CHAPTER 9

Structure: Repairing Failing Institutions

Cementing the Foundations

The term institution covers a lot of territory. Political, health, legal, and financial systems are institutions. So are tax codes and the media. Of course, schools, the police, charities, and religions are as well. A diverse group, to be sure. But one thing institutions all have in common is that they play a decisive role in the smooth running of our societies—local and global. When our institutions are working right, they provide stability.¹ We expect certain things from them—a fair trial, the same university degree requirements for all of us, and balanced news reporting, for example. And unless they are corrupted, they generally live up to our expectations. By default, institutions change slowly, and their constancy has engendered widespread trust in them.

But these are not normal times and institutions don’t have the luxury now to play by their normal rules. In eras of relentless disruption and global political and social fracturing—and deep-seated fears that the speed of change could upend the world order permanently to the advantage of a few and the disadvantage of many—institutions must adapt. Going a little further, they must learn how to disrupt themselves to keep pace with threatening economic, political, and social trends. In so doing, modernized institutions would perform again their traditional role of preserving the fabric that we need to hold us together and make progress into a difficult future. Unfortunately, many of our institutions are already failing at this and thus are targets of enmity and increasingly seen as irrelevant.

There is a host of substantial, well-researched, and verified analyses on managing change in large organizations, but the purpose of this chapter is not to take such a broad view.² Instead, through the stories of four extraordinary individuals who have boldly reconceived the operating fundamentals of their waning institutions, we provide a four-step roadmap for institutions to maintain their vital place in our lives in a period that is not easily suited for them. The first three individuals profiled in this chapter tackled failure at institutions we identified in chapter 4 as exemplars of how widespread and damaging institutional dysfunction has become—namely, media, global multilateral organizations, and education. The fourth individual profiled offers insight into how institutions can and must reconnect with the local communities they are intended to serve. Without that, institutional failure is preordained. Although the challenges institutions face are enormous, these stories demonstrate that great leaders who adopt strategies targeted at protecting their institutions from failure can rekindle their institutions to play the essential role of stabilizing and improving society while amplifying the social and economic progress that they were designed for.

Step 1. Media: Identify the Core Principles, Then Revitalize Them

The institution known as the fourth estate has fallen on hard times. Under pressure from technology and polarization, it is failing noticeably in its essential role as the gatekeeper of the news that matters and the distributor of unbiased facts to a world that is drowning in information and becoming less able to separate truth from fiction. However, one media organization, Pearson Plc (whose properties included Penguin Books, the Economist, and The Financial Times) was able to buck this trend and avoid succumbing to the forces stacked up against it.

Credit for propping up Pearson during its most challenging period primarily goes to Marjorie Scardino, who had an untraditional journey to eventually become the CEO of one of the UK’s most iconic (and wobbling) institutions. Born in Arizona and raised in Texarkana, Scardino was a rodeo barrel racer early in life, stayed in Texas through college and her graduation from Baylor University, completed law school and practiced for ten years before launching, with her husband, the Georgia Gazette, a small weekly paper that remarkably went on to win a Pulitzer Prize. They sold the paper for one dollar when its losses became too backbreaking to absorb. Scardino parlayed her experience running the Gazette into a top executive position at the Economist’s North American operations, which at the time (in the late 1980s) could hardly be called operations. Newsweek and Time were at their peak then, and few people in the United States had even heard of the Economist, which was primarily written and produced in the UK.

Scardino and her team changed the magazine’s trajectory. In the six years that she led the North American group, circulation in the United States more than doubled, from 100,000 to 230,000, which earned Scardino a promotion to manage worldwide business and in 1997 the chief executive job at Pearson. She was the first woman to head a FTSE 100 (Financial Times Stock Exchange 100 Index) company and the first American to run Pearson. Scardino inherited a company that was still a giant multinational but had lost its way—and, more important, its identity. Although its publications made Pearson a household name and a trusted institution in the UK, and increasingly around the world, the company also had its fingers in an incoherent array of other businesses: investment bankers Lazard, the unprofitable technology outfit Mindscape, and Madame Tussaud’s waxworks, to name just a few.

Obviously, these extraneous parts of the company had to go. But that wouldn’t be enough to get Pearson on track. After all, in the late 1990s media was experiencing the first tremors in the massive Web-based disruption that would permanently alter the way news is gathered and delivered. (the New York Times, for instance, began its online edition in 1996). Faced with this, Scardino directed a two-pronged strategy. First, isolate Pearson’s institutional brand. What makes people trust Pearson; what are its core tenets? Second, reenergize Pearson’s distinctive institutional character to be relevant in the new global environment.

The first part was relatively easy. At its heart, for nearly 150 years, Pearson was a provider of high-quality, accurate, and diligently developed content with an unbiased global perspective. That was what made Pearson distinctive and valuable. Scardino’s challenge was to rebuild Pearson in that image, modernizing where needed, adding or subtracting as necessary. To amplify its content, Scardino acquired educational businesses that covered the gamut from testing services to academic publishing and executive education. At the same time, she pumped money into expanding the Financial Times and the Economist into global markets and onto electronic platforms and developed an early digital strategy to sell Pearson’s products through multiple online channels. By the time her tenure atop Pearson was up in 2012, the firm was three times more profitable than when she first became CEO. Perhaps most important, the Economist had become one of the world’s most trusted sources for unbiased and thorough news reporting.

An important thing happens when you define an institution’s purpose in order to revive it: difficult questions about how to act and advance the institution so it remains relevant become clearer. The institution’s core principles, in effect, become the framework for decision-making and the language for dialogue about how to proceed.

Step 2. Multilateral Organizations: (Re)design the Institution around a Fractured World

It would be hard for anyone to disagree with the observation that the world is a hopelessly divided place. People are worried about severe wealth inequality; disempowerment due to technological disruption; and online and physical social communities that serve as echo chambers to separate rather than unite us around reliable news and information. Everywhere you look, people are the less-than-proud recipients of the short end of the stick. In such an environment, the role of our institutions is to recognize the fears underlying the differences that bedevil us and be active participants in assuaging our worries. Our most critical institutions, however, have fallen well short in serving that function. In particular, and most disturbingly, institutions that we need to achieve cross-national and multilateral collaboration—the very institutions we need to address the worries raised by the ADAPT framework—are not at all prepared to be useful in a fractured world.

The German economics scholar Dennis Snower reached that conclusion in 2017, in a somewhat notable shift in his thinking that exposes the steep climb institutions have before them. Snower is widely respected around the world for a lifetime of work that in subject matter went well beyond the output of most economists, spanning the gamut of institutional, psychological, labor, and behavioral economics.³ He was a devout globalist who had agreed for decades with the consensus that economic growth and social prosperity are linked and that integrated institutions were the foundation of global success.

But in 2017, when Snower was asked by the German government to prepare agenda items for an upcoming G20 summit in Hamburg, he realized that this yearly meeting of industrial nations—the world’s most visible institution ostensibly focused on charting paths to progress for all nations to follow—was built around obsolete ideas. In recent years, he noted, many economies were recording steady growth of production and income but large segments of the population felt left behind. Their quality of life had worsened or become more precarious; in globalized economic markets they felt disempowered, stymied from shaping their own fate through their own efforts, and they were alarmed by the disintegration of their established communities. Jobs, wages, environmental conditions, housing, and education were deteriorating. Where, Snower wondered, was the social advancement that was supposed to accompany economic gains? In his words: “It is important to recognize that the underlying purpose of the G20 is to satisfy human needs worldwide, starting with the needs of the neediest people. Promoting economic growth and financial stability are simply means to an end.”⁴

With that change of heart—with that statement of purpose chiding the G20 for not recognizing the fractured world they inhabited (and were responsible for)—Snower began the arduous effort to redesign the multilateral institution. He determined that to, as he put it, recouple economic and social progress, the way the discussion points for the annual summits were arrived at had to be fixed. Generally, from one year to the next, the leader of the host nation listed priority issues that they wanted to target at the meeting (usually economic and social issues they were interested in that affected their country) and a team of thinktanks called the T20 (the group that Snower was leading for the German G20) provided research-based policy advice for the agenda. That approach yielded a different set of topics each year without any consistent follow-up from one to the next to ensure that whatever the impact of the economic strategies put in place, the people who lived in the G20 were gaining the social benefits.

Snower’s creative answer to this problem was to design a new entity in essence connected to the T20, called the Global Solutions Initiative (GSI). This group, made up of thinktanks and thought leaders, maintained an ongoing narrative of common global social problems that had to be covered by the G20 to adequately address the most pressing issues. This could also help the T20 become an intellectual backbone of the G20, augmenting the shaping of its agenda development. The GSI’s initial narrative—that economic prosperity could become decoupled from social prosperity and that the job of the G20 was to recouple these differing sides of prosperity and focus on human well-being—became a guiding premise for the entire G20 labyrinth.⁵

It allowed the T20 to nudge its superior, the G20, to not neglect pressing anxieties that individuals in each country felt in their day-to-day lives, and gave the G20 the flexibility it needed to cover the favored topics of the host.

It was an elegant solution crafted by Snower—and now going on three years, it has already been successful in changing the tenor and contours of the G20 meetings. Snower is soft-spoken so, at first blush, would not seem to be a person who could redirect one of the world’s biggest institutions. But he accomplished this because of two somewhat contradictory qualities: he is a man of vast integrity, willing to recognize when a life’s work of assumptions need to be challenged, even at the cost of being rejected by many of his German colleagues who disagreed with his new positions; and his mild-mannered demeanor backed by the depth of his intelligence allowed him to bring brilliant people with very diverse theories and points of view together around a common cause. That is especially noteworthy when you consider that most of the T20 members were initially committed to the G20’s traditional focus on economic and financial policy, with only passing reference to social prosperity as a distinct goal.

As Snower’s thinking about tackling global problems has evolved, he points to three observations. First, all of us have many identities, based on our hobbies, interests, race, religion, location, nation, city, favorite food—the list is virtually infinite. And there is a growing emphasis on the diversity of those identities among people in the world. Thus the notion that the nation-state is the preeminent source of our identities is far from inevitable. Second, countries are championing quite different views of the optimal version of a political economy. Third, with that said, there are still critical issues—surrounding trade, global finance, climate change, and the like—that require purposeful cooperation among all of us. Given this, Snower suggests that global governance should be rethought around layers of governing bodies, with challenges tackled at the most local level possible.⁶ Every governance decision at any layer begins with the assumption that we live in a world with competing views about what is best and competing identities with competing demands. This is a radical departure from the belief in centralized global institutions dominated by top-heavy nation-states seeking broad consensus that has implicitly guided us for the past seventy years.

Snower’s G20 plan for institutions to deal with global fissures applies of course most easily to big systems. But while the global economy has become more integrated, global societies and political systems have become more fragmented, and thus it will be increasingly important to address global problems through social, economic, and political changes that enable our multiple identities to complement, rather than compete with, one another. In education, focus first on the classroom. In policing, the neighborhood. In politics, the wards, precincts, and streets. In healthcare, preventive medicine and the well-being of individuals. Remain mindful that humans have always mastered their challenges through collaboration in small groups and that global solutions require small groups to be working in harmony with our national and international institutions.

Step 3. Education: Accelerate the Ability to Change

A repeated motif in this book has been that education as an institution is letting us down. From elementary and high schools to colleges and universities, many students are not sufficiently taught what they need to know to elevate themselves and prosper in a dynamically altering technological world and the best and most effective education is often reserved for a small group of individuals (a group actually becoming even smaller) that can afford elite schools. In other words, the value of education is rapidly being subsumed by the other disturbing global trends involving technology, demographic shifts, and social and economic disparity. The upshot is that education as an institution is in a sort of paralysis, caught in a maelstrom of external and self-inflicted pressures and unable to change or find a way out of its dilemma.

Not every educator is able to assess this situation with the appropriate clarity it needs to do something about this dilemma, but Jim Danko is one who undeniably does. I got to know Danko well during a hurricane in 1996, when he came down to interview for a position at Duke. The university shut down for three days, giving Jim and me a lot of time together to discuss the challenges of education as an institution and bandy back and forth realistic and totally fanciful solutions—while sharing ice cream we had to save from melting since due to the storm there was no electricity to his hotel refrigerator.

Fifteen years later, when Danko became president of Butler University, we once again colluded to fix university-level education. Danko had hit up against that most existential problem for institutions in the current global environment—too slow to change and thus at risk of becoming irrelevant. Butler was founded in 1855 with the mission that everyone deserved a great education regardless of race or color, a provocative idea in the pre–Civil War United States. Although the mission has modified slightly, Butler has always emphasized the need to provide accessible, high-quality education. It has been a hugely successful regional school consistently ranked the best in the Midwest.

But Danko was not satisfied with that; he is a peripatetic intellect who has that great quality for an educator of never thinking we know enough about answers we provide. He was wary that Butler was resting on its history and not transforming fast enough to provide students with the education that they needed in today’s world. Three things bothered him the most: (1) universities weren’t really preparing kids for the technology revolution; (2) universities were increasingly not managing the ongoing need for education as people continue through life postdegree; and (3) universities were contributing to economic and social inequities, evidenced by the fact that schools placing kids more effectively in the job market were more likely to recruit from wealthy families and they didn’t make themselves known or available to places where the kids with the biggest needs for a great education lived. Instead, universities were recruiting from elite schools in every state, by and large neglecting good students from average schools.

In Danko’s view these were deep-seated issues that had established themselves due to Butler’s inherent conservatism. Institutions are lost in their own inertia, he thought, because they fail to comprehend that today’s problems won’t just resolve themselves over time; they were fundamental and new, and institutions had to disrupt themselves to fix them. To get this across to his board, Danko asked me to present the ADAPT framework to the group. He wanted me to lay out in stark detail the wellsprings of the crisis of prosperity and how technology was disrupting people’s lives and threatening their jobs. He asked me to talk about the creeping peril of demographics and polarization and especially the palpable loss of trust in institutions, well-deserved because by inaction they were abdicating their positive role in society. “I need someone that they would consider credible to make this case deeper, harder, stronger than I would,” Danko told me. “Paint the extreme picture of ADAPT. And I need you to talk about it in a way that it isn’t just about the university, but about the dangers to the larger society.”

Soon after I spoke to the board, Danko was able to get Butler’s leadership to agree to an imaginative plan that has the potential to change the nature of the university, leaving its valuable traditional elements in place while providing a pathway for innovation and experimentation. The plan had three parts.

1. Fashion an alternative entity, attached to the university but outside its governance structure, that was designed to expedite the debut of new student programs, taking risks with fresh ideas, accepting that some will fail and then learning from that failure. Even the board could not deny that this wouldn’t be possible within Butler’s conventional channels for program development. It would tackle questions like, What does a lifelong learning model entail? Which less expensive undergraduate programs are worth trying out? What elements would a pure technology-based degree have? The notion was to create a structure that would permit much faster experimentation and implementation of new untried educational and lifelong learning concepts than is traditionally possible in a university, ultimately to accelerate the ability for a university to change while maintaining important aspects of governance that make our educational systems worthy of trust and essential to our society. This part of the plan permitted the next two elements to occur.
2. Find new revenue streams, in areas such as executive education, alternative degree programs, and lifelong learning; if Butler didn’t, undergraduate fees would continue to rise, boxing out anyone but the wealthiest students. Without the ability to raise endowments like Harvard, Yale, or Stanford, Butler could not afford to underwrite degree programs for a wide swath of students from less well-heeled communities. This portion of the strategy was engineered to use new degree options and pathways to allow greater access, employability, and affordability.
3. Enhance holistic student learning by focusing on the student experience throughout the twenty-four-hour day, linking curriculum, pedagogy, and programs to the needs of employers and expanding the number and range of high-impact practice opportunities. All of these elements were meant to help Butler fulfill its mission to offer accessible solutions for learners currently excluded from traditional private higher education. Just like before the Civil War, Butler is continuing its focus on access for all.

Step 4. Local First: Community Connections

A principal reason why institutions have by and large failed and are not viewed as trustworthy anymore is that they have become estranged from the communities that they are supposed to serve. They no longer prove their value by their day-to-day presence in the community and the positive results of their activities. In today’s landscape, that is a significant missed opportunity. With so many initiatives to address ADAPT concerns fitting into the category called Local First, the way established institutions directly support and enhance the development of these initiatives could determine their long-term success as well as the viability of the institutions themselves. Since institutional responsibilities include such a broad swath of societal activity, their potential impact in helping local communities and innovators design programs to tackle inequities, fears, and concerns cannot be overstated.

One person who understood some time ago the importance of the institution and the Local First relationship was Frederick Terman, the former provost of Stanford University and dean of the Engineering School, a man I count among my heroes.⁷ I met him only once, shortly before he died in 1982, when I spoke with him about a topic that was in retrospect too big for one conversation: I wanted him to help me discover how a university could come to match the success of Stanford. What I received was a treatise on academic innovation that had at its heart an unforgettable message: the link between society and the university must be indestructible.

Terman was a brilliant man with a remarkably practical ability to break problems down into their simplest components to find uncomplicated solutions. When he became dean at Stanford just after World War II, Terman knew that he faced a tall order in trying to get funding from the Department of Defense and other government agencies that were supporting much of the engineering activity in the country. East Coast schools like MIT, Carnegie Mellon, Johns Hopkins, and Princeton were favored, while a university like Stanford in Palo Alto, a long way from Washington, DC, and New York, was at a distinct disadvantage.

To overcome this, Terman dedicated some of Stanford’s unused land to establish an industrial park, the first owned by a university in the world. He convinced William Hewlett and David Packard, two of his graduate students, to house their new company there. Over the years as Stanford Industrial Park expanded, Terman led efforts to link the university financially to some of the start-ups that moved into the park—and before long there was a continuous line of Stanford graduates populating the site. Terman’s initiative came to be known as Silicon Valley, a perfect example of an institution and a community embedded together for everyone’s gain. It was a product of necessity. Today the necessity for institutions of all kinds to do the same thing in ways applicable to their roles could not be greater.

The need to connect to the community should be a priority particularly for operational institutions that serve society directly—police forces, financial service firms, tax collectors, and healthcare providers, to name a few. When these types of institutions fail to be truly present in the communities they serve, serious harm can be done. In many communities these institutions are essential for local residents and the social network of the community to thrive. Thus the damage from the sustained failure of so many institutions to recognize the concerns of their local communities and to provide tangible answers cannot be overstated.

Leaders of all institutions could learn a tremendous amount from the principles and the leaders studied in this chapter. They all took imaginative, bold, intriguing, and risky steps, usually without fear, although not with total confidence. They adopted, each in ways that suited their situations, aspects of the four elements essential to protecting and reviving their institutions: (1) identify the institution’s core principles and innovate around them; (2) design the institution’s operations to survive and improve people’s lives in a fractured world; (3) accelerate new ideas and their execution while not alienating those who fear change; and (4) forge intimate connections with the local community and the people to be served. Institutions are essential for a cohesive world; they are the glue that holds us together in big and small ways, in big and small regions—from across continents to a neighborhood. The crises identified in this book cannot be solved with broken institutions.