Tuesday, June 26, 2012

Shoot the Innocent

Today I heard some news about a company that I have been acquainted with for quite a few years; several years ago a much larger company bought them.  Everything was going well, or so it seems, but, as with many companies these days, the big company was struggling in these tough times.  Last week the big company, which has a history of never really merging with anyone, just buying them and keeping the smaller companies at arms length, sent some folks around to the smaller company and fired a bunch of people.  The newly unemployed were given no real notice and in some cases were told to be out of the office ‘by 2 pm.’  (It was then 9 am.)  

One thought before I comment on this behavior and try to draw a leadership lesson from it; the large company routinely complained, as do most large companies, that mergers are difficult.  They also complained about rising overhead costs.  It doesn’t take a math wiz to figure out the problem: the rising overhead costs are because they kept buying up companies but not really merging them into the parent company.  The benefit of mergers is that 1) there is some sort of synergy between what the two organizations do AND 2) there is a natural efficiency following the merger because support functions - administration, accounting, legal, human resources, etc., can be merged and economies of scale will over time reduce overhead costs.

But, if the parent organization refuses to actually merge the companies – as is often the case with many large companies (defense contractors are notable case studies) – then those economies never take place.  Add to that the growing sense of ‘us versus them’ that will be found in both the parent company and the acquired company, and the impossibility of maximizing synergy if there is not a ‘team mentality,’ and you easily can see why mergers are so difficult.  As my father would say: ‘of course it’s hard if your doing it wrong.’

As for the leadership lessons to be drawn from the above: begin with the simple rule that it never pays to make enemies for no reason.  There are now a fair number of folks (those fired, and all their friends) who will spread the word that that big company is run by jerks and, if given half a chance will seek to emphasize that point.  Sometimes bad publicity can’t be avoided.  But generating it on your own through your own executive actions is never a good idea.  It may make for good drama on a soap opera, but being rude to people, and firing them without warning or regard to their lives or their own situation is never a wise thing in real life.  Surely this decision was not made the day before.  I assume it was made in light of quarterly forecasts and some projections of future contracts (or lack thereof).  Common decency would demand that people be treated fairly and given some ‘heads-up.’  These folks weren’t.  The Golden Rule applies: treat folks the way you would wish you (or your wife or brother or son or daughter, etc.) might be treated.

Have a plan.  When most acquisitions take place the buyer usually has one view of the future.  That view rarely includes your business sector ‘tanking.’  But it should.  Good planning always asks the question: “What do we do if Plan ‘A’ fails to achieve its goals? And “What happens if our assumptions are incorrect?” Most planning (corporate and governmental (the military is for the most part an exception)) fails to ask these kinds of questions.  That’s because most planning is awful – particularly among large corporations the executives suffer from severe hubris and firmly believe that they really don’t need to engage in disciplined planning. (It is perhaps comforting to know that this is a worldwide problem – I believe that the large numbers of MBAs and Lawyers on most boards is a key factor.)  If you want to try to fix it you need a small but dedicated planning staff – and you need to trust them.

Finally, Communicate with your people.  In the case I mention above, one of the factors may have been (I’m surmising) that there was a fair amount of paranoia on the part of the big company that the people in the small division would steal data (customers) if given too long a warning period.  Of course, if that really is the case they are going to have the customer’s names anyway, but by giving people no notice they effectively eradicated any sense of loyalty that might have endured once their former employees walked out the door.  On the other hand, if they had told people what was happening, the cash flow problems or contract problems they had, etc., perhaps someone might have found a way to help offset some of the issues.  Trusting your people is essential if you want them to work hard for you.  And not trusting them will eventually guarantee that they won’t work for you at all.

Good companies are led by good leaders.  Some bad companies are led by good leaders, but they usually turn them into good companies.  Bad leaders can turn a good company into a bad one – quickly.  But if you practice simple, sound, quality leadership and you will find yourself on the right track.  Just remember the Golden Rule.


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