Bob's Gutsy Leadership Blog

Two Missing Ingredients at J. P. Morgan Chase

In early April, it was reported in the Wall Street Journal that a so-called “London Whale” at J. P. Morgan Chase was engaging in some very large and complex trades.  Days later, at the Chase CEO’s weekly operations committee meeting, CIO Ina Drew, who has since retired, commented  that those financial trades would eventually work out; ”we can ride through this; it is blown out of proportion.”

Based on Drew’s view, on Chase’s April 13 quarterly earnings release conference call with analysts, CEO Jamie Dimon dismissed the seriousness of any “London Whale” problems.  He called it a “tempest in a teapot.”

A few weeks later, Dimon, continuing to read in the press of potential problems, called a meeting to review the situation.  When he was provided with only a high-level summary, he smelled a problem, and demanded to “see the positions;” meaning he wanted to see the details of the trades/derivatives that had been tied together into this financial hairball.  He was determined to understand the full situation.

Too little too late? Clearly. Insiders at the bank indicated he had been giving the investment banking part of the business very little attention since they had been generating good profits on a regular basis.

There are two very obvious problems here that we can learn from:

1.) While a leader needs to be a hard-charging advocate for their efforts, they also need to be objective.  The CIO failed in this area and has since paid a high price.  If an advocate is not objective, you have an unguided missile that may land anywhere.

2.) A leader needs to trust his or her subordinates, but regularly probe for full understanding of what is going on.   In this case, the CEO was not doing that.   A leader needs to realize that he or she is ultimately responsible, and allocate their time accordingly to spot problems, and opportunities, early.

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