Even the most casual of fans of football will know that Jurgen Klopp is leaving Liverpool Football Club at the end of this season:
To general surprise Mr Klopp announced on January 26th that he would be leaving his job as manager of Liverpool Football Club later this year. His team is leading the English Premier League, the most-watched competition in the world’s most popular sport. His job is secure—his contract does not run out until 2026—and he claims still to love it. But after eight years in the role, and more in management, he is running out of energy. His resources are finite, he said. “I can’t do it on three wheels, I don’t want to be a passenger.”
https://www.economist.com/business/2024/01/29/jurgen-klopp-and-the-importance-of-energy
Me, I’m a Manchester United fan myself. There was a time when this disclosure would have been met with groans of resignation from fellow football fans. These days, however, it is more likely to be met with a sympathetic chuckle, and that’s if I am lucky.
What has changed for Manchester United, and why are Liverpool fans so upset? Because both of these institutions ended up being dependent on the individual, and that is never a good idea.
An institution should be able to smoothly oversee the transition from one leadership to another, and that’s the point of that much derided term in management, “succession planning”. But in the case of Manchester United, it has been ten years (and counting) since we sat atop the Premier League at the end of the season – and Liverpool fear that the end of the Klopp reign signals something similar in store for them in the seasons to come.
But institutions ought to show more resilience than that. Ford shouldn’t have to struggle because Lee Iacocca is no longer at the helm, and Intel shouldn’t be dependent on a Grove (or a Krzanich):
There are times when being a semiconductor CEO is rather easy. Just consider Brian Krzanich: when he took over the Intel job in 2013, I wrote in The Intel Opportunity:
https://stratechery.com/2024/intels-humbling/
A new CEO has taken over Intel. Their core business, upon which the company has been built, is floundering. Does the new CEO, who is not really new at all (he’s the current COO), have the vision to ensure Intel’s continued success? I’m not talking about Brian Krzanich, who today was promoted from COO to CEO at Intel. Rather, I’m talking about Andy Grove, who took over Intel in 1987.
No institution, in fact, should be dependent on an individual. That’s kind of the definition of an institution, or at the very least an important part of it – an institution is defined by its ability to not be dependent on a particular individual for its survival and continued well-being.
But this is easier said than done, and this rather inconvenient lesson applies to countries, universities, firms and football clubs alike.
If a successful institution stops being successful because the leader is no longer around, then I’d argue that it wasn’t a successful institution in the first place.
Precisely because it was the individual who was successful, and not the institution.
What makes institutions successful? What makes them successful regardless of who is leading them? What lessons can we learn from institutions in other countries, and apply it to our own? How do we learn and internalize the art of building successful institutions, and not have them be dependent on individuals?
Institutional economics, if you ask me, is currently a most underrated field.
EconForEverybody 