Romney’s Business

The Republican contender touts his business experience—but does it really matter?

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.

In part, how well Bain prepared Rom­ney for the presidency may depend on which Bain we’d be getting: Bain Consulting, or Bain Capital? The presenter, or the decision maker?

About Governor Romney, the answer was “a little of both.” On the one hand, he passed an extremely ambitious health-care reform, one that served as the model for Obama’s national program. On the other, passing a big, expensive entitlement in a liberal state isn’t exactly playing against the varsity. And he has consistently refused to own what he did, insisting that although Romney­Care was a splendid solution for Massachusetts, ObamaCare—which is essentially just Romney­Care with some gestures at cost control—is an “economic nightmare” and “a power grab by the federal government.”

This kind of behavior suggests that in regard to Candidate Romney, the answer is “Bain Consulting.” Shortly before Obama unveiled his much-awaited jobs plan, Mitt Romney released a 160-page document titled Believe in America: Mitt Romney’s Plan for Jobs and Economic Growth. The thing reads almost like the consulting PowerPoints I had to watch in business school: slick design, inspiring quotes, ominous-sounding statistics, and 59 bullet points for getting America moving again.

A lot of the points are standard fare for the reasonable center-right wonk: move the United States to a territorial corporate-income-tax system like that of most other developed countries; pursue more free-trade agreements; streamline permit processes for the energy sector. But while proposing these rather vanilla initiatives may help get Romney the Pennsylvania Avenue gig, enacting them will take rather more effort—George W.Bush made trade a top priority of his administration, and saw the Doha round of WTO negotiations collapse anyway, because of intransigence in Congress and abroad.

Some of Romney’s other ideas sound like the grand rhetoric of someone who doesn’t plan to be around when the chickens come home to roost. “Day One,” he promises, he’ll direct the Treasury Department to list China as a “currency manipulator” in its bi­annual report—never mind that Day One, he won’t even have a secretary of the Treasury, and that doing this would risk a fearsome backlash from the country that holds about $1.1trillion of our debt. “Repeal Obama­Care” and “Repeal Dodd-­Frank” account for two consecutive bullet points, which is like adding “Stamp out Ebola” and “Achieve world peace” to your weekend to-do list. With enormous work, steely commitment, and some luck with Congress and the Supreme Court, Mitt Romney might achieve one of these goals. He would not achieve both.

“Consultants are pretty notorious as far as their truth-telling goes,” says Stewart. “At its core, consulting is supposed to be conceptually about delivering the bad news—but because there’s no accountability, there’s a tendency to tell people what they want to hear.” Even a good shrink may shy away from telling you that no, your mother obviously doesn’t love you. Or that psychotherapy can’t help you.

And even if we got Bain Capital instead of Bain Consulting, the drill sergeant instead of the therapist, that would not guarantee achievement. As a private-equity manager, Romney famously went through invoices to find out how much companies were spending on office supplies, to see whether it made sense for him to invest in Staples (it did, and he did). Such thoroughness, admirable in managers, is impossible in presidents. “They’d better not be checking on the paper-clip sales,” says Douglas Holtz-Eakin, former head of the Congressional Budget Office and economic adviser to George W.Bush; “the key is getting the right organization in place.”

Moreover, nothing in the private sector can entirely prepare anyone for the scope or the scale of the president’s job. “Presidents have to make trade-offs across a broader range of decisions,” says Holtz-Eakin. “Political, financial, all the interest groups. CEOs do not get the different constituencies competing, and certainly not with such rapidity.” CEOs also don’t have reporters trailing them in packs, ready to leap on the slightest verbal bobble or second-guess their vacation plans. “Even a governorship,” says Holtz-Eakin, “doesn’t prepare you for the scrutiny.”

Yet the president is not necessarily handed power on par with his responsibilities. As a private-equity investor, Mitt Romney could tell people to do what he wanted or he’d withdraw funding. As president, he’d be more likely to get that message from Congress. It’s as if a CEO had a 535-member board of directors who had to approve every line item in the budget, and could rewrite his organization chart at will.

And those 535 board members are hounded by thousands of special-­interest groups demanding that the government do the impossible: close the deficit without cutting anything but America’s tiny foreign-aid budget—or raising taxes on anyone but Warren Buffett. Withdraw from Iraq and Afghanistan without seeming to admit that we made a terrible mistake. Save the environment without inconveniencing any American. Streamline government without firing anyone whom any voter personally knows.

Before Herbert Hoover was president, he was a successful businessman, and so popular for organizing humanitarian relief during and after World WarI that both parties were hoping he’d run for office on their ticket in 1920. The historian David M. Kennedy, who wrote Freedom From Fear: The American People in the Great Depression 1929–1945, says Hoover was a “visionary” secretary of commerce under Harding and Coolidge, and calls him “the most accomplished and competent man of his generation.” But, as Kennedy notes, the skills that made him successful in those domains didn’t translate into his presidency; he didn’t have what it took to grapple with the Great Depression.

“Not because he didn’t understand the system,” says Kennedy, “and it wasn’t for want of knowledge about it. He wasn’t pig-headed, or a moss-backed conservative… Hoover was more of a technocrat than FDR was.” But it wasn’t enough. “He understood a lot about policy issues, but working the Congress, working public opinion and the levers of the political system, were not his skills. They were Roosevelt’s.”

Romney’s love for the private sector is beyond doubt. But as is the case with just about any relationship, love may not necessarily be enough.