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Over 30 years, multiple attempts to combine hand tool supplier Stanley Works and power tool manufacturer Black & Decker blew up, floundering over tricky but typical negotiation hurdles like agreeing on valuations and post-deal leadership. Then came John Lundgren, who took the helm of Stanley Works in 2004 and managed to finally bring the merger to fruition six years later. Widely viewed as one of the most successful integrations in decades, the merger exceeded its original target of $350 million in cost synergies by 43 percent within three years and created a platform for growth that has tripled its share price. In the interview to follow, Lundgren, who retired as chairman and CEO of the combined entity in 2016, reflects on the experience of combining two American icons.
On merging companies
We were rigorous in terms of focusing on people, process, profits. Every Monday morning, like death and taxes, we held an integration meeting that might go as long as four hours. Attendance was not optional.
We had 13 focused teams, each consisting of a Stanley executive, a Black & Decker executive and a subject matter expert. We’d do a deep dive on one or two areas at every meeting with bowling charts. There was a lot of green and a little yellow, and if something was red, we talked about it. Was it a bad estimate, or did you need more resources? What was the problem? There was obviously accountability, these were people’s full-time responsibility. A lot of their variable compensation would be based on achieving these objectives, which were audited internally and externally.
The beauty of it was—this sounds tough but it can happen in any big organization, particularly with a lot of moving pieces and matrices—there was nowhere to hide. If a distribution center hadn’t been moved, a piece of equipment hadn’t been installed, there really were no excuses. If we heard, “Well, we haven’t gotten this or that approval,” I’d say,
“Excuse me, you have the CEO and the CFO on the phone once a week. I don’t recall being asked to approve that.” So there was no excuse other than, “Hey, we made an estimate on a project or a program that just wasn’t any good.” Okay, let’s cut that in half and figure out where we’ll find the rest to fill the gap.
On Picking the Team
We’ve done acquisitions and integrations where people spent a third of their time on that and two-thirds on their day jobs. With this deal, we pulled a handful of senior people out of their day jobs to work on integration 100 percent, made it clear what they were to focus on and aligned their compensation to achieving those goals. That created a lot of opportunities for their No. 2 or their rising stars to step up. It didn’t always work out perfectly, but more often than not it allowed people to realize their full potential.
In terms of building a team, about a third of the people, particularly those from Black & Decker, said, “I was a director running this big business. I won’t be doing that anymore. I’m going to cast my net elsewhere.”
Another third expressed interest, but about half realized very quickly it wasn’t for them, and they were managed out of the company—gracefully, we think.
The last third said, “This is what I’ve been waiting for all my life. It’s a meritocracy. If we achieve objectives, I’ve got both economic and career growth. Put me in, coach. Where do I sign?” Seven, eight years later, they’re half of the people running the company.
The folks who stepped out of their day jobs, particularly those with experience on the Stanley side, realized it wasn’t forever and it might even be better than the job they left. That’s the beauty of how profitable growth creates an opportunity for everyone.
In the midst of the merger and working on the senior team, without informing the board, I had 360-reviews done on myself, my COO and the senior management team. When I shared them with the board they were absolutely stunned.
As CEO, I always did a self-assessment, “Here’s how I think I did relative to the goals, here’s how I think we, as a team, performed as a company, here are some things I wish we’d done better,” every year just to help them in their assessment. Then I would commission 360s on myself and the No. 2 person and share the results with the board.