My Two Cents: Interview With Oneself (see who wins!)
This is an interview with
myself. In this case, one of the most difficult challenges is coming up with
the questions.
Do I want to probe my thoughts about the competition? No!
What about an assessment of those who never advertise with us? Leave it alone
for now!
Question: That's not fair! You're doing what you don't allow others to do.
Answer: It isn't that I refuse to reply. I'm simply postponing the answer, not
dodging it. Now, let's be safe, but nonetheless controversial and entertaining.
Q: OK, then. What do you think of all these mergers?
A: I have some advice for all of the world's CEOs: Fire your MBAs.
Q: Why?
A: Because these people act in a certain way on their own and in a different
way when they become part of a conglomerate.
Q: Can you explain it better?
A: Sure. Please pay attention. As followers of WPP Group's Martin Sorrell, students
of Henry Mintzberg; or as consultants, MBAs understand that consolidation works
up to a certain point. After that threshold, it becomes counterproductive.
Q: I don't follow you. Please explain it with an example.
A: Gee, you're a real piece of work! OK. Let's assume Sony wants to buy, for
instance, 4Kids. The reasons are: It has two hot shows on network television
ready to go into syndication, a good library and a nice international business.
Now, an MBA outside Sony knows that it is better to take the two hot shows and
to leave the rest alone.
Q: Instead, what happens?
A: Please don't interrupt. It stops the flow of thoughts. Basically, what happens
is that the MBA inside Sony starts salivating at the prospect of cutting and
merging. Here's their rationale (or irrationale): If 4Kids generates $100 million
a year by spending $10 million, Sony can increase its profit by eliminating the
expenditures.
Q: A solid accounting principle.
A: Yes, but it doesn't work.
Q: Why?
A: First, because Sony sales staff cannot really maximize the whole library (they're
too busy with the deficits from the new network shows) and, second, because buyers
do not fill their schedules with products from just one content provider.
Q: So what happens?
A: Simple. Instead of generating $100 million, the acquired catalog can only
rake in $60 million. So, in effect, to save $10 million, Sony lost $30 million.
Q: How can "corporate" allow this?
A: Well, they trust the MBAs. And that's not all. In the euphoria of
the moment, a CEO is even prompted by the MBAs to say to the sales
staff: "Now that
we have the 4Kids' catalog, next year, I expect you to generate $650 million
[$500 million from the Sony catalog, $100 million for the acquired product and
$50 million overall increase]." But, guess what? The CEO will be considered
lucky if they can reach $550 million! Plus, MBAs don't know much about marketing ….
Q: How do you know?
A: From a study (reported by Philip Kotler - the marketing guru that created
the 4P's: Product, Price, Place, Promotion). It said that 32 percent of the MBA-types
is of the opinion that, when sales are down, the first thing to be cut is the
marketing budget.
Q: And that is wrong?
A: Of course it's wrong! Marketing is a "strategic" not "tactical" element.
Q: Understood. But, why fire the MBAs? They have spouses, extra-marital affairs,
mortgages that they can't afford to pay, kids in private schools…. After
all, the responsibility lies with the CEO.
A: Yes, but the MBAs are not fully honest when they propose to CEOs
plans that they themselves would never advise clients to undertake
when counseling from the outside. We know that CEOs need assurance
and protection, and, therefore, they're easy prey for MBA's advice.
In any case, my proposal is not to eject MBAs out of their jobs, but
simply to have them reside outside the corporate structure, where their
talent is put to better, more constructive use. In a final notice,
my advice is to read "Managers not MBAs," the book written
by Henry Mintzberg, professor of management studies at McGill University in Montreal.
Dom Serafini
