August 28, 2009

Mergers and acquisitions are in the news again as the economy tries to right itself.  It’s a tempting time to be sure, and companies are talking again about synergies and complementary strengths as visions of dollar signs dance in their heads. History is strewn with the litter of failed M&As (the majority by far) and I wonder if the basic lessons gleaned from those will ever be truly learned.  One of my favorite examples from back in the ’90s was the merger of Franklin Quest and Covey Leadership Center. The former made it’s mark with the eponymous Franklin Planner, tucked under millions of arms, and the latter was the corporate home of Stephen Covey, he of 7 Habits fame.

The merger was a disaster. Both companies seemed to think that because of their respective strengths the merger would be a textbook case of how do it right. The opposite happened and eventually their stock was trading below a dollar before pulling up a few years ago. Internally they could not successfully merge either culture or operational structure and competition between Franklin and Covey people was intense according to the people I knew in the company.

That’s the key right there. The people, the culture, the human relationships that determine whether an M&A or any internal strategy will succeed. The intricate due diligence process preceding a merger focuses on legal and financial issues, with varying degrees of attention given to operations and growth potential. At the end of the list is usually culture, and it’s culture that will determine the success or failure of all those preceding topics!

I’m seeing a lot more companies talking more about compatible cultures as they enter M&A discussions. Time will tell if they really mean it. I’ve had M&A clients who called for help after a year of stagnation, people leaving and others just not getting along and realizing they never paid attention to merging cultures. My favorite client was one who understood and factored in culture right from the beginning . What a difference it made in their new operational structure and strategy.

Cultural due diligence is equal in importance to all other factors of examination, more so, really, as ultimately culture influences both belief and behavior. And it’s behavior that determines if strategy succeeds.

August 25, 2009

Note: this was to be posted over a week ago and well, it didn’t get here. So the news topic is dated, but the lesson still applies.

Peter Drucker once said: “Management is doing things right; leadership is doing the right things.” Barack Obama did neither when he weighed in on the arrest of his friend in Massachusetts. And in fact, he continued to do neither for the next several days, seemingly confused at the reaction to his ill-spoken remarks. Regardless of one’s political leanings, this should be a lesson to him and to the rest of us who ever aspire to leadership positions. The president had no leadership experience prior to taking office and it shows.

I was reluctant to take on this topic as because political discourse these days has sunk to new lows and supporters on both sides of the aisle are way too sensitive to criticism of “their guy” whoever it is and whatever the issue. Believe me, I had plenty of issues myself with the former White House resident, and the current one is providing a study of on-the-job training and its attendant pitfalls.

Leaders, be they corporate or political, have to measure their words and their impact according to the weight of their office. When a CEO or president of the United States speaks, people listen! Obama made two critical errors (he made more total errors) in this situation: first, he lowered himself into a local issue where the president should never go. Second, he spoke with virtually no command of the facts of the situation. Can you imagine a CEO answering a question at an annual meeting about a dispute in a small subsidiary in another state? Of course not. And the president of the United States remembers the gravity of his position and stays out of small-town police work. To make matters worse, he passed judgment using defamatory words and phrases.

The electorate was upset with the former president for any number of reasons, all documented in the press. They voted for hope over experience, and this is the chance you take. I hope the president will take this as a opportunity to learn and grow in the nature of leadership, and for corporate America there lies a cautionary tale as well. Leadership is not to be taken casually and not to be trifled with. Too much depends on it, and if the designated leader either angers or loses the confidence of his followers, the strength of his or her leadership position is diminished. Sometimes irreparably. Take notice, you leaders and aspiring leaders out there.