Companies have physical plants and products and marketing. They have salespeople and information systems and workers. And overlaid on top of these physical and human assets is a structure called “management.” It’s not just the CEO and executive team and mid-level managers. It includes the organizational approach, the HR and production processes, the incentives, the contracts, etc., etc., etc.
In fact, calling this superstructure “management” is misleading. It gives the impression that you can change management by firing all the high-priced bums and bringing in an outside group, a “dream team” hand-picked by some highly regarded consultant. But this just doesn’t work. Just ask Carl Icahn or Ross Perot or T. Boone Pickens or any number of corporate raiders who have tried to put new management in place. You could replace the top 10, 20, or 50 people at a vicious, poisonous company with the Little Sisters of the Poor, and guess what? You’d still have a vicious, poisonous company.
Management isn’t just people. It’s a host of non-physical factors, from the managers to the history to the Credo to the structure that all interact to form a corporate culture that’s kind of like DNA. DNA replicates itself and provides the blueprint for all the protein in an organism. DNA is very, very hard to change.
At its best, corporate culture acts as a value multiplier, increasing the productivity of the employees and systems and physical assets. People are inspired to do more than their best. They’re passionate about altering the rules of the game, about going beyond just winning, about changing the world. Other times, the culture is a buzz-kill. The cynics and clock-punchers can’t wait to ridicule anyone who does more than the bare minimum. I have a friend who called these folks, “minimals”: minimal work for maximal pay.
Peter Lynch, the former Fidelity money manager, used to look for signs of a healthy or sick corporate culture. One place he checked was the parking lot. Were the cars mostly facing in our facing out? Cars facing in meant people couldn’t wait to get to work. Cars facing out meant people couldn’t wait to leave. Another sign: are people smiling? Do they like what they do and who they do it with – or do they dread the next shoe to drop? Does the leadership team worry about their perks and privileges, or are they “dirty jobs” people, willing to get involved in the most unpleasant tasks? T. Boone Pickens was known for actually cleaning the bathrooms where he worked. Who has the best offices? Michael Bloomberg, who owns the Bloomberg news service, has a cube in the middle of news floor – rather than a palatial office suite.
I’m not talking about management fads. These come and go. Every few years there’s a new style that rotates its way through the seminar, book tour, and business school circuit. Buzz-words like transformational, organic, “Level Five” leadership seem designed to sell books rather than change the way companies operate. Sometimes it’s hard to know what these words even mean.
Illustration: Simon Western. Source: Wikimedia
No, a company’s culture isn’t a physical thing. But it’s like morale in a military unit. It can’t be commanded, it can’t be quantified. But it can be felt, in little and big ways, in every human interaction. Steve Jobs authored a creative, irreverent culture at Apple; Dennis Muilenburg is building an athletic, robust culture at Boeing. Leaders create culture, managers implement culture. Both are needed.
In the end, effective management is about creating sustainable value for everyone in the process: customers, workers, owners. The alternative is to have brilliant engineers team with highly skilled workers at modern robotic plans to turn out products that no one wants at prices no one can afford.
That’s not a management goal that anyone wants to hit.
Douglas R. Tengdin, CFA
Charter Trust Company
“The Best Trust Company in New England”