Saturday, 1 March 2008

Seeds and fertiliser – how to build a firm

American visitor: “How come you got such a gorgeous lawn?”
Lord: “Well, the quality of the soil is, I dare say, of the utmost importance”.
American visitor: “No problem”.
Lord: “Furthermore, one does need the finest quality seed and fertilisers”.
American visitor: “Big deal”.
Lord: “Of course, daily watering and weekly mowing are jolly important”.
American visitor: “No sweat, just leave it to me!”
Lord: “That’s it”.
American visitor: “No kidding?! That’s it?!”
Lord: “Oh, absolutely. There is nothing to it, old boy, just keep it up for five centuries”.

What many firms, trying to grow fast or add scores of acquisitions, often fail to realise: Organisations work much the same way as a lawn. You can buy the machinery, lease the building, hire the people, acquire the assets pretty quickly and relatively easily, and put them together. But this does not mean that you will have a working organisation.

An effective firm requires that the various elements of its organisation - both the "hard" factors (such as its structure, incentive system, etc.) and the "soft" elements (such as the culture of the place, informal communication patterns, etc.) - are fine-tuned, interact and reinforce one another. Building such an organisation implies more than just "owning the parts"; it takes continued dedication, hard work and, most of all, it simply takes time.

1 comment:

Xian said...

Ever since Fed flooded the world market with cheap credit and the foreign dollar-peg (after 2001), the rapid growth of M&A by private equity firms really made their mark and set up a bad trend for CEOs of big companies. For the past few years PE firms have been doing more and biggers deals than with those with industrial-established assets.

1) PE firms made it look relatively easy for acquisition.

2) Ego factor - if PE firms can do it, I can do it too (thinking their own industrial experience is equal if not better than PE firms).

However businesses seem to look away the fact PE firms often don't do it for "keeps", as to speak, while other companies will have to inherite the position and often can not throw away a bad decision, or a badly implemented one.

In one way or another, time, in the competitive market today, is precious and therefore a scarce commodity (especially for a floated company...). Unlike any other commodity, you can't not "buy" it, which is all more for the pressure. Motivating and counter-productive at the same time, I say.