(From THE WALL STREET JOURNAL)
By Erin White and Joann S. Lublin
Act quickly. Be decisive. Don't cling to false hope. And bring an outsider's perspective.
Those are the key leadership lessons that executives and management experts took from the weekend drama on Wall Street.
They mostly praised John Thain, chief executive of Merrill Lynch & Co., for quickly arranging a marriage with Bank of America Corp. after U.S. officials signaled they would not backstop other ailing financial firms. By contrast, the experts criticized Lehman Brothers Holdings Inc. CEO Richard Fuld Jr. for not acting more quickly and decisively when Lehman's problems emerged earlier this year, contributing to Monday's filing for bankruptcy protection.
Management specialists said the two men seemed to serve as contrasting case studies in what to do -- and not to do. "Thain did the right things and succeeded in keeping that business together and maintaining a lot of value," says Steven Kaplan, professor at the University of Chicago's Graduate School of Business. "It's not the outcome he would have preferred . . . [but] certainly it's a much better outcome than Lehman."
Experts were impressed with the speed with which Mr. Thain engineered Merrill's sale; the deal was worked out within two days. "Figure out your options fast -- and don't focus too long on the best-case scenario," says Dee Soder, managing partner at CEO Perspective Group, an executive-advisory firm in New York. With business, economic and political conditions changing rapidly, "it's not enough to be smart," she says.
By contrast, experts say, Lehman's leaders "were gambling that they were going to get a bailout, and they lost," says Gerald C. Meyers, a University of Michigan business professor and crisis-management expert. "Reality is the hardest thing to isolate in a crisis situation."
It is a lesson other managers took to heart. Yaarit Silverstone, managing director for the organization-effectiveness practice at consulting firm Accenture Ltd., told lieutenants gathered in Asia Monday that they should use the crisis "as a call to action." Lehman's speedy demise demonstrates that "you can't wait until the crisis to examine the fundamentals of your business," she says.
Ms. Silverstone says she normally talks with 15 top deputies quarterly about economic and market conditions that affect Accenture and its clients. Now, she says, she plans to discuss the market at least monthly. "What are the risks and what are the weaknesses -- and how can you address them really quickly," says Ms. Silverstone, whose group advises companies on work-force issues.
Experts said Mr. Thain's tenure offered many management lessons in his nine months at Merrill, but perhaps chief among them is the value of an outside perspective. Mr. Thain, a veteran of Goldman Sachs Group Inc., arrived at Merrill last December after former CEO Stanley O'Neal had been ousted and the firm had recorded an $8.4 billion write-down of assets, mostly related to mortgages.
He quickly took bold steps, including flattening its management structure and giving newly hired lieutenants broad duties. In July, he helped arrange the sale of $8.5 billion in new stock.
At the same time, Merrill agreed to sell more than $30 billion in tarnished mortgage-related assets for 22 cents on the dollar, to get them off Merrill's balance sheet.
"He saw the organization for what it was [because] he hadn't been marinating in the Merrill soup," observed Constance Dierickx, a senior consultant in Atlanta for RHR International, an executive-coaching firm. "He didn't feel honor-bound to defend past decisions and mistakes."
By contrast, Mr. Fuld, a Lehman veteran, may not have been able to bring himself to make similarly dispassionate judgments about people and assets at the firm. "People that have a track record -- and a big-time track record -- they are walk-on-water people," says Sydney Finkelstein, a professor at Dartmouth College's Tuck School of Business. "It is really difficult for anyone else, even the CEO [or] a board of directors, to say, 'You, Ms. or Mr. Walk-on-Water Person, you're wrong this time.'"
William W. George, a retired CEO of Medtronic Inc. who knows Mr. Thain from serving on the Goldman Sachs board, says Mr. Thain demonstrated an analytical, flexible and transparent style there as well. "You didn't think that maybe he's only telling me the good news," recalled Mr. George, who now teaches at Harvard Business School. "You knew you could trust what John Thain said."
In 2003, for instance, Mr. Thain assured Goldman directors that planned job cuts would happen rapidly so staffers wouldn't fear that further reductions loomed. As a result, Mr. George said, employee morale "recovered quite quickly."
In striking an accord with Bank of America, Mr. Thain "got a good deal. He protected his shareholders -- unlike some other CEOs," Mr. George said. By contrast, he says, Mr. Fuld "dug his heels in."
Mr. Thain also appeared to have kept Merrill's board members well-informed during the crisis, helping them quickly ratify the Bank of America deal. Without that, says Gary E. Hayes, a managing partner at Hayes Brunswick & Partners, organizational and management-development consultants in New York, "it's hard to imagine that he could have gotten their agreement so quickly" about Merrill's proposed takeover.
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September 15, 2008 19:56 ET (23:56 GMT) | 
