Events, dear boy. Events.
Philip Whiteley - Chair of the Human Capital Forum
The Mail reports that Cadbury executives are losing key executives. Well, well! Who would have guessed? Certainly Irene Rosenfeld didn’t. The chief executive of Kraft projected reassuringly positive ‘cost savings’ from the merger back earlier this year. As I blogged at the time (http://felipewh.wordpress.com 8 February 2010):
“Irene Rosenfeld, CEO of Kraft, was quoted in the Financial Times as having identified ‘cost savings’ in the merger, but was unchallenged by journalists on this. The fact is, she has no idea whether potential savings will outweigh costs of integration and loss of talent. Not even a CEO can foresee the future.”
So, Ms Rosenfeld, what is the cost of losing these 120 managers? Have you prepared the figures for shareholders? What is the cost of losing Phil Rumbol, the marketing executive behind the hugely popular ‘gorilla’ adverts? Will any of them go to work for Felicity Loudon, the Cadbury heiress so upset by the sale that in June she put her £27 million mansion up for sale to launch a new chocolate company? You didn’t expect these developments? No, we never do. They belong in the category of what former prime minister Harold Macmillan called ‘events, dear boy, events’. Woody Allen’s take was: ‘If you want to make God laugh, tell him your plans.’
The problem is not so much over-optimism by Ms Rosenfeld and her bean-counting advisors, as a fundamental misunderstanding of what a company is. And, indeed, what money is. It is people who create money, not the other way around. Yet mergers are proposed on the basis of an analysis of the financial accounts and market share. It’s like looking at your bank account and grocery bills as a basis for assessing where your career might be in five years’ time.
Human capital isn’t just ‘an asset’, it’s the generator of all assets. All of them. To pretend otherwise is a misanthropic delusion. But it’s precisely this delusion that guides pretty much the whole of management and economic orthodoxy; the sort of nonsense reasoning that concludes: ‘let’s arrange a mega merger on the basis of a look at the books.’
