| rauniyar |
Posted
on 27-Apr-04 02:05 PM
In the PC industry, this is the path followed by almost every company. On the software side look at Borland, Broderbund, Personal Software, Lotus, WordPerfect and hundreds of others. The similarly afflicted hardware companies are so many that the names become a blur. All these companies, even though some of their names may remain, are effectively dead. Certainly, they bear no resemblance at all to what they once were. And every one of these companies had something else in common: At the time their management was displaced, they were profitable and had money in the bank.
So what happened? Well, in some cases the founders were at fault and should properly have been replaced, but in many cases it was something very different at work -- simple greed on the part of the financiers and venture capitalists. Here is the same scenario from his perspective of the typical VC member of the board.
The founder is no longer doing exactly as he or she is told. The company is moving toward an IPO or the stock is not performing to the satisfaction of the larger
shareholders. So the founder is forced out, then his or her shares are diluted to make room for the new managers, who are cronies of the financiers. This dilution eliminates the founder as a voice of opposition. The stock price is pushed up; the board sells out, the new management leaves, and nothing of the original company remains.
Sometimes the result of the ensuing crash can have effects beyond belief. The Learning Company, for example, pretty much destroyed the U.S. consumer software business in the 1990s, and then went on to destroy the U.S. toy industry as well by taking down
mighty Mattel. Now THAT's professional management.
This is all a trick promulgated by people who do not in any way care about the company or its people. But visit most any business school and what I just described is taught in case studies as examples of good management. It is maximizing shareholder value,
they'll say.
Pity the poor MBAs, for they know not what they do, nor do they seem to care.
In the last two weeks, I've been hearing from people who spent decades at places like IBM and AT&T Bell Labs only to be laid off or have their division sold. Some saw it coming years before, like the IBMer who noticed in 1986 that the company was cutting back subscriptions to technical journals for its library. He immediately began looking for a new career. But most just felt an increasing ache as their company slowly changed into something they no longer liked.
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