Wednesday, March 07, 2007

CIRM's Worst Enemy? Maybe Prop. 71

The talk was of a "dog's breakfast," personal chemistry, schizophrenia and micro-management. The overseers of California's $3 billion stem cell agency covered it all last month as they attempted to produce a new management structure and enhance their ability to recruit a new president for CIRM.

The occasion was consideration of changes that will now come before the institute's Oversight Committee next week. The group is seeking to create more of a non-executive chair for the agency and shift more authority and responsibility to the president.

Sitting in on the meeting Feb. 21 of the institute's Governance Subcommittee were the two men filling the positions most directly affected – CIRM Chair Robert Klein and outgoing President Zach Hall.

The discussion did more than lead to approval of the restructuring. It focused a bright light on failings of the initiative process that created the agency, including micro-management language in Prop. 71 that now hampers the flexibility of agency. That is not to mention the difficulties of running any organization with two chief executives.

Prop. 71 stands at the heart of the issue. The ballot measure enshrined -- in state law and the State Constitution -- management minutia that has no place in legal codes, such as specifying that chair of CIRM's Oversight Committee must supervise preparation of its annual report. That requirement – or any other element of Prop. 71 -- can only be changed by another vote of the people of California or by an extraordinary, super-majority vote (70 percent) of both houses of the legislature and approval of the governor.

One member of the Governance Subcommittee, Brian Henderson, dean of the USC Keck School of Medicine, seemed astonished when he learned last month of the difficulty in making what should be routine changes. "Wow," was his comment.

The "dog's breakfast" comment came from Richard Murphy, CEO of the Salk Institute, during a discussion about why three executive committees are needed for CIRM when it has something over 20 employees. Not mentioned was the large size of its Oversight Committee, which has 29 members.

Here is how it went:
Hall: "Well, as Ed (Penhoet) said, I think it's working. I think on paper it looks like a mess."

Murphy: "It looks like a dog's breakfast, yeah."

Hall: "What I'm trying to say is that if I were looking at this, say wait a minute. I'm going to be over 25 people. and, my God, we've got two executive committees and a senior management committee."

Henderson: "It's ridiculous."
At one point, Hall added,
"If it were a traditional organization, it would be crazy to have the board sitting here trying to tell the president or the CEO how they should organize the internal workings of the organization."
Hall's comments at various points during the meeting best summarized many of the underlying problems with the dual executive structure at CIRM. He noted that he did not have "a horse in this race" referring to changes which largely would affect his successor. They are changes that are subject to revision if the presidential search committee finds a candidate who wants them modified again.

Hall said Prop. 71 does not give a "very high degree" of authority to the president. As an example, he cited the activities of the Governance Subcommittee as he was speaking to them. Hall noted that the president does not sit on the CIRM oversight board, as is customary in many organizations. He has no say in grant funding and no mechanism exists for the president or the CIRM staff to make suggestions regarding which grants to fund.
"The institute has a very powerful board that makes all funding decisions and keeps the president and staff on a pretty short string."
Hall continued,
"One could make a perfectly good case that CIRM would be best served by someone who's a good manager, a good administrator, a member of the staff -- the president is often referred to as staff in this context -- whose function is not to be a source of ideas along with the board, but to implement the ideas that the board generates. I think it's a perfectly good model, and I think it's one that might work very well....(T)here needs to be congruence between the kind of person you want and the responsibilities that this person is expected to fulfill within the organization.

"If you hire a manager and have a structure that calls for a leader, I think you're in trouble. Correspondingly, if you have a structure that calls for a manager and require someone who is a leader, I think you're also going to be in trouble."
Later Hall said,
"The point that we're left with, which is a very, very difficult one, is that within a very small organization, there are two leaders. And I think that is a problem....(I)nsofar as the president is a strong person who wants to do things their own way and has ideas and wants to feel they have some authority and control, I think it is going to be a problem to fit that person into this structure. I certainly have had problems, and I think of myself as in that category. I may be different from others like that, but I think it's generic."
Hall continued:
"...(Y)ou can say very frankly there's a kind of schizophrenia here. There's a very powerful board and there is an institute which sometimes is treated like the staff...(but occasionally)is the important organization with a board that has oversight. There's a real tension between those two structures and those two visions....

"I think the solution that's in this (restructuring) document, while admirable in many ways, looks very complicated to me...(F)or example...the job descriptions of the chair and vice chair...emphasizes that in this small group the president is No. 3 in the organization, and I have to say that's not a very attractive proposition."
Philip Pizzo, dean of the Stanford University School of Medicine, brought up the personal dynamics issue.
"If the chemistry works, then that can oftentimes overcome organizational imperfections. If the chemistry doesn't work, it doesn't overcome almost any kind of organizational imperfection."
Klein voted for the changes to make his position more of a non-executive post. He retains substantial authority over financing – public and private – as well as litigation, and supervision of CIRM's financial plan along with authority to set the board's agenda. Klein described the changes as "reoptimizing" CIRM for a new president to give him or her "the kind of structure and mix that works optimally to serve their needs."

Sherry Lansing, chair of the Governance Subcommittee, said the plan, presented by Oversight Committee Vice Chair Penhoet, was "excellent," and she pushed hard for its adoption without significant changes. Lansing is a former top Hollywood film executive and has undoubtedly experienced more than her share of touchy management issues.

Despite its "dualing executive" – our words, not Lansing's – she noted that CIRM pumped out $45 million in grants last month and will pump out $80 million more next week, a record not to be sniffed at.

CIRM's performance, after a particularly difficult start-up year, has improved greatly. That is the result of sharply focused, hard work and long days from a tiny staff. Whether that pace can be maintained is doubtful. CIRM needs to perform its routine work routinely. That will leave it ready for the truly exceptional tasks that inevitably pop up. The new president, the new structure and Robert Klein are the keys to that effort.

As for more permanent restructuring eliminating overlapping responsibilities, the Oversight Committee does have the option of going to the Legislature and asking for changes in Prop. 71. But in addition to the difficulty of hurdling the 70 percent barrier, such a move would open the door to possible changes that might not be palatable to the institute.

(Editor's note: The quotations are all drawn from the transcript of the Feb. 21 meeting, which can be found at

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