Archive for December 7th, 2008
Everyone Has Their Own Reasons
Does the Sum of Idiosyncratic Decisions Mean Anything?
There’s an article in the weekend edition of The Wall Street Journal, entitled, It’s a Done Deal: Merrill and BofA. It is subtitled, “At Thundering Herd’s Last Meeting, Thain Presides Over Sadness and Anger.”
In previous posts we’ve already commented on a variety of related topics, including our dislike of mega-mergers, which concentrate idiosyncratic decision-making and exacerbate moral hazard issues. (For merger-related issues, see: Forced Mergers? Bigger Is Not Necessarily Better!, Bigger Is Not Necessarily Better or Idiosyncratic and Concentration Risk, Again.) We don’t think that regulation or regulators provide much oversight or control.
Per the subtitle of the article, it seems that much of the anger was directed at the board (which does make sense since it was a board meeting) and we’ve commented about failed boards in other posts, too; see The Failure of Boards to Direct and When the Going Gets Tough…Quit for example.
So, in this post, we’re restricting our comments to a single, short paragraph from the article related more towards a human resource issue.
It seems that Winthrop Smith Jr., the son of one of the founding partners of Merrill Lynch, Pierce, Fenner & Smith spoke at the meeting. (In fact, he may have been both sad and angry.) As the reporters note, “Referring to the exodus of longtime executives at Merrill when Mr. O’Neal took over, Mr. Smith said, ‘shame on members of the board for never asking any of us who loved this firm’ why they were leaving.”
In our youth, we were part of a similar exodus; there were six junior colleagues, and five left the organization within months of each other. (The other one did, too, but at a later date.) As is always the case, an idiosyncratic or personal reason could be attributed to each person’s decision to leave: A left for family, B wanted to move to a warmer location, C didn’t like the office décor, etc., etc.
If the reasons were purely idiosyncratic, then the organization’s management would be blameless of poor employee relations. It is even possible that in hindsight, someone within the organization to try to take credit for getting ridding of the deadwood – whether justified or not. (Those things are very easy to take credit for in retrospect and when the people are gone: “they couldn’t cut it” or other such comments.)
If the organization were truly blameless, then the departures could neither been foreseen nor attributed to any central deficiency or weakness or dysfunctional personality within the organization.
However, a thoughtful, self-critical leader should be willing to ask: “we’re sure that everyone has their own reason(s), but what are the odds of such an exodus without a centralized or systematic component?” Per Mr. Smith, shouldn’t someone ask: “why are they all leaving?” One shouldn’t expect answers from exit interviews as folks who are leaving have little reason to give more than pleasantries at an exit interview, and those who do complain are often dismissed as “someone with an ax to grind” so their feedback is never seriously considered disseminated.
In all likelihood, the probability that there was/is no systematic component is quite small. We have no inside knowledge of whether the Merrill board investigated their exodus or not. If not, we certainly empathize with Mr. Smith as it would then seem to be a case of either benign or purposeful neglect.
Of course, the presence or absence of a systematic component doesn’t explain whether the exodus was justified or not (from management’s perspective). That is a separate issue which will depend upon whether the observed consequences were intended or not.
We talk about similar issues in a few of our essays – particularly, Common Managerial Mistakes in Decentralized Organization and the last part of Strategic Consistency and Managerial Discipline–and several posts, including Insidious Insecurity.
We’ll likely update the post when time permits.
