Case Analysis – Innovation and Collaboration at Merrill Lynch
David A. Davis

The changed environment of Wall Street threatened the independent, silo culture that dominated the investment research trade. Brokerage houses needed to identify opportunities to create value-added products. Despite industry reforms, lower trading volume, and declining commission rates, “research continued to provide brokerage firms’ key competitive advantage, according to Institutional Investor.” (Harvard Business School, 2007, p3) Research management at Merrill Lynch determined that collaboration amongst its analyst would lead to the innovative products and services considered necessary to prosper in this climate. This paper discusses why, despite a limited source of power, Candace Browning’s use of persuasion as an influence tool was effective in moving her department from its star culture to one that better fits the changing market for investment research.
Power – Her position as head of Global Securities Research provided Candace Browning with legitimate power over Merrill Lynch analysts around the world. This potential to change the attitudes and behaviors of her staff was weakened by the low centrality she had in her position. “Centrality refers to the degree and nature of the interdependence between the power holder and others.” (McShane & Von Glinow, 2010, p306) Research analysts were used to working autonomously in their areas of expertise and were more dependent on Institutional Investor (II) rankings than a department head. The II rankings also increased the visibility of Merrill Lynch’s star analysts and dealt another blow to the magnitude of Ms. Browning’s legitimate power.
Persuasion – “The effectiveness of persuasion as an influence tactic depends on characteristics of the persuader, message content, communication medium, and the audience being persuaded.” (McShane & Von Glinow, 2010, p.312)
Characteristics of the Persuader – Candace Browning had begun her career in Merrill Lynch’s research department as an airline analyst and moved through the ranks to become Director of Equity Research before taking her current position. If her persuasion tactics were successful, the analysts and the company would benefit, but Browning would not profit personally. The staff’s trust in Browning’s expertise and credibility made them more easily persuaded by her.
Message Content – Candace Browning’s message to the analysts was clear: Innovate in the creation of value-added products for your clients. She presented facts that indicated that the department was in position to meet customer demand for more relevant research and used logical arguments to encourage collaboration. Because her emotional appeal for taking a customer-focused business approach mirrored what the analysts were hearing from their clients, the message became significant to them and made Ms. Browning’s task of persuasion that much easier.
Communication Medium – Candace Browning used an internal town-hall meeting to communicate the need for collaboration. Face-to-face conversations increased her credibility and provided an environment where persuasion works best.
Audience Characteristics – “Another potent force that can overcome some of the insistence of highly autonomous people on getting their way is the use of organizational vision.” (Cohen and Bradford, 2003, p#) Analyst are highly intelligent, so it was necessary for Candace Browning to get them to buy into a vision that provided direction, rather than her using personal or positional power to do so. “Regaining investors’ trust and restoring Merrill Lynch’s reputation for value-added research” (citation) was a vision that framed the analysts’ interests in terms of overall benefit to the company.
Management introduced new initiatives for the research department including a newsletter, training seminars, and a revamped performance-management system. Although these measures served to smooth communication and increase transparency, the real impetus for cultural change, collaboration, and innovation at Merrill Lynch came from Candace Browning’s effective use of the persuasion influence strategy.

References
Groysberg, Boris & Vargas, I. (2005). Innovation and collaboration at merrill lynch. Boston, Massachusetts: Harvard Business School. doi: 9-406-081
McShane, S.L. & Von Glinow, M. (2010). Organizational behavior: Emerging knowledge and practice for the real world, 5th. ed. New York, New York: McGraw-Hill/ Irwin.
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