Thursday, July 17, 2008

What Carlyle Does When No One's Watching?

Lou Gertsner, Chairman of The Carlyle Group, gave five tips on leadership from the Yale CEO summit in New York. Mr. Gertsner received a Legend in Leadership award during last month's meeting. In his address he offered his one handed tips. He offered the following when he reached his middle finger:

"It's all about culture. You have to transform the culture, not just the strategy. Culture is what people do when no one's watching."

Lou's third point hit me hard, especially given Carlyle's actions when barely anyone was watching. Consider the following:

Boeing booted Vought Aircraft Industries from a critical joint venture. The JV failed to ramp up key airframe assembly production lines due to "an internal liquidity crisis." It happened while Carlyle raised investment funds by leaps and bounds, also known as billions. The private equity underwriter passed off Boeing's dismissal for dismal performance as a "pure financial transaction," when they were fired for poor performance.

No one watched as Carlyle unloaded two U.S. aircraft operations companies to Dubai Aerospace. The media gave the PEU a free pass for the sale of Landmark Aviation and Standard Aero, which closed between the Dubai Ports World brouhaha and the NASDAQ-Dubai Bourse outrage. Nary a peep on the sale of over 50 domestic airport operations in the mainstream media. One of the divisions, Landmark Aviation, had been rumored to supply terrorist rendition flights.

It wasn't the first failure of business reporters to make connections to Carlyle and disturbing events from a corporate entity. LifeCare Hospitals lost 24 patients after Hurricane Katrina side wiped New Orleans. While numerous reports ran on possible euthanasia of acutely ill patients, Carlyle's name never appeared. The infamous PEU closed on LifeCare just weeks before landfall.

Carlyle's lawyers attempted to "Joseph Hazelwood" clinicians who stuck out the storm and did their best to offer care under horrific circumstances. While HCA chartered medical evacuation helicopters to shepherd sick patients to working hospitals, LifeCare patients simmered in a toxic stew within a dead facility for five days.

A New Orleans grand jury didn't buy Carlyle's "rogue doctor" story and failed to indict any medical professionals. That's when the PEU boys and their lawyers offered a truly innovative defense. Carlyle blames FEMA, citing patients became wards of the federal government as soon as federal evacution teams set up in the area. Apparently non-clinicians several miles away are more qualified to care for patients than LifeCare's credentialed doctors and nurses. That is, if LifeCare doctors stayed in town for the big event? I find it hard to believe long term acute care patients' needs could be met by one ENT specialist, Dr. Anna Pou.

Yes Mr. Gertsner, culture is what you do when people aren't watching. Yours stinks, at least that's the view from West Texas. Yes, that's the state that gave Vought $35 million in economic development funding to add 3,000 jobs by 2009. With six months to go and no one watching, what will Lou do as Carlyle's culture leader? It looks like he'll take the money and run. Carlyle plans on cashing in their chips via an IPO. Future shareholders, watch out for that contingent liability!