Thursday, February 22, 2024
CEOWORLD magazine - Latest - CEO Advisory - The moment that Lehman Brothers lost the plot – when they abandoned their ‘Strategic Core’

CEO Advisory

The moment that Lehman Brothers lost the plot – when they abandoned their ‘Strategic Core’

the lehman trilogy at the gillian lynne theatre

I was lucky enough to see The Lehman Trilogy at the Gillian Lynne Theatre in London last month. What a brilliant play: sharp script, clever set, perfect direction, simply brilliant performances. Every second of the three hours and twenty minutes was unmissable. But there was one moment in particular that made me gasp and will stick with me for a long while. 

It was in the third act when Robert Lehman, the last of the family ever to lead the firm, declared to a gathered throng: “Our business is very simple: we make money out of money.”

“That was the moment!” I said out loud, much to the embarrassment of my wife. 

And it was indeed the moment. For although the firm would continue to trade for a further forty years, I have no doubt that this was the moment when the seeds of the firm’s destruction were sown; the moment when it first began to abandon its ‘Strategic Core’.

Strategic Core

Your Strategic Core

Every organisation, every company, every department, every team needs a strong Strategic Core – without which it is doomed to mediocrity or irrelevance; destined for disappointment.

A strong Strategic Core is the foundation of your future success. It enables your organisation to fulfil its potential. It also enables your business to thrive in uncertainty and bend with the inevitable changes that will come your way. 

Your Strategic Core has three components:

The Why. (Your Purpose) Why does your organisation / department / team exist – and for whom?

The What. (Your Magic) What makes you special? What do you want to be famous for? What is the core ethos / guiding principles of your organisation?

The So What. (Your Benefits) How does your organisation benefit every one of its stakeholders – its people, its customers, its partners, its suppliers, its shareholders and society at large?

When coupled with a clear Aspiration, a strong Strategic Core gives you the strength and clarity you need to be agile in delivery (The How) in full understanding of what you are seeking to achieve and why.

Now, back to Lehmans, and a quick potted history.

Up until ‘the moment’, the brothers seem to have built their business on traditions of quality and customer service. They started out in 1847 selling quality fabrics, clothing and then dry-goods before morphing into cotton traders, representing the growers of the finest quality Alabaman cotton. After the American Civil War, they became a bank to help finance the reconstruction of Alabama. They were instrumental in the formation of the New York Cotton Exchange before morphing further into becoming an ‘issuer’: helping other companies list on the fledgling New York Stock Exchange.

The bank survived the 1929 crash in large part due to a luck of timing as they had not yet invested a large tranche of client money when the stock market fell off a cliff. And the bank was still thriving in the 60s when Robert Lehman supposedly uttered the words that made such an impression on me. In the decade after Bobby’s death, Lehman Brothers opened a trading arm which by all accounts could have been the inspiration of The Wolf of Wall Street. “Making money from money” had trumped and trashed the principles of quality and customer outcomes espoused by the firm’s founding fathers.  

Lehman Brothers would go on to merge and then de-merge with American Express before an extreme bout of hubris finally killed the company in 2009. It seems that flogging billions of ‘AAA-rated’ toxic investments that were based on the sale of mortgages to people who couldn’t afford them – was not a good idea after all, and a once-great firm was consigned to the history books.

For more than a century before ‘the moment’, Lehman Brothers was agile, eager and able to seize new opportunities – powered by a firm understanding of why it existed and for whom, of what made it special, and of the ethos of quality and customer service that gave it strength. 

But once they had started to weaken their Strategic Core, they were doomed.

How many other firms had similar weak cores and could have (arguably should have) gone the same way but were saved by taxpayers instead …

How strong is your Strategic Core? 

How strong is your Strategic Core? 

(If you wish to explore the matter further, click to download our Essential Guide to Strategy).

Warm regards


Written by Campbell Macpherson.
Have you read?
What Is Dumbing Us Down by Henry Mintzberg.
Why Venture Studios Are The Perfect Fit For Venture Capital by Dr. Erik Reis.
How Building a Viable Community Can Keep Your Business Going by Mike Fata.
4 Ways You Can Help Build Trust with Your Most Important Stakeholders: Employees by Ingrid Christensen.

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CEOWORLD magazine - Latest - CEO Advisory - The moment that Lehman Brothers lost the plot – when they abandoned their ‘Strategic Core’
Campbell Macpherson
Campbell Macpherson is a sought-after speaker and international business adviser on leadership, strategy and change. He is an Anglicised Australian based in the UK and can be found wherever his clients need him to be. Campbell is an Executive Fellow of Henley Business School and author. His first book, The Change Catalyst (Wiley 2017), won 2018 Business Book of the Year in London. His second book, The Power to Change: How to Harness Change to Make it Work for You (Kogan Page 2020) was a Highly Commended Runner-Up in the 2021 Business Book Awards. His third book, You: Part Two (thriving in the second half of your life) was co-authored with his yogi wife, Jane Macpherson, and was published in 2021 by Hachette. All of his books are available from Amazon US & UK and Booktopia in Australia. More information about Campbell can be found Here.

Campbell Macpherson is an opinion columnist for the CEOWORLD magazine. You can follow him on LinkedIn.