UK: Heller on Management - Play the power game by letting go.

UK: Heller on Management - Play the power game by letting go. - Today, the cult of the one-man band is waning and power is shared. But, says Robert Heller, as recent events show, theory and practice don't always match

Last Updated: 31 Aug 2010

Today, the cult of the one-man band is waning and power is shared. But, says Robert Heller, as recent events show, theory and practice don't always match

Power has been shunted to the sidelines in modern management theory.

In theory, today's power is there to be shared, and shared as widely as possible, rather than to be seized, preserved or enlarged. The collapse of the Glaxo Wellcome/ SmithKline Beecham merger has stripped away the facade, however, and the old demon lies plainly revealed.

Mega-mergers are built around the battle for external power.

By combining, giants aim to enhance their market might, their innovative strength, their bargaining muscle. The rationale for anti-monopoly and competition policies thus rests on the belief that corporate power over customers, suppliers and rivals will become overweening unless government sometimes intervenes.

To the extent that size is power, the merging corporations have become more potent and the weakening of anti-monopoly intervention under right-wing politicians has opened the floodgates to a massive wave of mergers in communications, financial services and drugs.

But how powerful are these mega-mergers? Without global distribution, any company will be at a crippling disadvantage compared to these worldwide networks. The unmerged will be vulnerable to giants with magnified predatory powers: even SmithKline Beecham has been touted as a potential target since the deal with Glaxo Wellcome collapsed. And the ability to concentrate huge spending on R&D and other investments may well win the global wars - if innovation is properly managed.

The need for proper management is the Achilles heel of mega-mergers, however. An oddity in the Glaxo affair is that both bosses have previously forged huge combines with apparently proper success. Sir Richard Sykes at Glaxo capitalised on the Wellcome purchase swiftly and vigorously; the buyer, by all accounts, let nothing stand in the way of imposing Glaxo's will and ways.

In contrast, SmithKline's Jan Leschly prides himself on the transatlantic blending which produced a company that was neither SmithKline nor Beecham but a mid-Atlantic creation with a new polyglot culture. But building a genuine NewCo is inherently a slower process, which cannot be carried through without tackling the basic question of internal power: who's in charge here?

In the brave new world of collective, collaborative management, that shouldn't be an issue. But, curiously, the cult of chief executive power has waxed, when in theory it should have waned. In the US, leaders usually insist on being chairman and CEO. In the UK, the one-man band also plays on - Thorn EMI recently lost an heir-apparent over the issue of sharing power with executive chairman Sir Colin Southgate.

Mega-mergers have a direct bearing on power struggles. The increased industrial might for the company translates into greater influence, prestige and pay for the executives, the chief literally above all. The prizes are bigger for one person than two. And two people coming from different corporate cultures, which they have dominated, won't easily welcome an environment where somebody else carries equal weight.

That only emphasises the defects of concentrated power. Its holders naturally stress the virtues of clear, single-minded, single-person direction. But history abounds with examples of double acts: consider only Hewlett-Packard, Marks & Spencer and Sony. Currently, Robert Eaton and Robert Lutz's duet at Chrysler is out-managing both General Motors and Ford. Two leaders whose strengths are complementary are more effective than one, and their pairing encourages similar pooling of strengths below them.

That pooling is fundamental to success. Massive reorganisations impose an intimidating burden that can only be tackled collectively. The Chemical/ Chase banking merger involved 56 different integration plans, 3,306 major milestones, 13,000 tasks and 3,820 interdependencies. Power struggles would have brought this mammoth operation to a standstill.

The bankers, however, approached their union in the same 'inclusive' spirit of which Leschly boasts at SmithKline. At this point, modern management and the power issue neatly meet. Modernists believe that managers and staff work better for sharing decisions and plans, taking responsibility for their own jobs and valuing achievement above hierarchy. That's the proper way to organise mega-mergers.

It's also the best way ahead once reorganised. The great danger of concentrating external power is that the giant feels less competitive pressure, not more, and shelters behind its enlarged market share. No longer vulnerable to takeover, they become marketplace victims of thrusting rivals who must be excellent merely to survive.

Collaborative management breeds excellence. Power, while wonderful for the ego, has no value in itself. The world's biggest drug company will fail unless it is also the best. That demands top management which can hold power wisely - paradoxically, by letting go.

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