Business Blog: Hoover’s Business Insight Zone

You could be forgiven for forgetting Morgan Stanley these days, what with all the hubbub surrounding other financial players like Citigroup, Bear Stearns, and Merrill Lynch. But Morgan Stanley made headlines this week when it fired Zoe Cruz, a 25-year veteran of the firm who was the head of its trading operations — and who was one of the highest-placed women on Wall Street.

This Wall Street Journal story gives the inside-baseball account. Note the lowlights of Cruz’s combative management style:

How Zoe Cruz
Lost Her Job
On Wall Street

Zoe Cruz appeared to be surviving the credit crisis that has roiled Wall Street. But the Morgan Stanley co-president’s response in the aftermath of the firm’s $3.7 billion in losses helped fuel her ultimate fall.

The 52-year-old executive didn’t take personal responsibility for the losses at Morgan Stanley, according to people familiar with the firm, and instead lashed out at fellow employees in a series of meetings about the losses, raising questions about her management style.

As a result, Morgan Stanley Chief Executive John Mack lost confidence in Ms. Cruz, whom he had repeatedly backed in the face of opposition from senior executives, these people say.

Among other criticisms leveled at Ms. Cruz: She didn’t have a good handle on the risks the firm took in its mammoth bond division, a business she had grown up in and built over the years, and she frequently clashed with well-liked veteran investment banker Robert Scully, often publicly correcting him at employee presentations.

. . .

Even before the mortgage-trading losses surfaced, Ms. Cruz’s leadership style was an issue. Some bankers and traders still resented her support for former CEO Philip Purcell, who was ousted in 2005 after a campaign against him by a group of Morgan Stanley alumni.

After Mr. Mack backed Ms. Cruz upon his return to the firm, he thought he could help Ms. Cruz improve her management style, and a personal coach was retained to work with her, people familiar with the firm said. But she didn’t always display harmonious team work with her co-president, Mr. Scully, sometimes contradicting him in presentations.

This puts me in mind of two things:

1. The very best performers, in my experience, are always ready to take responsibility for what happens around them. Good CEOs do it. Harry Truman did it when he said “The buck stops here.” Jerry West and Michael Jordan did it on the basketball court. And we could proliferate examples beyond that. What all of these exemplars display is the same mindset that drives Fernando Flores, a remarkable business consultant who refuses to accept excuses from himself or anyone else. I encourage you to read this Fast Company profile on Flores, written nearly a decade ago.

Talk all you want to, Flores says, but if you want to act powerfully, you need to master “speech acts”: language rituals that build trust between colleagues and customers, word practices that open your eyes to new possibilities. Speech acts are powerful because most of the actions that people engage in — in business, in marriage, in parenting — are carried out through conversation. But most people speak without intention; they simply say whatever comes to mind. Speak with intention, and your actions take on new purpose. Speak with power, and you act with power.

Cruz would have benefited from that kind of high-integrity, high-trust approach with her colleagues — and with herself.

2. It’s amazing how people — especially high-performing ones like Cruz — can’t see their own weaknesses, or can’t see how to get around them. The tippy-top performers I was just talking about? They figure out how to correct for their weaknesses, how to eliminate them or, even better, simply take them off the table. You would think that someone as unquestionably smart as Cruz would come to realize that, simply on the level of personal politics, she would be better served to bite her tongue than to lash out at colleagues. I’m not even talking about coming around to a truly empathic appreciation of other people (although I certainly would recommend that to anyone). I mean that, from a strictly selfish viewpoint, Cruz would have been better served to do a better job of keeping up appearances.

Citadel chief Ken Griffin has emerged as a major financial player in the past few years. He’s a math whiz, and he’s well known for his hard-charging ways. So there’s something vaguely comical when you find out that this financial “barbarian” sits in his office reading management books about building emotional intelligence and connecting on a personal level with his employees. But at least you can credit him for trying, becuase he’s self-critical enough to understand that for Citadel to grow like he wants it to, he has to open up some cracks of humanity in his hard-shell personality.

Maybe Cruz will get a chance to do that in the next phase of her career. But if she’s like most of us, she’ll continue not to take responsibility for what happened to her at Morgan Stanley.