Why Rumsfeld Soared as CEO, Sank at Pentagon

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Business leaders love to emulate battlefield commanders as they deploy their troops and make critical decisions. That's why otherwise-arcane military books like The Art of War by Sun Tzu and On War by Carl von Clausewitz remain brisk sellers: They're considered obligatory titles on the bookshelf of any executive with a taste for corporate battle.

Donald Rumsfeld, who will soon be leaving the Pentagon after six years at its helm, brought the military ethos to the business world when he first left the same government job in 1977 and became CEO of pharmaceutical maker G. D. Searle. Rumsfeld is credited with a financial turnaround at Searle that led to its purchase by Monsanto and earned him plaudits and awards. After leaving Searle, Rumsfeld continued his private-sector winning streak as CEO of General Instrument Corp. and chairman of Gilead Sciences. Both companies flourished under his watch.

When Rumsfeld returned to the Pentagon in 2001 for his second tour as secretary of defense, he reversed the revolving door. Instead of bringing combat-style leadership to middle management, Rumsfeld would impose capitalist corporate systems on a disorganized, corpulent bureaucracy. The military was stuck fighting the last war, or the one before that; Rumsfeld would force modernization. He would make the military more efficient and break a trough mentality at the services that dictated each was due its share of public largess. Instead of receiving its traditional portion of the defense budget, each service would be funded according to its ability to demonstrate market value, execute just-in-time sourcing, and show return on investment.

The lumbering, hidebound Army stood to lose the most. Its heavy armor and huge divisions were expensive to move, and slow to boot—the government equivalent of a scarified, unionized rust-belt operation. The Marine Corps and special operations forces were like a lean manufacturing outfit—much lighter, with quicker speed to market. And the Air Force, with its gee-whiz smart bombs and other technology, offered a high return on investment—if you assumed a bunch of bombing could turn back an opposing force.

If peace had reigned and the national security environment had evolved into a businesslike problem, Rumsfeld might have looked like a genius. The defense establishment was huge, outmoded, and inefficient, and only a buzz-saw SecDef like Rumsfeld could have started to turn it around.

That's not what happened, of course. The 21st century began with a flurry of wars, the stodgy old Army turned out to be more relevant than most critics had thought, and efficiency mattered a lot less than depth and longevity as Iraq became a multiyear affair. So where did the corporate SecDef go wrong? Business and civic leaders interested in gaining more than aphorisms from a study of the military might consider a few of Rumsfeld's mistakes:

Rumsfeld underestimated the institutions he set out to change. CEOs routinely face the need to change corporate culture, which is no easy task. But it's doable if you make a credible case for why change is essential—such as, we'll go out of business if we fail to adapt. And leaders then need to work the troops, person to person, to earn their trust. Rumsfeld took on a force far more ingrained than corporate culture—a professional military establishment with more than two centuries of tradition—and in an extraordinary turn he was proved wrong, on his own watch, by a war that was partly of his own making. Lesson: If you're going to strike a bear in its own cave, don't judge its strength while it's sleeping—take its full measure.

  • He dismissed smart people. Business leaders in the Internet age are learning the power of collective intelligence: As the authors of the new book Mavericks at Work put it, "Nobody is as smart as everybody." Except, apparently, Rumsfeld. He was famous for keeping his own counsel, ridiculing those who disagreed with him, like former Army Chief of Staff Gen. Eric Shinseki, and even punishing dissenters. All told, it is likely Rumsfeld disregarded cogent advice from military professionals with a millennium's worth of experience, just one of numerous characteristics reminiscent of Vietnam War architect and Rumsfeld predecessor Robert McNamara. Lesson: Listen.
  • He streamlined the wrong processes. Flat is good. But don't flatten your talent! Rumsfeld held nothing sacred—good for him—but probably made a mistake by bypassing senior military commanders in the chain of command and dealing directly with field commanders in Iraq. Yes, that nagging chain of command can be cumbersome. But as Rumsfeld considered moving Gen. James Jones, one of the brightest, most capable professionals in any government agency, from European Command to Central Command, Jones removed himself from the running when his boss reserved the right to go behind his back to lower-downs. Lesson: If you're not comfortable delegating, buy a small country where you can become king.
  • He vilified the people, not the process. For a while, the Rumsfeld style was refreshing—unlike many wishy-washy bureaucrats, he gave a pretty clear idea who he thought was bogging things down. Usually, it was the Army. And Army officials, fully aware they were in the SecDef's sights, battened down the hatches to wait out their boss's tenure. Rumsfeld was largely right—the Army was top-heavy and slow to adapt. But it's also the Army that is now bearing the better part of the nation's burden in Iraq, and Rumsfeld seems downright ungrateful. He could have been more diplomatic while targeting the same low-hanging fruit, preserving the Army's dignity in the process. Lesson: Don't disrespect your bread-and-butter division, even if its return on investment is low; it might just bail you out during tough times.
  • --Rick Newman

    TAGS:
    Rumsfeld, Donald
    Department of Defense
    corporate culture
    Army
    • Rick Newman

      Rick Newman is the author of Rebounders: How Winners Pivot From Setback to Success and the co-author of two other books. Follow him on Twitter or e-mail him at rnewman@usnews.com.