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to conspicuous consumption. Indeed, there could be a long list of potentially fruitful areas of inquiry to explain selected aspects of organizational life.

      Mergers and acquisitions present a particularly useful approach to the study of the effects of leaders’ behaviour. Many organizations have channelled significant energy-and resources-into these activities in the past thirty years. In addition, this is an area that has been the subject of many academic and business studies-and the evidence all points in one direction. Mergers and acquisitions rarely produce the benefits expected of them. So why have they been so popular? What is it that makes leaders risk so much when the odds are against them and the dangers so obvious?

      The business press often has featured headlines about mergers and acquisitions as if they were trumpeting Allied victories in World War II or great advances in medical science. The economic story under those headlines, however, tells a much different tale. Staggeringly, three quarters of all mergers and acquisitions fail to meet their hoped-for goals.

      One reason is the inability to know all there is to know about the company being acquired or with which one is merging. In addition to facilities, people, inventory, products, technology and other assets, you may be buying a lot of problems. One case study I came across of an ad hoc method of developing a security system in a large corporation can serve as a metaphor for how mergers and acquisitions may proceed:

      “How does management proceed? Usually piecemeal. First, a security officer (probably unqualified) is hired, followed by an alarm company together, perhaps, with guards and gatekeepers. No attempt is made to make an independent assessment of the risk—present and future—and then construct an appropriate plan based on that assessment, available resources and vulnerability....”

      (Hamilton, P., The Administration of Corporate Security

      and Crime Prevention. 1 [1], 1987, 11-19.)

      In the world of mergers and acquisitions, the parallel to this uncharitable account would be that management would proceed from an assumption that mergers and acquisitions are a necessary activity without first conducting the assessment of risk and rewards. It’s the cart before the horse.

      Among the problems being purchased in mergers and acquisitions are those under the heading of cultural differences. This can mean the need to overcome language, religious and other barriers that are often associated with national boundaries. The challenge of doing business in Japan is the oft-cited example of dealing with unfathomable cultural differences. However, there can also be considerable cultural differences in countries that seem much closer. Germany and America are allies, trading partners and both are major industrial nations producing high quality automobiles. However, the Daimler Chrysler merger shows that even these common traits may not bridge cultural differences.

      Even with a common language, as in America and England, there can be large cultural problems. In fact it is also possible to find cultural differences in the same industry and in the same community.

      Culture has to do with nations, religions, languages and ethnicity, but it is also a collection of beliefs, norms, attitudes, roles and practices of a given group, organization, institution or society which is highly resistant to change. However it would be wrong to conclude that cultural matters are the only cause of failure when organizations attempt to merge.

      Problems can also become evident in human resource matters. Productivity is known to decline during all periods of turmoil and uncertainty in corporate life. An organization may lose staff, and productivity may fall to less than an hour per day. Moreover, these human resource challenges may not fade after the merger is complete. The effects of the turmoil that mergers and acquisitions bring to long-term productivity, loyalty, morale and access to skilled workers may be profound.

      There are also less visible or obvious dangers in mergers and acquisitions. As in biological mergers, business mergers can transmit dormant ailments. The metaphor in the era of safe sex is that one is having intercourse with every partner one’s partner has ever had. The metaphor may seem dramatic, but in the corporate context it is essential that the acquiring entity knows about any potential liabilities-such as environmental exposures, retiree health-care liabilities or legal actions for which it is assuming responsibility.

      An example is the Bridgestone Company’s acquisition of Firestone. Bridgestone not only purchased inventory, a sales network, factories and a well-known brand name, but also the Firestone history. In that history are acrimonious labour relations, the largest tire recall in history, reluctance to embrace radial technology, questionable methods of storing raw materials, a questionable vulcanizing process and a relationship by marriage to the Ford family. So it should not have been surprising when a scandal, lawsuits and an even larger tire recall hit the new company. Certainly, the Japanese parent company had to grapple with US culture and the Ford relationship, which it did not do easily.

      Perhaps the most damning of all evidence against mergers and acquisitions can be found on the balance sheet. Acquirers often overpay for target companies. The most notorious example may be Quaker Oats’ purchase of Snapple soft drinks in 1994. In that acquisition, the $1.7 billion purchase price eventually was judged as being $1 billion too much. In 1997 Quaker sold the brand for less than 20% of the purchase price.

      Research has shown that a majority of M & A deals destroy value for the acquiring company’s shareholders. Returns for at least 71% of those deals are negative in the year following the merger.

      As in human relations, foibles can be a root cause of unproductive and even destructive behaviour. Wishful thinking, a lack of unique offerings and a lack of rigorous assessment of the potential can all play a role in unproductive mergers and acquisitions. Some leaders may need to prove their worth to themselves and others. They may also crave the feeling or “high” that frenetic activity brings. It’s known that emotion and ego play large roles in both personal and professional failure. But there is also a financial manifestation to that failure.

      A major bank studied the three decade frenzy of buying that ended at the turn of the century. It revealed that companies throughout the world spent “$3.3 trillion on mergers and acquisitions in 1999-fully 32% more than was spent in 1998. This resulted in a failure to realize expected gains from a whopping $1.6 trillion in investments”. Ironically, almost the entire thirty-year period of buying and merging repeatedly failed to achieve desired results.

      Not surprisingly, business academics and others have enjoyed a field day speculating on why leaders engage in such unproductive activity and why organizations fail to realize their full potential. A lack of effective response to the business environment is one of the most perplexing aspects of organizational behaviour, says one study in the bibliography at the end of this book. Another blames gargantuan egos for causing the demise or continued mediocrity of companies in two-thirds of the cases studied. One author wonders whether some are compensating for dark and complex reasons rooted in childhood trauma!

      It could be that mergers and acquisitions simply appear to be the appropriate way of doing business. Belief in an ever-expanding economy seems to point to the imperative of continuous growth. If new markets and products do not manifest themselves easily from the marketing and production departments, mergers and acquisitions may seem to be the appropriate means of achieving growth.

      Today’s leaders may even be drawing on some celebrated examples from history, such as the consolidation of General Motors by William Durant or the morphing of Wrigley’s from a laundry soap to a chewing gum company. These leaders may be adopting a “world-view” or be putting on rose-coloured glasses by assuming that growth through mergers and acquisitions is not only a valid course of action, but a necessity.

      Winston Churchill once remarked that men occasionally stumble over the truth “but most of them pick themselves up and hurry off as if nothing ever happened”. This may help explain why businesses would engage in flawed mergers and acquisitions, year after year for more than three decades, without learning that there are pitfalls to be avoided. It may sound odd that such stark lessons are not learned by successive leaders, but world views, and biases are powerful agents.

      There is ample evidence that organizations do not learn from the mistakes made by others. There had been several large oil spills

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