Taking control amid corruption: A discussion with Harry Spence

View original article in In Business here.

A couple of months ago, I got an email from Benton Harbor, Mich. It reported on the local strife following the appointment of a super-powerful municipal administrator under a new Michigan law.

“Do you do this?” my correspondent asked. “Any comment?”

And I replied that the only person I would trust to comment was someone whom I had admired for many years but had never met.

That person is Lewis H. (“Harry”) Spence, a Harvard-trained lawyer who has taken a number of high-profile municipal and government turnaround assignments. He was receiver of the Boston Housing Authority in the 1980s, receiver of the city of Chelsea, Mass., in the ‘90s, and then deputy chancellor for operations of the notoriously bureaucratic New York Board of Education.

I had always been interested in the Chelsea assignment because of its relative rarity and unqualified success, but it was during the New York assignment that I tore an article about him out of The New York Times. Mr. Spence said something to the effect that he took on the relatively lowly board assignment after some spectacular success elsewhere, because his own spiritual journey taught him that it did not matter who got the credit.

This was clearly not your usual Brooklyn bureaucrat.

Harry then went on to become commissioner of the Massachusetts Department of Social Services (DSS) after that organization had a spate of tragic child abuse scandals.

He now teaches at Harvard, where I caught up with him by phone.

Q: Tell me about your assignment at Chelsea.

I initially thought it a pure financial assignment – that the city was poorly managed. But within a few days, I sought the advice of a mayor of a town nearby, and I asked him what he would do. He advised getting rid of what he called the gambling machines …. And I said, “What gambling machines?” It turns out that for many years, the town had been mob-run. It was the poorest city in the state, but it was one of those places that had a lot of social clubs. The machines would subsidize the club, and the mob would grease the palms at all levels, including the mayor, in order to protect the franchise.

By formal agreement, the vice squad reported to the mayor, instead of the chief of police. This made it easier for mayors to directly control the gambling payoffs.

Q: So what did you do?

I called in the police chief, and told him that within a couple of weeks, I wanted a signed affidavit that there were no illegal gambling machines left in town.

Q: But were the machines the root cause of the problem?

Mob rule was the root cause. They decided to kill the golden goose – probably because they saw the city going down faster than they could control, so they accelerated the payoffs and corruption, especially in the real estate development process.

They never believed anyone would intervene on behalf of the city. But once they saw the machines gotten rid of, they realized change was for real. Although a funny side show occurred when one mobster tried to arrange to have the high school cheerleaders demonstrate to return the one-armed bandits.

At the same time, the U.S. attorney’s office came in. Once the prosecutions started, the bad guys started to turn on each other. This gave us breathing room on the practical side.

The people knew something was wrong, because corruption at the street level caused the city to go broke when the rest of the region was booming.

The real financial turnaround occurred when we raised city fees at all levels, contracted out parking meter collection, closed a fire station, stuff like that.

Q: What about development?

The development process was so corrupt that every responsible developer stayed away. The development process didn’t just fail … it was stolen at gunpoint.

Q: So is there a broader lesson to be learned here? For, say, Benton Harbor?

The mob likes cities in desperate decline. So a question for a Camden, N.J., or Benton Harbor is, if you see substantial increases in drug dealing or so-called adult industries (i.e., sex trade) you should be aware that you have now got another level of problem on your hands, because these industries are mob-controlled.

As a matter of fact, in Chelsea, the only time we heard publicly from the mob figures was when we published our economic development plan. They came out in vehement opposition. They did not want to see a vibrant city emerge.

Q: What about cities that are going broke now?

Chelsea was only the second city in U.S. history to go bankrupt since the Second World War. It was a shocking thing at the time, but in the last three years we have seen a substantial number of municipal crises arising out of economic conditions generally. So it is a more mixed story today – both economics and mismanagement are causes.

Q: What would you do now?

I would spend the first six months doing two key things. First, develop a serious team by both recruiting new people and developing the existing staff. Conduct intensive meetings so the staff knows that they can act independently in service delivery. And that they should interview other staff in the middle and lower reaches on the town structure to continue that message, and also learn firsthand what the roadblocks are.

You also want to hear the history of the place – find out what has worked in the past. So that gives a positive message for people and something to aspire to. Because there will be a great deal of anxiety left over from years of damage to the organization.

You also want to make the workings of the government more open and transparent. There is what I call a first law of fundamental dysfunction, and that is make everything as secret as possible. You have to break that law to get people to come around.

Lastly, you need to find the possibility of economic development. Otherwise you are only in a position to cut services and reduce costs, and that becomes a vicious cycle.

So an overarching question is always, what is a realistic development plan? For many places in the U.S., I imagine this part is much harder now than it was for us in the ‘90s.

Q: On reflection, what common features do you find in your assignments?

All of the organizations suffered because the constituency was impoverished. Poor people generally don’t know how to get accountability from the system. This was especially true of DSS, where the constituency was abused children.

In many of these situations, the political accountability mechanisms have failed. So the key task is to remind the larger organization that they need to broaden their concerns beyond bureaucratic survival.

Q: And what are you doing now?

I am teaching management and leadership at Harvard. I am interested in the concept of the “passionate organization.” We are asking why is it that many organizations literally drive the passion away? Is it possible to reignite that passion?

The answer is that it is possible, but uncommon.

One reason is that staff and management have a bad dynamic. Staff generally come to a governmental enterprise believing in the goals of the enterprise. These goals align with their own values. But leaders, often unconsciously, betray those goals in service of their own egos – self-protection or self-advancement. Staff then lose faith in the enterprise’s commitment to its mission, and turn their backs on the larger organization, trusting only a few close coworkers.

Rather than engaging in compliance requirements to demand commitment to the enterprise, new leaders need to re-establish the moral compact with staff that all, including the leadership, are called to serve not their egos, but the purposes of the enterprise. It’s my experience that the restoration of that moral compact revives the original passion and commitment of most staff to the purposes of the enterprise.

So the passion is there! We try to show that large organizations can restore a moral component to the mission, and that management is committed to that component. This can help the staff to revive that long-suppressed hunger for the mission, and for that essential part of themselves.

Q: Even at the municipal level?

Years after my Boston Housing assignment, I was stopped by a cop in Boston. He said, “You don’t remember me, but I worked in public housing when you were there. My buddies and I still get together to talk about that. It was the most exciting job in our lives.”

Many thanks, Harry.

About the Author

Walter Simson

Walter Simson was a lending officer and workout specialist at Chase Bank in New York when his family asked for some help with the family printing business. He took it over and turned it around over a three year period, and then returned to the bank for a few years. He now spends most of his time in the Midwest--very different from the international career he had devised in college, where he loved language study. He has since pursued a career of professional management, typically in troubled businesses, where personal referrals make all the difference. His practice is dedicated to strategic repositioning, not to cost-cutting.