Reprinted with permission of the Financial Times.

God's line manager People around the world have been mesmerized by the events surrounding the death of Pope John Paul II and the election of Cardinal Ratzinger, now Pope Benedict XVI, as his successor. Now we wait to see how the new Pope performs in one of the world's most complex and challenging leadership roles. Critically, will he be able to stem the steady decline in the Church's stature, influence and relevance to its faithful that has been evident for at least 30 years?

Pope Benedict recently alluded to perhaps the most important manifestation of this problem when he spoke of the spread of relativism - the tendency of many Catholics, and others, to reject the notion of an enduring truth and to go their own way when they feel the Church is not in touch with their basic needs.

Reversing this trend is high on the Pope's list of priorities. But to do this he needs a cohesive organization capable of attracting and managing human and financial resources effectively and efficiently. Unfortunately, the evidence is that the governance and management structures he is inheriting are not up to the task.

The Catholic Church's problems are evident in many places around the world. In my own country, the U.S., I recently looked at the state of the Church from the standpoint of a McKinsey consultant. This is what I found:

  • The Church has significant human resources problems. Its ability to recruit has declined dramatically during the past 40 years and the workforce is rapidly aging. It is no longer the first choice of the best and the brightest.
  • Many of the clergy (and potential clergy) do not believe that a) celibacy is an essential requirement of the priesthood or b) women should be excluded from the priesthood and other important roles in the Church. And they are frustrated and demoralized by the reluctance of the Church to discuss the issues openly.

  • The Church has serious financial problems. Many of its traditional sources of revenue are drying up, while at the same time costs are rapidly escalating because it can no longer attract high-quality, cheap labor. Also, churches are closing as fewer people attend mass, and maintenance is an ongoing cost. Potential liabilities as a result of the recent sexual abuse scandals are large and growing, and the dismal spectacle of dioceses declaring bankruptcy to protect their assets from legal settlements is further evidence of the problem.
  • I also found substantial changes in the character of the Church's membership - and its potential membership. People are much better educated and better informed than in the past, and many no longer feel committed to the Church's "product line": its teachings on divorce, birth control, abortion, homosexuality or even regular attendance at mass and Communion.
  • Finally, after the abuse scandals, many of the faithful no longer trust Church leaders or believe in their infallibility.
  • In the developing world, recruitment is less of a problem. But there are serious concerns that some of the Church's basic teachings, such as forbidding condoms in areas where AIDS is prevalent and condemning birth control in poverty-stricken, overpopulated countries, are at odds with people's most basic needs.

    Thus the Church finds itself increasingly vulnerable to the more attractive, less demanding and seemingly more practical claims of a variety of other religions.

    From the outside this looks like a Church in disarray. However, most of the faithful remain highly committed to the basic message of Christ and they hunger for sure-handed leadership and dramatic changes in the delivery system.

    Some of the discontent is undoubtedly caused by the tension between a Church based on belief in an immutable body of dogma, and a laity that is increasingly more confident about its capacity to judge right from wrong and act accordingly. However, I believe another cause of the Church's rapid decline is the badly outdated and grossly inadequate system of governance and management. By modern standards of good management, the Church is set back somewhere in the dark ages.

    Is it fair to apply these standards to the Church? While it is not a corporation, the Church's financial assets, spending and workforce dwarf those of the largest companies in the world. In the U.S. alone (with about 7 percent of the world's Catholics), the Church has operating expenses of more than $100 billion a year, employs more than one million people and controls an investment portfolio (including property) which, while not publicly disclosed, is probably of equally daunting proportions. Scaled up, the church could well be approaching a $1 trillion enterprise worldwide.

    So while Pope Benedict might not like to think of himself as a chief executive, he certainly faces many of the same sorts of problems.

    And his "corporation" is not in good shape.