Romney’s Business

The Republican contender touts his business experience—but does it really matter?
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Justine Schiavo/The Boston Globe via Getty Images

Mitt Romney wants you to know how much he loves the private sector. At the Tea Party Republican Debate hosted by CNN in Florida in September, Romney used his opening statement to tell America, “I spent my life in the private sector”—a point he reiterated repeatedly for anyone who’d missed it, or tuned in late.

His long-term relationship with the private sector, he went on to say, meant that he understood “how jobs come to America and why they go.” Later he rhapsodized: “I’ve competed with companies around the world. I’ve learned something about how it is that economies grow. It’s not just simple—wave a wand and everything gets better.” If he’d been doing this on Oprah, he’d have climbed on the couch like Tom Cruise, to shout “I love the free market!”

The son of George Romney, who was a former CEO of American Motors and governor of Michigan, Mitt received a joint J.D./M.B.A. from Harvard in 1975, and began his career at BCG, one of the world’s top-three management consultancies. He jumped two years later to Bain & Company, another of the top firms (the third is McKinsey), and worked there turning around struggling businesses until 1984, when he co-founded Bain Capital, the firm’s private-­equity spin-off. When Bain ran into trouble in 1990, it asked Romney to become the CEO and restore the firm to financial health—which he did in 1991 and 1992. After six more years at Bain Capital, and by then a very rich man, he left for a career in public service, running the 2002 Winter Olympics in Salt Lake City, and becoming governor of Massachusetts.

Perhaps awed by this résumé, his debate opponents all failed to offer the obvious rebuttal: If he loved the private sector, why did he ditch it to seek public office? Romney’s last immersion in business was more than a decade ago; his last full-time job was as governor of one of the most liberal states in the country. The other Republicans onstage didn’t dare ask the question that ran through my mind as I watched this performance: How, exactly, did almost 25 years with Bain prepare Romney for the presidency?

Consider what we want a president to be: a visionary who can articulate a common purpose that unites fractious interest groups; a master negotiator who can advance America’s interests in the world, as well as push his policies past the combined resistance of lobbyists and his congressional opponents; a bold, decisive leader who can shepherd the country through crises; and a master manager who can keep his vast staff of experts—and the world’s largest employer—operating smoothly.

Now consider what a consultant does. Consultants are, as any firm will tell you, the “best and the brightest,” culled from elite undergraduate and graduate programs. But they rarely lead anything larger than a small team; the average Army second lieutenant nine months out of a third-tier state college probably has more direct reports, and more deliverables.

Moreover, a consultant’s voice is not the voice of direct experience; most of the problems that consultants analyze are ones they have never faced. And although consultants asking for your business may talk about the trove of industry intelligence they have to share, in practice, the sharing is limited: contracts forbid sharing anything really juicy, and some firms work with only one client per sector at a time. In fact, the arguments for hiring a consultant are often the same as those for seeing a psychiatrist. Both experts have helped an awful lot of people work through prob­lems, which makes them good at listening and gives each one an arsenal of best practices to suggest to their new clients.

Even more important, the best consultants, like the best shrinks, can help you with transformations you know you should make—but can’t. Often management knows what needs to happen, but cannot appear to advocate it. “Change is difficult for large institutions,” says Matthew Stewart, a former consultant whose book The Management Myth contains a scathing critique of management theory. “Sometimes they need a little outside army to help them with that change as temporary reinforcements.”

The skills of a top-flight consultant are undoubtedly an asset on the campaign trail, where the main job is to describe problems and possible solutions in the most attractive way. Mitt Romney is arguably doing this for the GOP: mirroring its concerns back to it in a way that may help it move on from the political box it’s trapped in. “Just say no!” is an insufficient governing philosophy for the next four years, especially because many of the bolder Republican proposals frighten voters; by repackaging Republican priorities into something with broader appeal, Romney may help the party transform itself into a party that can govern.

But the tendency of consultants to have a “hugely presentational style of management” also has a downside, argues Stewart: “They think they’ve basically done the job when they deliver a PowerPoint.”

Moreover, when consultants are accountable for results, they don’t necessarily shine. “Consultants are notoriously pretty bad managers of their own companies,” says Stewart. “They tend to think that ‘managing people’ means managing people who are very similar to you, in small numbers.” Indeed, in some ways, managing a company of consultants more closely resembles managing the prom committee than it does running a concern that churns out widgets at $62.50 per gross ton with a staff of high-school graduates who are counting the hours until Friday.

To be sure, some former consultants have been very effective leaders—the legendary IBM CEO Lou Gerstner was a McKinsey alum (though, of course, so was Enron’s Jeff Skilling). But did the successful ones succeed because of their consulting experience, or in spite of it? Consultants are fundamentally analysts, not decision makers. A U.S. president, however, has an enormous staff that does nothing but collect information and provide advice. He doesn’t need to be a top-notch analyst. He needs to be able to turn the advice of his top-notch analysts into action.

Of course, Romney’s tenure at Bain Capital lasted longer than his time at the Bain consulting group. The two firms share a name and a culture. But Bain Capital does a lot more than just analyze: when Bain Capital—or a group of investors that it is part of—invests in a company, it takes seats on the board, puts at least one person at that company in an operating role, and directs layoffs and promotions and strategic decisions. At the end of the day, the people who run these deals are as accountable as the CEOs for whether the companies make money. They can’t just talk. They have to execute.

“Romney deserves enormous credit for what he did in the private sector,” says Avik Roy, a former Bain Capital employee who is now a health-care analyst. “He built a tremendous multi­billion-dollar business out of nothing. When Romney was starting Bain Capital, private equity was relatively new and unproven, and he built Bain into one of the top firms in the world.” And in the process, he unlocked the hidden potential in a bunch of other, struggling firms. You can argue about whether Mitt Romney really knows how to create jobs—one prime criticism of private-equity deals is that many can lead to layoffs—but you can’t dispute that he knows how to turn around a dysfunctional organization and create economic value.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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