EVERY ORGANIZATION HAS A CULTURE - BY DESIGN OR BY DEFAULT

A good culture starts with a leader’s vision. Then he develops statements that capture the basic actions that his workers must take to achieve that vision. These culture statements are the principles for everyone to live by, and everyone must know them.

For one leader, the vision may be to build a business that serves customers well with a product or service they are proud to sell. For bureaucrats, the vision is to just expand control.

Cultures can cause conflict, usually in one of two ways. The most common is when businesses merge. More mergers fail from this clash than any other reason. Once a set of principles is ingrained in people’s thought and action, they find it difficult to change. And when two of them are suddenly thrown together, trouble begins.

Three people have shared personal examples of culture problems in their careers. Their stories are not uncommon.

A technology consultant was continually frustrated working with the merged Hewlett Packard (HP) and Compaq. Both HP and Compaq had enjoyed success, growth, and industry recognition. When they merged in 2002, they should have had common ground. But each was working to penetrate a market in which the other had little interest. They brought to the marriage quite different cultures and ideas about the proper goals for the business. Compounding the problem, previously, Compaq had acquired Digital Equipment Co. (DEC). The consultant said that when he talked with employees years later, he could tell in a few minutes whether the person he was talking to was from HP or Compaq/DEC. Culturally, they did not speak the same language.

Years after he retired, a top executive in a major financial service firm recalled how it bought scores of smaller businesses in its industry nationwide. He had to explain to each new acquisition that how they “had always done things” no longer mattered. They must adapt to the new culture – whether they liked it or not. This role took time from managing his major division and forced on him the role of an unwelcome messenger.

A retired business owner, Ian McGregor, said that he regretted not building a strong culture in his firm that we will call IM Wealth (IMW). For decades, Ian neglected his leadership role. This helped bring IMW to a bad end after he left. Ian knows now that he should have built a good culture and changed the trajectory of his business.

IMW offered professional services to a niche clientele. A favorable, chance event in the local market helped IMW quickly build a client base, using internal tools that gave it a competitive edge and his good reputation.

The customer base grew over the years Most of the employees eventually became owners. But despite IMW’s excellent reputation for client service, competitors grew faster. Ian now recognizes that IMW failed to hire or train sales talent to solve its growth problem.

Beginning its third decade, even as Ian relegated himself to a more advisory role, his “situational awareness” increased in some critical areas. (1) Industry technology progress reduced the company’s competitive edge. Competitors offered clients improved products that had not been available. (2) A new IMW management team believed, without supporting data, that their old tools would help penetrate a different and much larger market. (3) IMW was losing customers in its original market, but the team believed that current cash flow would support a marketing program aimed at the new market. They forecast that this new market would carry the company to a higher level, and they began aggressive marketing that diverted money and people from IMW’s original goals.

The CEO chose a successor who was committed to the new marketing effort. However, as the original customers declined from attrition, revenue and profit steadily dropped. Eventually, at a tipping point, it was too late to refocus objectives and turn IMW around.

Management successfully negotiated a sale of IMW at a price favorable to the stockholders. But the sale came at a cost. The CEO had always stated that his objectives were (1) never to sell, but rather pass ownership to the employees and (2) maintain a strong internal R&D base. The sale disrupted both objectives. More worrisome, the buyer’s culture differed markedly from IMW’s, with potential for future disagreements between buyer and seller.

Ian retired before the final chapters in IMW’s story. He still feels personally responsible for the story’s end. Ian knows that he made major errors in his years at the company, all the result of his passive attitude rather than leading to create a culture for everyone. He cites these specific errors:

·        He had an “unwritten” culture to stick to a market that IMW served well and avoid the larger market where IMW had a big competitive disadvantage. He passively assumed that everyone would always agree with him.

·        He filled the role of chief salesman and set an example for others to also develop customer prospects. But that was not leadership. What IMW needed was a culture that made every employee a sales representative, marketing to contacts they had everywhere. He should have trained employees to do this and charged them with measurable goals. Again, he failed. He left a void that he did not prepare others to fill.

·        He allowed the new marketing effort to continue for years without any accounting for the project budget or results. Growth was projected with no specific plans. Growth never occurred and he never insisted on accountability.

IMW was a financially successful “partnership” with no plan to grow. Each “partner” performed his duties, but there was no CEO doing the hard work of leading. Ian, too late, sees the errors he made and what it cost those he left behind. He hopes there is a lesson here for others.