Management
Great article at BusinessWeek highlights the immense difficulties of integrating large acquisitions or mergers – in this case, United and Continental Airlines. The link to rocket science is in the article’s last line, and it’s hilarious.
Researchers have not been able to find a link between banker compensation and short-term performance metrics. In their words, their finding “refutes the suggestion that incentive structures in banks could be blamed for the crisis”. As we were reading the study’s description, we were alarmed that the professor equated “short-term performance” with the short-term movements in share prices, which is not usually how compensation is set in banks. Then we found a post by the Epicurean Dealmaker that destroys the study precisely on these arguments.
Great thought-provoking article, called “The Dumbest Idea In The World: Maximizing Shareholder Value”, sent by our most loyal reader. As the sender himself said, the discussion isn’t new but it’s always interesting. The real point of it is the power of incentives. The “too-simple” conclusion would be that “the road to hell is paved with good intentions” – but that would be wrong.
When we commented on share buybacks recently, we alluded to the “bad name” that M&A has received. We mentioned that, on average, M&A “destroys value” as defined by some academic studies and as seen in real life all too often. We’ve now come accross a Strategy & Business article listing “the top-10 M&A fallacies and self-deceptions”, and it’s a good list of reasons why M&A may go wrong, or may not be the best choice. Change a few words and some of the 10 points can be used to consider share buybacks as well.
It’s a holiday in Brazil, our Proclamation of the Republic day, so we thought we would go “light” today. It’s been a while since our last “humor” post… Two funny, yet very serious, cartoons inside. Brush them aside at your own peril! (there goes the “light” touch…)
“Synergy”, “two powerful minds working in unison”, “complementary skills” and so on: all that we try to achieve has to be checked against reality, especially when theory meets the REAL incentives and cultural aspects of a company. As we constantly repeat to ourselves, “culture eats strategy for breakfast”. An article notes that the two co-heads of Morgan Stanley’s Institutional Securities Group can’t stand each other and, more importantly, that this personal dispute is disrupting business. The Epicurean Dealmaker wrote a very interesting analysis of this particular dispute in light of the bigger picture of the natural conflict of interests inside an investment bank. What he finds there can be applied almost anywhere else where such conflicts are, perhaps, less obvious.
Quick notes: First, two profiles on the two top execs at Goldman Sachs, CEO Lloyd Blankfein and his heir apparent, COO Gary Cohn. Together they form an interesting picture of the world’s most loved/hated bank. Second, Seth Godin’s post today about quality and how to define it. It appears at first as it’s “more of the same”, but given his background he’s clearly focusing on media/marketing; therefore the “types of quality” framework take on a different, but no less useful, meaning.
From the “better late than never series”, a July 2010 special series by the Washington Post is way too enlightening to ignore even now. It’s about the huge inefficiencies brought by uncontrolled – and unaccountable – spending in the Intelligence/Military complex after the 9/11 attacks. Some will point out that, since then, a certain high-profile terrorist has been found and dealt with, but it doesn’t change the main arguments of the articles. In fact, there’s still a world of lessons to be learned and mental models to be taken from these pieces.
The London Business School’s Business Strategy Review (BSR) magazine/ website has a “World Business Leaders Series” worth spending some time on. We comment on a video with the Chairman of the London Stock Exchange and we highlight sections that, although intended for business in general, can also be framed for the specifics of investment management.
Yesterday was Christmas eve and we had a bonus post, but we have more: a great 52-minute video with Carlos Brito, CEO of AB-InBev, on High-Performance Culture. It’s very interesting to note that the “speech” doesn’t really change over the years – but why should it change? The “recipe” of Dream, People, Culture resonates well and in their case has been implemented with so much discipline and energy that they have achieved huge success over +20 years in the brewing business (even longer than that if you count the Banco Garantia golden age).
Read more about Christmas bonus, pt. 2: Carlos Brito @ Stanford
