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Tom Ridge's Megamerger: Advice from Corporate America

After Hewlett-Packard (HPQ) began its massive merger with Compaq Computer last May (page 52), CEO Carly Fiorina flew into Washington with three top executives to brief another chieftain with an even more daunting task--Homeland Security boss Tom Ridge. Fiorina spent much of Oct. 4 sharing her playbook with Ridge at Fort McNair, a stately military base overlooking the Potomac.

Fiorina isn't the only corporate manager whose advice Ridge and his transition team have sought as they prepare to create the Homeland Security Dept. out of 22 federal agencies with 170,000 employees. Already, scores of business leaders, management consultants, and academics are lending their expertise gratis. The brains of AT&T (T), ExxonMobil (XOM), Ford (F), Lowe's (LOW), and Raytheon (RTN) are among those that have been picked.

All that business consulting makes sense because Homeland Security has to wrestle with the same issues that arise from Corporate America's megamergers--governance, cash flow, logistics, incompatible technology, overlapping jurisdictions, and clashing cultures. BusinessWeek talked with some of the same experts and other merger gurus. Among the best tips:

-- Hit the ground running. Government mergers drag on. "The 1986 Pentagon reorganization took four years because they were trying to get it absolutely right," says Paul B. Davis, a professor at the Industrial College of the Armed Forces. "My advice is, don't go for the optimal--go for the workable solution and then adapt."

-- Be audacious. President John F. Kennedy had no idea whether the nation could land a man on the moon by the end of the decade when he announced the goal in 1961. A fail-safe security system for America's 103 nuclear power plants would be a good challenge to set.

-- Take a hint from Neutron Jack. At General Electric (GE), Jack Welch created a senior executive service and moved execs around from office to office every couple of years. That creates a cadre of experienced managers who can see beyond the horizon and offer broader solutions to problems. "Ridge has to avoid the career-employee attitude that `This is the way we do it because we've always done it this way,"' says Kevin P. Varney of Business Executives for National Security.

-- Create a red-flag mechanism. As Britain's First Lord of the Admiralty, Winston Churchill worried in 1940 that he was hearing only good news from his underlings. So he set up a committee to give him the "brutal facts." Ridge needs the same sort of early-warning system.

-- Get a smaller board of directors. Congress needs to reorganize, too, or Ridge will spend all his time testifying before petty tyrants such as Representative Don Young (R-Alaska), who heads a committee overseeing the Coast Guard. When told the Coast Guard was to be moved to Homeland, Young protested to President George W. Bush: "This is personal!"--as if he mattered more than the nation's defense. Ridge ought to answer to no more than two House and two Senate panels, like other large departments do.

-- Pay attention to culture. Uniformed officers of the Border Patrol, Coast Guard, Secret Service, and Customs Service are concerned about whether their uniforms and patches will be changed. Such things matter for morale and message. As long as the mission statement is the same for all, preserve local culture.

No doubt, Ridge has a difficult task ahead. "How do you even measure success when your most important goal is having nothing to report?" asks James C. Collins, author of Built to Last: Successful Habits of Visionary Companies. No one has written that book yet. If we're lucky, Ridge will give it a shot when he retires--mission accomplished. Conservatives continue to tighten the screws on the 13 House appropriations subcommittee chairmen, the so-called college of cardinals. If the cardinals, known for porking up pet projects, don't hold the line on discretionary spending in 2003, the Right will go after them. Leading the campaign: Americans for Tax Reform chief Grover G. Norquist, an ally of incoming House Majority Leader Tom DeLay (R-Tex.). House bosses recently jettisoned the seniority system for picking cardinals and can strip them of their posts if they don't get approval before sending bills to the floor. Senate Democratic leader Tom Daschle (S.D.) and his former House counterpart, Dick Gephardt (Mo.), have been roasted by pundits for failing to craft an effective economic message for the 2002 elections. Democrats seem to concur. With the pair mulling '04 Presidential bids, a Dec. 2-4 Marist Institute poll of New Hampshire voters finds Gephardt and Daschle running far behind Al Gore and Senator John F. Kerry (Mass.). Gephardt, a longtime friend of labor, polls just 5%, including a meager 5% in union households. Daschle got a measly 3%. The National Foreign Trade Council reinstated its Free Trade Award after 17 years and honored Commerce Secretary Donald L. Evans on Dec. 10. Some free traders find the choice curious. They blame Evans for decisions to impose tariffs on imported steel and Canadian lumber.

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