Integrating Cultures: 2008 M&A Forecast

Some of you in the Merger & Acquisitions world might be interested in this video from the Wall Street Journal featuring Chris Williams of Harris Williams Co. and his forecast for M&A activity in 2008.

Wall Street Journal 2008 M&A Outlook

In case I don't get to my next blog on Goldman Sachs during this holiday season, best wishes to you and yours for a prosperous 2008.

Leadership Coaching: Helping Them Visualize

Tuesday, November 20, 2007


Three recent client situations reminded me that most of us find it very difficult to visualize something intangible like teamwork or a feedback-rich culture or a new business model. It’s difficult to verbally answer the question, “what would you hear people say or see them do that would indicate to you this organization values feedback?” when you don’t have a picture of that possible state in your mind.

So here are two products I’ve come across to help leaders visualize what they are trying to create in their organizations. I recently used the VisualsSpeak product with a team recently designated a “leadership team” as a way to help them describe who they are individually and what they bring to the team. VisualsSpeak co-founder Christine Martell was very helpful in getting me up to speed on how best to structure the exercise and facilitate the discussion. The 200 photos were visually engaging and stimulated some great insights from the individual leaders about their role and contribution to the team. The team indicated that the exercise was very helpful in communicating another dimension of each member’s personality and goals, all of which is going to help them continue to build trust with each other. I think this tool is very adaptable and would work great in any situation where a leadership team is trying to make a possible future as concrete as possible.

By the way, Christine is one of the facilitators who will be at the inaugural VizThink Conference scheduled for late January in San Francisco. I’m going to it to learn more about how I can use the visual world to make leadership and organization development come alive. And because you are fortunate to be a reader of this blog, here is a discount code (ACBT1 – that’s a number one at the end of the code) to use to get $100 off your registration price (it pays to know the right people.)

The second product is a video production company called Silver and Goldie that specialize in the production technique called “machinima.” As they describe it, machinima (a word combining "machine animation" and "cinema") is the art of making real movies in virtual worlds that exist as 3D computer-generated imagery (CGI). They have built a studio in Second Life (a virtual world that has gotten a fair amount of press over the past year or so) and create videos without a lot of the limitations the real world imposes and for a cost that is often much more cost-effective as well. Even if you’re not into the virtual world, I find Second Life fascinating because it is giving us a glimpse of what a 3-D Internet is going to look like. Here’s a sample of a video they did for Intel.

What’s great about this technology and product is that it can help leaders communicate a visual picture of what a future state of the company or its culture will look and sound like. So instead of individual employees needing to fill the usual “picture” vacuum (often a source of some very outrageous but creative rumors), they can instead react to a visualization of what the new business model or culture will look and sound like. And a key to motivating people to move forward into the future is to give them a clear picture of what it will look like. Technology now allows you to visually create the future for a very reasonable price. Very cool.

M&A Due Diligence: Company Culture from the Inside Looking Out

Friday, November 9, 2007


I read with interest David Harding and Ted Rouse’s guest column in the October 2 issue of the Wall Street Journal entitled “Human Due Diligence.” In it, they discuss the importance of paying attention to what they call human due diligence during the merger and acquisition (M&A) process. Under “human due diligence,” they group understanding the culture of the organization, the roles that individuals play, and the capabilities and attitudes of its people. In this article, most of their discussion focuses on the importance of identifying key employees to be retained during the due diligence process. I agree completely. The new organization will need the right talent and an integrated, consistent leadership voice to make the merger successful. But when it comes to how to factor in the two cultures into a new organization, leaders need to identify something more substantive than “decision making styles” to better understand the role of culture in making or breaking the merger.

Therefore, I would add as a critical element of the due diligence process an assessment of how well each company is doing in executing key management practices that have been proven to be linked to bottom line results. One company may be stronger in some practices than the other. When working with companies who are looking to merge or acquire the other, I would want to know how the two companies measure up individually in executing these management practices. This assessment will tell me where the gaps might be that the leaders will need to address before, during, and after the merger. Otherwise we may be looking at what we call “culture” and find out only later that it was more window dressing than substantive business concerns.

If you have read some of my earlier columns, you know I’m a fan of the Denison Culture Survey for these reasons. This instrument can give both companies a clear picture of how well each of them is doing in four critical areas that reflect both an external and internal focus:

• Adaptability
• Mission
• Consistency
• Involvement

I would be more concerned about a merger that indicates that neither organization has a particularly strong ability to adapt to market changes and customer needs (Adaptability) than how similar are the dress codes or benefits packages. Not to say that the merger should be abandoned but instead such an assessment will present the post-merger challenges and risks more clearly and concretely to the decision makers. In my mind, this makes for a more robust due diligence, focused on the key management practices that will ultimately determine the success of the merger and, more importantly, bottom line business results.

Otherwise, the two companies run the risk of falling into the trap of assuming the acquiring company or larger company’s culture will be the culture of the new company. This could end up perpetuating, or even exacerbating, the deficient management practices in the new company. Better to find out where each company stands during the due diligence process by asking up front the people who see the company’s culture from the inside looking out. No matter how challenging an M&A can be to the executives in charge, it’s that much more complicated in the trenches. All the more reason to concentrate on assessing and understanding the culture from a grass roots perspective. Otherwise, leaders retained will squander their talent by assuming culture means one thing when it really means another.

The Proof is in the Fluffernutter

Friday, October 19, 2007

I’m not a foodie but I live with one so it wasn’t a surprise when we ended up at one of Portland, Maine’s best restaurants, Five Fifty-Five, during a recent vacation. What qualifies this story for this column is that I believe my positive experience had as much to do with the restaurant’s culture as it did with its food. When done right, a business can take on a personality, one that stems from its culture – values, aspirations, and shared expectations. And just like any other appealing personality in a relationship, it can draw you in. How does this happen?

First, the business has to be congruent. In other words, all parts of the operation have to fit together, seamlessly. In Five Fifty-Five’s case, the parts are service, atmosphere, menu, price, and attitude. I have been to plenty of restaurants that have the service down pat but the menu is uninspired. Or a fantastic menu but the actual meal doesn’t match expectations. Or how about those restaurants that have a fancy decor and are obviously projecting the attitude of “we are upscale” and one day you see some tacky sign in its window advertising two-for-one specials. Or lackluster wait staff surrounded by beauty and elegance. It takes a lot of forethought and effort to make sure all the pieces fit together.

But getting all the operational parts to fit together is not enough to create a personality. The business also needs to know “who they are.” Some of this comes from matching the parts well but I believe an experience of personality comes from thoughtful, purposeful design on the part of the business owners. And this personality isn’t necessarily an extension of the owner’s personality. Rather, once you combine operational congruency with a concrete vision -- that is when a personality can emerge that can draw you in. My sense from Five Fifty-Five is that if the owners walked away tomorrow, the staff would carry on the culture because it is that palpable and satisfying to them.

I think the biggest business payoff is that a consistent personality throughout the experience builds trust along the way, implicitly and imperceptibly. In the case of Five Fifty-Five, the consistency of each contact point we had, whether with a staff person or the actual product, was so powerful that we ordered more and enjoyed more than we would ordinarily. By the time we got to the dessert menu, there was no doubt we were going to order the homemade marshmallow fluffernutter because we had complete trust in what they would serve us. And we were not disappointed. It reminded me that a great dining experience has a symphonic quality to it.

So think about this if you’re having trouble attracting and keeping customers. How congruent is your company’s personality? How fragmented? Does it turn customers off or draw them in further? Who are you?

Poisoning a Culture

Friday, October 12, 2007

I wanted to follow up on my blog from last week about the sexual harassment guilty verdict against the New York Knicks, including its head coach Isiah Thomas and its owner, James Dolan. Even though the conventional wisdom says that Mr. Dolan is in no jeopardy of losing his position (his father would have to fire him), nor is the parent company, Cablevision, likely to lose customers over this, no one should fool themselves into thinking “no blood, no foul.” Leaders who create and perpetuate a culture of intimidation, secrecy, and retaliation ultimately poison their own organizations. This happens because rather than attracting and retaining talent that can drive organizational performance, such a culture attracts and retains people who often are motivated more by self-interests than the interests of the organization. Sometimes it’s a matter of survival, in others a matter of ego. But when it happens with the people in positions of responsibility, the contamination spreads fast and wide.

What kind of talent is going to be attracted to such a work environment, especially when talent is in such short supply in most industries? Who would want to put up with such behavior? One profile is the talented person who takes a big salary with the intent of sticking it out for a year or two and leaving with their resume and bank account upgraded. Then there is the lesser talented person who gets hired because real stars have no interest in such shenanigans. And even more deadly is the person who actually agrees with such leadership practices. Add in those already in the company who feel their only option is to stick it out and so they withdraw as a means of survival. Let this dynamic go unchecked and the poisonous culture becomes more and more embedded in the organization’s fabric and mindset. Then see how ugly this is when new leaders attempt to administer a strong antidote.

I must confess two separate examples that came my way this past week made this story all the more extreme to me. One was the article on leadership in the October 1 issue of Fortune magazine that my colleague Rob Pasick passed on to me. Fortune teamed up with Hewitt and RBL Group to “conduct new research into the ways companies around the world are developing leaders and which are doing it best.” They identified nine best practices that these companies shared when it comes to developing leaders. I checked, “encourages a hostile work environment” wasn’t one of them.

Then on Wednesday I had the distinct pleasure of hearing Joe Dumars, NBA Hall of Famer and now general manager of the Detroit Pistons, speak on leadership at the Detroit Regional Chamber’s Small Business Conference. (Personal plug...I followed Mr. Dumars with a break-out session on how to develop your company's leadership pipeline. Videos of all the presentations are supposed to be eventually posted on the Chamber's website.)Mr. Dumars exudes integrity. (The NBA named its sportsmanship trophy after him.) His three keys to effective leadership? Have the conviction of knowing who you are; set the tone by letting your passion come through; and be the most unselfish person in the room. The irony that his back court team-mate for many years was Isiah Thomas was not lost on many in the crowd. Compare and contrast. That’s a lesson every leader should learn.

Live, from New York, A Cautionary Tale

Friday, October 5, 2007

For this week’s entry, I go to the world of professional sports to remind us that leadership, culture, and the law can intersect with significant consequences. This past week, the jury in the Isiah Thomas sexual harassment case reached its verdict. It found Mr. Thomas, head coach of the New York Knicks NBA basketball team, guilty of sexually harassing the Knicks’ former senior vice president of marketing, Anucha Browne Sanders. It also found the New York Knicks corporation guilty of subjecting Ms. Browne Sanders to a hostile work environment, and specifically its President, James Dolan, guilty of retaliation. Mr. Thomas’ monetary fine – zero, the Knicks’ fine -- $8.6 million, Mr. Dolan’s fine -- $3 million.

This is a painful reminder that the law, through Title VII of the Civil Rights Act of 1964, holds leaders accountable for their culture, at least in the sense of not creating a hostile work environment. Given all the business books that flood the market touting the management and leadership practices that create successful companies, one would think this type of leadership philosophy would be unheard of in such a public organization as an NBA franchise, and one as storied as the New York Knicks. And as Selena Roberts of the New York Times points out in her article (“The Garden Needed a Warning Label”) this week, there is another sexual harassment case working its way through the legal system involving the New York Rangers, the NHL team, also under Mr. Dolan’s leadership.

From an organizational culture perspective, this is most disturbing to me because it is one thing to have incompetent leaders mishandling an organization and putting it and its employees at risk. It’s another thing to consciously manage your people in such a way that intimidation, secrets, and humiliation define the company’s culture. Given the testimony and verdict, it’s hard not to detect a degree of malevolence in Mr. Dolan’s leadership practices that goes against every management philosophy and ethics of human relations.

But why did it take a public trial and jury to hold Mr. Dolan accountable for his leadership practices? In some ways, this was a disaster waiting to happen. Charles Dolan, father of James Dolan, was the founder of HBO and is best known as the owner of Cablevision Systems Corporation, a large cable television operator in the New York City area, which also owns Madison Square Garden, Radio City Music Hall, the New York Knicks and New York Rangers. Wikipedia lists his estimated worth at 2.3 billon dollars. Though a public company, the Dolan family has essentially run Cablevision as a private company for most of its existence and should actually go private later this month. In 1999, Mr. Dolan gave his son responsibility for the Madison Square properties listed above. Given the strain between the two men that has been reported over the past few years, it wouldn’t be surprising to find out that the father deferred to the son when it came to decisions so as not to come across as a meddler. Add to this that both the Knicks and Rangers are basically franchises, albeit unusual ones, where the respective commissioners of both leagues, David Stern and Gary Bettman, also tend to defer to the team owners, and you end up with little oversight and even less accountability.

So the cautionary tale is that these dynamics that undermine accountability can easily cause those in positions of responsibility to turn a blind eye to such management and leadership practices, which eventually catch up to an organization, its leader, and its stakeholders. Though some in the New York press are saying that the verdict will not hurt Dolan’s career, I can’t help but think of the impact this will have on attracting and retaining talented people in these organizations. But talk about being naïve. I don’t think this is on Mr. Dolan’s mind. It just doesn’t fit in with this Greek tragedy.

Role Model: Mac McCallister

Friday, September 28, 2007


I’m finally getting around to an article (“To Understand Sheiks in Iraq, Marines Ask ‘Mac’) written by Greg Jaffe in the Wall Street Journal that appeared in its September 10 issue. It is about a former Marine Corps officer, William “Mac” McCallister, who has created a role for himself as the Marine Corps’ expert on tribal culture in Anbar Province and as an advocate for incorporating these insights into the military strategy for stabilizing Anbar Province and the country overall.

Mac comes across as a great role model for “leaders” of any stripe who are looking to achieve challenging results within an unfamiliar or complicated organizational culture. For example, his curiosity about the origins and dynamics of tribal culture, as compared to early American administrators who downplayed their importance, seems to have played a key role in his success to date. But curiosity without humility usually shortchanges the learning process. This doesn’t appear to have been the case with Mac. It appears he recognized his ignorance in the beginning, which fueled his desire to fully understand the situation, no matter what uncomfortable path he ended up following. Contrast that with the “I know what I know and full steam ahead” mindset of the initial American strategy or of business leaders who either ignore or downplay the power of an organization’s culture.

I was also glad to read that people recognized how valuable context is when dealing with a fragmented and foreign situation. As Marine Brigadier General John Allen (deputy commander of U.S. forces in western Iraq) says in the article, “virtually everything Mac said added context to things we had been learning ourselves.” Context pulls everything together and gives it meaning. Without context, actions and words can come across as random events that prevent participants from drawing meaning and patterns, dooming them to a predominately reactive strategy.

Something else that caught my “OD” eye was the quote from Montgomery McFate, a cultural anthropologist with a doctorate from Yale whom the Army hired last year to help draft its new strategy for battling insurgents. Dr. McFate, who the article says has helped mentor Mac, has this to say about her charge. “Mac does exactly what good anthropologists do: He enmeshes himself in foreign societies, and attempts to see the world from their point of view while retaining his own objectivity.” Given how the article describes Mac, it would appear Dr. McFate is on target. But what I would add to her assessment of Mac’s skills is that of a change agent. Mac seems to be going beyond just an advisory role. I suspect because of his Marine Corps background and sense of duty, he is determined to influence and change the U.S. military strategy in Iraq. And I think he has a good shot at success for the reasons described above and for one more reason – he is able and willing to work within a framework rather than ignoring or trying to change the framework. In other words, as he learned more about the tribal culture, his conclusion wasn’t the culture was wrong or outdated or in need of change, rather -- it is what it is. Because of this, he wisely shifted his effort to changing the military strategy. And because he is working within an institution he is very familiar with and which views him with a fair amount of credibility, there is a greater likelihood they will listen and take in what he has to say.

If you’re interested in seeing an unclassified version of Mac’s PowerPoint presentation that he gave to Marine Corps brass this year on the tribal culture and implications for the military strategy, click on the this link.

http://www.smallwarsjournal.com/blog/2007/07/coin-in-a-tribal-society-1/

I particularly found his comparison with the Marine Corps culture to be very interesting. Even without his speaking points, you can get the gist of his argument and insights.

The Granddaddy of Them All

Friday, September 7, 2007

As I was thinking about Adizes’ life cycle stages recently, the Adolescence stage particularly intrigued me. This is the stage when the organization needs to transition from the Founder running the business to hiring professional managers to do so. This is when a lot of drama can occur. It doesn’t always go as smoothly as, let’s say, the Google experience when founders Larry Page and Sergey Brin recruited Eric Schmidt from Novell to run Google. It also seems regrettable that the transition can go so badly that circumstances conspire to separate the founder from the very company he or she created (witness Steve Jobs in his first go-around with Apple). I understand that some founders are serial entrepreneurs and are quite happy to move on to the next challenge. But what about those founders who clearly aren’t cut out to be CEO’s of the companies they start but still want to play a significant role in the company’s development and success? They represent the most tangible link to the early days of the company when its values and mission were fresh and energized. Must the new regime push him or her to the sidelines? Is there a role for them?

I think there is and I think we need to look to the role of grandparents in our families to give us some ideas of the role a Founder can have as his or her creation grows up. There are a variety of dimensions to the grandparent role. In some cases it serves as a bridge between parents and children. In other cases, it can reinforce and perpetuate the values and beliefs of the family. Given their position of once-removed from the primary responsibility of raising the children, grandparents can add an objectivity and “long view” to day-to-day activities that parents can’t.

How could this translate into a business setting? I see a need, particularly in companies at the Adolescence stage, to have someone of authority have the responsibility of making sure the organization develops both adaptability and resiliency to ensure its longevity. The common CEO and COO roles divide along areas of focus and somewhat along time – the CEO role primarily has an external focus with a medium term view while the COO role primarily takes an internal focus with an immediate term view. What is missing in these two roles is the long view. Who has primary responsibility to ensure the organization has an organizational infrastructure that will help it continue into the future regardless of market conditions or particular leaders? I think this can be an invaluable role for the Founder as the company matures. They can provide a degree of support, stability, and credibility to the organization that an outside, professional leader would be hard pressed to replicate. And this job need not be just a seat-warmer.

With a title like “Chief Culture and Sustainability Officer,” their primary responsibility would be to build and maintain an organizational culture that gives the organization core survival skills and strategic drive. To make this concrete, I would give him or her primary responsibility for developing the key organizational capabilities and management practices that the Denison Model (see my July 27 posting, “Next Time Call Me”) has identified as key to long-term, bottom-line, organizational vitality. Otherwise, this effort can fall through the cracks – too “big picture” for the COO, too operational for the CEO and too critical for the VP of Human Resources. With such a role, the founder could bring a perspective and context to executive deliberations that would otherwise be missing. And they could serve as the bridge between the past and the present and as the guide between the present and the future.

In the right situation, this role would give certain types of founders the greatest reward for the creativity and hard work it took him or her to get the company started and off the ground – the legacy of a company that lives on past them.

Gone Fishin'

Friday, August 31, 2007

It's such a beautiful day here in southeastern Michigan, I've just got to play hooky. But be sure to check out my posting next Friday entitled "The Granddaddy of Them All." Also, my new and improved website is up and available for visiting at www.tollegroup.com.

Have a great holiday weekend.

Brian

Cue today's theme

The Power of Linking Tools

Friday, August 24, 2007

I was having coffee with a colleague last week and the conversation turned to Dr. Ichak Adizes’ work on the life cycle stages of organizations. I checked out his website and as I read through the different stages, it struck me that this model and the Denison model are quite complementary. In particular, the Adizes model recognizes that the Prime stage “is the optimal position on the lifecyle, where the organization achieves a balance between control and flexibility.” I immediately thought of the Denison model and its Adaptability and Consistency culture traits.

I think this idea of balance is critical to understanding how the Denison model plays out in the real world and the challenges that come with it. I think of the model as actually a plate that one would hold as if a waiter. The trick is to balance it among the four culture traits (Involvement and Mission being the other two) to produce the greatest organizational performance level. What the Adizes model helps us to see is why this imbalance can occur over time. It also identifies which of the issues that lead to this imbalance are normal problems -- that is, those that could probably go down lower on the priority list because “they tend to resolve themselves during the natural course of growth and development.” More importantly, the model also identifies the abnormal problems associated with each of the lifecycle stages. It is these problems that require as much of an organization’s limited time and resources as feasible to address and resolve if the organization is to move to the next lifecycle stage.

An analysis of organizational performance can benefit from integrating the two models because they each bring a unique dimension to the task. The Adizes model brings more of a time dimension while the Denison model brings more of a depth dimension to the analysis. If we think of an organization as a large-scale organism, it’s as if the Adizes model calls upon our skills as a developmental psychologist over time and the Denison model as an internist at particular moments.

For example, an organization can conduct a Denison culture survey and learn that its organizational capability of coordination and integration is relatively low. The leadership team may be tempted to devote time and resources to address this. But if the organization is at the Infancy lifecyle stage, it may be wasting time and resources because the higher priority at this stage for continued survival is being action-oriented and opportunity-driven. But the very next stage of the lifecycle, Go-Go, requires the ability to start adding structure and control if the organization is to transition to the next lifecycle stage, Adolescence. Integrating the two models gives you a better picture as to the health and ability of the organization and where to focus time and resources to keep the organization developing.

Integrating the two models can also provide insights as to why an organization may score low on the Involvement capability in the Denison model. At the Go-Go lifecyle stage, the Founder’s ability to “do it all” is reaching its limits. The need to bring in professional managers as well as decentralize decision-making is becoming more and more important. How the Founder views this situation and approaches this transition will play a critical part in moving the organization along its development path. The Denison model can point out the degree of deficiency in this capability and the Adizes model can point out the importance of addressing it.

These are two great tools to have at your disposal to help organizations achieve their full potential.

Wishing on a Culture

Friday, August 17, 2007


Two situations have unfolded over the past few weeks that either directly or indirectly concern organizational culture. In last week’s posting, I talked about AirTran’s attempt to buy out Midwest Airlines and the changes that would bring to Midwest’s vaulted service culture. As well, Robert Nardelli started his job as the new Chrysler CEO this past Monday and the business press has written much about the drastic changes he may bring to Chrysler to get it profitable once again.

What caught my attention in both of these stories is the idea that a culture is worth fighting for or protecting. I see this as wrapped up in an anthropological view of organizational culture. Anthropologists study cultures, observe behaviors and practices, and identify core beliefs and values that drive these behaviors. It seems to imply that the best cultures are those whose members are most satisfied or happy. In the organization development field, there is a school of thought that believes happy workers in a happy workplace equals company profits. What concerns me about this philosophy is that there is an acceptance that the company’s culture should be democratically-determined, that it can be defined by what we would like it to be or what we are comfortable with. Rather, my experience has taught me that it is the marketplace and its critical success factors that should define a company’s culture. What does the culture need to be in order for the company to compete in its marketplace? Happy workers and a happy workplace environment are not enough to drive profits.

I talked about the Denison model of organizational culture in an earlier posting ("Next Time Call Me," 7/27/07). I think it’s important to view organizational culture through this type of lens because it captures the importance of organizational balance between external and internal focus, and adaptability and stability. We can have a company that treats its employees well but has lost touch with its customers and the changing marketplace. This is not a recipe for success. So it’s not a question of who wins, the employees or the customers. It needs to be both.

In the case of AirTran and Midwest, the resistance of Midwest’s management to AirTran’s offer seemed somewhat tied to a fear of what AirTran would do to the Midwest culture. All of this seemed to open the door for other buyers to enter. Late last week, the private-investment firm TPG Capital said they would team up with Northwest Airlines and beat AirTran latest offer by 25 cents. (Northwest, I think, could care less about preserving Midwest’s culture. They are all about protecting their midwest turf.) Despite having three new board members supposedly sympathetic to the AirTran overture, on Monday of this week, Midwest said it had accepted the TPG offer. Not to be out done, AirTran came back late Tuesday and beat the TPG offer by another 25 cents, offering $16.25 per share. Just today Midwest reported that it will accept a cash offer from TPG at $17 per share.

So is this offer in the best interests of the company, given its many stakeholders? A majority of the Midwest shareholders were ready to sell but the Midwest management insisted that their go-it-alone strategy is superior to becoming a part of AirTran. Midwest customers would probably experience lower fares but with less room and kiss the cookies good-bye. Midwest management would have been out on the street.

But whatever view you take on the business wisdom of this deal, are we aware that in some situations, a desire to hold on to a certain way of doing things can cloud our judgment? Can we fall into the trap that a culture’s preservation can trump what’s good for the business?

Something’s Gotta Give

Friday, August 10, 2007

Now that I have recovered from my family vacation, I can get to a short blurb I saw in the local paper while out of town. It was an Associated Press wire service news item on Airtran’s possible buyout of Midwest Airlines. It’s short enough that I include here the entire piece:

Exec: Keep Midwest culture, not name

The top executive of AirTran Holdings, Inc. said Wednesday the company would try to keep Midwest Airline’s culture – but not is name – after a proposed buyout. AirTran Chairman and Chief Executive Joe Leonard spoke to journalists in Milwaukee a day after Midwest Air Group Inc. announced a committee of its board would start talks with AirTran and other suitors. Airlines that try to straddle two brands after a merger inevitably weaken both brands and leave consumers confused, Leonard said.

From what I know about Midwest and AirTran (having never flown either airline), AirTran’s business model is low-fare while Midwest’s is high service. Here’s how they describe themselves on their respective websites:

Midwest Airlines:

The minute you walk onto one of our aircraft, you know Midwest is different. Wide leather seats, superior service, chocolate chip cookies baked onboard and competitive fares have helped us earn our reputation as "The best care in the air". Add our Midwest Connect regional service and there's something for both business and leisure travelers alike.

AirTran Airways:

AirTran Airways is a low-fare airline designed for business travelers, offering Business class, new planes with XM Satellite Radio and EasyFit Overhead Bins, assigned seats, and our accommodating frequent flier program A+ Rewards. AirTran Airways' mix of low fares and an affordable Business Class with excellent customer service and one of the world's youngest all-Boeing fleets has continued to strike a chord with the public. People said an airline couldn't be all these things. AirTran Airways’ continued success has proven them wrong.

From a business standpoint it makes a lot of sense for AirTran and Midwest to combine. They share similar aircraft and very little of their routes overlap. But how do their business models compare and cultures, given that Mr. Leonard seems to put somewhat of a premium on Midwest’s culture.

Here’s a concrete example of the similarities and differences between the two airlines. Both extensively use Boeing 717’s in their fleets. Midwest’s seat configuration is four across, all coach class, for a total of 88 seats on board. AirTran’s configuration is five across, except in business class which is four across; twelve business class seats, 105 coach class seats for a total of 117 seats on board. This is 30% more capacity than Midwest for the exact same airplane.

So I’m trying to understand Mr. Leonard’s comment that AirTran would try to keep Midwest’s culture after the buyout. Does he mean its definition of customer service? Because if he is referring to a culture of service, that would come with a price tag. Midwest serves freshly baked cookie while you sit in wide leather seats with only one neighbor next to you. This level of service doesn’t come cheap. But I suspect Mr. Leonard wants to keep the friendly, personal service offered by Midwest flight attendants without the added cost of freshly baked cookies and 30% fewer seats on board.

He was quoted in the Milwaukee Journal Sentinel as stating that AirTran would replace most of Midwest’s wide, two-by-two seats with narrower seats, boosting the amount of revenue generated by each flight. I would assume the cozy quarters would be in steerage, I mean coach class, and not business class. Sound business plan but lousy service or culture-booster. I can’t see how Mr. Leonard can keep the Midwest service culture by making it fit into a low-cost, medium service AirTran business model. Something's gotta give. Southwest has done it but they have a very particular definition of service and even they are re-thinking what they offer to stay competitive, such as assigned seating.

So be clear about what you mean by culture, Mr. Leonard, because it may just involve putting on an apron and doing some baking.

Next Time Call Me

Friday, July 27, 2007


Timing is everything, they say. Back in April I came across an article in the Wall Street Journal about some of the issues facing Procter and Gamble (P&G) as it works to create the intended synergies between its Crest toothpaste and the Oral-B toothbrushes of recently acquired Gillette. In her article (“Merger Challenge: Unite Toothbrush, Toothpaste”), Ellen Byron describes some of the cultural differences that Gillette people experienced as the business was absorbed into P&G. In one example, language was a distinguishing characteristic of the two cultures:

P&G employees are known for loading their communications with acronyms like CIB (“consumer is boss”), FMOT (“first moment of truth,” or the moment when consumers notice a product in a store) and SMOT (the “second moment of truth,” when they use it). Outside board members use glossaries at meetings, and Ms. Stacy (head of Gillette’s sales to dental professionals and now for P&G) says she needs one, too. “I have it in my briefcase at all times,” she says, pointing to her attaché’s front pocket.

Apparently there were also differences in decision-making approaches:

Mr. Cleverly, (Gillette’s oral-care president and initial head of the merged oral care divisions) used to working under former Gillette CEO James Kilts, also faced adjustments. He balked at what he saw as laborious processes and slow decision making at P&G, say former Gillette employees familiar with the matter. “The cultural differences were real,” Mr. Cleverly says.

These differences may seem somewhat minor, but the problem is that they can start to distract employees from the really important efforts needed to make sure the company achieves the intended benefits of the acquisition. In this case, P&G is very keen on displacing Colgate from its top position in the oral care market and sees the combined Crest and Oral-B product offerings as the key piece to this strategy. It’s human nature for people from both companies to see differences more than similarities in the early months of integration. But if this emphasis on differences is left unaddressed, this mindset can start to take root and becomes increasingly difficult to change as time goes on.

So I wish P&G well in its business integration efforts in its oral care division. But should the process begin to slow down, Mr. Lafley (A.J. Lafley, CEO of P&G), here’s my recommendation on how to integrate the cultures to create a high performance culture that drives business results.

I don’t know of a better tool and process to use than the Denison Organizational Culture Survey. I recently got around to attending a Denison workshop to learn more about these instruments and I came away very impressed and excited by the ways companies, in a variety of situations, could benefit from Denison’s research and surveys. Of course I went into the workshop a bit skeptical – how could someone capture something as intangible as culture? Well, Dan Denison and his colleagues took a different approach over twenty years ago. Rather than trying to capture culture, they instead focused on identifying organizational factors that drive organizational performance, as measured by bottom-line results. Their research confirmed that the following four culture traits and twelve corresponding organizational capabilities have a direct impact on organizational performance:

Mission
• Strategic Direction and Intent
• Goals and Objectives
• Vision

Adaptability
• Creating Change
• Customer Focus
• Organizational Learning

Consistency
• Coordination and Integration
• Agreement
• Core Values

Involvement
• Capability Development
• Team Orientation
• Empowerment

I particularly like the comprehensive of this cultural model (it covers both an external and internal focus, as well as flexible and stable infrastructures) and that Denison has statistically proven that its correlates with bottom-line business performance.

So how could this have benefited P&G when they first started this integration effort with Gillette? It could have shown Mr. Lafley and his management team how the P&G and Gillette cultures stacked up against 10,000 other companies in terms of organizational strengths and deficiencies. Comparing the two companies in this way, we could then identify which company’s culture was stronger in certain organizational capabilities so we could pinpoint the specific areas where culture merging would have the greatest bottom-line pay off. It may not have prevented but it would have blunted the typical “we bought you so you have to be like us” integration mindset often seen in acquisitions.

There’s lots more to talk about here, but for now it’s exciting to know that just as toothpaste and tooth brushes can be made compatible for greater value so too can organizational cultures.

Weight in the Saddle

Thursday, July 19, 2007

A couple of things in the business world came together for me in the past few weeks.

Back on July 8 I read Paul Brown’s New York Times review of a new book entitled "Finding Midas." The author, Russell Cleveland, is founder of RENN Capital Group, an investment management firm. Using Wall Street investment wisdom of “bet on the jockey, not the horse,” Mr. Cleveland describes the type of chief executive he looks for when making his investment decisions. It is the entrepreneurial C.E.O. that catches his attention, whether or not the person is the founder of the company. “Entrepreneurial management concentrates on seeking new opportunities, trying to fulfill the needs of others,” he writes. “Professional management is mostly about making assets more effective and efficient. Both types of management are important, but in our economy it is the entrepreneurs who create the economic growth and wealth for everyone else.”

Then on July 12, David Kesmodel and John Wilke’s article (“Whole Foods is Hot, Wild Oats a Dud – So Said ‘Rahodeb’”) appeared on the front page of the Wall Street Journal. In case you don’t know, the Federal Trade Commission (FTC) has filed a lawsuit, seeking to block Whole Foods’ takeover of one of its competitors, Wild Oats, on antitrust grounds. The C.E.O. of Whole Foods, John Mackey, has been quite vociferous in defending his company’s strategy and actions. It turns out that the FTC, in a document it made public late on July 10, included a quotation from the Yahoo Finance stock forums. The footnote reads, “As here, Mr. Mackey often posted to Internet sites pseudonymously, often using the name Rahodeb.” (Rahodeb is an anagram of Mackey’s wife’s name, Deborah.)

Given the speed of Internet journalism, by late evening on July 11, Mr. Mackey had posted seven responses to the question “Who is “rahodeb” and why does the FTC quote this person?” on Whole Foods’ website’s Frequently Asked Questions section. His first three answers were:

• I posted on Yahoo! under a pseudonym because I had fun doing it. Many people post on bulletin boards using pseudonyms.
• I never intended any of those postings to be identified with me.
• The views articulated by rahodeb sometimes represent what I actually believed and sometimes they didn’t. Sometimes I simply played “devil’s advocate” for the sheer fun of arguing. Anyone who knows me realizes that I frequently do this in person, too.

Keep in mind that Mr. Mackey posted to Yahoo from 1999 to mid-2006 and only stopped posting because he lost a bet with another correspondent over Whole Food’s stock performance.

Next headline, July 14, in the Wall Street Journal, “SEC Opens Informal Inquiry of Whole Foods CEO Postings.”

Now I have no idea whether his actions violated any securities laws but as a leadership consultant, I find his use of “fun” and “unintentional” to justify his unorthodox actions as reproachable. The smart leader knows that one’s intentions are of no consequence – it is the impact of one’s actions that matter the most. I recognize it must be very difficult for him to separate his identity from the company’s identity, having co-founded it as a college dropout back in 1980. But as can be the case in situations like this one, the moment arrives when it is painfully and publicly clear that the company has grown up but its creator has not.

Then Whole Foods issues the following press releases on July 17:

• “Whole Foods Market’s Board of Directors Begins Independent Internal Investigation Associated with Online Financial Message Board Postings”
• “Whole Foods Market today released the following statement from Co-founder, Chairman and CEO, John Mackey: "I sincerely apologize to all Whole Foods Market stakeholders for my error in judgment in anonymously participating on online financial message boards. I am very sorry and I ask our stakeholders to please forgive me."

Sounds like someone got tired of the jockey doing acrobats while riding the $5.6 billion racehorse.

Postscript: Here is a Wall Street Journal video from Friday, July 20 on the Mackey story.

Driving Miss Manners

Tuesday, July 10, 2007

Leave it to Toyota to come up with another variation on the hybrid theme. In yesterday’s Wall Street Journal, Amy Chozick gives us an inside look at the luxury car buying experience that Lexus is promoting in its Japan market to compete with BMW and Mercedes (“The Samurai Sell: Lexus Dealers Bow to Move Swank Cars”). Lexus has modeled its version of customer service after ancient Japanese hospitality traditions, including its samurai culture and tea ceremony. All its employees attend a three-day training course in the shadow of Mount Fuji to learn how to bow, serve tea, and smile in ways to make the Lexus car buying experience pleasurable and memorable. Needless to say, this is an unusual mix of business strategy, national culture and customer service.

As I thought about this story more, I began to see that this strategy is more than just a variation on customer service. Rather, what Lexus is trying to do is to create a culture of hospitality in the rough-and-tumble automotive industry. And there is a significant difference between customer service and hospitality. Being more transactional in nature, customer service is standard business practice, regardless of how well a company practices it. But hospitality implies ritual, location, and relationship, the sense of welcoming and care. Not exactly words you think of when “dealer showroom” comes to mind.

Clearly this hospitality strategy is in line with tenets of the experience economy. My posting from March 23 (“Jim Gilmore and the Geeks”) talked about some companies who have developed intentional experiences for their customers as a way to either distinguish themselves from their competitors or offer value-added features or both. I talked about the importance of authenticity if an experience is going to avoid the gimmick trap. With this hospitality approach, Lexus is coming close to blurring the lines between service and ritual. Since rituals usually involve an acknowledgment or honoring of some sort of significant life event or experience, Lexus may need to seriously look at how far they want to go down this path. To what degree does buying a Lexus in Japan signify an accomplishment or life passage? Would this only apply to first-time Lexus buyers, who have truly “moved up” in status and buying power that they can now afford a Lexus? We all grew up on the notion of cars as status symbols. How could Lexus use the ancient hospitality philosophy to take this reality to the next level? And why couldn’t Lexus apply this approach in the U.S.? Though the practices and ritual are not of American origin, the Japanese version of the hospitality tradition has the chance of striking a chord with a particular luxury car buyer – the acknowledgement that this purchase represents a major personal accomplishment. Combine this with a “ceremony” that is dignified, refined, and rooted in 700-year-old traditions and you can create one powerful and emotional connection.

Now I’m not advocating that the Big Three automakers copy Lexus’ hospitality strategy. But it wouldn’t hurt them to re-examine the entire buying experience through the eyes of the consumer. Otherwise, an old saying (ichigo ichie) from the Japanese tea ceremony may prove to be prophetic…

Treasure every encounter with another person, because it may never happen again.

Culture in the Clouds

Wednesday, June 27, 2007

It was only a matter of time for this true confession moment to arrive. I am a commercial airline junkie. Despite never having worked for an airline or the likelihood that I ever will, I love reading about the airline industry. So you can imagine what a thrill it was when I won in a silent auction a few years back a session in the America West (now US Airways) flight simulator in Phoenix, Arizona. Yes, I flew an Airbus 320 (I need to work on my landings).

So Susan Carey’s interview with CEO Dave Barger in the June 21 issue of the Wall Street Journal (“Changing the Course of JetBlue”) naturally caught my attention. I was curious to hear what he had to say, having been recently promoted to CEO and being there during JetBlue’s operational meltdown in February.

His comment that caught my attention was his response to the question about the likelihood of airline consolidation.

WSJ: Will the long-predicted consolidation of the airline industry ever happen?

Barger: I truly believe it will. Take a look at the auto industry and the steel industry and these other maturing industries and one can’t help but be led to a conclusion that there will be consolidation. How many alliance carriers do you need to go from A to B? How many domestic brands do you need? But how do you merge cultures? That seems to be the lone question that never has been answered adequately. You can merge operating certificates and facilities and fleets and the infrastructure. But even if a merger makes sense, there isn’t enough creativity to say, “Listen, how are we going to make the cultural side of the equation work?”

Even for a culture aficionado like myself, Mr. Barger’s comments on the blending of cultures being a key business challenge jumped out. This thought stayed with me as more articles came out the past few days about Northwest Airlines rash of cancellations, apparently due to pilot availability. The pilots are blaming management for not hiring back enough pilots to cover the busy summer travel season and management saying it’s pilots not showing up for work. Since I live in the Detroit area, I am unfortunately beholden to Northwest for my travel needs. And it ain’t pretty. They recently came out of bankruptcy, having slashed $2.2 billion in annual operating costs, with 60% of the savings coming from reductions in employee wages, benefits, and work rule reductions. And it shows. I would venture to say that very few people on a Northwest plane want to be there.

Then I read Melanie Trottman’s article in today’s Wall Street Journal (“As Competition Rebounds, Southwest Faces Squeeze”) about some radical changes Southwest Airlines is contemplating as it decides how best to compete with the legacy airlines (such as Northwest) who have lower costs as a result of going through bankruptcy. Here’s the quote that stood out for me:

Southwest, which prides itself on being employee-friendly, is one of the only airlines that has not sought wage or benefit concessions from its workers. The airline characterizes its work force as ultraproductive and pleasant to passengers. If management seeks pay cuts, it risks alienating employees who Mr. Kelly (CEO) calls the airline’s “greatest weapon.” Mr. Kelly says he’d consider pay cuts a “management failure.”

Southwest knows that an employee-positive culture is an investment, a savings account you add to in both the good and bad times (Southwest didn’t lay off anyone after 9/11) so that when you need to go to the employees and ask for greater effort in service or cost reductions, they are more likely to make the necessary sacrifices to stretch the company dollar. Contrast that with Northwest’s approach. They busted one of their unions during bankruptcy. It solved a short-term problem and obviously helped to keep the airline aloft. But at what price? Long term they have a significant employee relation problem – pilots who will only do the minimum required. I don’t know about you, but when was the last time a commercial airplane flew without a pilot?

Which brings me back to Mr. Barger’s comment. Imagine trying to merge the cultures of Southwest and Northwest. I think I need some Dramamine.


Post-script: As I was writing this column, up pops an email from Crain’s Detroit Business with the headline, “Tell Us Your Northwest Problems.” Excuse me while I take this call.

What Comes After (in Business)

Tuesday, June 19, 2007

Two recent articles got me thinking about the life cycle of companies and business in general. Neal Boudette’s article in yesterday’s Wall Street Journal (“Detroit Confronts Surplus of Showrooms”) and David Gross’ guest column in the June issue of Inc. (“The Truth About Investment Bubbles”) both allude to the fact that death is as much a part of the business world as the living world. Couple this with the fact that most religions believe that death is not the end of the line, that there is some type of re-birth that occurs, you can find yourself in a philosophical discussion that has real business ramifications.

In the case of the saturation of Big 3 dealerships left over from their heydays, Boudette points out in his article that it’s not so easy to pull the plug on a dealership. Given state laws that protect franchisees, some of these smaller dealerships can hold on for some time. Boudette describes one Lincoln-Mercury dealership in southern California (average sales of 20 to 25 cars a month) that turned down a buy-out offer from its Toyota competitor down the street. “But Mr. Mayberry, 58 years old, said no thanks. His father had bought the business in 1961, and he does enough business between new-car sales, used cars and service to make a profit and pay his salary and those of his two brothers and employees.” I’m sure from Ford’s perspective, it would be better if Mayberry Lincoln-Mercury closed up shop. And maybe it is time for it to die. But as long as it is making a profit, as long as it is still breathing, why bring it to a premature death? But the longer it is alive and diluting the local auto market, the greater the drain on Ford.

Gross talks about how major investments in infrastructure over the past 150 years has sometimes led to short term death but long term growth. The over-building of such things as telegraph lines, rail lines, and fiber-optic cable created the possibility that some players would not survive the shakeout. But those that did or those that built on this inexpensive infrastructure were able to create new businesses in a cost-effective manner. So just as we benefit from the fossils left behind of dinosaurs long gone, so do businesses build and succeed on the skeletons of over-built infrastructures. Nothing ever disappears completely.

Sometimes what needs to die in order for a re-birth is the death of a myth or self-perception. Some companies have such a storied history that when the present starts to pummel them, they cling to the past and its finely tuned myths. The company may not need to die but how its stakeholders view its past, present, and future may need to die off. We can only begin to let go of the past if we believe that something good and new will rise from the ashes. Something always comes after.

Laptop Dip

Tuesday, June 5, 2007

Last week I attended an event featuring Seth Godin, the marketing guru and author of such books as Purple Cow, Permission Marketing, and Small is the New Big. (Apparently he is B-I-G on the West Coast.) He was in Ann Arbor as part of the book tour for his latest, The Dip: A Little Book that Teaches You When to Quit (and When to Stick). His argument is that successful people (and organizations) quit all the time. They succeed because they know when to either quit or push through what Godin refers to as “the Dip” – the point in the process where things get really tough and you start to question why you’re even in this. They also excel in recognizing and abandoning efforts that are headed for a dead-end -- “the Cul-de-Sac” in Godin-speak.

Which brings me to the news from late May that Dell will start selling two desktop PCs in Wal-Mart and Sam’s Club starting this Sunday. So Dell is going retail, into the heart of Hewlett-Packard territory. The two have battled it out for some time as to who will be the world’s largest PC company. As I understand the story, a few years back, Dell’s direct sales model (you order and customize your PC online and it is shipped to you directly) was kicking H-P’s retail model, primarily on price. H-P decides to play the Dell game and tries to compete on price, laying off employees to get the low cost structure that Dell can achieve through low inventories, since they make PCs only on demand. H-P starts to lose big. Out goes CEO Carly Fiorina and in comes new CEO, Mark Hurd. About this time the laptop revolution starts to kick in and more buyers gravitate to retail locations where they can check out the look and feel of the laptop. At the same time H-P gets its internal operations in order and yesterday the Wall Street Journal publishes an article entitled “How H-P Reclaimed Its PC Lead Over Dell.”

So here’s where “the Dip” comes into play with Dell. Mr. Godin points out that “the stupid thing to do is to start, give it your best shot, waste a lot of time and money, and quit right in the middle of the Dip.” Even though Dell says this is the first step in a broad, global retail push, it seems like a weak first step. Let’s face it, Wal-Mart and Dell? If you’re going retail, you got to go with Target. And it’s only two models of desktops. (I thought the laptop market is where the action is nowadays?) From an organizational culture standpoint, Dell needs to live-and-breath retail, something that doesn’t happen overnight. In the process, Dell will need to relax the “direct sales dogma” that has brought them much success. In an email to employees a few months ago, Michael Dell stated that “the Direct Model has been a revolution, but it is not a religion.” I suspect many within Dell found the statement to be heretical – the Direct Model has been their Holy Grail of competitive advantage for some time. Some say “you can’t serve two masters” and Godin the Oracle says “you really can’t try to do everything, especially if you intend to be the best in the world.” Seth, do you want to be the one to tell Michael Dell you can have a Dip on the way to a Cul-de-Sac?

Taking Transformations Private

Tuesday, May 29, 2007

The news that a private equity firm, Cerberus Capital Management LP, is taking Chrysler off of DaimlerChrysler’s hands is intriguing me more and more, particularly after I read Orit Gadiesh and Hugh MacArthur’s article (“Growing the ‘Private’ Club”) in the May 25 issue of the Wall Street Journal. In it they explain why private equity “is becoming a benchmark of performance for CEOs and boards of directors.”

Despite the little I know about the private equity world, I still suspect that we organization development (OD) types could learn a thing or two from their investment and management models as we go about helping our companies and clients reach their potential.

Here’s my limited understanding of the private equity model. They go after public companies that they consider to be under-valued, take them private by buying all the outstanding shares (and taking on a significant amount of debt), clean up the business by focusing on the key business or businesses that will drive value, thereby transforming the company into one with a clear value and growth strategy. Then they take the company public again to reap the financial rewards of a sought-after stock in the public investment market. I would assume one of the reasons why there is so much money in the private equity world is that the model usually generates big returns on investment. As Gadiesh and MacArthur point out, “from 1969 to 2006, the top quartile U.S. private-equity funds had annual rates of return ranging from an average of 39% to well over 200% through good times and bad.” I don’t know about you, but that pretty much beats my CD.

Here’s what I think we can learn (or be reminded of) by the success of most private equity transformations:

1. Focus on value – I can’t imagine how a management team could deliver such legitimate returns without a laser sharp focus on what is the value proposition for this business and proceed to cut, trim, re-deploy and invest resources in such a combination as to maximize value.
2. Discipline – Plenty of public companies have assets on the books that have little to do with its core business. Too many companies fall for business opportunities that have little to do with their espoused value proposition. Others get tangled in the “build it and they will come” mentality. My guess is that these private equity management teams have the discipline to avoid temptation and fantasy.
3. Transform to the market, not utopia – if we’re not careful as OD professionals, we can lose sight of what’s really important and spend too much time and money on employee satisfaction surveys and 360 feedback and other types of “temperature checks”. Our main focus with our clients should be “what changes need to occur to ensure we can execute our business model that is designed to deliver value to our shareholders and customers.”

Keep an eye on these folks. If they pull off a Chrysler miracle, it’s a whole new ballgame.

Sprechen Sie "Engineer?"

Tuesday, May 22, 2007

The Wall Street Journal ran an interesting article ("SAP's Plan to Globalize Hits Cultural Barriers") back on May 11 by Phred Dvorak and Leila Abboud about the efforts going on at SAP (the German software engineering company) to globalize its technical workforce.

A number of things caught my attention as I read the story.

In my March 9 posting, I talked about how one can describe and understand corporate cultures through the lens of behavioral styles. In the SAP Story, the clash between Shia Agassi (we'll assume he represents the Driver culture - started four companies by age 24) and the German programmers (we'll assume they represent the Analytical culture -- took a year or more to hone programs) is a classic struggle between speed and quality, which are not natural allies. But the important thing to consider is that if either side "wins," SAP loses. Here's why.

If the Driver side wins, a SAP product will get into the market faster but may experience quality glitches that undermine its credibility and drive its customers to its competitors who have comparable products with better quality. If the Analytical side wins, the products will be technically sound but will most likely be late to market or outdated from an innovation or customer requirements standpoint. The trick for SAP, or any other technology company, whether they are in software or pharmaceuticals, is to find the right balance between responding to market pressures for faster release of products and ensuring quality. It can take a company and individual members a long time to realize that both, speed and quality, are needed in most markets today.

Adding to this dynamic is the fact that five German IBM engineers founded SAP. I don’t know about you, but when I hear the words “German, “IBM,” and “engineer” spoken in the same breath, words like “precision,” “methodology,” and “quality” take on a whole new dimension. I think it’s safe to say this history has embedded an engineering mentality deep within SAP’s DNA. What implications does this have for SAP’s business? Well, for one thing, engineers tend to view suspiciously any argument for speeding up a process. They understand making a process more efficient but they don’t “get” doing it faster because quality is bound to suffer. An engineering mindset also tends to want to build a complete and thorough version of whatever product they are working on, often because they are capable of including additional features and of course there is the “cool” factor to consider. This can lead to really cool products that the customer finds too complicated or irrelevant.

Another piece to this puzzle is what work SAP leaders assigned to which global center. Palo Alto handled the products’ look and feel (sounds glamorous and high visibility); India specialized in analytical tools (sounds like this could be cool); Walldorf (Germany) managed hard-core coding. The little I know about the assembly line culture of software development tells me that hard-core coding responsibilities aren’t glamorous or career-advancing roles, particularly when compared to project management roles. So on top of all this change, the German programmers got the grunt work (somebody tell me if I’m off base here). Keep in mind as well, these are programmers who take a great deal of pride in their national and personal reputation as engineers. As one German developer commented about the Hercules project, “it’s not ‘good, old German engineering.’”

So what’s my pithy advice to SAP?

1. Educate everyone in SAP on the external environment – rapid advances in technology demand innovation and adaptability if SAP is to compete effectively.
2. Focus on the customer and their needs. Just because you can build it doesn’t mean customers will spend money to get it.
3. Experiment with finding the right balance between speed and quality. Learn where speed will compromise quality and where it won’t. Understand as a Driver or Analytical style person that one’s predisposition to a particular way of doing things doesn’t make it right in every situation.

Most of all, viel glück!

Splitting Hairs Over Culture

Tuesday, May 15, 2007

Two articles I read recently have gotten me thinking more about this idea of a “strong” culture and whether such a moniker is as desirable as it sounds.

David Cho’s May 7 article in the Washington Post on New Century Financial’s culture (“Firm’s Culture Led to Approval of Bad Loans”) and a white paper (“Demystifying Corporate Culture”) on HermanMiller’s website either refer or allude to strong cultures.

Here are the opening paragraphs from Mr. Cho’s article:

Maggie Hardiman cringed as she heard the salesmen knocking sides of desks with a baseball bat as they walked through her office. Bang! Bang! “’You cut my [expletive] deal!’” she recalls one man yelling at her. “’You can’t do that.’” Bang! The bat whacked the top of her desk. As an appraiser for a company called New Century Financial, Hardiman was supposed to weed out bad mortgage applications. Most of the mortgage applications Hardiman reviewed had problems, she said. But “you didn’t want to turn away a loan because all hell would break loose,” she recounted in interviews. When she did, her bosses often overruled her and found another appraiser to sign off on it.

In the HermanMiller paper, one of its opening paragraphs reads as follows:

The idea that an organization could be intentional about building a culture and that the culture can, in turn, affect an organization’s performance, has been around since 1939, but it didn’t fully enter the business consciousness until the late ‘70s. Since then, a strong corporate culture has become a holy grail of sorts for companies looking for an edge in today’s environment of constant change and increasingly stiff competition.

So what makes for a strong culture? I think an argument can be made that New Century Financial had (the company has declared bankruptcy) a strong culture. There seemed no doubt about what it expected of its employees, what was necessary to succeed in its marketplace, and the values it emphasized: approve as many loans, however questionable the credit history of the applicants, as fast as possible. Yet I doubt if most people would hold New Century Financial as a culture worth emulating.

All of this reminds me that I have been uncomfortable for some time with the concept of a strong culture as the desired state because it is open to interpretation and it implies a certain set of values that isn’t always reflective of health or strength. For example, is a culture strong because there are clear expectations and mission and are consistent in reinforcing certain behaviors? If so, New Century Financial meets these criteria, however dysfunctional and demeaning some people experienced it. Or is a culture strong simply because it has endured? Then a hide-and-cover culture like Ford Motor can end up relying more on living on its past glories than facing its current and future challenges. And to what degree does a charismatic leader boost this endurance through his or her sheer will and when they are no longer on the scene, the culture struggles to survive? In addition, it doesn’t take much for conventional wisdom to think of a culture as “strong” one day and “rigid” the next when it fails to adapt to its external environment.

Therefore, I think we need to further evolve our perception and understanding of what makes for a desirable culture and I think the adjective “strong” falls short and is outdated. I would replace it with “sustainable,” which I recognize is somewhat of a buzz word. But what is probably not a passing fad is that organizations in the future will experience rapid and unpredictable change. The ability to adapt and find new ways of accomplishing its mission or the flexibility to re-think its purpose convey to me a strength that is uncommon but critical if we are to preserve the best of what collective effort in an organized entity can accrue to its members, our economy, and our society.

What’s My Metaphor?

Tuesday, May 8, 2007

I recently attended a colleague’s PhD dissertation defense in the field of organizational behavior. It occurred to me during his discussion that one’s take on the nature of organizational culture is influenced by the metaphor one uses to define and conceptualize something as intangible as culture.

As I listened to his presentation and the questions his academic committee members asked of him, the picture of an organization as a machine emerged. The talk had a certain mechanistic quality to it, along the lines of “this isolated intervention had this type of response.” Very “cause and effect.” The more I reflected on this metaphor, the more I thought about how viewing an organization in these terms would influence how you approach “fixing” an organization’s culture. Because if someone views an organization as a machine, that would imply that someone or something has built this culture, has constructed it. Something constructed has inter-connecting pieces so if an organization’s culture is in need of fixing, some pieces or their connections must be broken and in need of repair.

With this type of metaphor, the change agent takes on the role of social engineer – tinkering until the right interventions cause the desired effects. And because we know humans are not machines, we can subconsciously separate ourselves from the machinations of an organization’s culture. We end up having an externalized relationship with the culture and the nature of any relationship can be captured on a scale that has “what we do to it” on one end and “what it does to us” on the other. And once something is external to us, it is that much easier to blame, judge, or question the other.

But if one’s metaphor for an organization’s culture is an organism, then one looks at an organization’s culture through different lens. An organism implies an intricacy and inter-dependency that challenges the notion of isolating particular cause-and-effects. An organism is in intimate contact with its external and internal environments and its dynamic is more ebb-and-flow than action-reaction. It operates on many different levels – chemical, emotional, psychological, biological. With this metaphor, an undesirable state of affairs is less about something being broken and more about something being out of balance. Since we as individuals are organisms, the culture-as-organism metaphor would imply that an organization’s culture is an extension of us, a reflection or perhaps even a magnification of the collective individuals, warts and all.

In this case, the change agent’s role is one of physician, and specifically, general practitioner -- someone who takes a holistic approach to understanding and addressing the issues that have caused an imbalance in the “body corporate.” It involves listening to where the ailments are located and exploring until they surface the imbalances. A change agent who sees through this frame of reference would most likely be aware of the existence and significance of iatrogenic ailments -- those induced in a patient by a physician’s words or actions. Such a change agent would appreciate how any intervention by them would have repercussions in the organization, sometimes far beyond their sight or reach. There is no divide between the change agent and the culture – at most it is a step back to gain perspective.

I’ll leave you with some simple questions to ponder: machine or organism, engineer or physician, broken or imbalanced? How do you “see” an organization?

Mapping the Dynamics of Change: Is Time on Your Side?

Tuesday, May 01, 2007

I am going to pick up on an earlier posting of mine about mapping out all the many dynamics of organizational change. This posting will look at how time orientation is part of the dynamics of change. As with the earlier posting, I welcome your additions to this list.

Past

- The myths and stories that surround the founding of the company.
- The degree to which these myths/stories compare to the real story of the company’s founding.
- Who are considered the heroes of the founding story.
- The degree to which the company’s founding is characterized as the result of one person’s effort vs. a team effort.
- The common understanding of why the company was successful in the past.
- The degree to which the past is considered the “good old days” or “the golden age.”
- How failure in the past is characterized.
- The degree to which failure in the past was attributed to external vs. internal circumstances.
- The degree to which the Board of Directors is seen as contributing to events in the past.
- The degree to which employees still hold a grudge over decisions made in the past.
- The degree to which middle managers still hold a grudge over decisions made in the past.
- The degree to which senior leadership still hold a grudge over decisions made in the past.
- The degree to which the unspoken opinion is “our best days are in the past.”
- The degree to which previous change was managed well.
- The degree to which employees believe “the past is prologue.”
- The degree to which middle managers believe “the past is prologue.”
- The degree to which senior leadership believe “the past is prologue.”
- What are considered “skeletons,” where are they “buried,” and who knows the answers to both?

Present

- The degree to which employees see themselves as victims of the changing external environment.
- The degree to which middle managers see themselves as victims of the changing external environment.
- The degree to which senior leadership see themselves as victims of the changing external environment.
- The degree to which employees acknowledge the current change.
- The degree to which middle managers acknowledge the current change.
- The degree to which senior leadership acknowledge the current change.

Future

- The timeframe in which employees expect the current change to slow down or go away.
- The timeframe in which employees want the current change to slow down or go away.
- The degree to which employees believe more change is in the foreseeable future.
- The timeframe in which middle managers expect the current change to slow down or go away.
- The timeframe in which middle managers want the current change to slow down or go away.
- The degree to which middle managers believe more change is in the foreseeable future.
- The timeframe in which senior leadership expect the current change to slow down or go away.
- The timeframe in which senior leadership want the current change to slow down or go away.
- The degree to which senior leadership believe more change is in the foreseeable future.

There are too many variables to think about. I need to take a break.

The Culture Matrix: Part 2

Friday, April 27, 2007

My blog from this past Tuesday introduced you to Marc Chouinard and his Culture Matrix process. Marc shared with us the two main factors that often are overlooked in any change initiative:

• Revealing and understanding the real “living” culture of the organization;
• Revealing and understanding the forces that will support or hinder the change initiative, called Performance-Drivers and Performance-Drains.

He gave us the low down on the living culture on Tuesday. Ready to get smarter? Let's go...

Performance-Drivers and Performance-Drains are culture dynamics we can reveal when we access the real, living culture (RLC) of an organization. He defines the RLC of an organization as “the coming together of what people believe they need to be and do to be successful in the particular context of their organization—the coming together of the workforce’s conscious and unconscious behaviors drivers.”

Culture elements come in pairs of contrasts.
Let’s imagine that your organization goes through a traditional culture assessment that includes the following statement: “working hard increases my opportunities within the organization.” Let’s say for the purpose of this exercise that the predominant answer to this question by your organization’s workforce is “Strongly Agree.” This means that your organization has an “assessed” culture of “working hard.”

Now, what does the concept “working hard” mean? From the angle of the RLC of your organization, the best way to define a culture element is to define its contrast. So, what is your contrast to the concept “working hard?” You can answer this question by asking yourself: “If I am not working hard, what am I?” The answer is the contrast.

Now imagine that I am asking this same question to each employee of your organization. Employees may say that the contrast of “working hard” is “being lazy” or “working smart” or “having a balanced work/life,” or anything else for that matter. The reality is that the answers will cover a wide spectrum. It is in these answers that lay the Performance-Drivers and Performance-Drains of your organization. The contrast of a culture element defines a “force” that is either supporting or hindering your organizational objectives.

What the contrasts say about your employees
The contrasts to “working hard” say a lot about your workforce. They:

• reveal how the owners of this pair of culture element contrasts perceive the world around them;
• define the multiple sub-cultures of your organization (in this case in regards to the “working hard” culture element); and
• define the targeted change strategies that change agents need to ensure sustainable change.

Let’s go a little deeper with these contrasts.

“Being lazy”—this contrast says that the employees forming this sub-culture are hard workers. They tend to do a lot and feel good when doing a lot. They may also be very inefficient, because their measure of success is the amount of work they are doing or the amount of time they spend at the office, rather than the results they are generating.

“Working smart”—these employees tend to be result-oriented. They value efficiency. One of their measures of success is the ability to produce results within a regular or reduced schedule. They tend to judge the “being lazy” contrast employees as being inefficient or disorganized. On the other hand, because they are not working long hours, they tend to be judged by their “being lazy” colleagues as being lazy, because they are not working long hours.

“Having a balanced work/life”—these employees value their personal time and their activities outside their work. They tend to work regular hours and perceive “long hours” workers as having no personal life and as being workaholics. Their “being lazy” colleagues or managers often perceive them as being lazy or lacking ambition.

Performance-Drivers and Performance-Drains
You can see that “working hard” can be a Performance-Drain for your organization. It can lead to:

• The “being lazy” employees spending a lot of time at the office, without necessarily being productive.
• The “working smart” employees being frustrated and disgruntled because they are not recognized and rewarded for the results they are generating because they are not spending long hours at the office.
• The “having a balanced work/life” employees being de-motivated because they realize that their choice of lifestyle will prevent them from growing within the organization.

Conclusion
As you can see, it is the contrasts of “working hard” that define it. Each of the three contrast-based definitions carries very different and sometimes opposing meanings, values and perceptions. In this regard, each individual subconsciously gauges his or her level of “working hard” against their particular contrast and concludes to what degree their behavior will make them successful or not within their particular organization.

As Marc points out, if you don’t know these extremes, you can’t formulate a change plan that will work. This is because your workforce may agree “at the rational level” and diverge “at the subconscious level”—where behavioral drivers and motivators rule. That’s why we have organizations where everyone says the right thing and all are in agreement and still have zero alignment on what actions to take.

The Culture Matrix, through this multi-layered approach, dramatically increases the speed, the ownership and the sustainability of the change effort. It gives you access to the core of people’s subconscious drivers and motivators. As a change agent it allows you to target your communication and change efforts to the specific sub-cultures of your organization, using their own words. Very cool.

The Culture Matrix

Tuesday, April 24, 2007

I finally got around to talking with a colleague-once-removed of mine, Marc Chouinard, about his process for effecting cultural and organizational change. I think his approach has a great deal of merit, precisely because it targets uncovering the subconscious “frames of reference” that drive individual actions, decisions, and interpretations during any change effort. I think this “in the trenches” approach is a critical component of any change strategy. So let me try to give you a summary of Marc’s process, The Culture-Matrix.

From Marc’s perspective, there are two main factors that, most of the time, leaders overlook in any change initiative, but that make all the difference in the success and sustainability of the change initiative. These factors are:

• Revealing and understanding the real “living” culture of the organization;
• Revealing and understanding the forces that will support or hinder the change initiative, called Performance-Drivers and Performance-Drains.

This blog will focus on the first point. I will cover the second point in a subsequent blog.

Revealing and Understanding the Living Culture of an organization

Let’s start by defining what the real “living” culture of an organization is. It is the coming together of what people believe they need to be and do to be successful in the particular context of their organization. In other words, it is the coming together of the workforce’s conscious and unconscious drivers of their behaviors.

One of Marc’s clients, in a moment of personal epiphany, does a great job describing the “living” versus “assessed” culture of an organization -- “there’s a big difference between having an opinion on something and being driven by something.”

“Having an opinion on something” refers to culture assessment questionnaires which ask a series of “opinions” to the members of an organization in order to define the culture of the organization. Marc’s client continues:

It’s okay to have an opinion about the presence or absence of a culture element, but it doesn’t tell you if this culture element dictates day-in and day-out your perceptions, decisions, behaviors, judgments and the ways you react to your environment. If you would have asked my employees if customer satisfaction is important for our organization, they would have answered a resounding YES! Yet, when you look at what motivates a great proportion of them on a daily basis, you find what is critical in their mind to be successful in their role in our organization is to solve problems.

As we all have experienced when talking to a customer support organization when experiencing problems with a product or service (computer, insurance plan, car problem, etc.), the solving of our problem is only one factor that influences our satisfaction as a customer. Other factors can be, based on our personal preference, the friendliness and helpfulness of the representative, being clearly explained the steps that will happen to solve the problem and identifying who are responsible for each step.

In the case of the organization of Marc’s client, the customer support personnel focus on “solving problems” because they believe that is what will make them successful within their organization. So their interpretation of what it means to “make the customer satisfied” (the assessed culture) is “solving the customer’s problem” (the real living culture of the organization). Having the assessed culture of your organization tells you nothing about the “living” culture or your organization.

It is important to know the living culture of an organization because it:

• tells you what your employee and managers focus on to realize the objectives of your organization;
• defines the code of conduct (both formal and informal) that your employees are following.
  
  

The Culture-Matrix reveals the living culture of your organization. It is a guided individual interview process that takes place in groups of ten employees where each individual works individually and privately. Contrary to culture assessment questionnaires, the Culture-Matrix does not suggest specific culture elements: it reveals the culture elements that are present and in the words of the employees. This process takes between two to three hours per group of ten employees.

No questionnaire, no personality instruments, just good, hard investigative work “in the trenches.” I don’t know about you but I like getting my hands dirty when it comes to cultural and organizational change.

Coming up next, Performance Drivers and Performance Drains.

Mapping the Dimensions of Organizational Change

Friday, April 20, 2007

You can’t talk about organizational culture without eventually getting around to talking about organizational change. So in the spirit of recent Herculean mapping projects, such as the Human Genome Project and the mathematical structure known as E8, I am going to start by laying out all the different dimensions I know of when it comes to organizational change. I invite others to join in and add dimensions that I miss (the E8 project included 18 mathematicians using their super-computers to lay out a 453,060 x 453,060 matrix). To keep this effort somewhat manageable, I’m going to tackle one dimension or continuum per post. Let’s start with the role that the external environment plays in organizational change.

Dimension: External Environment

• the degree of force (speed, impact, rate, and breadth) of external changes.
• the degree to which the organization’s competitors are making changes in response to the outside forces.
• the degree to which the senior leadership attaches importance to a competitor’s actions.
• the degree to which the media are characterizing the external environment and the quality of the various organization’s responses to date.
• the degree to which the organization is physically located to the source of the change.
• the degree to which the Board of Directors (both individually and collectively) is:
• paying attention to these forces;
• using data, anecdotal evidence, or intuition to characterize the external environment;
• attaching importance to these forces;
• taking these outside forces seriously;
• concluding these outside forces require the internal organization to adapt;
• communicating its assessment of the external environment to senior leadership.
• the degree to which the shareholders (both individually and collectively) are:
• paying attention to these forces;
• using data, anecdotal evidence, or intuition to characterize the external environment;
• attaching importance to these forces;
• taking these outside forces seriously;
• concluding these outside forces require the internal organization to adapt;
• communicating its assessment of the external environment to senior leadership and the Board of Directors.
• the degree to which senior leadership (both individually and collectively) is:
• paying attention to these forces;
• using data, anecdotal evidence, or intuition to characterize the external environment;
• attaching importance to these forces;
• taking these outside forces seriously;
• concluding these outside forces require the internal organization to adapt;
• making plans to respond to these forces;
• concluding which parts of the organization need to change and how quickly.
• the degree to which middle management:
• buy into senior leadership’s assessment of the external forces;
• trust the analysis and judgment of senior leadership.
• the degree to which rank-and-file employees:
• understand the external forces and their potential impact on the organization’s future success;
• believe these forces will have the consequences that senior leadership has spelled out;
• trust senior leadership’s judgment and assessment of the external environment;


Future postings will cover a different dimension of change. Maybe together we’ll be able to pull off this Dynamics of Change Mapping Project after all.

Leading Change -- This Fall on ABC

Tuesday, April 17, 2007

The April issue of FastCompany has an article on the change effort going on at the F.B.I. (“Mission Impossible?”) and I think it’s worth checking out. The bottom line is that in our post-9/11 world, we need the F.B.I. to be an organization that focuses on preventing terrorism and not just tracking down the perpetrators after the crime occurs. It has to move from a reactionary culture to an anticipatory culture. What makes this change particularly challenging is that it’s not just about “how” the F.B.I. goes about fulfilling its mission – it’s about its mission as well. In other words, the F.B.I. is going through both a business model change (from criminal investigations to counter-terrorism) and an operational change (from narrowly-focused investigations to a broad, coordinated strategic approach to countering terrorist acts). The article wasn’t too optimistic about the organization being capable of making such a change:

People who know the F.B.I. best – including many who’ve spent their careers there – would say that its culture, leadership philosophy, and links to the political arena make major change in “the bureau,” as it is also known, highly improbable. It is, they argue, just too entrenched, too bureaucratic, too rigid, too old, too slow to understand, and execute the scale and sweep of change that needs to happen.

This is sounding like one dumb dinosaur. Not good for them, not good for us.

This resistance to change, given all the implications to the bureau’s future and our country’s security, got me thinking. One thing I suspect is a factor in people resisting change is our natural, human tendency to treat the unknown or unfamiliar with skepticism or downright hostility. When we are not in control of a situation, when the external environment imposes change on us against our will, we naturally imagine the worse and spend considerable time and energy fixating on the negative in all its permutations. Our imaginations kick in and we come up with all sorts of dire implications to the change. We love horror films because our instinct toward self-preservation has wired our imagination to see the worse and respond accordingly. We can’t see any other possibility unless someone shows us a different story, a picture of what the new world would be like. Something that visualizes and describes “a day in the life of…”

But if people can use their imagination for the worse, then we can tap into that same imagination to image the future. Why not use the power of our imagination and show people an F.B.I. that is working and acting in the way it needs to as a counter-terrorism organization? And who best to show us this different F.B.I. than Hollywood? Yes, it’s time to bring back “The F.B.I.,” the TV series. (In case you weren’t around, “The F.B.I.” was a very popular TV series on ABC from 1965 to 1974.)

Too farfetched of an idea? Well, I direct my skeptical reader to Master Schein’s discussion of the importance of establishing “temporary parallel learning systems” as part of any transformational change effort. In his own words:

If, however, senior management recognizes that elements of the culture have become dysfunctional, then it must launch a transformational change program and create a management process that makes such deep change feasible. The actual change activities will vary according to the situation, but almost all such programs involve creating a temporary parallel learning system in which some new assumptions are learned and tested. It is too painful to give up a shared assumption in favor of an unknown substitute. If some part of the organization can learn an alternative way of thinking, and if the alternative can be shown to work, then there is less anxiety as the alternative is gradually introduced into the main part of the organization. The trial and error in the temporary parallel system creates some of the necessary psychological safety by providing role models for new ways of thinking and behaving. (The Corporate Culture Survival Guide, p. 130-131)

So why not have a TV series serve as a temporary parallel learning system? What better way to make the new way concrete and tangible? So Hollywood, show all of us what the new F.B.I. could and should look like. Stretch our imaginations. Show us it is possible. Take us inside the drama of counter-terrorism but also organizational change – a drama many of us know only too well. Show us the patriotism of those going against their self-interests for the good of our country. But keep it real and not the fantastic nature of 24 so people can buy into it. And make sure Harrison Ford gets the big role. No one plays tough and vulnerable quite like Mr. Ford. And my vote for the name of the series is Today’s F.B.I. Leading change, sixty minutes at a time. I think it’s long overdue.