Monday, October 03, 2011

Dilbert - Servers Down

Scott Adams has nailed it again. When bankers buy a company, they usually have a 5-year horizon to "add value" and improve EBIT "matrices" before they dump their "financially engineered" creation off to another group of moneyed morons. Watch the old Wall Street film, ("greed is good") for a dramatization of what I'm talking about.

Generally, they have little clue about how the companies they purchase do their thing, but do know from the starting balance sheet that they can't screw things up so badly that it implodes before they dump it within their 5-year window.  In the meantime, they install a temporary "management team" of revolving door flunkies to watch over their pillaging of the company and do what they must to keep the bones together during that 5-year window.

Invariably, leaders similar to Dilbert's Pointy-Haired boss are installed at key positions and given the charge to reduce their “headcounts.”  One of the commonalities these pointy-haired leaders share is an almost manic drive to avoid taking responsibility for any of the technology being used by their “headcounts.”  To their underlings…the ones who are often responsible for the success of the enterprise the bankers bought…these new leaders are viewed as empty suits, which they often are.  Adams has captured one small glimpse of this dynamic very well indeed.



Jim said...

The empty suits don't want to wait 5 years anymore. 10/4/11's strip shows the new corporate mentality, buy a company instead of making you company attractive to good talent. It's like buying a plate lunch just for the beans. The part that scares me is that some of them breed.

Gus said...

My insurance broker says that it is very difficult to find a privately owned $20-$30 million company that hasn't been sold to these private equity investors. From my observations, they are constantly scouring the country for likely purchases; the purchase criteria being, a solid record of profits within a certain percentage formula. Slap a few of those together, take credit for rapid growth, and sell the beans off again.