FT.com reports that newly appointed Merrill Lynch & Co. (NYSE: MER) CEO, John Thain, wants to remake Merrill in Goldman Sachs Group's (NYSE: GS) image. In particular, Thain wants different parts of Merrill to work more effectively as a team.
The irony of this idea is high. That's because Thain's predecessor, Stanley O'Neal hammered his subordinates every quarter as Goldman outperformed Merrill. O'Neal led a big increase in Merrill taking on more trading risk because he thought that was what led Goldman to do so well. It was this Goldman envy that ultimately led to O'Neal's downfall.
Now Merrill's board has someone who worked at Goldman -- Thain spent most of his Wall Street career in the Goldman system, rising to become co-president before leaving in 2003 -- to try again to remake Merrill in Goldman's image. In my book, Value Leadership, I compared the Goldman and Merrill cultures and concluded that Merrill has a long history -- dating back at least to 1995 -- of encouraging internal competition based on a star system that creates massive amounts of turnover at executive levels.
I predict that Thain will face enormous resistance when he tries to impose the Goldman system of teamwork onto the Merrill culture. If he succeeds, he deserves enormous admiration.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.
Reader Comments (Page 1 of 1)
12-05-2007 @ 1:39PM
Matthew Levy, Results Management Group said...
John Thain’s acknowledgement of culture and management dysfunction as a key contributor to poor business results is a courageous move and one that more CEOs should consider.
Lack of effective executive collaboration and the impact that has on corporate culture may be the single most underestimated causes of poor corporate performance for large and small companies alike.
Once more, as companies across the nation are preparing now for execution of next year’s strategies, addressing executive team dysfunction is of the essence.
Executives would be well served to identify symptoms of poor executive level collaboration, such as: Inability to deliver on breakthrough results and lack of shared commitment to the same compelling vision or strategy are the first symptoms to look for. Next, I recommend checking the executive team for chronic frustration or resignation. Does your team have a long list of
unresolved issues, conflicts or disagreements? Do members revisit decisions that were already made? Do executives fight over resources instead of recommending investments that best serve the
company? There are some obvious pointers to weakness in corporate culture as well, which include: employees that at lack motivation or are rarely accountable for the results they create and
instead blame others. If you notice a culture of mediocrity or have rarely hit your numbers, there may be a cultural a problem. High employee turnover is also a strong sign. However, all such situations can be addressed much easier than most executives think – but it takes the
support of experts and executive level commitment to changing their ways.