When Big Deals Go Bad—and Why

BUSINESSWEEK—Amid a flurry of bad news for big deals, it bears remembering that successful mergers heed the basic rules of business.

The greatest business successes are often engineered by bold visionaries who altered industries: Think Microsoft, Berkshire Hathaway, and Southwest Airlines. Unfortunately, when that type of grand thinking is applied to the mergers-and-acquisitions arena, disaster often ensues. Multibillion-dollar deals are based on personal relationships and egos, grandiose plans for so-called transformational changes to an industry, and a sense that the new sum will be far greater than all the previous parts. And, of course, the path for much of the wheeling and dealing is well lubricated by fee-hunting bankers and lawyers. Read article.

Manage Your Energy, Not Your Time

HARVARD BUSINESS ONLINE—The science of stamina has advanced to the point where individuals, teams, and whole organizations can, with some straightforward interventions, significantly increase their capacity to get things done.

Steve Wanner is a highly respected 37-year-old partner at Ernst & Young, married with four young children. When we met him a year ago, he was working 12- to 14-hour days, felt perpetually exhausted, and found it difficult to fully engage with his family in the evenings, which left him feeling guilty and dissatisfied. He slept poorly, made no time to exercise, and seldom ate healthy meals, instead grabbing a bite to eat on the run or while working at his desk.

Wanner’s experience is not uncommon. Most of us respond to rising demands in the workplace by putting in longer hours, which inevitably take a toll on us physically, mentally, and emotionally. That leads to declining levels of engagement, increasing levels of distraction, high turnover rates, and soaring medical costs among employees. Read article.

Restaurants: Sweet & Sour Profit News

BUSINESSWEEK—Profit forecasts from two casual dining chains were on the menu Oct. 3. Investors got some sweet news from Panera Bread, but a more sour outlook from P.F. Chang’s China Bistro.

Panera Bread said it expects its third quarter earnings per share to be 35 to 37 cents — the higher end of its previous 32 to 38 cents forecast — on a reported 35% rise in revenue. The operator of fast casual cafes that offers sandwiches, bagels, soups, salads, and other fare says system-wide sales rose 0.8% in September at its bakery-cafes open at least 18 months. Read article.

Market Fundamentals: 2000 vs 2007

MCKINSEY QUARTERLY—Talk about summertime blues. After peaking above 1,500 this July, the S&P 500 suffered an abrupt 10 percent correction before ending the month of August at 1,475. As of the publication of this article, the broad market has rebounded following interest rate cuts by the US Federal Reserve bank in mid-September. But stocks remain buffeted by a volatile credit market and by concerns that current high price levels might succumb to the same economic forces. Forces that caused the markets to plunge more than 40 percent in the three years after the last peak, in 2000.

As central bankers warily eye credit markets and ponder further interest rate cuts, no one can really anticipate what might happen next in a market wracked by volatility and skittish investors. Nonetheless, a comparison of the fundamentals underpinning the S&P’s recent performance and those at the time of the 2000 peak offers insights about the parallels and divergences between the two periods. These insights can give investors a better feel for where the market is now—and where it might head next. Read article.

The Science of Subtle Signals

STRATEGY+BUSINESS—By analyzing overlooked behavioral cues, researchers are creating a new understanding of organizational effectiveness.

In 2006, when Vertex Data Science — a US$724 million private company based near Liverpool, England, and one of the world’s largest providers of call center outsourcing — wanted to improve the performance of its telephone sales operators, the managers went looking for an unusual kind of self-understanding. They enlisted the aid of Alex Pentland and his colleagues from the Human Dynamics Group at the Massachusetts Institute of Technology’s Media Lab, the elite research institute for digital technology founded by technology pioneers Nicholas Negroponte and Jerome Wiesner. The researchers traveled to Vertex’s operations offices in Inverness, Scotland, to set up electronic devices that analyzed the speech patterns of the operators on the call center floor. The devices captured neither the specific words that the operators used nor the logic of their conversations, but only the physical voice signal: the measured variations in tone and pitch. Even so, Pentland and his researchers predicted accurately, after only a few seconds of listening, the ultimate success or failure of almost every call.

Successful operators, it turned out, speak little and listen much. When they do speak, their voices fluctuate strongly in amplitude and pitch, suggesting interest and responsiveness to the customer’s needs. Operators who speak with little variation come across as too determined and authoritative, but by speaking invitingly, being responsive but not pushy, a skilled operator can let callers find their own way to a sale. Early experiments have suggested that these insights can improve a company’s telephone sales performance by 20 percent or more. Read article.

The New Language of Competition

BUSINESSWEEK—Friend or foe? Companies have to learn to be friends with and foes of other companies with whom they do business.

I’m just back from London, where I participated in an idea summit organized by WPP, one of the world’s leading marketing-communications groups. The highlight of the day for me was a talk by Sir Martin Sorrell, WPP’s founder and CEO, and a true game changer in the realms of marketing, media, and strategy.

Back in my days running Fast Company, I had the chance to conduct an in-depth interview with Sir Martin, and he offered truly original insights into strategy, competition, and the global economy. Last week in London he did it again.

For me, the most striking insight came from Sir Martin’s discussion of the competitive dynamic between his firm—a global marketing powerhouse—and digital powerhouses such as Google. One participant wondered: Are the new Internet giants allies of or rivals to marketing giants such as WPP? Read article.

Seeking a Joint Effort for Greener Athletic Shoes

THE NEW YORK TIMES—Jeffrey B. Swartz, the chief executive of Timberland, is frustrated. He has seen makers of athletic shoes and outdoor wear — companies like Nike, Patagonia and certainly his own — act in concert to end child labor practices. And he has seen these companies use more organic cotton and use solar and wind energy.

But he has yet to see an industrywide effort to adopt the greenest methods for making, transporting and selling shoes. Green technologies are readily available, he says, but shoe companies have been excruciatingly slow to adopt them.

The main reason, he says he suspects, is that while most of the industry’s chiefs really do care about environmental issues, they are indulging in parallel play. Read article.

CEOs & CFOs

CHIEFEXECUTIVE—Today, more than ever before, a CEO and CFO must function as a team. Financial expertise has always been critical to managerial strategy, but rampant mergers and acquisitions, shareholder activism and ever more complex regulatory requirements are recasting the CFO role—and, in turn, the relationship between finance chiefs and their CEOs. The change isn’t always positive. While many CFOs report having more involvement in strategy, others say that intense scrutiny from regulators and wall street, coupled with onerous compliance requirements, have turned the job into one of endless drudgery. This Chief executive special report examines why some CEO-CFO partnerships work—and why some implode. Read article.

Consumer Spending Surpasses Forecasts

THE NEW YORK TIMES—Americans made more purchases than expected in August and a crucial inflation indicator cooled, the Commerce Department said yesterday, two indications that the economy is still somewhat insulated from turmoil in the residential housing market.

But lagging consumer confidence and uncertainty in the labor sector could point toward sluggish growth in the coming months, analysts warned as a tumultuous third quarter came to a close.

Consumer spending rose a better-than-forecast 0.6 percent last month, the largest uptick since April, led by strong sales of durable goods. Income increased 0.3 percent, down from a 0.5 percent rise in July but in line with Wall Street forecasts. The rate of wage increases was also slightly down from July. Read article.

Fair Trade in Bloom

THE NEW YORK TIMES—Rafael de Paiva was skeptical at first. If he wanted a “fair trade” certification for his coffee crop, the Brazilian farmer would have to adhere to a long list of rules on pesticides, farming techniques, recycling and other matters. He even had to show that his children were enrolled in school.

“I thought, ‘This is difficult,’” recalled the humble farmer. But the 20 percent premium he recently received for his first fair trade harvest made the effort worthwhile, Mr. Paiva said, adding, it “helped us create a decent living.”

More farmers are likely to receive such offers, as importers and retailers rush to meet a growing demand from consumers and activists to adhere to stricter environmental and social standards. Read article.

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