Winning - Jack Welch [82]
By too provincial, I mean many acquirers automatically assume their people are the better players. They might be, but then again, they might not. In a merger, you have to approach your new personnel situation as if a headhunter had just delivered you a list of fresh players for about every position on your field. If you simply stick with the going-in team, you could lose better players for no good reason.
Oh sure, there’s a reason for this behavior, but it’s not good—it’s just familiarity. Your own people are the devil you know—and they know you back. They understand your business and its culture. They know how work gets done your way.
To compound matters, it is simply harder to let go of friends than strangers. You know their families. You’ve been through good times and bad. You may have once told them they had long-term potential with the company. Some may have even worked on the deal.
It’s hard to say, “You’re not good enough anymore.”
But you just have to remember, one of the great strategic benefits of a merger is that it allows acquirers to field a team from a bigger talent pool. That’s a competitive advantage you cannot let pass. Just be very fair in your severance package and face into the deed, even if it means saying good-bye to “your own.”
Without doubt, avoiding this pitfall can be challenging.
I cannot count the number of times we swooped into a deal and installed a GE manager in every leadership position. Most of the time, we were blissfully unaware of the potential that we had lost, but one time in particular, we couldn’t be. The cost was too high.
It happened in 1988, when GE acquired a plastics business based in West Virginia from BorgWarner. It was the perfect bolton deal, or so we thought. The business we bought included an ABS engineering plastic product line. We had an engineering plastics business of our own, albeit in the higher-end products Lexan and Noryl. The GE Plastics team saw one immediate cost synergy. All they had to do, they figured, was to get rid of the BorgWarner sales force and push BorgWarner products through GE channels.
But there was a problem with the plan. Our sales force was a group of sharp, button-down types, accustomed to making a technical sale, convincing engineers to switch from metal to plastic. The BorgWarner sales force was a different breed. They sold their less expensive, more commodity-like product to purchasing agents the old-fashioned way—“belly to belly”—relying on personal relationships and hefty expense accounts.
Our people weren’t very good at that.*
It was a disaster. We lost 90 percent of BorgWarner’s sales force thanks to our conquering mind-set, and our ABS market share dropped about fifteen points. The acquisition stumbled, and it never did reach its full potential. ABS eventually turned out to be a worthwhile addition to the GE market basket, but at far too high a price.
We should have known better. Two years earlier, we had gotten the people selection process right when we acquired RCA.
On every level, the RCA deal was a win for us. With the acquisition of NBC, it met one of our strategic goals of moving into services, and at the same time, it strengthened our manufacturing base with the addition of three businesses we were already in, semiconductors, aerospace, and TV sets.
In all three of these industrial cases, we took advantage of the enhanced talent pool made possible by the acquisition and picked RCA leaders to lead the merged organizations.
GE’s TV manufacturing business, for instance, was being run at the time of the deal by a smart young CEO who had come into the company through our business development staff. He was an MBA and former consultant, and although he had a bit of a swagger that he needed to be coached out of, his results were OK, and we generally thought he had long-term potential as a leader, which we’d told him more than once.
RCA’s TV business also had a very good CEO in place—he was an old industry hand, with savvy and