Just a few blogs ago I said that with the debt ceiling silliness in D.C. resolved, we might have clear sailing until the next crisis. Who knew that the credit downgrade crisis was just a few days away?  Of course, no one can say that this is completely unexpected. If S&P was rating was a corporation instead of a government, what would they have done with the same data? Massively increased debt, no real plan for paying off the debt, barely a plan for paying this month’s bills, many missed deadlines to complete a budget, and the top officers too engrossed with complaining about their fellow officers to develop a financial plan. When the rating is dropped on Friday, what is the reaction on Monday… more blaming your fellow officers? Is this the kind of firm you would invest in? Why wouldn’t a rating agency drop their credit rating?

There will always be challenges to the economy, some legitimate, some exaggerated and some just plain old ridiculous. However, the hidden story about this historic event is… this is really about Quality COntrol. A credit rating is, after all, a measure of the quality of an organization’s operations and planning, and how this affects their ability to function. That’s not all that different from how the Regulators in your organization are using management reporting and quality improvement projects to understand the quality of your products, and the risk you represent to the firm if you are producing a poor-quality  product. If, like the U.S. Government, your organization is found to be lacking, what happens next? I think that we can expect was laid out a long time ago in  the 7 Stages of
Grieving. Ever hear of it? These are the stages that we all go through when we are lose something important.. someone we love, the job you loved, even when a child grows up and moves away. I’m not sure if Washington will grieve because of the damage they’ve  done to the economy or because their opponents refuse to drop dead, but here is how corporate grieving works:

1. Shock and Denial: The government has been in denial for months now, while news report after report has talked about the possibility of a credit downgrade. In the corporate world sometime we try to ignore the coming of the regulators, hoping they will go away or that their negative report will not have any consequences. Most of the time though, it gets worse rather than better.
2. Pain and Guilt: I think Washington has already passed through this stage, sometime between 9:00am and 9:01am. You, on the other hand, may linger in this sweltering hell of guilt forever. At least it can seem forever. I’ve worked with people who have had big quality problems, and almost always there was some knowledge that something was wrong, before the Regulators found the problem. Maybe they only had an inkling of what was going on, but not the metrics to identify the specific problem. The manager may have had bigger problems to pursue or maybe just didn’t want to deal with the issue, but he knew the issue was there. Now that the world knows, it’s a bit embarrassing, and it doesn’t feel very good.
3. Anger and Bargaining: This is what Washington does best! Scream, yell, blame everyone, claim that the analysis by S&P was wrong (already in progress!), or just slamming S&P for making a bad decision to change the rating regardless of the analysis. You can expect this to the longest and most active stage of government grieving. For the rest of us, we may be allowed to have a bit of anger, but anything more than “just a bit” and you look unprofessional and perhaps a bit foolish.
4. Depression, Reflection and Loneliness: When Washington grieves it’s the American public that gets depressed. When a manager has a problem, they usually need to suffer in silence and deal with it.  Managers that partnered with other groups, worked with early regulatory projects and improvement initiatives will be jointly responsible for problems. True, one will be the most responsible for a given issue, but you’re not completely isolated or completely responsible when something goes wrong. In a big corporation, no one person or group is usually completely responsible for anything, since any significant issue requires multiple areas of expertise that are not contained in any single group. The bottom line is that things go wrong, and as your career advances the magnitude of what could go wrong… that you will be responsible for… will increase. If you consistently work and compromise with other parts of your firm, especially regulatory groups, you may be able to avoid or at least minimize this stage. If Washington could re-learn how to compromise, it could have avoided the downgrade entirely!
5. The Upwards Turn: We can expect the markets to bounce up and down for this week, and probably next week as well. Before S&P officially downgraded the government’s credit rating, the downward slide since early July was an “unofficial” lowering of the credit rating, by the markets rather than by the raters. Soon, do not expect this on day one, but soon… Washington will ask the all-important question, “What do I need to do to get back a AAA rating?” As a manager, the sooner you ask, “What do I need to do to fix my service?” the sooner you will be able to move yourself personally and your group as a whole back on the road to normalcy.
6. Reconstruction & Working Through: Fixing the problem, and not fixing blame has got to become the 1^st priority. In Washington there are some people who will get this and some who never will. Depending on how the nation learns from this experience, either we will continue to vote for people who say that they
   will never compromise, or we will vote for people who know how to work together.
7. Acceptance & Hope: Few in Washington have yet accepted responsibility or is ready to believe that “the other side” has a position they can live with. In
   Washington or in your own firm, those who are not willing to change how they
   work today are not going to be able to improve the way they work. Moving from
   being told you have a problem to finding out how to fix it, is essentially the story of how you will move from your last failure to your next success. The best advice is… do it as quickly as possible and everyone gets a chance to be happy again!

Will the Washington crowd learn to fix the problems that they created? Until now, Washington wasn’t ready to make any sort of long-term budget deal. The credit downgrade is bad in the short run, but it’s providing a very effective incentive to make a deal. It’s the same in Corporate Services. We may convince ourselves that any number of our current problems are survivable.. until those problems become public. Sometimes, that’s what it takes to make us focus on what needs to be done. At least, that’s my Niccolls
worth for today!