Professor John Kotter won his renown mostly as a guru of change processes at large companies and enterprises. In his essays and books, Kotter listed eight steps for managing significant processes of change.
First and foremost is to create a feeling of urgency. The second step is to build a coalition for change.
You don't need to be a rocket scientist or Harvard business professor to know why change has to start with these two steps.
Neither companies nor people like change. Even worse than change is big change. To force change, people first have to understand why it's necessary.
Change is hard and arouses terrific opposition, so unless you have a strong, committed coalition, you'll fail.
Last week Prime Minister Benjamin Netanyahu and Finance Minister Yuval Steinitz unveiled their economic program. Faithful to Kotter's system, they began by creating a feeling of urgency - Netanyahu said the economy is like a "jet plane in freefall."
Now that Netanyahu has compared the economy to a crashing plane, it's time to build a coalition and present a dramatic program for change.
Yet on both points, Netanyahu and Steinitz stopped. Their plan brings no revolution. It will cause no change in the economy. It doesn't even try to tackle any of the economy's basic ills.
Naturally, none of this is a surprise. To make serious structural changes in the economy, one of two things is needed: a crisis of unprecedented proportions (like the one the government was in back in 2002), or a strong coalition committed to change.
We are in the throes of a financial crisis of unprecedented proportions, but locally we're not suffering the desperation we're seeing in Britain and America. So at this stage, Israelis are not willing to accept decrees and significant structural changes.
As for a coalition for change, there is none. The 30 ministers at the cabinet table see the economy through their own prisms. The 74 Knesset members in the governing coalition have their own visions and agendas. The thousands of people in the party central committees, who pull the MKs' strings, have their own interests. The 50 biggest businesspeople in the land, who have strong influence over public policy and legislation, have their own personal issues.
In short, Netanyahu and Steinitz do not have a strong coalition committed to change.
They say that when Moshe Sneh, of blessed memory, would read a speech, he'd write himself a note in the margin - "Weak point. Raise your voice."
Netanyahu and Steinitz couldn't transmit a sense of urgency that could predate dramatic change, they didn't present a revolutionary program and so far, they have no coalition for change. All they can do is call a press conference and raise their voices.
The cost of guarantees
The program Netanyahu and Steinitz presented last week includes NIS 12 billion in guarantees to be made available to Israel's banks. In its announcement, the Finance Ministry didn't dwell on the economic cost of the guarantees.
According to the economic logic of free-market advocates like Netanyahu, the government should demand a price for its guarantees. Banks are businesses, after all, and the government shouldn't hand out gifts to the banks' shareholders.
If the state decides that because of the financial situation, it doesn't want to charge the banks interest or a fee for its guarantees, then it's transferring money from taxpayers to the banking system.
That's the moment when Netanyahu and Steinitz, as the taxpayers' representatives, should stand up and demand that the banks pay somehow for their guarantees, and that the banks' managers change their ways.
When taxpayer money is directly subsidizing the price of capital for Israel's banks, the banks' managers become a sort of public servant, like the CEOs of state-owned companies. So it's proper to ask whether their wages should be limited.
Maybe we don't need to wait for the banks to exploit the treasury's guarantees before reconsidering the bankers' pay. Maybe we should simply study the lessons from the collapse of the American banking system.
During the last six months, banks in the United States, Britain and elsewhere suddenly morphed from private capitalist institutions into nationalized, socialist ones. When the crisis is big enough, the market can't handle it and the taxpayer is called in to pour trillions into the banking system.
If during a crisis the taxpayer still has to finance a bank's bad gambles, can we say the bank had been a "private" business beforehand, a business where pay levels should be set by the market and the market alone?
Americans have been debating that question for months - so far the bankers' view seems to be prevailing, with the upshot that they get taxpayer money and their "free-market" salaries, too.
It's far from sure that we should adopt the American system. And if ever there was a time to open the subject of remuneration at Israel's banks, which on top of everything are a kind of monopoly, it's now.
Last week we presented this idea to one of Israel's four leading bankers. We asked if he shared our view that if Washington hadn't hurried to nationalize most of the American banking system, Israel's banks would have been subject to giant losses (on their investments in securities issued by foreign banks). Then Jerusalem would have had to nationalize Israel's banks.
The banker thought for a moment and said he couldn't refute that argument.
We pressed harder. If Israel's three biggest banks are "too big" to be allowed to fail, meaning that come the crunch they'll be saved by the government and taxpayer, does that mean the leaders of the banking system are public servants?
This time the banker balked. This crisis is a once-in-a-century event, he explained. "I don't see myself as a public servant. I operate in the private sector."
We don't agree. You can argue that when recruiting talent, banks have to compete with pay levels in the private sector. You can't argue that they're a private business. By definition they're a public business subject to regulation. Not only have Israel's bankers ignored this in recent years - when it has come to pay, they've gone to extremes.
The moment Netanyahu and Steinitz give them guarantees is the moment to demand change in the Israeli banking system.
Bank of Israel governor Stanley Fischer's unprecedented move, calling on Bank Hapoalim's owner Shari Arison to depose the chairman, Danny Dankner, is a step in the right direction. Once the banks have grasped that they're a public business, we expect the regulators and elected representatives to become massively involved in them.
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