Management Override and Navy SEALs

Keeping pace with all the ethics and compliance lessons one can learn from the Trump Administration is no easy task. Nevertheless, we have yet another one: the perils of management override, as demonstrated by President Trump’s determination to keep a disgraced Navy SEAL in military service.

The story evolved quickly over the weekend. It begins with Navy commando Chief Petty Officer Edward Gallagher, who had been court-martialed on charges of shooting civilians in Iraq, murdering an Islamic State terrorist who had been taken prisoner, and threatening to kill fellow Navy SEALs who reported him.

Gallagher was acquitted of those charges earlier this year. Navy officials then demoted him for bringing dishonor to the Navy when he posed for photos with the dead terrorist’s body, and in recent weeks had been preparing to expel Gallagher from the SEALs.

To recap, then: Gallagher had been accused of misconduct, an investigation was had, he went on trial, and a military court acquitted him. The Navy then moved ahead with other administrative punishment as senior leaders deemed appropriate under Navy regulations.

So far, so good. Yes, questions exist about whether Gallagher intimidated his fellow sailors to cover up acts of butchery; or whether Gallagher was railroaded by Navy brass. But we on the outside aren’t Navy officials, and we’re in no position to second-guess how the Navy had been handling his case.

Then President Trump entered the picture.

Ten days ago, Trump reversed Gallagher’s demotion. The president is the commander in chief, so he can do that; and the Navy accepted it. Trump then fired off this tweet on Nov. 21, declaring that Gallagher shouldn’t be kicked out of the SEALs either:

The Navy will NOT be taking away Warfighter and Navy Seal Eddie Gallagher’s Trident Pin. This case was handled very badly from the beginning. Get back to business!

— Donald J. Trump (@realDonaldTrump) November 21, 2019

That prompted Navy secretary Richard Spencer to threaten to resign if Trump proceeded with reinstating Gallagher to the SEALs. Senior Pentagon officials spent the weekend trying to convince Trump of the mess he would create with a direct order overruling Navy procedure and decades of military practice. 

Alas, no luck. At first it seemed that Spencer had reached an understanding with the White House where Gallagher would leave the SEALs after all, but by Sunday afternoon defense secretary Mark Esper had fired Spencer, ostensibly because Spencer had been going above his head to work directly with the White House. 

That’s baloney, of course. Spencer’s resignation letter was released, including the lines that “I no longer share the same understanding with the commander in chief who appointed me in regards to the key principle of order and discipline. I cannot in good conscience obey an order that I believe violates the sacred oath that I took.”

So what can we learn from this tempest via Twitter? Lots.

Management Override

Management override happens when a manager intervenes in a business process that has created some result the manager doesn’t like. So he or she overrides the internal controls or ethical norms around that business process, to force a result the manager does like — based solely on that manager’s inherent power as the boss. 

Unto itself, management override isn’t a bad thing. We see management override in the corporate world every day: transfers or promotions given to employees who normally wouldn’t get them according to corporate policy; expensive business travel or pay raises granted during a spending freeze; a decision not to fire someone for misconduct when the rules say that’s what should happen.

Management override is not the same as managers making tough decisions, such as whether to work with a high-risk third party. Override happens specifically when the rules say Outcome X should happen, and the manager says, “Nope, we’re going with Outcome Y, because I say so.” 

So what’s the difference between acceptable management override and a governance trainwreck like what we just witnessed with the Gallagher fiasco? 

First, management override should work as a process. That’s a bit meta, since we’re  talking about a process to override the results of other processes — but it’s true. The exercise of management override should have a formal structure, where arguments are brought to the manager about possible choices, and then he or she decides what to do.

Second, the process of management override should be documented. That lets others see the manager’s logic in deciding to override internal controls. It helps others understand the circumstances where they could submit future requests for override. 

Third, management override should be rooted in the organization’s values and objectives, and transparent about how the override supports those things. That’s why structure and documentation are so important: so the manager can demonstrate the wisdom of his or her decision to the whole organization, and keep the organization’s trust even when we’re overriding standard policy.

That’s how management override should work, at least.

Back to Gallagher and the Navy

President Trump did none of those things with Gallagher’s case. As far as we can tell, Gallagher and his supporters waged their campaign on Fox News, which Trump spends all day watching, so he simply tweeted out his pronouncements and disregarded concerns about Navy administrative process. 

Again, legally the president can do that. Heck, reinstating Gallagher might even be the right decision to make — but the process Trump used to make that decision was incredibly stupid, wreaking yet more damage on the enterprise he leads and leaving everyone confused about what processes to follow to get things done. That’s the lesson here for compliance and audit professionals.

The true threat from management override is that it can insert the manager’s arbitrary impulses where logical, disciplined business processes should be.

Then people can’t discern what the company’s true business objectives are, and without that ability they don’t know how to perform — other than to court favor with the manager, which frankly is what we see from the Trump Administration all the time. Once that understanding breaks down, the business starts turning against itself and missing its objectives. Which is also what we see from the Trump Administration all the time.

The good news is that many compliance functions grasp this point at least intuitively. For example, when you draft a policy that includes a mechanism for employees to request an exception — that’s management override done well. There’s a structure. There’s documentation. There’s transparency.

Or consider the world of financial reporting, where management override can be a dire threat. A manager substituting his or her own judgment about some critical estimate, maybe allowances for doubtful accounts or the useful life of physical assets — that’s a time-honored way to commit fraud.

But management override does have its place in financial reporting, if management makes its decisions in a disciplined, transparent way. It’s the impulsive, arbitrary disregard for data, process, and internal control that lands your company in the soup.

That poor approach to management override is what we just witnessed with Trump and petty officer Gallagher. So yet again, pay lots of attention to how President Trump is running the government — and then do the opposite in your own organization.