Don’t lose that deal over lunch

February 13, 2017

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In this Trumpian era, it is important to understand deal-making. I pass on a hint to deal-makers.  Don’t lose the deal you almost won in the morning, by something you do over lunch.

I write, not as a great deal-maker, but as a student of those who claim to be. My case-example goes back some years to a time when executives would swap leadership stories in workshops encouraging the sharing of their experiences.

In one of the workshops, I came across the account of an international deal that had been moving to a satisfactory conclusion. The tale-teller came from a UK international organization. The deal was in a country with a very different culture. Negotiations were made with simultaneous translations on each side.

The technical details of the deal were surprisingly easy to wrap-up. Most had been agreed through professional teams working in advance of the meeting of the corporate leaders. Having reached the point at which a decision to go ahead seemed certain, the final morning meeting broke up for lunch. A celebratory mood prevailed.

The senior British figures were driven to a top dining place in the country for lunch. “They spoke in a few words of English,” the British manager told us “We had been briefed that it was vital to keep up with them in the drinks and the toasts. Unfortunately, the booze got to us more than it did to them. Worse, their broken English was a sham.  At least one understood every word we said about them, our real thoughts about them, not the censored versions they had been hearing before. You could say we won the contract in the morning, and lost it over lunch.”

Please take from my story what you will. As we are learning from events in America and around the world, this is a time when we all have to learn the art of the deal.

The case may also apply to those political figures setting out on Brexit negotiations.


Walgreens Boots Alliance and the Rise and Rise of Stefano Pessina

January 21, 2015

As 2014 drew to a close, the second stage of a merger took place incorporating the American convenience stores group Walgreens with what was originally known as Boots the chemist of England. Boots had already morphed into Boots Alliance at the time of the merger

In the new year [January 15th, 2015] the new company announced its first dividends. The histories of the brands can be found in the excellent website of the new company. It positions itself as a first global-pharmacy led health and well-being company. This strap line may not be pretty but it has a rather ponderous truth reflected in the brands of Walgreen stores of America and the revamped Boots stores in the UK. The stores also hint at shared values and reasonably compatible cultures which could go some way to avoiding the pain that accompanies any merger.

WBA is not a football club

Walgreens Boots Alliance, has the new Nasdaq label WBA. [not to be confused with WBA, aka The Baggies, or West Bromwich Albion, another venerable brand in England, and a midlands- based Football club.] The merger was suggested to have been imposed on Walgreens by impatient shareholder activists.

Winners and Losers

The change had more executive bloodshed on the Walgreen side. Unsurprisingly, the veteran Stefano Pessina of Boots Alliance became the most obvious winner, just as he was when he engineered the Merger of Boots with his own Swiss-based operations earlier . The financing of the deal cost Walgreens five billion dollars plus shares. LWD subscribers will have followed the commercial rise and rise of Stefano Pessina in earlier posts in which I noted:

In the original merger between Boots and Alliance, the new board had a majority of former Boots executives. But the Alliance side was the more profitable, and Stephano brought with him a sizable shareholding and considerable personal wealth. Pessina had enough power to be magnanimous. Mr Baker [a departing Boots executive] may not have had much temptation to stay on when the alternative was a £10 million incentive to leave, with more chances of securing a new leadership role elsewhere.

Leadership lessons

I’m not sure of the leadership lessons here. Perhaps it is that self-made billionaires are not all ego-crazed narcissists. Maybe absolute power is not always accompanied by absolute ruthlessness.

Image

The image was one taken as I was visiting a Walgreens in Buffalo, NY last year. It’s not much to do with the merger, unless you read something into the caption …


Thomas Cook: Harriet Green takes on a historic culture

October 15, 2013

Harriet GreenThomas Cook is an iconic name among British travel agencies. Its new CEO Harriet Green faces tough times for the travel sector as well as having to deal with a resilient corporate culture.

Some years ago I researched the company after reading a historical biography. I was struck by the corporate culture, which reminded me of the provincial ‘assurance companies’ at the time, loyal staff, solid and traditional in its values. Harriet Green faces interesting challenges.

A recent interview in The Independent sketches the leader and her possible dilemmas.

The shelves are wedged with books, as you would expect for a history graduate, and another nod to the past is mounted on the wall overlooking Ms Green’s shoulder: a sepia-tinted portrait of Thomas Cook himself.
She hopes to take a leaf out of the founder’s book. In 1841, the Baptist preacher arranged to take a group of temperance campaigners to a rally 11 miles away, charging a shilling each to cover rail fare and food.
More innovation followed over the decades. Thomas Cook was the first company to develop travellers’ cheques, a low-cost airline and the round-the-world trip. Now Ms Green is leading the march for new products beyond the company’s sun, sea and sangria core. That means city breaks and winter sun and catering better for discrete categories of holidaymaker, such as Nordic divorcees.

She has closed shops but refashioned others, which look “a lot more Apple than travel”. Sunseekers can now load their vacation wishes on to an iPad and take them home to discuss with the family.
Ms Green has been vocal about women putting themselves forward for top jobs, and wrote to Frank Meysman, Thomas Cook’s chairman, to tell him she had the skills he needed even though her background was in electronics, not travel. “I felt I had enough experience, that I would be pacy, resilient and be able to generate belief,” she says. Thomas Cook shares fell when her appointment was announced – but have risen tenfold now.
“You ask any chairman, any chief executive: it is about getting women, from 13-year-olds to 25-year-olds who take business degrees, to think running a business is good and positive and fun.”
Ms Green climbed the corporate ladder starting as a trainee at Macro, which distributed semiconductors, and rising to be UK managing director. Her next company, Arrow Electronics, gave her a larger canvas. After setting up its European network, she travelled to Africa, Asia and America.

“My last meeting is usually at six or seven and then I do my reading and emails. I make a commitment to everyone I’ve ever worked with that every email they send me will be responded to in the day. I’m the only chief executive I know who does all her own emails – that is something very personal and important to me.”

Ms Green has shaken up her senior team at Thomas Cook, with a third of her lieutenants promoted from within and a third new appointments.

Leaders and leadership

Some aspects of culture in the company seem to have survived. I noted the mention of the founder’s portrait in the article cited above. It’s the one that was an ever-present ghost of Thomas Cook in the old corporate headquarters.

As for emails: I applaud Harriet Green’s energy. But with 30,000 staff with direct access, I wondered about the cultural discouragements still present to deter most employees attempting to communicate ‘over’ a line manager. Maybe that’s how the emails arrive in manageable numbers each day?


Much More than Marmite: The Unilever Strike

January 18, 2012

One popular newspaper has been running stories about ‘Marmite workers’ going on strike. For Unilever’s employees it’s much more than that

To associate Unilever only with one of the manufacturer’s more quirky products is an oversimplification. Unilever is a modern global organization founded by the entrepreneur and social welfare pioneer William Hesketh Lever.

The strike last month and continued today [January 18th 2011] is over the 21st (as well as the 19th century) issue of pension rights. It is believed to be the first in the company’s century of operations.

The Guardian describes the background to the strikes:

Before Christmas, Unilever, which produces goods such as Dove soap, Wall’s ice-cream, PG Tips and Marmite, was hit by the first ever national strike involving its UK operations after revealing plans for a pensions shake-up.
The firm, which employs around 7,000 workers, is looking to move 5,000 staff to a less generous career average scheme by the middle of next year. The remainder are already signed up to the new scheme, which was closed to newcomers in 2008.
On Saturday, leaders of the Unite, Usdaw and GMB unions said they would call for a series of strikes from 17 January, claiming new pension arrangements could cut retirement income for staff by 40%.

A personal view

Unilever recruited me as a technical manager in its Port Sunlight laboratories on Merseyside at the start of my professional career in the late 1960s. Even in proximity to the militant culture of the shipyards of Birkenhead and with Liverpool across the Mersey, Port Sunlight retained its paternalistic but cosy ethos. The laboratory and manufacturing sites were in walking distance from Port Sunlight’s model village built for the workers, with its Art Gallery, Bowls green and (open-air) swimming pool.

Later, as a management researcher, I retained memories leaving me with a largely positive view of big company culture and sensible employee relationships with ‘management’. Today, Unilever employees are facing up to changes to a century of tradition.

[Image is not of your editor protesting for pension rights]


Carol Bartz is fired as CEO of Yahoo

September 7, 2011

Carol Bartz

Carol Bartz

Carole Bartz was fired by a phone call as CEO of Yahoo. What does this tell us about the corporate culture?

Correction

The intitally published version of this post suggested Carol Bartz was ‘fired by an email’. That turned out to be false and I apologise for the error. She was fired in an unexpected telephone call. The core of the original post was that dismissal by email would have been outrageous. I’m not convinced about her ‘dismissal by mobile’, although there could well be mitigating circumstances for that. There remains an interesting story of how Ms Bartz has been treated since her appointment as one of the most successful female executives in Coprorate America.

Carole replaces Jerry

Ms Bartz took over at Yahoo in 2009 from one it its co-founders Jerry Yan. She made organizational changes, cut costs and attempted to move out of search-oriented business.

According to the BBC Ms Bartz emailed her own staff yesterday [Sept 6th 2011] to say

“I am very sad to tell you that I’ve just been fired over the phone by Yahoo’s chairman of the board”

Larry Magid, a technology analyst said the company has not seen enough of a turn-around under Ms Bartz’s leadership. “She hasn’t done anything to change the company’s fortunes, and they are still anxious to find a leader who can move them up,” he said. Critics also claim that Yahoo has failed to make significant strides in two of the most lucrative segments of the market; search and social networking.

Tim Morse, the company’s chief financial officer will serve as and interim chief executive while the board of directors select a new CEO. Shares of Yahoo jumped at after hours trading on the news [6th Sept 2011].

Bartz and the Glass Ceiling

In an earlier Leaders we deserve post we looked at the impressive track record of Bartz. The press comments on her appointment suggested that the Glass Ceiling was still alive and well for female executives in Corporate America. It also hinted at ageism (Bartz was in her 60s on appointment).

Dismissals we deserve

It can be argued that Carole Bartz ‘deserved’ to be fired for failing to meet the expectations of the marketplace. However, the manner of her firing may tell something about the culture of Yahoo, and attitudes to women and ageism in global corporations and financial institutions.


Porsche Volkswagen merger edges forward

August 14, 2009

VW-Logo

The long-awaited merger between Porsche and Volkswagen edges forward. The complexities have additional national features

Mergers tend to reveal and emphasise differences in the cultures of the participating organizations.

A few years ago , I had some personal involvement with a merger between two institutions located close physically and professionally. The outcome for several years was not so much the expected two sub-groups within the new extended organization, but six including two smaller groupings acquired to strengthen the core merger.

Mergers are often said to require around five years for the legacy cultures to settle down, despite attempts by the leadership of the new organisation to establish a shared vision.

In the UK, the diverse cultures of Cadburys and Schweppes remained for at least that long, in an uneasy marriage of the more traditional with the swashbuckling. The two cultures were still recognisable two decades later, and contributed to the logic of CS acquiring the ailing Dr Pepper/Seven Up group, and subsequently demerging the fizzy bits into the wonderfully named Dr Pepper Snapple Group

Porsche Volkswagen makes a classic business case study. I leave its complexities to those more involved in that venerable Business School approach. Here I will concentrate on exploring the map of the merger for its leadership implications.

It promises to be a titanic struggle. The two cultures feature most obviously in the strong brands symbolising the two institutions.

Background

Leaders we deserve has been noting the possibility of a merger since 2007 when Porsche appeared to be the more powerful of the two protagonists.

Dr Ferdinand Porsche designed the original Beetle in 1936, and his grandson, Ferdinand Piech, is chairman of VW and the controlling shareholder in Porsche. Wendelin Wiedeking, chief executive of Porsche, is a member of the supervisory board of Volkswagen …In November 2007, rumours suggested that Porsche intended to acquire VW, and incorporate the models under the Porsche brand through a holding company. The powerful unions at Volkswagen sent a signal of discontent, with work stoppages, including 40,000 workers at the main Wolfsburg plant [Wednesday Oct 30th. 2007]

At the time I commented in the same blogpost

My suspicion is that plans towards securing that dynastic merger are in place. Whether the happy day is near remains to be seen.

There were a few twists and turns to the story over the next two years. A little matter of a deep global recession and financial crisis. Some complex moves involving share acquisitions, and governmental background interventions.

The BBC observed

Over the past year [2008-9] Porsche built up major debts to get a 51% stake in VW, only to fall short of the required 75% when it could not raise more funds. Porsche’s failure to buy VW saw the firm’s former chief executive Wendelin Wiedeking and financial director Holger Haerter resign “with immediate effect” last month [July 2009].
Porsche will now effectively become the 10th brand in the VW family, joining the likes of Audi, Seat and Skoda. However, VW has pledged to maintain Porsche’s “independence”.

Independence

Independence. Ah, yes, in the sense that it has been a ‘friendly’ merger, and not, as the cynical are inclined to say, a bloody takeover.

The Cultural Turn

So what of the two cultures? To an outsider, Volkswagen is more than able to accommodate Porsche as a coherent brand such as it did with Audi. It has done a good job in that respect with Seat and Skoda. On the other hand, it might be that the more local historical rivalries will prove more difficult than those posed with international acquisitions. But even as I write, I see that the notion of merger is becoming blurred into the vocabulary of a takeover.

We will have to wait some time to see how this turns out for the organizational culture of the VW organization.


Alcatel-Lucent confronts its cross-cultural challenges

July 31, 2008
Alcatel-Lucent logo

Alcatel-Lucent logo

Alcatel-Lucent leaders step down a year after the Franco-American merger. Various difficulties have been cited by the board, including the cross-cultural challenges after the merger

The company announcement in Paris and New York put it as follows:

Alcatel-Lucent (Euronext Paris and NYSE: ALU) today announced changes to its leadership and Board of Directors. The company also announced its quarterly results and demonstrated improvements to its operational results for the third straight quarter. The Company reported that it is making steady progress on the strategy the company laid out last fall. To pave the way for a fully aligned governance and management model going forward, the company announced the following changes to its management team and Board of Directors:
Non-Executive Chairman Serge Tchuruk has decided to step down on October 1, 2008. CEO Pat Russo has decided to step down no later than the end of the year, and at the Board’s request will continue to run the company until a new CEO is in place to effect a smooth transition and maintain the continuity of the company’s business. The Board will commence a search for a new non-executive Chairman and CEO immediately.

Perhaps the most instructive phrase is the one about ‘paving the way for a fully aligned governance and management model’.

The financial side is starkly illustrated in Bloomberg’s report of the company’s sixth successive quarterly loss. [July 29th 2008]

(Bloomberg) — Alcatel-Lucent SA, the world’s largest supplier of fixed-line phone networks, said Chief Executive Officer Patricia Russo and Chairman Serge Tchuruk quit after the sixth straight quarterly loss. The second-quarter net loss widened to 1.1 billion euros from 586 million euros , a year earlier..

Russo and Tchuruk were the architects of Alcatel SA’s November 2006 purchase of Lucent Technologies Inc., creating a company that has never earned a profit, shed 62 percent of its market value and is eliminating 16,500 jobs. Russo, 56, hasn’t said when she expects the losses to end. She will step down by the end of the year, while Tchuruk, 70, will leave Oct 1.

The market conditions have been pretty bad since the merger. Competitors have also struggled for growth. But Alcatel-Lucent had added difficulties of achieving changes relating to the American and French cultures of the partners of the merger.

The technical issues were highlighted by Ovum

Alcatel-Lucent is riding multiple horses in the wireless infrastructure segment. Today, Alcatel-Lucent is the only Western vendor to offer or develop products for all wireless technologies (GSM, UMTS/HSPA, LTE, CDMA2000, WiMAX). The only other vendors doing so are Chinese companies ZTE and Huawei, but their cost structure and access to capital are more favorable than Alcatel-Lucent’s.

Scale is vital

In telecoms scale is vital. Without significant scale, profitability suffers. In that context, mergers are presented as the best means to create scale. However, simply adding more product lines does not create scale – the vendor must also go through a painful product rationalization process before reaping scale benefits. Product rationalization has an obvious R&D cost – the need to build a common platform – but it also has a marketing cost as the vendor needs to keep customers of discontinued platforms on board. In addition, competitors will try to benefit from any discontinuities and grab market share. This is what Ericsson and Huawei did last year at the expense of both Alcatel-Lucent and Nokia Siemens Networks.

The BBC has drawn attention to the cross-cultural difficulties post-merger.

‘Cultural divide’
“We hope that a new CEO will be able to bridge the cultural divide between the Americans and the French and get all sides pulling together,” said Richard Windsor from Nomura.

But the BBC article focused on a perceived divide between the two leaders who are departing.

Mergers mean trouble

For some years the business school wisdom is that mergers tend to be triumphs of hope over rationality. Leaders are only human, after all. It is also well-known that most marriages begin with both partners believing this is for ever…

That may be taken as a pretty cheap shot, and a weak metaphor. So let’s get more specific.

Business week a month ago [June 18th 2008] had also picked up on the marriage metaphor.

Alcatel-Lucent’s Troubled Marriage

Alcatel-Lucent (ALU) is in big trouble, and Russo is catching serious flak. In France, the 56-year-old executive is viewed with suspicion as the first American, and the first woman, to head a blue-chip French company. In the U.S., she’s vilified by many former employees of Lucent Technologies, where as CEO she oversaw a brutal downsizing before its merger with Paris-based Alcatel. All that is driving speculation that Russo may be headed out the door.
The marriage of these iconic companies was never going to be easy. True, Lucent’s U.S. strength in the wireless business nicely complemented Alcatel’s global footprint and its prowess in fixed-line and broadband. But the cultures could hardly have been more different. One was hierarchical and centrally controlled, the other entrepreneurial and flexible …What may surprise critics of France’s hidebound corporations is that Lucent was the rigid one.

Remember the EADS story?
There are structural parallels in this story the those at EADS (Airbus). Both companies suffer from the weakness of the dollar; whiffs of executive wrong-doings (in Costa Rica hanging over the one company, of insider-trading in the other); problems across cultures (remember the Airbus communications issues between Toulouse and Hamburg?).

Update

In the subsequent months, Alcatel Lucent was the subject of various stories suggesting it was a possible takeover target.