Saturday, August 19, 2017

Pondering on Corporate Growth vs Growing an Extended Family Business

I should start with the disclaimer that I do not have an MBA, and I'm no expert on business development.  However I have worked in several different offices around the world and have my ears open to what goes on in the business side of what I do for a living.

I've been reflecting upon the assimilation of engineering firms by larger firms, especially the takeover of CH2M by Jacobs that happened this past couple of weeks. In our growth-driven economy firms seek increased profits for shareholders, private or public, which drives certain behaviors.  One way to grow your stock price is through mergers and acquisitions. If done right, it benefits the stock holders in a big way.  However there will undoubtedly be some collateral damage as the now merged firm seeks to reduce overhead costs and keep the stock price up.  I've heard it said that a good merger is where 1+1 = 3 through synergies between the two original firms. I think that's unrealistic and you actually get 1+1 = 1.5 which is still better for either of the original "1" but less value than the sum of the two.  Then from that position of 1.5, you can continue to build your firm (with the added bonus of having removed one of your opponents!) Elementary math tells you 1+1 = 2, at best, so I think it's wishful thinking or downright dishonest to claim otherwise! In these mergers there will be financial winners for sure but there will necessarily be losers in terms of people losing their jobs and increased uncertainty for those remaining.

But I'm losing the train of my thought and the intent of this blog...

Something I've observed in many smaller businesses, particularly those that engage multiple family members, is that driving profits up is important but it is the means to an end and not an end in itself. The ultimate goal seems to be to create a better life for the owners, employees and their families. Now, you still have to work hard and make profits, but that's not the end goal.  Somewhere along the line, as they get bigger, these "mom and pop" firms lose their way and the means (profits) to the end (family health) becomes the end in itself and often the original end, suffers.  I wonder if there's a way to grow a firm but keep the attitude and focus on the health and vitality of the employees and the families it supports? Or perhaps the growth-driven economy doesn't allow that?

I love working for Black & Veatch.  Most of all I love working with the people in the firm. It does feel like an extended family in many ways. Whenever we hire someone new, or we do surveys of why it's a great place to work, the most common comment is that we have great people.  I'm not saying that as a means to inspire greater investment or growth of our stock prices. I'm saying that in and of itself.  Let's value people first, with an eye to keeping the money rolling in as a vibrant and financially profitable firm.  Do I need to make a legal disclaimer that these thoughts are my own and not those of my firm...? Or maybe the shift in business away from a trust-based model to a litigious one, could be my next topic for blogging! Did I mention I don't have an MBA? And yes, I know I'm naive!

Anyone else as naive as me?!