In my studies and travels this week I’ve had a great time meeting with old friends (I’ve noticed that they are getting older??) and seeing the old neighborhood.
Traveling for some reason just seems to set me free. Even though I still have financial troubles, relationship troubles, business troubles, traveling makes me feel good about this country, opportunity, my friends, business associates and clients.
This week I was reminded of a concept called Management by Abdication. This is a concept that I first learned about in book by called E-myth.
Before we get into that though, I want you to know right up front that I’m a salesman. If you read this, you will be compelled to act, and if you work with me, I might make a commission. How’s that for disclosure?
Just want to tell you that from the get go, so there is no confusion later.
So what is Management by Abdication?
Abdication is similar in meaning to the word assumption, but with some differences.
The example that was used in a book my Michael Gerber called E-myth talks about an overwhelmed business owner who hires an accountant and brings him on board, The business owner is so excited to have someone that will help him do the work, that he just piles on the workload onto the new accountant and just says… “handle it.”
The accountant, knowing accounting, does his thing, and accounts. Since he has had no company manual, no real direction, and no idea of what the business is all about, makes decisions on the best information that he has. The accountant certainly does want the company to do well. When he goes to ask the “boss” a question or two, the boss always answers… ” Just use your best judgment, I trust you.”
So the new accountant makes decisions based on his own biases, his own understanding, and his own goals for the company… Not that the accountant has done anything wrong, but the owner has given him responsibility without direction.
This is management by abdication. Giving someone the responsibility for something, without any goals, direction, or checkpoints for that person to follow.
Responsibility without accountability.
Have you heard about anything like this? Sure you have. We hear it all the time in politics, in big companies… But what about in our personal lives.. Are we doing this in our own lives too?
Sometimes Management by Abdication is good, sometimes not.
For example it’s good for getting groceries. Take your favorite grocery store. We abdicate all sorts of responsibilities when we go and buy food. Obviously we can’t grow fruit and vegetables, have cattle, slaughter pigs, etc. etc. to get the food that we need. So we abdicate some of that responsibility. We ASSUME that the retailer (and the supply chain) has our best interest in mind… I mean after all they don’t want to kill off their customers do they? In general terms I think Assuming that the grocery store doesn’t want to kill you is a safe assumption.
Most of them these daily abdications are safe ones… Sometimes they aren’t.
A really big area that I am seeing a lot of management by abdication is in the arena of personal financial planning.
Most of us learn our financial knowledge from our parents… Unfortunately they weren’t that great of teachers, things are totally different now, and the “pension” (which many of them are living off of now) is almost a thing of the past (except for some government employees… but that’s another conversation for another day).
So what our parents taught us… Get a good education, get a good job, save your money, and you’ll be OK…. Simply doesn’t work anymore.
I run into people my age (45 and over) that are doing all of those things, and they’re not OK financially.
So where do people turn to get this education about money and finances and retirement?
This is the problem.. They typically don’t. They abdicate this responsibility. They don’t learn the ins and outs of investing, insurance, compound interest, tax deferral, tax reduction, etc. etc. etc.
Many of them don’t even know how much money they are really going to need to retire.
So they just dump that responsibility onto a financial planner, fund manager, or the 401k manager at their work.
This is management by abdication.
Does a financial planner, fund manager, or your boss at work have your best interest at heart? I’m sure they do think about you from time to time, but what do you think their best interest is?
Not that there is anything wrong with thinking of ourselves first. Let’s just be honest about it. I’m interested in my best interest, and you yours.
But is it smart to abdicate the responsibility of our life savings to someone that has higher self interest that our interests?
I mean if your account goes down a little is your financial planner personally “hurt” like you are?
Why are we so willing to go to college for 4 years or more, do a job that we may or may not like for 40 years, and then turn the responsibility for our money over so easily?
Do they really know what our goals are? Have you set checkpoints, guidelines and status updates, and reviews to make sure they are doing what you need them to do?
You had quizzes in college to make sure you were on track. Your job gives you deadlines and projects to finish with a time line… Why don’t’ you give your financial plan the same sort of tracking and guidelines?
If you’re at a point in your life where you are ready to TAKE BACK RESPONSIBILITY for your money, your finances, and your retirement from whoever you’ve abdicated it to… Let me know.
I make money by helping people take back responsibility for their finances.
That’s what I do.
Let’s take responsibility back. Lets be in charge of our own lives. Lets make a difference for ourselves first.