Two CEOs. Two companies. One finished well. The other is . . . well . . . finished.
Merrill Lynch and Lehman Brothers Holdings, ranked #’s 30 and 37, respectively, in this year’s Fortune 500, crossed the finish line earlier this week – one holding its head high, the other hanging its head in defeat. Merrill will largely remain intact, purchased at a bargain price by Bank of America, while Lehman, founded over 150 years ago, is in the process of being liquidated.
As I’ve said before, finish lines are a great place for Leadership Learning. John Thain became CEO nine months ago, and began taking drastic steps quickly at Merrill Lynch. Richard Fuld, Lehman’s CEO since 1994, tiptoed to the edge of dramatic remedies, but never pulled the trigger.
The two provide us with lessons useful to all Leaders right now.
Perspective. In this mortgage crisis that has pummeled the financial industry harder and faster than anyone imagined, Leaders have been forced to respond in the moment. But for many leaders, historical perspective can double as historical baggage – “This is the way we’ve always done it . . .” ” That has never happened here before . . .” With his outsider’s perspective, Thain dismissed such views and put every option on the table. Fuld hoped Lehman could ride the crisis out as in the past and found himself with no options at the end.
How is historical perspective clouding your ability to see every possible option in your present challenges?
Decision-Making. Leaders are paid to make decisions, and CEOs are paid to make big decisions. As of last week, Thain was still deciding among several paths – try to ride out the troubles alone, put Merrill up for sale publicly, or seek a major investment from someone like Goldman Sachs. Fuld was said to be “monitoring” the situation at Lehman. Recognizing he may be left with fewer options come Monday, Thain, over the weekend, engaged Bank of America CEO Ken Lewis to buy Merrill. It wasn’t his first choice of solutions, but it was better than Lehman’s “choice.”
How often do you make decisions by making no decision?
Communication. Thain was able to act so quickly because he kept his board informed as he acted. He knew nothing could be consummated without board approval. By contrast, The Wall Street Journal asks in today’s paper¹ “Where was [the] Lehman Board?” Eight of it’s ten external members have no direct experience in the financial services industry. The WSJ comments “it is telling that news accounts of Lehman’s capital-raising efforts focused entirely on the efforts of Mr. Fuld, and make nary a mention of the 10 other members.”
Who else needs to be kept informed about significant decisions affecting the future of your company?
Hubris. How often do we see pride as a barrier to leadership? Names like “The Gorilla” (for his intimidating presence), “The Chairman” (he rode alone in an elevator to his office each day) and “The General” (Lehman’s military-like, top-down management structure) have been used to describe Fuld. John Thain, on the other hand, is a fixer. He fixed and modernized the New York Stock Exchange. And in nine months, he has brought Merrill out of perilous waters that overwhelmed Lehman. Just last month, Thain unloaded $30 billion of the firm’s tainted assets at 22 cents on the dollar – a very public admission of past mistakes. And in selling to Lewis, he was willing to turn over his CEO title if it meant saving his company.
How might your pride isolate you and prevent you from taking necessary action as a Leader today?
Many are calling these events unprecedented. Leaders can be paralyzed by them; or they can “choose” to grow and respond accordingly.
¹ The Wall Street Journal, September 18, 2008, page C7