This paper focuses John Allison’s management style, what he finds to be the essential characteristics of a leader, and how he employs ethics and principles in this everyday life, in business, and as an educational leader. He is the former CEO of BB&T and current leader of the CATO Institute. There is little distinction between Allison’s “leadership style” and his philosophy. His philosophy can be directly applied to any situation, challenge, or circumstance. Allison is purpose driven and mission oriented, and he applies a set of ten principles to achieve his mission. This paper will also look at how Allison defines a vision, mission, values and principles. Each of the ten principles are examined, and finally, the paper will look at some of the detractors of Allison’s philosophy.
John Allison, Consistent Philosophy of Life, Effective Manager of Business, and Important Contributor to Society. John Allison lives by a clear philosophy that permeates every aspect of his life. He built a multi-billion dollar bank (BB&T) on it, and managed to stay away from toxic investments that led to the downfall of many banks because of it. He is now taking this highly moral, completely integrated, and fully comprehensive philosophy to the rest of society by donating time and money to universities by explaining the morality of capitalism and rational thought. Most recently, he was appointed to lead the Cato Institute, a Libertarian think-tank. An effective manager instills purpose in themselves and their employees and lives by a set of values or principles that manifests purpose into reality.
The purpose needs to be clear and the principles must be interconnected and consistent. Failure on one principle is failure on all principles; and thus, the vision, mission, and goals of an organization are jeopardized. This concept is consistent with six competencies detailed in Hellriegel, Jacosn, and Slocum’s text book, Managing, A Competency-Based Approach. For example, an organization determines that it must outsource a piece of their production (Strategic Action). Therefore, executive management must effectively work with operations professionals (Teamwork), who must develop and action plan (Planning & Administration) and Communicate that plan to line managers.
It is imperative that executive management carefully considered the cultural drivers of the country that they are entering (Multi-Cultural). Finally, whether this strategy is effective hinges upon whether all levels of employees have good Self-Management skills. Failure on any part of these competencies will lead to failure on the whole. Hellreigel’s six competencies pass John Allison’s integration test; however, John’s principles remove the organizational lens of the six competencies to make them more basic and universal. This paper looks at John Allison’s management style and how it is driven by his vision, mission, and principles. Success with these principles will lead to the success of the six competencies. Finally, this paper will spend some time with the detractors and misunderstandings of John’s philosophy.
John Allison’s Management Style
It is impossible to explain John Allison’s management style without getting into the details of his basic philosophy first. The Richard Craver of the Winston-Salem Journal interviewed Allison in July 2010, and he noted that, “the key lesson of Allison’s success is that if you get the basics right, the details will follow, and you will run your business right. If you get the basics wrong, you’ll eventually make a fatal mistake in the details” (Craver 2011). Allison’s basics are a purpose driven life and organization that is achieved through principles. This philosophy is detailed in a 30 page employee handbook that all employees are expected to understand and has remained consistent at BB&T for over 20 years. As a result, “[BB&T] attracts employees who agree, and repels employees who disagree. After a quarter century, they have established a culture of great coherency, and in business, that is a great power” (Craver 2011). From a bigger picture perspective, John Allison’s management style is utilitarian in its approach; however, this implies that BB&T’s goal is to simply be profitable.
However, profitability is a means to the overall vision of BB&T, which is to make the world a better place to live in (Allison 2011). Allison explained in a lecture at Wake Forrest University that money is not the end game; instead profits are the means of the overall goal (Allison 2011). The utilitarian methodical approach may be considered amoral, at best; however, it becomes highly moral in the context of a moral vision and purpose. At the individual level, BB&T does not simply manage employees, instead, they develop leaders.
Allison explained that “Most business failures are due to leadership failures; most of those are the result of personal leadership failures” (Allison 2011). Therefore, each employee is not just given a handbook of BB&T’s vision, mission and values, but they also attend a presentation given by Allison himself. In this presentation, Allison explains that there are two fundamental aspects to leadership. First, leaders must create a sense of purpose in themselves and their employees. Purpose creates passion. Second, leaders must live principles that turn purpose into reality (Allison 2011). Living these principles motivates average performers to perform at an above average level and prevents the Great from becoming average.
Allison’s Clear philosophy:
Allison’s philosophy can be summarized by a general vision that is manifested by a mission statement. The vision is “To make the world a place that you want to live in” (Allison 2011). The mission is to apply principles that improve the odds of staying alive, becoming successful, and ultimately being happy. The ten principles are further defined herein and are universally applied to individual and organizational missions. Allison’s personal vision and mission parallels BB&T’s vision and mission statement, which is “To make the world a better place by: Helping our clients achieve economic success and financial security; creating a place where our employees can learn, grow and be fulfilled; making the communities in which we work better places to be; and thereby, optimizing the long-term return to our shareholders, while providing a safe and sound investment” (Handbook 5). With the Vision and Mission clearly defined, Allison’s ten principles are:
Principle 1 – Reality
The reality principle is an Aristotelian concept that A=A. In an interview with New York Times, Allison said that, “Wishing something is so does not make it so” (Martin 2009). Although this concept seems very simple, there are plenty of examples in history where individuals, governments and businesses evaded reality. Allison projected that, “I guarantee that long before the rest of us knew, those geniuses at Lehman Brothers, knew that something was wrong, but they evaded it” (Martin 2009). Reality is independent of authority. For example, the ratings agencies had a level of authority in the market place; however, the ratings agencies evaded the reality that subprime lending was unsustainable. BB&T avoided the subprime market by not evading reality and being responsible for evaluating authority and determining what was true (Allison 2011). Reality is also independent of popularity. For example Galileo bucked the popular idea that the earth revolved around the sun.
Principle 2 – Reason / Objectivity
Allison contends that mankind’s competitive advantage is that humans have the ability to think and develop concept formation. Allison avoids religion; however, this concept is not in conflict with a Christian’s perspective with some distinction. God created man in the image of God. Therefore, to reason is to approach God and to fulfill His intention for mankind. Allison applies Aristotle’s model of thought. First, base premises on facts; second, use inductive and deductive reasoning; third, integrate conclusions that are not contradictory; and forth, use conclusion to reach a higher level of thought (start the cycle again). Deductive reasoning is the concrete application of a general principle. Inductive reasoning is the taking a general principle and applying it to a specific application. BB&T has been a highly strategic organization, which requires objective thought and facing reality. In the late 1980’s, laws were about to change that would allow banks to enter other states.
Realizing that North Carolina would soon be flooded with competition from larger banks, he began a series of intra-state acquisitions prior to the changing of the laws. This allowed them a head start on the out-of-state competition while giving BB&T the experience to perfect the merger process well before the larger consolidation of the industry. Allison recognized the reality, used inductive and deductive reasoning to conclude that they would need to get bigger, be purchased, or struggle as a result of the changes in the law, and then was able to move on with a new premise of how to become bigger. Despite the popular opinion that BB&T was paying too much for some of its acquisitions, the strategy paid off. BB&T defended its role as “acquirer of choice,” and stressed the strategic nature of its acquisitions.
It had developed a reputation as one of the most successful integrators of acquired banks in the industry. “Darn few have been able to get away with a consolidation strategy, but one of the best is BB&T,” an SNL Securities analyst told the Business Journal Serving Charlotte and the Metropolitan Area (BB&T.com). Allison also uses reason to implement a method of philanthropic activities in order to be more effective based on BB&T’s core strengths. Allison explained in Philanthropic Magazine that, “The money that was being spent wasn’t going to promote the well-being of our company or our country. We needed to focus our contributions on something that will matter, and we think that presenting the concepts that undergird capitalism is essential for both BB&T’s well-being and the well-being of the society in which we live” (Sparks 2011).
Principle 3 – Individual
Allison contends that all thought happens at the individual level. “Our brains are not physically connected” (Allison 2011). Teamwork is important principle, but new ideas are generated by the individual. A team can improve the idea or even give some the inspiration to develop a new idea, but the thought came from one’s mind. This principle also means that the individual is responsible for themself. “A manager cannot be responsible for their employees,” Allison explained in his lecture. A manager, parent, or leader can only guide people, but the individual must make choices and affix attitudes for herself/himself.
Understanding this concept is very liberating not only for the individual employee, but also for the organization. At the employee level, ownership of their own role gives them a sense of importance. At the organizational level, businesses benefit by having limitless ideas that bubble up to management. In Craver’s interview with Allison, he noted that, “The decision not to write mortgage loans of the type that are now called “toxic” was made by a fairly low-level executive without even consulting Allison” (Craver 2011).
Allison continues the concept of liberating the individual by saying, “Man has rational capacity, and a capitalist system allows him the greatest individual freedom to exercise that capacity for creativity and innovation—and to be rewarded accordingly. It is, in a very deep sense, a just system” (Sparks 2011).
Principle 4 – Productivity
Productivity is a measurable at the organizational level though output and profitability. A profitable business is a good thing. More fundamentally, productivity is the “gut-level commitment to get the job done” (Allison 2011). From a Christian’s perspective, production and productivity is a very spiritual concept; the idea that something tangible was formed from the intangible. This is especially spiritual when the idea was inspired through prayer and worship. There is a parallel between with the most miraculous event in history, when the spirit became flesh, and when someone’s idea becomes reality. The root word for sacrifice is “to approach” (Wigoder 873); therefore, when a person creates, she is performing a kind of sacrifice; not in the sense that something is given up, but instead, both the tangible world and the spiritual world are in agreement; “On earth as it is in heaven.”
Allison’s professional trajectory certainly is one of productivity. He started at BB&T, once known as the Branch Banking and Trust Company, in 1971 and became chief executive in 1989, when the bank had $4.7 billion in assets. By the time he retired as C.E.O. in December, he had overseen 60 bank and savings-institution acquisitions and turned BB&T into the 11th-largest bank in the nation, with $152 billion in assets, according to the bank (Martin 2009). Allison commented on BB&T’s Sterling Award winners (internal awards based on productivity). He noted that the same people won 25% of these awards, and that they all shared a commonality. All of them discussed what they were doing, and were not stuck on the obstacles. There is a basic belief in their ability to achieve (Allison 2011).
Principle 5 – Honesty
Without honesty, nothing else works, whether that is capitalism, a church, a business, or a government. Marilyn Fedak is a retired Investment Manager that works with John Allison on making the case for the free market at the university level. In a joint conference with Allison, she refers to the importance of honesty, At its best, the free market produces a “virtuous cycle,” but it has to be rooted in trust and the rule of law. Trust and predictability are everything. Capitalism is based upon the idea that, implicitly or explicitly, you’re making contracts with people all day long, and if you can’t trust that the laws in place will prevail and that the other person is going to fulfill their side of the bargain, well, then no transactions are going to take place. (Sparks 2011)
Allison explains that being honest 100% of the time is a true test of integrity. For example, “You can be wrong and be honest. We are not omniscient.” Therefore, “We must mean what we say and know what we mean” (Allison 2011). This phrase encompasses two concepts. One, cumulative white lies lead to a black lie. For example, some managers are less than honest on performance reviews by sugarcoating or enabling underperformance. Then, the manager reaches a breaking point, or the poor performance leads to major mistake.
The employee never gets the chance to correct their actions due to their manager not being honest. On the other hand, the manager may be wrong in his/her premise that the employee is the problem. The real problem may be a poorly designed system, which could have been addressed during the performance review. The concept of cumulative white lies is also evident in personal relationships. Allison gives an example of a married couple, “the husband gets mad at the wife for not hearing what he didn’t say” (Allison 2011). Two, it is up to the individual to take responsibility for their claim to knowledge. “Sometimes the best answer is, ‘I don’t know’” (Allison 2011). Principle 6 – Integrity
Integrity is defined as the consistent application of moral principles. David Leoper is the CEO of Wealthcare Capital Management. He also subscribes to Allison’s objectivist philosophy. Leoper references Ayn Rand’s description of morality as the, “Judgment to distinguish right and wrong, vision to see the truth, courage to act upon it, dedication to that which is good, and integrity to stand by it at any price” (Geracoiti 2011). By this definition, integrity is akin to faith. One may not immediately understand the consequences of breaking a moral principle, but she or has faith that such actions will have an eventual consequence.
A key example of Allison’s integrity was after the Supreme Court’s infamous Kelo decision. BB&T was the only major bank not to provide financing for projects that used land seized through eminent domain for private purposes. “We thought that was a violation of a principle that is necessary for a free society,” Allison says. The bank’s decision, “turned out to be great economics, which doesn’t surprise me at all” (Sparks 2011). Later in 2011, Don Luskin moderated a conference with John Mackey of Wholefoods and John Allison. Mackey was highly criticized for his public stance against Obamacare and was nearly thrown out of his own organization.
Mackey’s conclusion was that he will think again before making political comments. Allison, however, disagreed and explained, I’m a person that believes very strongly in my principles, and I can’t sacrifice them in my business, regardless of the consequences in the short-term. We took a strong position on eminent domain, after the Kelo decision. I couldn’t tell my customers and employees that we have principles, but in this case we’d turn a blind eye to people’s property being expropriated to be given to other private people. In our case, it was successful. We got thousands of people moving their accounts to BB&T because of our position on eminent domain, because we acted on principle. That’s the same reason we refused to write loans to people who couldn’t afford them. I did it because I never want to have to tell someone that I did something that I thought was morally wrong. (Vegter 2011)
Allison took a visible stance against the federal government once again in 2008 when he submitted a 14-point letter to Congress in which he objected to the bailout of the financial-services industry out of concern that it will hurt, “well-run financial institutions such as BB&T (Craver 2011). His integrity was questioned when BB&T accepted TARP monies shortly after the closed-door session with the nation’s political leaders. Shortly thereafter, Allison stepped down as the CEO so that he could start his education campaign. His work at the university level and at the CATO Institute is an effort to stop governmental force being exerted against independent businesses again.
Principle 7 – Justice / Fairness
According to Allison, “The good news is that we are all unique individuals” (Allison 2011). Managers that make the average above average and to keep the great from becoming average instill justice in the workplace. Allison believes that, “Egalitarianism is one of the most destructive ideas in our society” (Allison 2011). Managing equal outcomes not unequal input is truly unjust. Since individuals are not the same in their talents and abilities, a manager’s key function is to evaluate and judge others. This is a difficult function; therefore, Allison prescribes a three point method for judging others in order to stay fair. The person needs to be judged (1) as an individual, based on (2) the personal merits and based on (3) what matters in that specific circumstance. Therefore, “We reject collectivism and how they judge, which is based on their memberships groups, such as race, sex, nationalism, etc. [Collectivists] are always wrong because they are making an individual decision based on a group observation. An Individual cannot be a group” (Allison 2011).
Principle 8 – Pride
Aristotle described pride as the ultimate virtue because in order to have pride, all other virtues (justice, honesty, integrity, and rational independent thought) needed to be mastered. The pride described here is not arrogance or hubris, but instead, it is the reward to do good deeds and the reward for having done good deeds. Allison describes this as the “psychological rewards;” However, the rewards for Christianity are much more profound. The apostle Paul speaks of a healthy pride that one should have in oneself and others (2 Cor 5:12; 7:4; 8:24; Gal 6:4). Christianthinktank.com quoted the Greek-English lexicon of the New Testament that “Even Lexicons based on semantic domains have entries for ‘pride (legitimate)” (Chistianthinktank.com 2012).
Allison equates pride with strong ethics. In a defiance allusion to Warren Buffet’s quote about ethics, Allison says, “The next time you face an ethical decision, ask yourself if you would be willing to tell the people that you love, care about, and judge to be of high-esteem the decision you made, not the newspaper.”
Principle 9 – Self-Esteem / Self-Motivation
Allison believes that this principle is the foundation of happiness. In his lecture, he states that, “You must believe at a very deep level that you are capable of being good and that you have the moral right to be happy.” He explained that this is, “The most important and controversial thought that I have to share with you today” (Allison 2011). On several occasions, Allison has made reference to the “sandbox example.” It is a story about a boy named Johnny that is playing with his toy truck in the sandbox. Fred then comes and takes Johnny’s toy truck because he wants to play with it. A fight then ensues, and Johnny’s mother comes over and says, “Johnny, be a good boy and share with Fred.” Allison asks, “What message does that give to Fred? More importantly, what message does that give to Johnny?” (Allison 2011).
The heart of self-esteem is that a person can only control his or herself, not others. Therefore, the individual can only be in charge of their attitudes and their work; and thus, must be focused on them. Egalitarians are focused on others, and as a result, are adverse to others for being great. This is envy, which is the ultimate immoral pastime. Allison explains that, “you may be able to fool your boss, but you will never fool you. Do your best, and self-esteem increases. Do less than your best and self-esteem decreases” (Allison 2011).
The trader principle fits with any of the other ten principles, but it particularly fits with self-esteem and self-motivation. The trader principle simply means that because people are self-interested, only win-win relationships are sustainable over the long term. All other relationships are either a lose-lose or eventually a lose-lose. Free-market capitalism is a highly moral system because it incentivizes good behavior and provides for a system for people to interact with others in search for win-win relationships. Allison explains this concept as the new leader of the CATO Institute: One of the things that I really want to do is make this a moral fight instead of a fight around the technical aspects of economics.
The libertarian vision is a moral vision and we own the moral high ground. A free society is the only society in which people can think for themselves and pursue their rational self-interest. Freedom creates the ability, through creativity and incentive, to raise the quality of life for everyone. When I was CEO of BB&T we saw the opportunity, on many occasions, to create products and services that would improve the quality of life of our clients but some government regulation prevented us from doing it. Unfortunately most business leaders are not really capitalists. They are crony capitalists looking for some way to use the government to give them a special advantage. Cato is a defender of real capitalism, real free markets (Benko 2012).
Principle 10 – Teamwork
In a philosophy that is built on the individual and self-motivation, teamwork may be overlooked as a key principle. However, teamwork is essential in an organization and a society. Teamwork allows much more to be produced. Craver noted in his interview with Allison that, “What makes Allison unusual among leaders is that his philosophy is one of realism — not phony idealism. It’s all about excellent individuals making personal contributions to a joint effort — for the purpose of making profits, not saving the whales. Allison candidly says, in effect, a team is made up of people, each of whom is an ‘I’. We insist that you be an individual, and that if you want to be on the team, you have to voluntarily buy into the mission we have all chosen to share (Craver 2011).
Detractors of Objectivism
Forbes dubbed John Allison as the “Philosopher King;” however his philosophy is not easily accepted by many. The first and most relevant critique is that God is absent from this philosophy. This paper has included some allusions to how objectivist principles can mesh with Christian ideals; however, the architects of this philosophy, namely Ayn Rand, were atheists. The incongruities of this philosophy and Christianity largely lie in the concept of natural order (mother-nature) and the belief in God that is not visible (faith). As explained above, Christians cross this intellectual divide by substituting “natural order” or “mother nature” with God. There are also some differences in the idea of selfishness and self-sacrifice. More research is needed to find intellectual bridges; however, some of these conflicts are semantic in nature. Nonetheless, there is a logical case for God, and Christians knows that God reveals rational thought, purpose, creativity, motivation, and reason through prayer. There is some confusion between being selfishness and self-destructive. Detractors of objectivism and capitalism contend this it is a “dog-eat-dog” system that takes advantage of others. Allison argues that taking advantage of others is truly self-destructive, not selfish.
If a business takes advantage of a customer, then the customer will alert the market-place; and thus, the business will be harmed. Businesses take advantage of others through the political process, but that is not capitalism, and as Allison said, is not congruent with his philosophy. Finally, detractors find Allison’s philosophy lacks emotion. Allison disagrees and says that emotions can be a good thing. “Passion is an emotion, and you need passion in life” (Allison 2011). Allison believes that emotions are learned, not magical. This certainly seems to be true with some emotions, such as phobias; however, to the Christian, emotions can be divine inspiration. Allison warns leaders to check their premises when their emotions are at odds with reason. He further advises to always go with reason over emotion.
Christians would disagree, at least in part. A Christian may always go with reason over emotion, but only after prayer and meditation and when reason and emotion are in-line. Certainly, a Christian should go to God in prayer to check their premises and motives. Life becomes easier to live, organizations are easier to lead, and employees are easier to manage if one has a clear philosophy and set of principles. With this in mind, BB&T’s senior management style is written in its literature as being as “participatory, team oriented, fact-based, and rational” (BB&T History 111). They define management concepts as, “obtaining and retaining excellent people, training employees well, give employees the appropriate level of authority and responsibility, expect a high level of achievement, and reward performance accordingly” (BB&T History 112).
All of these definitions and concepts line-up with Allison’s core philosophy. BB&T’s website explained that, “Allison’s management style stressed decentralization, striving for a community banking feel at the branch level” (BB&T.com). The individual, self-esteem, productivity, and teamwork principles are the driving principles for this decision. Moral Clarity leads to better decision making, longevity, success, and happiness. This is good for all the stakeholders involved in the organization.
This paper will conclude with scripture that encapsulates the role between managers and employees and consistent with most of Allison’s principles. Ephesians 6:5-9 says: Ephesians 6:5-9 Slaves, obey your earthly masters with respect and fear, and with sincerity of heart, just as you would obey Christ. Obey them not only to win their favor when their eye is on you, but as slaves of Christ, doing the will of God from your heart. Serve wholeheartedly, as if you were serving the Lord, not people, because you know that the Lord will reward each one for whatever good they do, whether they are slave or free. And masters, treat your slaves in the same way. Do not threaten them, since you know that he who is both their Master and yours is in heaven, and there is no favoritism with him.
Allison, John (7/21/11), “Principled Leadership” Lecture at Wake Forest University Schools of Business. http://vimeo.com/27183721
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Craver, Richard (7/10/11), “My Interview on John Allison – Today’s John Galt,” Winston-Salem Journal http://www.iamjohngalt.com/2011/07/my-interview-on-john-allison-todays.html
Geracioti, David (Apr. 12, 2011), “Cold Call: Wealth Manager Operates Firm on Rand’s Objectivism” Wealthmanagement.com, http://wealthmanagement.com/institutions/cold-call-wealth-manager-operates-firm-rand-s-objectivism
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Perman, Matt (4/29/30), “A Christian View of Management in Ephesians 6:5-9.” What’s Best Next http://www.whatsbestnext.com/2011/04/a-christian-view-of-management-in-ephesians-65-9/
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