Wounded Leaders: How Their Damaged Past Affects Your Future. Allan Bonner

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СКАЧАТЬ any discussion or examination of modern corporate life is dominated by the challenges and failures of today’s leaders. The very word “leadership” conjures images of big, larger-than-life personalities who can be role models for the rest of us. Think of Churchill, de Gaulle_a Reagan, Thatcher or Trudeau. Whom we choose as our models depends on our origins, culture, perspective and beliefs.

      In North America, any list of business leaders is dominated by names from the US. Historically, these would likely include Rockefeller, Carnegie, Morgan, Whitney and Ford. We tend to think of these men as decisive, ethical, hard working, strong, competent, single-minded-and also excellent communicators. However, we also know that history is written by the “victors” and while their biographers may have been frank and fair we have to concede these men had an easier time of it than today’s captains of industry. It’s easier to exercise and project power when you have time to write a speech, or react to bad news when there’s no television or internet demanding instant answers and solutions-and analyzing what you’ve said before you’ve even finished speaking.

      The odd thing is that even though today’s leaders live and work in a totally different world from their business ancestors, they persist in chasing the same old dream: bigger is better. Of course there’s nothing wrong with making more cars or widgets, if that is your core business. However, a widget maker who wants to generate more profits by taking over a very successful ice cream business based in a different country is likely to find he’s bitten off more than he can chew, lick, or swallow. And far too often our business leaders over the past three decades have chosen the latter option in the race to grow bigger, better-and richer.

      THE MAGNETISM OF MERGERS & ACQUISITIONS

      There are numerous aspects of organizational life that could be studied as manifestations of the health of the modern corporation. We might examine recent accounting and ethical wrongdoing and come to the conclusion that there’s been a failure to instill in young people a code of good business conduct. We could also study extreme examples of executive compensation and attempt to link that phenomenon to the evolution of our consumer society. An anthropologist might even relate high executive compensation to conspicuous consumption. Indeed, there could be a long list of potentially fruitful areas of inquiry to explain selected aspects of organizational life.

      Mergers and acquisitions present a particularly useful approach to the study of the effects of leaders’ behaviour. Many organizations have channelled significant energy-and resources-into these activities in the past thirty years. In addition, this is an area that has been the subject of many academic and business studies-and the evidence all points in one direction. Mergers and acquisitions rarely produce the benefits expected of them. So why have they been so popular? What is it that makes leaders risk so much when the odds are against them and the dangers so obvious?

      The business press often has featured headlines about mergers and acquisitions as if they were trumpeting Allied victories in World War II or great advances in medical science. The economic story under those headlines, however, tells a much different tale. Staggeringly, three quarters of all mergers and acquisitions fail to meet their hoped-for goals.

      One reason is the inability to know all there is to know about the company being acquired or with which one is merging. In addition to facilities, people, inventory, products, technology and other assets, you may be buying a lot of problems. One case study I came across of an ad hoc method of developing a security system in a large corporation can serve as a metaphor for how mergers and acquisitions may proceed:

      “How does management proceed? Usually piecemeal. First, a security officer (probably unqualified) is hired, followed by an alarm company together, perhaps, with guards and gatekeepers. No attempt is made to make an independent assessment of the risk—present and future—and then construct an appropriate plan based on that assessment, available resources and vulnerability....”

      (Hamilton, P., The Administration of Corporate Security

      and Crime Prevention. 1 [1], 1987, 11-19.)

      In the world of mergers and acquisitions, the parallel to this uncharitable account would be that management would proceed from an assumption that mergers and acquisitions are a necessary activity without first conducting the assessment of risk and rewards. It’s the cart before the horse.

      Among the problems being purchased in mergers and acquisitions are those under the heading of cultural differences. This can mean the need to overcome language, religious and other barriers that are often associated with national boundaries. The challenge of doing business in Japan is the oft-cited example of dealing with unfathomable cultural differences. However, there can also be considerable cultural differences in countries that seem much closer. Germany and America are allies, trading partners and both are major industrial nations producing high quality automobiles. However, the Daimler Chrysler merger shows that even these common traits may not bridge cultural differences.

      Even with a common language, as in America and England, there can be large cultural problems. In fact it is also possible to find cultural differences in the same industry and in the same community.

      Culture has to do with nations, religions, languages and ethnicity, but it is also a collection of beliefs, norms, attitudes, roles and practices of a given group, organization, institution or society which is highly resistant to change. However it would be wrong to conclude that cultural matters are the only cause of failure when organizations attempt to merge.

      Problems can also become evident in human resource matters. Productivity is known to decline during all periods of turmoil and uncertainty in corporate life. An organization may lose staff, and productivity may fall to less than an hour per day. Moreover, these human resource challenges may not fade after the merger is complete. The effects of the turmoil that mergers and acquisitions bring to long-term productivity, loyalty, morale and access to skilled workers may be profound.

      There are also less visible or obvious dangers in mergers and acquisitions. As in biological mergers, business mergers can transmit dormant ailments. The metaphor in the era of safe sex is that one is having intercourse with every partner one’s partner has ever had. The metaphor may seem dramatic, but in the corporate context it is essential that the acquiring entity knows about any potential liabilities-such as environmental exposures, retiree health-care liabilities or legal actions for which it is assuming responsibility.

      An example is the Bridgestone Company’s acquisition of Firestone. Bridgestone not only purchased inventory, a sales network, factories and a well-known brand name, but also the Firestone history. In that history are acrimonious labour relations, the largest tire recall in history, reluctance to embrace radial technology, questionable methods of storing raw materials, a questionable vulcanizing process and a relationship by marriage to the Ford family. So it should not have been surprising when a scandal, lawsuits and an even larger tire recall hit the new company. Certainly, the Japanese parent company had to grapple with US culture and the Ford relationship, which it did not do easily.

      Perhaps the most damning of all evidence against mergers and acquisitions can be found on the balance sheet. Acquirers often overpay for target companies. The most notorious example may be Quaker Oats’ purchase of Snapple soft drinks in 1994. In that acquisition, the $1.7 billion purchase price eventually was judged as being $1 billion too much. In 1997 Quaker sold the brand for less than 20% of the purchase price.

      Research has shown that a majority of M & A deals destroy value for the acquiring company’s shareholders. Returns for at least 71% of those deals are negative in the year following the merger.

      As in human relations, foibles can be a root cause of unproductive and even destructive behaviour. Wishful thinking, a lack of unique offerings and a lack of rigorous assessment of the potential can all play a role in unproductive СКАЧАТЬ