Background and Context
In February 1991, Paul Mozer, who ran the government bond desk at Salomon Brothers, put a false bid into a U.S. Treasury auction to get around a rule that capped how much of any one auction a single bidder could buy. In late April his superiors found out, and the firm's chairman, John Gutfreund, was told. Nobody reported it to the government until August, after an internal investigation turned up more improper bids. By then the delay had become the scandal. Gutfreund resigned, the Treasury briefly barred Salomon from bidding in its auctions, and Warren Buffett, a major shareholder, stepped in as interim chairman to keep the firm alive. Useem tells the story as one of nine case studies in The Leadership Moment, and this sentence is one of the lessons he draws from it.
Interpretation
The sentence puts two failures on the same footing. Inept action is the familiar one: a leader decides, decides badly, and the mistake is there for everyone to see. Inaction is harder to pin down. There's no single moment when the error was made, only a stretch of time in which something should have happened and didn't. Useem's point is that this second kind counts just as much, and can cost just as much.
The words "to leadership" matter too. Gutfreund didn't place the false bid. What he lost, he lost over what he failed to do once he knew about it. The damage from inaction lands on the person whose job it was to act, and on everyone who was counting on them to do it.
Current Relevance
The pattern keeps turning up in corporate disasters. When General Motors investigated why it took more than a decade to recall cars with a faulty ignition switch, a defect linked to more than a hundred deaths, its report described a culture in which people agreed a problem needed fixing and then nobody fixed it. GM's chief executive, Mary Barra, gave the habit a name: "the GM nod."
Rules have since been moving toward treating delay as an offense in itself. U.S. public companies, for example, now have to disclose a serious cyberattack within four business days of deciding it's material, rather than whenever they get around to it.
Impact and Legacy
Salomon became a standard business-school case, partly through Useem's chapter and partly through Buffett, whose testimony to Congress in September 1991 produced a line still widely quoted: "Lose money for the firm and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless." The case helped make a point that's now routine in compliance training: leaders answer for the problems they know about and leave alone, as well as for the ones they cause. Useem's sentence is less famous than Buffett's, but it states the general rule the case teaches.
Contrasting Views or Controversies
Plenty of pauses are wise. Doctors practice watchful waiting, investors sit through panics, and a leader who reacts to every alarm can do more harm than one who waits to see which alarms are real. Useem's line is easiest to apply looking back, once the outcome is known; in the moment, a leader rarely knows which kind of pause they're in.
Salomon itself is messier than the lesson. The firm's lawyer advised that the bid should be reported even though the law might not require it, and the executives agreed. What followed was less a refusal to act than a decision to act later, made badly and never revisited. Seen that way, the line between Useem's two failures is thinner than the sentence suggests: putting something off is a decision too, and it can be an inept one.
Practical Application
- When you learn of a problem: write down, that day, what you'll do about it and by when. A problem with a date attached is much harder to let drift.
- When a meeting ends in agreement: before anyone leaves, name the one person who will act and when they'll report back. "We should" with no name attached is how three months go by.
- For boards and senior teams: keep a running list of known problems that are still open, with how long each has been open. Age is the warning sign.
- As a citizen: when an institution apologizes for a failure, ask when it first knew, as well as what went wrong. The gap between those two dates is often the real story.
Background on the Author
Michael Useem (born 1942) is an American sociologist and management scholar who spent most of his career at the University of Pennsylvania's Wharton School, where he is now professor emeritus of management and long directed the Center for Leadership and Change Management. He studied at the University of Michigan and at Harvard, and his early work, including The Inner Circle (1984), examined the small network of executives who sit on many corporate boards at once. The Leadership Moment (1998) shifted his attention from how business elites are organized to how individual leaders decide under pressure, a subject he has stayed with in later books such as Leading Up (2001) and The Go Point (2006). Salomon fit that subject closely: a powerful firm nearly undone by a decision its leaders kept putting off.