Business Blog: Hoover’s Business Insight Zone

Regarding Citigroup CEO Chuck Prince, Floyd Norris and I may be talking about slightly different things. So first let me give you the very short version of my argument, which can be boiled down into two points:

1. Floyd Norris is your go-to source for understanding the credit mess that has wrapped up the big banks, and he’s right that the mess won’t get cleaned up overnight, by Chuck Prince or anybody else.
2. Notwithstanding point #1, Citigroup needs a better CEO than Chuck Prince.

Now for more specifics. Norris was nice enough to write a blog post in reply to my Prince-bashing post of yesterday, and his answer was typically well-informed (not to mention typically genteel). In his post, Norris writes:

[Walker] makes a good case that Mr. Prince has made plenty of mistakes, but is, I think, not as clear on what a new boss should do now.

Fair enough — and I’ll offer my opinion on what the new boss should do in just a second. Norris also refers to the column he wrote last week, which certainly doesn’t mince words as regards Citigroup’s missteps in the current credit swamp. Both his blog post and his column are useful reading to find out more of the details behind the banking industry’s wave of bad bets on the credit markets, as well as the efforts of Citi and others to address them through the Master Liquidity Enhancement Conduit.

Norris also writes that “it is unfair to blame [Prince] for the credit crunch we are now in.” I agree wholeheartedly; especially given the widespread credit practices that Norris details in his column, it would be silly to lay all of that responsibility at Prince’s feet. I should have made it clearer before that my beef with Prince does not lie there.

Okay, so what has Prince done wrong? Or what would I have a new boss do?

From everything I’ve read, both in financial reports and from the inside-baseball accounts of Citi’s operations, Prince has failed to shepherd adequate improvements in Citi’s operations, especially in terms of streamlining or integrating the disparate parts of the bank that were cobbled together through the long series of deals spearheaded by former CEO Sandy Weill. These are Citi-specific challenges, rather than the more generalized problems created by today’s credit mess, and nothing in Prince’s record suggests that he’s doing a great job of addressing them.

Mind you, Prince is very smart — no question about that — and he certainly has good qualities as an executive. But this isn’t Random Company X we’re talking about. It’s a Fortune 10 company, the largest financial services company in the world, and it deserves to be run by a Hall of Famer. Given Citi’s complexity, it may need to be run by a Hall of Famer to thrive. And from everything I can tell, Chuck Prince is not that Hall of Famer. He doesn’t have the operational expertise. He’s not a master motivator. He doesn’t elicit intense loyalty from his subordinates or instill any kind of awe in friends or foes. Mind you, he need not be the center of a cult of personality. The right person for Citi might have the smooth, reserved personality of Reginald Jones or Anne Mulcahy rather than the hard-charging mien of Sandy Weill or Jack Welch. But Prince seems to lack the stuff to command that kind of respect.

As for what a new boss should do? The same things that Jamie Dimon did when he took over as CEO of Bank One — mend the operations, from the executive suite on down — and the same things that Dimon has now done integrating Bank One into JPMorgan Chase and running the combined company. Plenty of folks — Chuck Prince no doubt among them — are already tired of the Dimon-Prince comparisons, which are inevitable in any case since the two men helped Weill to build Citigroup in the 1990s. But the comparisons are fair, since Dimon has taken on exactly the sorts of challenges that Prince now faces (integration, streamlining, continued acquisition, and so on), at the same scale, and he’s done a much better job of managing them.

But if the Dimon parallel doesn’t work for you, how about the recent example of Mark Hurd at Hewlett-Packard? Hurd has a personality so bland as to be unnoticeable, but his success at H-P has been remarkable. Best of all for purposes of the Citigroup comparison, H-P was trundling along at the good-but-not-great level when Hurd came in, and he didn’t do any one dramatic thing to change it, but rather many things that got the company pointed in the right direction. From the outside looking in at Citigroup, I simply don’t know the many things that Prince — or his successor — should do to elicit a renaissance at the company. But a troubleshooter in the Dimon mold, or an operator in the Hurd mold, would dig into those problems and start making changes.

Beyond all this, I have a belief — grounded more in my observation of human nature and organizational dynamics than in any specific take on Citigroup’s finances — that something would help Citi move down the right path. But Prince isn’t doing it, or at least hasn’t done it obviously and convincingly to date. The other day Norris wrote that “Nothing a new boss could do [at Citigroup] will cure those [credit] problems. We’ll just have to wait and see how bad it gets.” I’m sure Norris is absolutely right about the first statement; the credit positions in which Citi is now tangled will not be unwound overnight. But I’m just as sure that a great manager could be doing more for Citi right now despite the credit tangle the bank is in. What we’ve been hearing from Prince gives me no confidence that he’s up to this challenge.

Who knows? Maybe Chuck Prince will surprise me. If he does, I’ll gladly admit it. But the odds aren’t great. Norris finishes his newer blog post with this: “When this credit crunch is over – perhaps in a few years — I look forward to compiling a list of CEO’s of big financial companies who avoided getting caught doing things that look dumb in hindsight. It may be a very short list.” He’s right about that — but we already know that, whatever happens next, Prince won’t be on that list.