Raymond L. Wheeler, DMin

Musings about leadership


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Is Your Corporate Culture Healthy or Toxic?


Corporate Culture – The Non-verbal Accelerator of Corporate Efficiency and Resilience

I was intrigued with the article (and the ensuing flap) over Greg Smith’s New York Times essay on why he left Goldman Sachs. In the middle of all that was written one thing stood out as a consistent theme – corporate culture is important.  What does corporate culture do?  How does it help an organization to be efficient?  When does it hurt profitability in the long run?  The questions are important to anyone at the helm of an organization.

Corporate Culture Defined

What is corporate culture?  A corporate culture is a shared (inculcated) way of seeing and making sense of the world internally and externally. Corporate culture is reflected in statements like, “That is how we do things around here.” The values and systems that grow around an organization can be one of the most powerful tools available for ensuring consistent decisions, seeing new possibilities, reinforcing quality actions and communicating a consistent brand. It is the corporate culture that support and leverage the discrete functions of the organization and that inhibit them from becoming silos of independent functions that undermine efficiency. I have adapted the idea of culture to the corporate setting.[1]  Organizational culture is:

  • The total way of life inside the corporation;
  • the social legacy individuals acquire from the corporation as typically modeled by the founder or chief executive(s);
  • a way of thinking, feeling and believing;
  • a theory on the part of management about the way in which employees as a group of people in fact behave;
  • a storehouse of pooled learning and belief;
  • a set of standardized orientations to recurrent problems;
  • learned behavior;
  • a mechanism for the normative regulation of behavior;
  • a set of techniques for adjusting both to the external environment and to competitors;
  • a precipitate (impulse) of the firm’s history.

Identifying corporate culture is sometimes like catching a slippery fish – it is more difficult to do when one is inside the culture.

Because corporate culture is a set of assumptions that define reality and response to reality it is important to make an effort to define how our organization behaves.  What if an organization’s cultural assumptions are inaccurate? Some argue that because business deals primarily with facts and numbers that such subjective things as “organizational culture” do not actually impact real business decisions.  The fallacy in this is that truly objective data does not exist.  The selection important data is an act of cultural filtering. When the interpretation of what the numbers mean is turned into actionable milestones the full force of the organization’s culture surfaces.

Corporate Culture Can Go Awry

Organizational culture is both formative and resilient.  It is not permanent. This point is critical for leaders to understand.  Organizational culture can withstand severe stresses and the occasional lapses of executive or managerial judgment. Organizational culture reinforced by the consistent behavior of its leaders serves as a check to lapses of executive or managerial judgment and as a guide and check for employee behavior.  The formative nature of organizational culture reinforces the discrete actions of the organization that create value.

On the other hand organizational culture is adaptive. The rather scary point is that organizational culture follows the behavior of leaders over time.  Culture reflects and structures the values that drive it.   This can result in a corporate culture that evolves to meet new market pressures effectively.  Or the adaptive nature of corporate culture may just as possible create a toxic environment that supports or masks its own toxicity.  Read Smith’s description again:

“It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.”[2]

Smith asserts that the organizational culture (the systems and values inculcated by the leadership over time as demonstrated in their behavior and decisions) became toxic internally and externally at Goldman Sachs and thus undermined employee engagement and loss of client focus.

Even the responses critical of Smith’s essay made the same observation of Goldman and Sach’s toxic culture.  Matt Levine’s critique of Smith’s motives and timing did not undo Smith’s thesis but confirmed it:

“One question on everyone’s mind is…why did it take him 12 years to figure out that Goldman’s culture was rotten? After all, Matt Taibbi and the SEC have been saying similar things for years.”[3]

Former Federal Reserve Chairman Paul Volcker also confirmed Smith’s observation about eroding organizational culture.[4] Great leaders pay attention to their organization’s reputation. This is not a Pollyannaish denial of the fact that successful organizations generate their share of envious critics’ hell bent on blackening the eye of success.  Every great leadership team and great organizational culture has its detractors. However, if an organization’s reputation differs substantially from the organization’s espoused values it is time to stop and assess the organization’s health.

I contend that the leader who fails to pay attention to the nuances of the culture he/she influences through their own behavior, decisions and reward structures are already well down the road of an organizational failure whether that failure be the loss of talent, an ethical/legal lapse, or financial collapse. Why?  What does organizational culture do in operational terms?

Three Operational Impacts of Organizational Culture                          

Organizational culture is critical to the support of the organization’s discrete actions. Discrete actions recognize the unique disciplines that make up the organization’s competitive advantage.  Organizational culture is the framework on which all support actions build.  As noted above organizational culture is the sum of its history, approach to implementing strategy and its understanding of the underlying economics of the activities themselves.  Organizational culture is most visible in support activities such as human resource management, firm infrastructure and technology development.

Organizational culture is essential to identifying and bridging the threat of isolated actions. Isolated actions indicate competition internally that add to costs and reduce value.  Isolated actions may either indicate a dissonance emerging in the organization’s culture or may be the cause of dissonance in the organization’s culture.  Where the organizational culture is working it becomes the informal mechanism for pulling attempts at isolated action back into the appropriate discrete actions of the company.

Organizational culture is the character and feel of the organization that draws and retains the firm’s top talent.  As noted in Levine’s critique of Smith’s commentary Goldman Sachs has hemorrhaged talent.  Levine contends the hemorrhaging talent is the result of an economy that has readjusted the financial rewards possible in the industry.  Levine’s parallel observations are interesting.  The correlation of toxic culture and loss of income potential or value creation seems to affirm the first two impacts of organizational culture.  The demise of corporate culture creates the kind of internal dissonance that clearly sends talent searching for something employees can take pride in.  Do your employees take pride in the work of your firm?  If they don’t then it is time to look at your organization’s culture and its mission carefully.

Assessing Organizational Culture

So where does a leader start in evaluating the culture of their organization?

Artifacts and creations – how do people dress, what art is in the building, how is the building structured and decorated?  These are clues not conclusions.  This is the constructed physical and social environment, written and spoken language and overt behavior of members.  Determine whether a change has occurred and how the change impacted the organization.

A friend of mine, the president of an organization, once redesigned the corporate office space by moving his office from the seventh floor to the third floor with all the divisional offices and consolidated the second and third floors to house the entire corporate structure so he could actually walk around and talk with his team.  He told that his initial move prior to the total remodel was to move his office from the seventh to the third floor.

The day after he completed his move he returned to find his office vacated.  He asked what happened to his office.  It was moved back over night to the seventh floor.  The board did not want to flatten the organization.  My friend created cultural dissonance by moving opposite the culture with the intention of changing the culture.  My friend succeeded in the remodel project. He won the approval of his senior management team.  However the board ultimately removed him. The board hired someone whose values mirrored a more hierarchical approach to organizational culture. Had my friend been more observant he would have paced the change he attempted differently.

Reevaluate the espoused values – what ought to be; the non-negotiable of the organization.  Determine whether the actual values imbedded in decisions reflect the espoused values.  Pay special attention to episodic events of inconsistency i.e., periods when espoused values are forgotten or ignored in decisions.  This usually occurs in crisis.  Pay attention to what triggers the abandonment of espoused values and ask two questions.  First what was the trigger and does this trigger represent a toxic starting point?  Will behavior that seems to be the exception actually become the rule and result in a toxic culture that may undermine the long-term support of the firm’s discrete activities thus eroding its value making potential?

Second, ask whether the espoused value is sufficient for the organization?  One organization I worked in espoused “family values” which was interpreted as willing to pay for health insurance, provide extended leave in extenuating circumstances and overlooking poor performance if a family problem could be identified as the cause.  The dissonance that occurred in this privately held organization was that poor performers were viewed recipients of financial reward at the expense of those top performers.  In a debate among the executive team this dissonance came to the surface. The dissonance was never really addressed.  The result, a new set of isolated activities emerged as managers worked around the dissonance at the cost of the firm’s profitability.  The solution would not be to cut the “family value” but to define it more clearly in light of the other driving values of the firm.  In this case the executive team failed to address an insufficient value and thus contributed to the emergence of a toxic reaction.

Review the firm’s basic assumptions. Assumptions are perceptions taken for granted and therefore happen all the time in the cultural unit.  These assumptions affect five areas:

  1. Humanity’s relationship to nature – whether the perceived total environment can be controlled or must be harmonized or people are subjugate to nature.
  2. Nature of Reality, Time and space – what is real and how one discovers what is real. Event or time oriented.
  3. The nature of humanness – what it means to be human and inhuman in behavior.  Helps determine who fits and who does not
  4. The nature of human activity – whether humans can be perfected or you can’t influence behavior at all – fate.
  5. The nature of relationship – what is the proper way to relate to each other?

It may first appear that reviewing assumptions has no bearing on what the organization does to generate value.  However assumptions are the crux of managerial decisions from the line to the C Suite. If the organizational culture is in the throes of dissonance assessing the firm’s assumption’s can often bring the root of the problem to light.

Conclusion

The power of understanding and deliberately framing corporate culture rests in the fact that corporate culture can serve as the non-verbal accelerator of corporate efficiency and resilience.  The down side of a culture’s adaptability is that it can devolve into toxicity as it mirrors the behaviors of its executives and managers in the market place.

When corporate culture is effectively evaluated and monitored it provides one of the most power tools to maintaining the discrete actions of the firm and is essential is to identifying and bridging the threat of isolated actions.

Finally, by reviewing the firm’s artifacts and creations, espoused values and basic assumptions leaders can decide the health of the culture they manage relative to the firm’s value creation and talent retention activities.


[1]  Clifford Geertz. Available Light (Princeton,NJ: Princeton University Press, 2000), 4-5.

[2] Greg Smith, “Why I am Leaving Goldman Sachs” Source: http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html; accessed 14 Mar 2012.

[3] Marc Levine, “Attack on Goldman Sachs Misfires” Source: http://www.cnn.com/2012/03/14/opinion/levine-goldman-sachs/index.html?npt=NP1; accessed 14 Mar 2012.

[4] Jennifer Liberto, “Volcker: Goldman Turning Away from Clients” Source: http://money.cnn.com/2012/03/14/markets/goldman-volcker/?npt=NP1; accessed 14 March 2012.


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The Betrayal: When Broken Trust Turns Toxic Part 1


Surprising Venom

“Look Ray,” he said, “I know you have your stuff together.  Sit here, gather your consulting fee and look for another job while you do. This is not about you.  This guy does not deserve to be in business.  I am going to take him down, take what cash I can and move to the job I already have lined up.”

These are the last words I heard upon exiting my first job after graduate school.  How in the world had this company come to such a venomous end?  The guy speaking was a man the owner trusted completely.  Upon receiving news that I would  be let go in the downsizing after the 9/11 attack on the World Trade Center I was told that based on performance I was a good choice.  However, the owner preferred to bring his longtime friend and director of the manufacturing division in to restructure the company to survive the hit we had taken in our cash flow as a result of a vanishing sales pipeline.

How did I get here?  Why was this guy so filled with poison toward this owner?  Why was the owner so clueless?

 The Back Story

I completed a master’s degree in intercultural studies with an emphasis on organizational development and leadership development.   I became more and more enamored with the subject of organizational design and leadership development. I knew I wanted to take this new knowledge into business and work to improve personal and organizational performance.   I did not know how to make the transition from directing and leading in the religious non-profit world to the business world.  I knew two things, I had something very valuable to offer and a lot to learn (the curse of graduate education is that it provides new knowledge and in so doing also catalogues every students ignorance).

I alerted several mentors and close friends that I was not interested in another non-profit role but wanted to enter the business world to test the wings of my newly acquired expertise.   Brian, a friend of mine (a recently minted MBA on his second post-graduate role) asked me to join his turn around team.  I remember his pitch.  The company he was hired to lead had a pioneering software product for managing the front desk operations of hotel and other hospitality property.  The company had developed and protected an innovation the big guys had not yet thought of.  The company was strongly capitalized.  The owner had made a poor hiring decision and was ready to listen to business/organizational talent that could structure and propel his innovation forward.  The owner would back away from daily operations and give Brian and his team the opportunity to lead forward. Brian recruited me to serve as director of operations, another experienced friend to lead sales.  We rebranded, reorganized, restructured our way through the first three months and began to see the promise of building sales momentum.

I went to work understanding the operational functions of programming, customer service, human resources, and sales.  I mapped a new organic organizational structure designed to leverage Brian’s business plan forward and began recruiting and retraining across all departments.   Lora went to work restructuring the sales department.  She worked through our database like a lioness stalking a herd of gazelle. Brian went to work rebranding the company and analyzing financials.  These were heady days. We were succeeding in turning things around.  The owner was happy, our customers were either happy or becoming happier and our innovation was protected and winning us sales from our bigger and more established competitors.

I was on the freeway traveling to the office in Anaheim, California before sunlight on the morning of 9/11 and heard the news of the first plan hitting the tower of the World Trade Center.  I drove to work glued to the radio and stunned at what I was hearing.  When I walked into the office instead of seeing the sales team on the phones to our Caribbean and east coast customers they were in the lunch room standing around a television set watching the horrifying drama unfold.  Before the day was even over potential customers started calling to cancel their orders for our software.  In the first 48 hours following 9/11 we lost our entire sales pipeline and began analyzing how long we could keep the doors open without any sales revenue.

The End – The Enigma of Human Relations

What a contrast to my first meeting with Brian. My last meeting with the owner ten months later was a dirge. “Ray,” the owner announced “I would like you to orient Bob (the director of operations at the company’s manufacturing division) on operations in the software division.  Bob will take over operations of both divisions as we merge to survive this set back.  I have known Bob for a long time and his law degree and experience are just what I think we need to survive.  If there were any way financially I could keep you and your skills I would but without sales we are going into a hole at an unrecoverable rate.”

We negotiated a consulting role that would last for two weeks.  I would have two weeks to find something new and turn over the reins of the software division.

I showed up to the office on my first day as an ex-employee turned consultant.  When Bob walked into my office and described in detail how he was going to destroy the owner financially and why.

What happened?

If you have insights into this catastrophic dynamic write your comments here.  Over the next several weeks I intend to write on how business relationships disintegrate to the point that trusted friends turn into fatal enemies.  The subject of betrayal and situations leading to betrayal are not new nor are they simply the fodder of English literature classes studying Julius Caesar.  Do strategies exist that help owners and managers avoid this collapse of trust? What are your insights?  Have you experienced a similar collapse of relationship?  Have you seen it?  Have you studied it?