Relentless: The Forensics of Mobsters’ Business Practices

By Jerold L. Zimmerman and Daniel P. Forrester

All types of organizations, for profit, not-for-profit, lawful, and unlawful, must be relentless in highly competitive, and constantly evolving environments. Every day iconic brands like Sears, Kodak, and Blockbuster vanish. Managers in lawful companies face disruptive technologies, groundbreaking new products, and competition from new entrants. Every organization must manage its way through a rapidly shifting world, or else fail. Yet some organized crime syndicates last decades despite massive law enforcement efforts and rival gangs directed at their daily demise.

 

The American Mafia, which burgeoned during Prohibition in the 1920s, still operates in the twenty-first century. The Sinaloa Cartel remains the largest smuggler of drugs into the US, despite jailing its leader, El Chapo Guzmán, in a US supermax prison. How do these criminal syndicates survive, and even thrive? They apply fundamental economic principles to devise management practices that channel their heinous members' self-interest to achieve the syndicates' objectives.

 

Relentless uses the most unexpected organizations, crime syndicates, to elucidate essential economic concepts that allow all leaders to build stronger, more robust companies. These concepts align the organization's business strategy and employee empowerment, incentives, and corporate culture. These principles attract the right people to create resourceful, market-obsessed, and relentless high-performance teams. Understanding the management practices devised by mobsters illustrates the economic concepts that lawful managers also must heed. While lawful managers cannot simply follow the business practices of mobsters, they must apply the same fundamental principles described in Relentless.

• Language: English
• Publisher: Willowcroft Publishing
• Release date: Jan 12, 2021
• ISBN: 9781734837117

Book preview

Relentless is defined as continuing in a determined way without any interruption and showing or promising no abatement of severity, intensity, strength, or pace.

— Cambridge Dictionary and Merriam-Webster Dictionary.

Before settling on the name Amazon, Jeff Bezos registered the domain name Relentless.com. In fact, entering Relentless.com in a browser, redirects you to Amazon.com. In 1995, he adopted the mission to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices. The ever-relentless Bezos claims The No. 1 thing that has made us successful by far is obsessive, compulsive focus on the customer. Over the last twenty-five years, Amazon’s relentless strategy allowed it to evolve from an online store to dominate the country’s digital backbone in cloud computing.

All types of organizations—for profit, not-for-profit, lawful, and unlawful—must be relentless in highly competitive and constantly evolving environments. Every day iconic brands like JCPenney, Kodak, and Blockbuster vanish while El Chapo Guzmán, convicted head of the Sinaloa Cartel, and his wife launch their high-profile El Chapo 701 fashion clothing line. Russian and Sicilian Mafias turn to cybercrime. Managers in lawful companies face disruptive technologies, groundbreaking new products, and competition from new entrants that challenge their existence. Every organization must manage its way through a rapidly shifting world, or else fail. Yet some organized crime (mob) syndicates last decades despite massive law enforcement efforts and rival gangs directed at their daily demise. The American Mafia, which blossomed during Prohibition in the 1920s, continues to persist in the twenty-first century. What allows some of these criminal organizations to survive, and even thrive at times?

Society remains fascinated with gangsters and mobsters. Twenty-six million Netflix subscribers watched the first episode of Narcos’ third season. People have viewed tens of millions of clips from The Godfather on YouTube. Twelve million viewers tuned in to HBO’s final episode of The Sopranos. An average of 4 million individuals watched each episode of HBO’s The Wire. The National Geographic TV channel runs several popular series on the Mafia. El Chapo Guzmán’s 2019 trial in Brooklyn captured international attention and daily media coverage.

We grew up riveted by the popular series, The Untouchables, an American TV crime drama that fictionalized an actual Prohibition agent, Eliot Ness, fighting Al Capone’s Chicago syndicate in the 1930s. Like many, we consumed the genre of gangster movies: The French Connection (1971), The Godfather (1972), The Godfather: Part II (1974), Scarface (1983), and Goodfellas (1990). Most of these movies end badly for the bad guys. Nonetheless, many crime syndicates continue to exist. How?

Besides being hounded by law enforcement and rival mobsters, organized crime cannot use traditional institutions that promote lawful commerce such as banks, which facilitate lending and financial transactions, courts, which enforce commercial contracts, and electronic technologies such as email, texts, and the World Wide Web, which expedite communication both within the firm and with suppliers and customers. Organized crime relies mostly on cash to conduct its business. Few written records can exist, lest they fall into the hands of law enforcement. Some Mafia bosses held meetings while driving around in their cars to avoid police surveillance. Imagine trying to manage a legitimate business under such circumstances. How do they succeed under these adversities?

Anyone intrigued by this question should read this book. Our intended audience consists of c-level executives, directors, leaders of small and large for-profit and not for profit firms, and students of business, economics, and criminal justice who want the answer. Anyone running an organization be it a retail store, sitting on a school board, a manager in a large corporation or not for profit faces the same challenges as organized crime—how to attract, retain, and motivate people, how to improve the firm’s operational performance, and thereby achieve the organization’s objective, be it profits or a not for profit’s mission. It means developing a culture that relentlessly motivates the team to act in concert. It involves eliminating dysfunctional and petty bickering while empowering people to take advantage of their unique capabilities. These management challenges also face organized crime. Understanding the management practices devised by mobsters that produced syndicates with a relentless focus illuminates the fundamental economic principles that lawful managers also must heed.

Understanding how some crime syndicates prosper has been a fifteen-year quest. It involved digesting dozens of organized crime books, including autobiographies by criminals, leading criminal justice textbooks, numerous academic research articles, and countless media articles. We interviewed criminal defense attorneys, prosecutors, and law enforcement officers. We learned one significant insight from all these sources—many successful criminals were just plain good businessmen. (We use the term businessmen rather than businesspeople, because all of them were male—a fact we reflect on later in the book.) They knew how to run efficient operations and control the people around them, and which corruptible officials to bribe. They possessed a relentless obsession on their vice markets. They formed relentless high-performance teams of extremely loyal followers who shunned short-termism and took the long view. They created enduring cultures and extremely strong brand names. They prospered. When they were knocked off or imprisoned, an underling assumed the leadership reins. They had succession plans, unlike many lawful firms.

As an example of their business acumen, one group of heroin smugglers from the small Xalisco county in the Mexican state of Nayarit innovated a highly effective customer service model tailored to middle-class white kids. The traffickers realized these kids wanted convenience and wanted to avoid buying drugs on street corners in dangerous neighborhoods. So, the Xalisco dealers gave addicts a phone number they could call to place their order and an address where the traffickers could deliver their goods. Driving non-descript cars carrying small amounts of drugs reduced the risk of police raids because it was not worth the effort to bust a drug dealer carrying $20 or $30 of heroin. This business model worked so well, the Xalisco traffickers operated cells in dozens of U.S. cities.

Because many criminals were accomplished businessmen, we turned to our core competencies as management scholars and consultants. We applied the same fundamental economic principles we used to analyze lawful organizations to understand the management practices of organized crime that allowed them to prosper. This book describes these core economic principles, and how to apply them in lawful firms.

Jerold Zimmerman’s academic career focused on understanding why some organizations fail while others succeed, including the management practices that benefit or hamper the organization’s fate. This book merges his professional interests of organizations and his fascination with organized crime. It culminates a fifty-year career studying how small and large, public and private, for-profit and non-profit, organizations motivate and control the behavior of their people. His journey began in 1969 as a PhD student in the business school at the University of California, Berkeley. It continued at the University of Rochester’s Simon School of Business where he spent over forty years as a teacher, administrator, researcher, consultant, journal editor, and textbook author. The decision to join the faculty at the University of Rochester in 1974 proved pivotal. The small faculty consisted of about twenty-five young, energetic scholars trained at leading doctoral programs. Scientific, groundbreaking research in business schools based on sound theory and employing large-scale empirical studies transformed the elite management programs from trade schools to rigorous, scholarly institutions seeking to understand how organizations really work. Pioneering research by Michael Jensen and William Meckling on the economic theory of the firm proved transformative. The Rochester environment attracted a bevy of similar-minded academics that afforded Zimmerman the opportunity to collaborate with wonderful colleagues and students in economics, accounting, statistics, and finance. Forty-five years later, several professors who began their careers at Rochester in the 1970s received the Nobel Prize in economics.

Zimmerman also served as deputy dean of Rochester’s Simon School of Business, where, as chief operating officer, he oversaw hundreds of students, faculty, and staff with a $10 million budget. Instead of researching and teaching the principles of management, he now managed a real organization, and quickly learned that theory informs practice. His teaching and research proved enormously useful in structuring how to approach management problems, people, and new situations.

After his stint in the dean’s office, Zimmerman returned to the faculty to resume his research and teaching. He published a popular MBA textbook, Accounting for Decision Making and Control (McGraw-Hill Education), now in its tenth edition. His most educationally rewarding project involved the collaboration with two brilliant economists, Jim Brickley and Cliff Smith, in publishing another MBA textbook, Managerial Economics and Organizational Architecture (McGraw-Hill Education), now in its seventh edition. This textbook provides the conceptual framework underlying Relentless. Zimmerman’s academic career produced several prestigious research awards, nine books, and fifty research studies dealing with how organizations adapt and thrive.

In the fall of 1997, Daniel Forrester entered grad school at the University of Rochester’s Simon School of Business. It was during his first weeks in the MBA program that he heard about the three legs of the stool and the three wise men who had designed this enduring organizational paradigm: Cliff Smith, Jim Brickley, and Jerold Zimmerman. During his time at Simon, Daniel’s mind was wired to view human behavior through the lens of economics. He learned that companies are trying to get groups of self-interested individuals to move beyond nearsightedness—and move toward what can be achieved collectively as part of a high performing team. That viewpoint served Forrester well throughout a career in the consulting industry advising CEOs and boards on how to reimagine their business models and shift their cultures within a never-ending context of change.

Daniel remembers hearing Zimmerman lectures on applying incentives to drive leadership alignment toward the growth of companies. He remembers learning that the methods that companies bring to accounting are far more than looking at passive numbers on a spread sheet within an audit. Zimmerman connected ethics to accounting practices during a time when nefarious companies like Enron and WorldCom were showing that their core values were meaningless words on a corporate website. Zimmerman and his fellow economists at Simon School, changed Forrester’s world view and helped him understand how to answer simple, nuanced, and powerful questions about business:

•What is the firm?

•Why do companies exist?

•How can you align leaders to achieve noble and ethical causes through solving problems for customers?

•How can you drive companies to change and reinvent themselves so they can continue to grow?

Decades later Forrester reached out to Zimmerman for some expert feedback on a challenging consulting case at his firm THRUUE. A Fortune 100 client was seeking to shift their culture, around the world, in order to drive growth. Within minutes, Zimmerman did what he always does—he helped us think about the problem from multiple dimensions. At the end of the call, Zimmerman mentioned a manuscript that he was working on that explored a unique set of atypical organizations that would outlast Goldman Sachs and Google. Forrester was immediately interested. After reading early chapters of what became Relentless, the two went back and forth on emails and phone calls for the better part of a year—as Forrester shared his practical experience. Daniel observed that the key levers that mobsters use to conduct their businesses must include an examination of the significant management attention that they give to preserving their unique corporate cultures.

Forrester’s contributions to Relentless are minor compared to Jerold’s research, vision, and passion for this book. Yet thinking about this book offered Daniel an intellectual challenge like few ever considered. Namely, what can lawful managers learn from studying small groups of closed and secretive cultures that morph endlessly and peddle products (neither of us would ever wish to consume) inside highly complex markets with incessant legal scrutiny. It turns out that you can and will learn a lot about the enduring laws of economics and the power of a managed microculture.

We wish to acknowledge very useful suggestions and comments on earlier drafts of this book from Jim Brickley, Jay Busch, Marc Chase, Dave Cope, Patty Dechow, Bill Dotson, Barry Gilbert, David Gilbert, Henrik Glarbo, Tony Gorski, Dan Horsky, Maryann Karinch, Paul Kennedy, Thomas Lys, Derrick Mashore, Graham McDonald, Fred Marcus, Cheryl McWatters, Charlie Miersch, Paul O’Connell, Cliff Owens, Jill Pranger, Eben Moulton, Vincent Grady O’Malley, Avi Seidmann, Clifford Smith, Peter Spinelli, Daneille Taylor, Janice Willet, Joe Willet, Jim Williams, Joanna Wu, Dodie Zimmerman, and Mark Zupan. Their comments challenged us to sharpen our thinking and to improve the manuscript. Special thanks to Lisa Fyfe for her cover design, Catherine Barr for preparing the index, Katie Barry for copy editing the manuscript, and Fauzia Burke and David Wogahn for their guidance through the publication process.

Jerold L. Zimmerman

Daniel P. Forrester       

Every successful organization must have leaders performing one vital function—thinking. The main task of a leader is to think very carefully about how to align the organization’s strategy with the extent of employee empowerment, incentives, and corporate culture. Thinking means addressing the following questions: Do we have the right strategy? To execute the firm’s current business strategy, are the right people empowered to make the key decisions; do these people have the proper incentives to make these decisions; and, does the corporate culture support the strategy? Addressing these questions amounts to what we call the Strategy-Incentive-Alignment Problem. Great firms do not operate on autopilot. Thinking cannot be outsourced. There is no substitute for thinking about these important questions. This book educates leaders how to think about this difficult Strategy-Incentive-Alignment Problem all organizations confront and must address if they wish to thrive in a competitive and ever-changing landscape.

Thinking about how to align strategy, empowerment, incentives, and culture is hard, and cannot be reduced to twelve easy steps for success. Rather, we conduct four forensic analyses of successful organized crime syndicates to illustrate how their heinous leaders thought about, and ultimately solved, their Strategy-Incentive-Alignment Problems. In particular, we study the American Mafia, the Sinaloa Mexican drug cartel, the Hells Angels, and the Crips and Bloods street gangs. Our forensics of these syndicates reveal that all four followed well-accepted economic principles (enumerated at the end of this Prologue) to address their Strategy-Incentive-Alignment Problem, allowing them to succeed.

We chose these four criminal organizations because they have lasted long periods of time, and they could only have survived if they successfully addressed their Strategy-Incentive-Alignment Problem. These crime syndicates chose their level of empowerment, incentives, and culture to achieve their strategy, which involved generating significant illegal profits while eluding law enforcement and rival gangsters. Each had a different strategy. The Mafia operated extensive rackets including bootlegging, gambling, prostitution, and extortion. The Sinaloa Cartel smuggled drugs across the U.S. southern border. The Hells Angels wanted to party and ride their Harleys. And some Crips and Bloods dealt drugs on street corners. Nonetheless, the syndicates’ leaders thought their way through the Strategy-Incentive-Alignment Problem to create relentless enterprises. These four organized crime syndicates paint a dramatic picture of how they achieved near total dedication from their members by meticulously following fundamental economic principles derived from over seventy-five years of research by leading scholars.

Like justice, these economic principles are blind to the guilt or innocence of the leaders following them. These principles apply to both lawful and unlawful organizations. Many crime bosses, often with little formal education, especially in economics, understood and used these principles to build relentless crime syndicates. This book teaches lawful leaders how to apply these principles using memorable examples from our forensic analyses of the four organized crime syndicates.

Addressing the Strategy-Incentive-Alignment Problem requires all organizations, lawful and unlawful, to design four, economics-based, coordinated administrative systems that (1) delegate specific tasks to individuals or teams (empowerment), (2) measure the performance of those assigned the tasks, (3) reward/punish these individuals, and (4) create a corporate culture to execute the strategy. We refer to these four administrative systems as an organization’s Four Pillars. Every building serves a unique purpose. A factory, a skyscraper, a hotel, and a home require underlying pillars to support the edifice. Structural engineers design the pillars based on the unique characteristics of the building. So too do law-abiding leaders. They develop unique strategies that encapsulate their organization’s core competencies and market opportunities. Given their one-of-a-kind strategy, they must then choose the level of empowerment, incentives, and corporate strategy to execute the strategy. In particular, leaders must relentlessly review their Task Assignment Pillar (empowerment), Performance Measurement and Reward/Punishment Pillars (incentives), and their Corporate Culture Pillar. Like structural engineers, leaders must design Four Pillars to create an organization that achieves its corporate strategy.

The Four Pillars analogy differentiates our approach from others in important ways. First, the Four Pillars are based on over seventy-five years of well-accepted economics research. Further Readings that follows Chapter 8 lists the most influential studies in the past seventy-five years. Second, innumerable articles and books promise management elixirs, usually with mixed results. If a magic tonic exists, why do new prescriptions constantly arise? Previous writers often offer a one-size-fits-all approach, which ignores the uniqueness inherent in all organizations. The Four Pillars of McDonald’s are unlikely to work for the American Red Cross. Our approach follows basic immutable economic principles that apply in all different types of organizations. Third, management gurus offer long laundry lists of management secrets with little guidance as to their priority or importance in different organizations. Our method stresses that leaders must think their way through the puzzle of how to align their distinctive strategy and Four Pillars. Each firm, department, and not for profit are unique and requires its own distinct Four Pillars that motivate their people to work together effectively. Amazon’s strategy requires a different edifice than the Mafia’s. Each structure requires unique Four Pillars that reinforce each other. Fourth, unlike other approaches that focus on just one pillar such as corporate culture, or incentives, or empowerment, we emphasize that all Four Pillars must be jointly designed for the organization to achieve its strategy. Finally, we underscore throughout the challenges leaders face engineering their Four Pillars to implement their strategy. Most senior executives admit their strategy, incentives, and culture can be better aligned. We offer a process for continuous improvement.

The socioeconomic factors underlying crime syndicates vary significantly from those of lawful firms. Crime syndicates usually recruit members from lower socioeconomic strata who face little upward mobility. Some are from broken homes, seeking a sense of belonging and even safety. They possess a greater propensity to use physical violence. Lawful firms try to avoid recruiting social outcasts and antisocial, immoral individuals. For these reasons, some people might reject this book’s premise that lawful managers can learn from blood-stained villains. Others might view heinous, but successful, criminal syndicates as unworthy of study. While lawful and unlawful businesses differ in important ways, they share the same Strategy-Incentive-Alignment Problem.

We are not suggesting that lawful firms simply copy organized crime’s Four Pillars. They cannot do this even if they wanted. Each syndicate forged unique pillars. Moreover, lawful managers cannot deploy physical violence. We seek to make two essential points for lawful managers. First, an organization’s Four Pillars drive its success and survivability. Second, lawful managers must construct Four Pillars that uniquely and jointly execute their strategy. Although criminals and lawful managers deploy very different sets of Four Pillars, both must follow the same economic principles in designing them. Relentless expounds these general economic principles and illustrates how successful mobsters followed them to build lasting criminal enterprises.

A careful forensic analysis of the four crime syndicates reveals, to varying degrees, their Four Pillars yielded organizations with remarkable traits that most lawful leaders only dream of attaining. All four syndicates attract, retain, and nurture extremely loyal, resourceful, customer-focused, and relentless criminals who form high-performance teams, build exceptionally strong brands, fashion enduring cultures, and recruit the right people while purging vampires. These crime syndicates take the long view that shuns short-termism to promote the syndicate’s prowess.

It is a mistake to dismiss organized criminals as miscreants who use only violence to achieve their ends. Some crime leaders thought carefully about their Strategy-Incentive-Alignment Problem. They devised elaborate written codes of conduct that delineate acceptable and unacceptable behaviors and deployed mechanisms to enforce their codes. They established intricate initiation rituals to instill desirable values and cull unwanted members. Others devised well-defined succession plans to ensure continued leadership if bosses were killed or imprisoned. Many displayed unrelenting resourcefulness in finding new, lucrative rackets. One ruthless drug cartel boss bribed prison officials to smuggle a GPS-enabled phone into his maximum-security Mexican cell so his associates could build a mile-long, lighted, and ventilated tunnel equipped with a motorcycle on a track to whisk him out to a waiting airplane. His cartel’s enormous resources built the tunnel in a little over a year. These were not stupid people. Society wishing to combat these evil syndicates must understand and appreciate their relentless ability to succeed, the enormous resources at their disposal, and their ingenuity.

Recognizing their relentlessness and resourcefulness is not intended to romanticize or rationalize organized crime, the people involved in these illegal pursuits, or their behavior. These syndicates cause enormous damage to our society and our families. They consume inordinate criminal justice resources to constrain their monstrous activities. The U.S. Federal Bureau of Prisons estimates 45 percent of all inmates serve drug-related sentences, many directly or indirectly the result of