Stanley Black & Decker’s John Lundgren On Making Mergers Work

Now, had they turned out horribly, I might not have been quite as eager to share the results, but I didn’t have to make that decision because it seemed like we were doing what was expected of us and were respected as leaders.

I didn’t know it was in the envelope before it was opened, I had no idea. But once the envelope was opened, I was much more comfortable sharing with the board that I had it done—let me say it that way.

On Cutting Costs

On day one, I was stunned to find out that R&D, advertising, promotion, sponsorship, etc. were all part of SG&A at Stanley. I said, “Guys, it’s like cholesterol, there’s good cholesterol and bad cholesterol. R&D, sponsorship, promotion, brand building—that’s good cholesterol.

Money we spend because we have to report earnings, maintain a legal function, run our systems—costs of doing business that don’t directly touch customers or build our brand—that’s bad cholesterol. It does nothing but reduce our margins.”

So I said, “For every dollar you cut out of the bad, we can spend 50 percent on the good and still save a lot of money.” I’m grossly oversimplifying, but we truly approached it that way.

You cut the horrible systems inefficiencies causing us to duplicate and triplicate efforts, save $3 million and reinvest half of that in growing the business. Over time, we created a culture of investing against organic growth in terms of product development, innovation, brand building, brand support. And, however many years later, a $2 billion business was $12 billion.

On Having people to Talk with

Early on in my tenure at Stanley, I was very, very fortunate to have a seriously experienced and capable board, given the relative size of the company. I had Jack Breen, the CEO of Sherwin-Williams, an incredibly experienced, high-integrity guy who really knew the difference between a director’s role and the CEO’s role. I had Emmanuel Kampouris, who ran American Standard, an incredibly successful CEO, and Stillman Brown, who was the CFO at United Technologies in both the Harry Gray and George David era. Also John Opie, one of Jack Welch’s vice chairmen, who ran GE Lighting.

These were serious people. These guys were all on my board, day one. They were incredibly valuable throughout that period and, most importantly, during the merger. “Let’s go forward,” they said. That helped.

In addition to a supportive board during the merger I had a guy named Steve Schaubert, who I had known earlier in my career, a very senior partner at Bain. He passed away a few years ago. He was a Baker Scholar at Harvard Business School, he was in W’s class at Yale, he was a pilot in Vietnam. He was always someone I felt I could get the unvarnished truth from. He was just a good sounding board, essentially a privileged insider but outside my board.

I don’t care who you are or how comfortable you are in your tenure, I think there are always times when you’re looking for that objective third-party point of view, it’s an opinion you respect, you know. And Steve, for years, filled that role for me, for which I’m eternally grateful.

Read more: An Open Line Of Communication Is Your Biggest Opportunity