Is Your Roof Leaking?

So which is it? It's raining and therefore you can't fix the roof? Or since it's not raining, the roof is not leaking and therefore there is no need to fix the roof? In either case, the roof doesn't get fixed and as soon as the rain goes away so will the leak until the next time it rains. Translating this old story to the world of organizations roughly means that organizations are either so busy doing things that they have no time to work on their corporate culture or that their business results are such that there is no apparent need to work on corporate culture. The problem with this of course is that the hole in the roof or the absence of high performance accountability culture lies as a latent problem under good times and is a bit like doing in-flight kite repair under stressful times. There's never an ideal time to work on it. Therefore any time is as good as any other.

Consider this hypothetical situation. Company X gets formed around a new piece of technology that is spectacularly effective and becomes wildly popular with a large audience. Because of the strength of the technology and the ability to transform the technology into products, the company enjoys spectacular revenue growth and profitability. The company goes public. Huge sums of money are generated that provide for continued expansion of the product line, global distribution, and market development. Everything is going just fine. The original founders are able to scale their expertise and their core idea to formulate a rapidly growing and expanding enterprise. Everyone in the organization has a shared sense of what's important, what the priority set is, and intuitively knows what to do.

What is hard to see these circumstances is that as the organization grows, there is a very gradual loss of the founding message in the company that begins to erode some of the original effectiveness. Originally the company understood its customers, its customer’s customer, all of the distribution channel, and all the other moving parts of their business model. Because of the speed of expansion this business model was not codified nor systematized because it was carried on the mutual understanding of “how we do things”. Mutual understanding of how things are done and who does them is also known as organizational culture. It is the invisible element of an organization that can only be seen in the reflection of how things are done. As an organization grows, the culture is stabilized by reinforcing cultural norms by way of hiring practices, orientation processes, coaching and mentoring, and overall leadership. When this doesn't happen effectively, there's a loss of the original message. What can easily happen is that the technology and products that originally made the company so popular, begin to suffer an almost invisible breakdown.

Here's an example: let's say maker of cellular communications equipment originally sold in two basic ways. The first way that they sold was to corporate accounts where the deployment of their cellular devices was done on a corporate wide contract. The second way that they sold was to single users. In one case they're selling in units of hundreds in the other case they're selling in units of one. Sooner or later, the growth of the company begins to flatten. More aggressive sales targets are placed on both the corporate sales organization as well as the single user sales channel. The corporate sales organization realizes that there are a number of small business people who technically are a corporate client but they are a sole practitioner. This leads them to sell to the sole practitioner who originally had a cell phone that was attached to the network as an individual, not as a corporate account. Not knowing this, the sole practitioner purchases a new device from the company only to find out that their connection to the network is blocked because of the classification of their account. This leaves the person without cell phone capability, a bill to pay for the new device, and an opportunity to spend hours on the phone trying to unscramble the connection between the two types of accounts. An argument can be made that this is just simply a systems design error or an oversight but actually runs deeper than that. What this amounts to is a reflection of a loss of the original founding idea of outstanding performance in customer service. It is a loss of integrative thinking and a lack of collaboration. Certainly there are some systems and procedures issues at play here but one of the more fundamental aspects of this type of situation is the aspect of organizational culture. In a strong organizational culture based on customer service, customer outcome focus, collaboration, integrative thinking, and value chain analysis, this would not happen.

Leaders need to understand that there are culturally embedded signals as to what to do and how to do it that communicate the rules of “how to decide”. This is very different than “tell them what to do”. When organizations are small there can be a great deal of “tell them what to do” . As the business grows, at some point that will stop working and the transition must be made to “teach them how to decide”. This is the juncture at which culture becomes central to the execution of strategy and the performance of the company.

The impact of culture is very pronounced in the case of mergers and acquisitions. It's well documented that the extracted value of most mergers and acquisitions does not equal their cost. The debate is about why that is true. Our contention is that when two cultures meet, what gets lost is a shared sense of the obvious that is carried by culture. No matter which culture was the acquired and which was the acquirer, the mixture often creates a breakdown. People are accustomed to doing things in certain ways and it's not always obvious to them why it is that they do the thing they do the way they do. Sort of like the old story about the person being asked by their child as to why they prepare food the way they do. Not knowing the answer the person goes and asks their parent who in turn doesn't know so goes and asks the grandparent. Three generations later, the answer is that the great grandparent did it that way because of the equipment that they had available to them. And even though that equipment restriction no longer exists, the practice of three generations ago is still in effect. The way we do work is culturally embedded. When two cultures who do work differently are merged, a conflict results. The conflict then has an opportunity to be resolved one of three ways. It can be resolved passively by having someone simply withdraw and become silent. It can be resolved aggressively by someone imposing their will. Or it can be resolved constructively through idea sharing, alternative generation and mutual commitment to moving forward. These three aspects of passive, aggressive, and constructive behavior are the reflection of the underpinning characteristics of the organization’s culture.

So although there may never be a perfect time nor an ideal set of circumstances to engage in cultural transformation, there's also never a bad time. So that means that the time to get going on understanding corporate culture, formulating the approach to improving it, and executing on that approach is as good right now as it's ever going to be.