I’ve been in the workforce a long time, and one of my basic “rules” is that whenever I hear someone trying to make a case for a merger or deal predicated on all the wonderful “synergies” it will bring, well, that just tells me to run and get as far away from it as quickly as possible.
Sound extreme? Maybe, but in my experience, deals that are predicated on the great synergies they bring are almost always doomed to fail. That’s because the benefits of the synergies are wildly exaggerated and overstated (especially the so-called cost savings) in order to sell the deal, then grossly under-realized later after the dust from the actual merger has settled.
Here’s an example of what I’m talking about: the just-unwound merger between Time Warner and AOL. Not only was it terrible financially— “valued at $166 billion when the self-styled ‘deal of the century’ between America Online and Time Warner was announced on January 10, 2000, an AOL-containing Time Warner today commands a market capitalization of $28 billion … an 83 percent loss in market value,” according to TheDeal.com—but it was also a horrible cultural fit, bringing together an overhyped and overvalued new-media company with a solid and sober old-media giant.
How did it work out? Well, the overhyped new-media company tried to cram its culture and coolness down the throat of the stodgy old-media giant, and the results were predictably bad.
“Although the partnership between Time Warner and AOL was once pitched as a way to advantageously meld old media with new,” The Washington Post notes, “the deal has been regarded in recent years as one of the largest blunders in corporate history. None of the supposed synergies of the expensive union between the two ever paid off, and in recent years AOL’s flagging fortunes have increasingly cut into its parent company’s profit.”
Time Warner brought a ton of great brands to this deal—Warner Bros. Entertainment (including Warner Bros. Pictures), Turner Broadcasting (which includes CNN, TBS, TNT and Turner Classic Movies), HBO and magazine publisher Time Inc. (Time, People, Fortune, In Style, and Sports Illustrated magazines).
American Online brought its Internet service provider business that claimed as many as 34 million subscribers at its peak, according to PC World, “but it lacked the infrastructure and management savvy to transition from dial up to broadband, and its ISP business remained stuck in the ’90s. … While AOL remains a major Internet service provider with about 6.3 million subscribers, it has been letting that business waste away for years. … Today it’s [primary] income source is its declining online advertising generated by its eclectic mix of content sites, including the AOL.com portal, gossip site TMZ.com, and MapQuest. There’s a business model there, certainly, but AOL is small potatoes compared to competitors Google, Yahoo and Microsoft—not the Internet behemoth Time Warner wants it to be.”
In fact, the cool new-media company ended up being a gigantic albatross around the neck of Time Warner, pulling down the value of the combined company. And those great synergies that everyone touted when the merger was announced back in January 2000? Well, they ended up being as overhyped as AOL’s pre-merger stock price.
The New York Times points out: “The [Time Warner-AOL] merger was fed by heady ideas that did not quite pan out—that big online audiences would necessarily yield big profits, and that there were profound synergies to be had by owning different media.”
Synergies in business always sound great, but they should simply be regarded as a nice bonus if they actually work out and not the main reason for making the deal in the first place. In other words, the concept of synergy is more myth than anything else. In fact, if you are basing your deal on the synergies you’ll see, well, my guess is that you don’t have much of a deal to begin with. Just ask Time Warner.
In fact, a lot of baby boomers want to stay on the job longer these days given what the recession and economic downturn have done to their IRAs, 401(k)s and other retirement accounts. These are people are a lot like me—boomers who want to work as long as they can, or at least until age 70 so they can maximize their Social Security payout.
But in an odd twist, a lot of boomers are now retiring unexpectedly, and “Instead of seeing older workers staying on the job longer as the economy has worsened, the Social Security system is reporting a major surge in early retirement claims that could have implications for the financial security of millions of baby boomers,” according to a story in the Los Angeles Times.
“Since the current federal fiscal year began Oct. 1, [Social Security retirement] claims have been running 25 percent ahead of last year,” the Times story adds, and “that compares with the 15 percent increase that had been projected as the post-World War II generation reaches eligibility for early retirement, according to Stephen C. Goss, chief actuary for the Social Security Administration.”
This shows you just how hard it is getting a fix on where workers’ heads are and what they might do, and it makes long-range workforce planning extremely difficult. In fact, just last December, a CareerBuilder survey found that 60 percent of workers older than 60 said they planned to postpone retirement and stay on the job.
What has changed, of course, is the economy. While I believe the CareerBuilder survey accurately captured the mood of boomers wanting to continue working back in December, it clearly didn’t anticipate the huge plunge in the economy and job losses in the first quarter of 2009. Yes, a lot of older workers want to keep working, but what do you do if you lose your job, can’t find a new one, and have the Social Security retirement option available?
If you are in that kind of fix, you do what most people would do: You take the retirement money and run, even if that’s not what you planned or wanted to do.
Here’s what is going on, the Times story indicates: “Many of the additional retirements are probably laid-off workers who are claiming Social Security early, despite reduced benefits, because they are under immediate financial pressure, Goss and other analysts believe.” And, the story adds, “The ramifications of the trend are profound for the new retirees, their families, the government and other social institutions that may be called upon to help support them. On top of savings ravaged by the stock market decline and the loss of home equity, many retirees now must make do with Social Security benefits reduced by as much as 25 percent if they retire at age 62 instead of 66.”
This just goes to show you how ridiculous it is trying to make broad-brush assumptions—like baby boomers retiring in a huge wave—given how unpredictable the economy can be. And it just shows again that no matter what part you play in the workforce—employer, manager or down-in the-trenches employee—the smart thinking in this economy continues to be pretty simple: Always hope for the best, but make certain that you prepare for the worst.
My recent posts on the battle over the union wrangling about “lifetime jobs” at The Boston Globe (see “The Value of a Lifetime Job: Would You Believe It’s $33,000” and, earlier, “Does Anyone Really Think They Have a ‘Job for Life’?”) were based around what I consider to be a pretty obvious premise—that the concept of a “lifetime job” is completely unsustainable in our 2009 economy, and it is reckless to put a lifetime job guarantee ahead of the survival of the business and jobs for everyone else.
That’s why this story in The New York Times this week about lifetime job guarantees in Japan resonated with me. According to statistics released Wednesday, May 20, the Japanese economy in the first quarter suffered its worst contraction since 1955, declining 15.2 percent on an annualized basis. But a far smaller portion of workers have lost their jobs in Japan than in either the U.S. or the European Union (Japan’s unemployment rate in April was 4.8 percent, compared with 8.9 percent in the U.S. and Europe).
And here’s the kicker, according to the Times: “Analysts say this is because lifetime employment is alive and well in Japan, with the state playing a big role in keeping it so.”
The story goes on to point out that “Japan’s obsession with keeping workers employed—even those who are not needed—comes at a cost. Companies slash wages, which reduces consumer spending. Businesses become more reluctant to take on new recruits, shutting young people out of the labor force. And productivity plummets, hurting Japan’s competitiveness in an increasingly aggressive international market.”
A lifetime job was a reasonable notion in my grandfather’s time, but it is completely out of whack in a 21st century economy. It’s a holdover from a long-ago time and about as functional in today’s world as a buggy whip. No wonder Japan’s economy hasn’t been able to ever really recover, and shame on the Boston Newspaper Guild for having the chutzpah to even make this a part of labor negotiations.
As I’ve said before, don’t get me wrong: I love the concept of a “job for life,” but I put that in the same category as buying a ticket in hopes of winning the lottery. It’s a wonderful fantasy, but totally removed from the reality of day-to-day life. If you want proof of that, just take a good hard look at Japan.
There are a lot of people who would consider Google to be a pretty smart company, but that doesn’t mean it’s immune from doing some pretty dumb things.
Here’s the latest example: “Concerned a brain drain could hurt its long-term ability to compete, Google is tackling the problem with its typical tool: an algorithm,” according to The Wall Street Journal.
“The Internet search giant recently began crunching data from employee reviews and promotion and pay histories in a mathematical formula Google says can identify which of its 20,000 employees are most likely to quit.”
So, what’s wrong with a tech company using its technological know-how to help solve a people management issue? Nothing really, as long as you don’t go overboard with the use of the mathematical formula. And that’s where I take issue with this Google-like notion that technology is always the best way to solve every problem.
As the Journal points out, “The move is one of a series Google has made to prevent its most promising engineers, designers and sales executives from leaving at a time when its once-powerful draws—a startup atmosphere and soaring stock price—have been diluted by its growing size … Google’s algorithm helps the company ‘get inside people’s heads even before they know they might leave,’ said Laszlo Bock, who runs human resources for the company.”
When I read things like that, it makes me wonder: Is Google trying to solve a technical problem or a human resources issue? The notion that you can somehow get “inside people’s heads” before they even know what they are going to do is both frightening and disturbing, and would seem to have more long-term potential to drive people away than to help keep them in the Google fold.
“Our headlines are selected entirely by computer algorithms,” Google says. “Google News has no human editors selecting stories or deciding which ones deserve top placement. This is very much in the tradition of Google Web Search, which relies on the collective judgment of online publishers to determine which sites offer the most valuable and relevant information. Similarly, Google News relies on the collective judgment of online news organizations to determine which stories are most deserving of prominence on the News homepage.”
Pardon me if I’m bothered by the notion of taking people—and their experience, perspective and judgment—out of the equation, yet that seems to be Google’s response to all too many workplace issues.
And, all the algorithms in the world won’t solve this problem that is also noted by the Journal: “Current and former Googlers said the company is losing talent because some employees feel they can’t make the same impact as the company matures. Several said Google provides little formal career planning, and some found the company’s human resources programs too impersonal. ‘They need to come up with ways to keep people engaged,’ said Valerie Frederickson, a Silicon Valley personnel consultant who has worked with former Google employees. ‘If Google was doing this enough, they wouldn’t be losing all these people.’ ”
Blogger Scott Jagow notes that “Google has surveyed employees in the past and when I Googled, I found why Google employees quit, a collection of testimonials from current and former Googlers. They complained about things people at most big companies complain about—the hiring process, the management, the bureaucracy, the small kitchen.”
Yes, Google has some of the same growing-pain issues with people that so many other organizations like them have had before. The company has gone overboard to try to supply the little things to keep workers happy, but in the long run, good workforce management is about more than cutting-edge benefits and a cool place to work.
It’s about doing meaningful work that matters and that you are appreciated for. It’s about working with and for people who care as much as you do, and feeling like you are a key part of something a lot bigger than yourself.
Somehow, I don’t think this new Google algorithm is going to be able to get at all of that, and it is foolish to think it can. Technology isn’t the answer to every question, no matter what the big brains at Google may think, and sometimes, you need to apply smart people and experience to a problem instead of the notion that higher math and a formulaic approach is all you need to get the job done.
There are lots of things they don’t teach you when you become a boss or a manager, and these are usually the highly unpleasant or unmentionable tasks that you only face when times get really tough.
Today’s lesson is about taking responsibility, accepting blame, doing what’s right for the greater good of the organization—in other words, knowing when to fall on your sword.
Although there is always a good time to leave a job (and knowing when the time is right), I’m not talking about simply leaving because you have done all you set out to do, or maybe because you have stayed on too long. No, I’m talking about falling on your sword and leaving in the classic and traditional business sense—because you are taking responsibility for something bad that happened on your watch, under your leadership, regardless of whether it was really your fault or not.
Why is Martin falling on his sword? According to The Lede blog in The New York Times, “The speaker had been widely criticized for his failure to respond appropriately to the revelation that many members of Parliament have been abusing their taxpayer-financed expense allowances for items like moat clearing and porn.”
And, according to the Times story, “For some, Martin was a scapegoat for the squirming embarrassment of legislators of all major [British] political parties caught in a cascade of disclosures in The Daily Telegraph newspaper about their spending under an official program that allows members of Parliament to defray the costs of maintaining homes in London and in their home districts. But for others he was held responsible for blocking disclosures of financial abuse and for stonewalling reforms from his leather chair dominating the benches of the House of Commons.”
Yes, Martin had to go, but some think that he might not have gone without a lot of political pressure being brought to bear from people like British Prime Minster Gordon Brown. Like so many American executives who also dug in their heels despite driving their organizations into the ground recently, Martin tried to avoid what was painfully obvious to everyone else—that only his going would truly help everyone to deal with the issue and get past the problem.
This is a hard concept for just about any manager or executive to accept, because most believe that their presence can greatly help to resolve whatever issue is on the table. It’s tough for anyone to believe that they are standing in the way of a solution—like former CEO Rick Wag0ner at General Motors—and that’s why it sometimes takes outside pressure before they can really see the light.
Yes, doing the right thing can be tough, but tougher yet is knowing WHEN to do the right thing and being willing to accept the consequences of falling on one’s sword.
Generally speaking, if you have to be told or urged to go, it’s probably too late.
Martin finally saw the light and did what he needed to do. He couldn’t lead anymore, and falling on his sword made sense, although it could have been worse.
As The Guardian newspaper noted: “It may be of some consolation to Martin that he will not face the fate of the seven speakers before 1560 who were beheaded. Another one was murdered.”
Yes, despite the rough-and-tumble world we live in, some business practices have improved over the past 450 years.
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