ExxonMobil CEO’s difficult move from executive to diplomat

ExxonMobil CEO's difficult move from executive to diplomatDonald Trump has named Rex Tillerson, ExxonMobil’s current CEO, as his Secretary of State. 

You hear a lot of arguments why business leaders should make effective politicians. And those arguments make sense, for sure. Business leaders know how to manage large organizations. They know how to combat inefficiencies. They know how to satisfy diverse stakeholder communities, and how to identify market trends and plan for the long term.

You would expect a lot of those skills to translate. But there are plenty of differences between being an executive and a diplomat. I want to call out some of these difference, for a couple of reasons:

  1. A lot of the debate about Mr. Tillerson is heavy on contemporary politics. I want to zoom out and think about the tension between business and politics at a higher level.
  2. We tend to lionize business leaders. Capitalism has admittedly been such a positive force, that we assume success in capitalism will translate into other domains. I’d like to push back on that idea here.

I’m not saying Mr. Tillerson will or won’t be successful as Secretary of State. You could build compelling cases for or against nearly any nominee. What I’m trying to say is there are real reasons to be skeptical, just like there are real reasons to be hopeful. And the reasons we should be skeptical are the same reasons we have to be careful assuming our own past success will translate to the future.

One huge difference between business and politics

Business is coherent in a way that politics isn’t. What do I mean by that? There is one common thread to business: the almighty dollar. With politics? You have a bunch of competing aims that are sometimes irreconcilable.

The goal of any business enterprise is to maximize financial performance. At the end of the day, no matter which specific metrics you’re following, the point is to make the business more valuable. We won’t always agree on precisely how to measure the value of a business. But all business leaders work toward the same end…a more valuable business.

Politics is different. You have an economic component, of course, in the form of trade. But diplomacy involves so much more than trade. While a business focuses on financial performance, a government focuses on influence. And, for better or worse, “influence” is much, much more difficult to nail down than “financial performance”.

In other words, the success definitions are different. At the 30,000 foot level, there is consensus about how to make businesses more valuable. Even at 30,000 feet, there is next to no consensus on how to make your country more influential.

What do we even mean by influence? Let’s define it obliquely. A country has influence when it can serve the interests of its people through foreign policy. A country has no influence when foreign policy terms are dictated to it. Influence is the currency a country uses to establish favorable foreign relations.

We need to keep in mind, a country’s interests can change considerably over time. And global conditions change. A business might be able to lock in favorable terms with a supplier and reap the rewards for the foreseeable future. A country needs to build nimble relationships with friends and foes to protect its people, no matter what political conditions emerge.

Let’s use a Wall Street Journal op-ed as an example

On Monday, Gerald F. Seib published an op-ed in the Wall Street Journal titled “Listen Closely: Donald Trump Proposes Big Mideast Strategy Shift”.

The conclusion from the op-ed is that Donald Trump will likely try to pursue two conflicting goals in the Middle East:

  1. Reduce US resistance to Russian and Syrian military forces in Syria.
  2. Roll back the nuclear deal with Iran, an effort he has called his “number one priority”.

One problem is that Russian President Vladimir Putin likes the Iran deal. While Putin would welcome a reduced US presence in Syria, he would dislike a harsher approach toward Iran.

In a nutshell, these are the kinds of foreign policy dilemmas that US presidents face. No two countries have overlapping interests in all cases. Some actions will create friction with Russia. Other actions will reduce tensions. But there’s no realistic way to devise a diplomatic path that avoids conflict. And with conflict comes inevitable costs and criticism.

Here we have an important difference with business. As a business leader, you can choose with whom to cooperate. You choose your suppliers. You target customers. Your success, in part, is predicated on finding relationships that are dominated by win-win dynamics.

That simply doesn’t happen in diplomacy. All meaningful relationships have unavoidable friction. You can’t just drop Russia as a business partner and seek another country as a better fit. You have to work with Russia, no matter what international conflicts emerge, and no matter how much your interests may or may not align on a case by case basis.

Another important difference between business and politics: scope

We’ve already discussed one big difference between business and politics: the definition of success. In business, success is easy to define and understand. In politics, specifically in foreign policy, it’s murky at best.

Another important difference is scope. In business, you can cooperate, or not cooperate, as much as you’d like. Want to establish a joint venture? Define the scope. Choose a project. Set the terms. And cooperate within that domain. 

Likewise, you can embed as deeply with a supplier as you’d like. Think of Amazon literally operating on the manufacturing floor of one of its suppliers:

[The program] allows Amazon to set up shop and hire its own workers within a manufacturer’s warehouse or facility. Amazon essentially runs the e-commerce and logistics for the manufacturer, which can sell direct to the consumer.

In other cases, Amazon will have zero presence with a particular supplier. It all depends on the business context.

In global politics, the United States and Russia, for example, will always have deeply connected interests. They’re always operating on each other’s manufacturing floors. In some cases, that can work brilliantly. In other cases, it provokes conflict. But neither country can simply choose to engage in only the global affairs that the other doesn’t care about. In reality, no such global affairs exist.

It’s about whether you can pick your fights or not

In business, you get to pick your own fights. You choose what to offer. You choose which segments of the market to target. You choose your organizational structure, and your employees, and your strategy. And you know what victory looks like in any of these fights. Your investors make it very clear.

In politics, you don’t get to pick your own fights. As the US, you don’t get to choose whether Russia intervenes in Syria’s civil war, or whether Iran pursues a nuclear weapon. Your only choice is how to respond. You can’t target a different market, or build a different commercial model. You can’t delay your product launch, or pursue a reorganization. 

Take one of Mr. Trump’s quotes from the Wall Street Journal op-ed: “our goal is stability not chaos.” Stability is a noble goal. You can trace a lot of difficulty we’ve faced to chaotic conditions.

But in the Middle East, if stability is your goal, then you will need to get in bed with dictators. You will need to take the side of governments that actively work against the interests of their own people. You will need to suppress democratic movements that risk throwing a stable regime into turmoil. 

Again, it’s not that the choice is easy. It’s not. Take the opposite of stability. Promoting democracy around the world comes with enormous costs, chaos being one of them. Any decision you make will lead to outcomes that are easy to criticize. You need the conviction of your core values, and a clear idea of what role the United States should play in the world. Then you march to that vision, knowing things won’t unfold perfectly.

There are no financial statements in foreign policy. No balance sheets to tell you how heavily leveraged you are. No income statements to tell you about profitability. No cash flow statements to assess your liquidity. The outcomes are fuzzy. They won’t be defined for years, probably decades. Favorable and unfavorable narratives will be written. There’s nothing like a stock price to point to, to break any ties.

A lot of your skills will translate. But be careful not to overestimate

Before I get to the broader conclusion, I want to reiterate something. I have no idea whether Rex Tillerson will or won’t be a successful Secretary of State, if he is confirmed. I’m certain that Mr. Tillerson is an extraordinarily intelligent gentleman, with a wide working knowledge of the world, and first class people skills. Those are great tools to have, no matter what job you’re seeking.

At the same time, we shouldn’t overreach. Don’t just assume that because Mr. Tillerson has successfully led one of the largest corporations on the planet, that he can successfully lead the world’s largest diplomatic organization. Some skills will translate. But those skills won’t necessary return the same success in diplomacy that they did in business.

But you and I have a lesson to learn from this too. We need to acknowledge our strengths. We need to appreciate how universal, how transferable, these strengths are. We need to not limit ourselves, by assuming that while we’re good in the lab, we can’t use those same skills to be good in the boardroom. We can use those same skills.

Still, we need to acknowledge when the game has changed. In the case of diplomacy, we had two huge changes relative to business. First, success is much harder to define, and much harder to build consensus around. Second, the scope of the engagement is much larger. Fundamental constraints in business no longer apply in diplomacy.

While many of our skills will help us succeed in different roles, we need to know where our gaps are. Know the rules of the game, and how they change from one environment to the next. In some cases, rule changes will help you. New rules will help you take even greater advantage of your strengths. But in other cases, rule changes will force you to fill some gaps.

As always, be aware. Give yourself proper credit. But don’t blindly assume the path to success in one role will work equally well in another. It might. But it might not.

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