appear to be sweating. Perhaps someone brought up in the banks' world of "reputation management", where success and failure can rarely be reliably attributed, would have been more clued up about this than an academic (accustomed to much more robust performance measurement than anyone in the private sector).

King has also been publicly critical of the performance of the banking sector, both to the Trades Union Congress and the Mansion House. Levels of criticism that are normal at academic conferences (perhaps especially for economists) are seen as extraordinary hostility by those in business who, ironically, think they live in a cut-and-thrust world. There will be many in the banks who will want someone "friendlier" to them in his place.

So should the next governor of the Bank of England be another academic? Not necessarily, but let us hope for someone who knows how money works, thinks critically, knows when they don't know, focuses on performance rather than impression management and works well with others without "cosiness". The ability to walk short distances on water would come in handy, too.

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