When Multi-Tasking Leads To Poor Decisions

July 24, 2007

Back in the mid-1990s, when I first started covering capital markets, the period of late July to Labor Day was the absolute worst time to be a reporter. Bankers started taking their annual vacations, the deal pipeline started to shrink, and it was tough to find contacts actually in their office to speak to you. Fast forward to 2007, and the summer respite has all but disappeared. For the past few years, in particular, the pace of mergers & acquisitions, fund raising activity and general corporate activity has been virtually nonstop. Yes, people still take vacations, and there are brief slowdowns around holidays, but for most market players, August is just another busy month on the calendar. And even when we’re on vacation, we end up having to check our Blackberrys pretty frequently. Such a frenetic pace warrants some pretty obvious questions: Are buyers spending enough time on due diligence? If not, is it because the banks are pushing unrealistic timetables? Are private equity firms spending too much time looking for deals and not enough on their existing portfolios? The list could go on for several paragraphs. But perhaps a better question to consider is, at what point does the pace of deal flow, combined with the need to multi-task in a world where most of us are under increased time pressures in general, start to compromise a person’s mental capacity for making the right decisions? To phrase it differently, at what point does ‘trying to do too much’ – a phrase often used in athletics – end up affecting performance? I remember talking to a general partner about three years ago who, at that time, was sitting on 40 boards. (No, that’s not a typo) This was not a mega buyout firm where legions of associates, analysts and administrative assistants could potentially help him manage all those commitments effectively. This was a middle-market GP whose firm was buying companies at a healthy pace. And, last I checked, neither he nor his firm had scaled back. I don’t have enough knowledge of his firm’s portfolio to say whether he’s doing a good, bad or okay job managing all those board seats, doing deals, etc. But I have to suspect that on more than a few occasions, he’s had to make incredibly quick decisions, and some of those will invariably be the wrong choices. Given the state of the markets, I recognize it’s incredibly tough to say no to a potential deal opportunity. And right or wrong, most people—especially the Type As in the financial markets—would consider it career suicide to call a boss or colleagues to say ‘Hey, I just can’t handle another deal right now’ or ‘We should pass on this one, because we’re having enough problems managing our current portfolio.’ But for middle market firms, in particular, being overcommitted is a risk that, while it may come with the territory, should not be overlooked.