In the year 2000, America Online (AOL) merged with Time Warner in a deal valued at $182 billion.  So far, it is the second largest merger in history.  When the deal was announced, Steven Case, Co-founder of AOL said, “This is a historic moment in which new media has truly come of age.”  CEO Gerald Levin of Time Warner said, “Because AOL takes us to the internet, our merger with AOL will unleash immense possibilities for economic growth.” The announcement was hailed by many as a momentous coming of age for the internet.

Within a year, the two companies hated one another.  Employees from both companies continually clashed with one another, and leaders from each company spent their time blaming one another for the financial losses that soon began piling up.  Thousands lost their jobs.  There were countless executive upheavals.  Ten years later, the combined values of the two companies, which are now separated, was one-seventh of their combined worth on the day of the merger.  To this day, the Time Warner-AOL merger is taught in business schools as one of the worst transactions in history.  What happened?

Executives from both companies attribute the failure of the merger to market circumstances (the dot-com bubble burst), the slowdown of advertising, and the change in how to access the internet.  While these issues were definitely a factor, the major reason was the clash of customer bases, cultures, and leadership approaches.  These two companies were oil and water.

There are four fundamental kinds of enterprises:  customized, predictable and dependable, best-in-class, and enrichment.  Time Warner was a predictable and dependable enterprise and AOL was a best-in-class enterprise.  They differed on almost everything: whose leadership approach was better, how to decide, who had what kind of power, structure, design of work, and much more. 

Where they really differed was in their customer promises, which meant that their cultures (control vs. competence) and their leadership approaches (directive vs. standard setter) were completely different.  Each had developed its own way of connecting customers, employees and leaders.  Their financially motivated merger ignored the fact that they were fundamentally different living systems and thus almost killed both, reducing their combined financial values by 86 percent.  Put starkly, by primarily viewing their two enterprises as financial vehicles (more revenues, cost cutting, and layoffs and more profits), and not as living systems (each having its own unique web of connections between customers, employees and leaders), they almost completely destroyed them. 

They are not alone.  Estimates vary, but somewhere between 50 and 83 percent of all mergers and acquisitions fail.  Leaders need to learn a different way of thinking – adopt a living system-centric mind-set.  They need to define a merger or acquisition as a combining of two distinct living people systems, each of which is composed of a highly interdependent network of customers, employees, and leaders.

In a merger or acquisition, how the new enterprise is led and what kind of culture it develops should be determined by the enterprise’s customer promise.  All too often, the leadership and culture of the new enterprise is determined by financial accounting, market analysis, historical revenue analysis, legal due diligence, etc.  These matters are important, but they shouldn’t determine the new enterprise’s leadership and culture.  The customer promise of the new enterprise should determine that.  Because this is misunderstood, upwards of 83 percent of all mergers and acquisitions don’t work.        



I have been working with leaders in all walks of life, profit and nonprofit, for more than forty years now and have come to appreciate how hard leadership can be. It is complex and high-pressured work. And, in my experience with more than 4,000 leaders, the most difficult aspect of it is leading people.

So it’s not surprising that most leadership books focus on people-related issues. I list 50 kinds of people problems in my book, such as: persistent internal conflicts, distrust, employee disengagement, low level of cooperation, low morale, turf battles, etc. If you step back and look at all of the people problems over the years, two interesting patterns show up. One, they keep reappearing, year in and year out. Two, they are typically addressed one or two at a time. A search at the present time (November, 2018) on Amazon for books on “employee engagement” yields a list of 1,000 books.

If you drill down, however, an even more interesting pattern shows up. All these problems have to do with people separating from one another: in silos, by disengaging, by thinking they understand when they don’t, etc. When leaders believe everybody is clear about the direction of their enterprise, but employees perform in a way that doesn’t fit that direction, leaders and employees are separated. When people blame one another for mistakes, they create separation. These separations, or disconnections, involve customers, employees, and leaders, and separations between any one set (e.g., leaders and employees) impact all three.

These disconnections keep reappearing because they are symptoms of a deeper problem – hidden system disconnections. These are the root causes of people problems. My book describes four fundamentally different kinds of enterprises, named as follows: Predictable and Dependable, Best-in-Class, Customized, and Enrichment. Each of the four has its own particular set of properly ordered connections. Each leads differently, approaches its customers differently, teams differently, uses power differently, decides differently, etc. The principles of unifying and empowering enterprises are the same, but each one of the four practices these principles differently and, importantly, when one or more of these practices are implemented that don’t belong (“properly connect”), separation occurs and “people problems” show up. If you practice consensus decision-making in a Best-in-Class enterprise or practice “steward” leadership in a Predictable and Dependable enterprise, you create contradictions and crosscurrents. Because these separations are hidden, the symptoms persist or subside and then reappear.

The essential solution to “solving” people problems is to lead and enculturate your enterprise in a manner that is consistent with your customer promise. I spell out how to do that in my book.


Please click on the links below to read the very favorable reviews by 800CEOread.com, C-Suite Book Club, and ChangeThis.com

800CEOread.com:  800CEORead review and Editor's Choice

C-Suite Book Club: C-Suite Book Club Review

ChangeThis:  ChangeThis.com review and article

You may purchase the book at: Amazon link

The Root Cause of the ‘Performance Review’ Problem

As far as can be told, no one has found the performance review useful.  Now GE, Accenture, Deloitte, Adobe, Gap and many others are changing their approaches to reviewing performance.  Changes include (among others): conducting them more often, bringing more dialogue into the process, using apps, and implementing software-based programs.

The ineffective performance review is a symptom of a deeper issue – our individual-centric mindset.  For several understandable reasons, we lead our enterprises while holding a belief that our individuals (singularly or in teams) are at the center of what we are striving to accomplish.  One of those reasons is our (and most western economies) strong societal value of individualism.  It is not that individuals themselves are the issue.  Individuals are important.  The issue is our mindset that individuals are the center of our endeavor. 

Every enterprise is a living people system and the three living elements of that system are its customers, employees and leaders.  It is the connections of our customer-employee-leader system that need to hold center stage.  The more complete these connections are, the more successful we will be.  Our central focus needs to be the quality and extent to which our leaders and employees are delivering on our enterprise’s customer promise.  Effective performance depends on how well we are working together as a system to deliver on our promise to our customers. 

Effective “performance reviewing” occurs when we set customer promise delivery goals, build plans and timelines to accomplish these goals, continually monitor our progress, treat problems and failures as our problems and failures, treat successes as our successes, give people feedback designed to help goal-attainment, help one another to succeed, stay focused on what is working and not working, and celebrate accomplishments all along the way.  

Culture is not a Compilation of Individual People’s Values

Equating the culture of an enterprise with a compilation of individual people’s values may have some limited application to a sorority or a fraternity, but that’s it.  Anyone who tries to sell you on such an idea is selling you snake oil.

Culture has to do with creating conditions for your people to fully deliver on your enterprise’s customer promise.  It is driven by the nature of your business and what it takes for you to succeed in your marketplace.  It is all about implementation and identity.

A rowing team’s culture is formed by what this collection of people must actually do in order to succeed.  This is true for every non-profit and for-profit enterprise.  A compilation of each of the rower’s personal values is not what leads to success.  

Our research over the past 35 years tells us that there are sixteen major drivers of culture and that each set of these drivers is practiced differently in each of four fundamental kinds of enterprises. 

Additionally, the kind of culture (and leadership) that is best for you is determined by your customer promise. Singling out culture and focusing just on it is informative, but of next-to-no value.  Culture has to be addressed only in the context of your customer promise and your approach to leadership.  All three need to be worked with simultaneously.

Equating culture with complied individual values is simplistic and has considerable potential to do more harm than good. 

System-centric Leadership Development

After all these years, CEOs remain dismayed about the low impact of leadership development.  Boston Consulting Group claims that their research conducted in 2015 with 1,500 global executives demonstrates that businesses worldwide have wasted $40 billion in leadership development initiatives.

While likely overstated, BCG’s conclusion does illustrate an important issue about how we have all historically approached leadership development.  The majority of initiatives designed to develop leaders come unconsciously from an individual-centric mindset.  There is nothing inherently wrong with this approach.  Helping individual leaders develop their personal and interpersonal leadership approach has definite benefit.  But, it puts the cart before the horse. 

Understanding your enterprise as a system needs to come first.  There are four fundamentally different customer promises and each one requires its own unique culture and leadership approach.  Each of the four is a unique system that links customer promise, culture and leadership.  One size does not fit all.  Take empowerment as an example.  In many respects, empowerment is what leadership is all about.  But, it is practiced in four fundamentally different ways.  How it is practiced depends upon your unique customer promise and what is required to fully deliver on your promise.  Not only does one size not fit all, when it is misapplied, it makes things worse.

If you want your leadership development initiatives to work and ‘payoff’ for you, take the system-centric approach.        

Your customers are not "outside" your enterprise

In a recent Lexington Herald Leader newspaper article, a professional PR executive wrote an article titled “In the New Year, Small Business Should Focus on the Customer.”  This executive proposes that “…focusing on the customer is the top trend for 2016.” 

Focusing on one’s customers is not a “trend.”  Without customers, your enterprise does not exist.  The same is true for leaders and employees.  Every non-profit and for-profit enterprise is a living people system – comprised of customers, leaders, and employees.  All three are the three living elements to your enterprise.  They are inextricably connected to one another.  They are interdependent.  Each depends upon the others. 

When we treat them as if they were separate from one another or when we (unconsciously) mechanize and/or commoditize one or more of these three elements, we create distortions, misconceptions and contradictions.  The major distortion is that we start treating one another as objects.  We label our customers as “ratepayers” or “consumers.”  We call employees “laborers” or “jobholders.”  We call leaders “officers” or “controllers.”  We call people "human capital." Or, we view customer focus as a “trend.”       

At its essence, your enterprise is biological, not mechanical. 

The Goal is Customer-Employee-Leader Connection, not Employee Engagement

The business press, books, and consultants’ websites are full of ideas for getting employees engaged.   But setting up ping pong tables, installing swings in conference rooms so employees can swing when they feel bored in meetings, providing free popcorn on Fridays, and the like don’t do much for the success of your enterprise.

A business enterprise exists to fully deliver on its promise to its customers.  Customers, employees and leaders who are connected is what counts.  The more these three are connected, the more employees (and customers and leaders) will be engaged.  Focusing on employee engagement per se actually subtly misconstrues the purpose of the enterprise.  It gets people focusing on a tangent.

Employees are motivated by making a recognized contribution to the progress of the enterprise.  Leaders are motivated by the same thing.  Customers are happy when those employees and leaders live up to their promise.  Mutual prosperity is the major motivator.