Business Management: The Growing Culture Malaise and Why You Have to Care

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Scott Sedam shares why many of his builders pointed out cultural differences in the industry and how builders can move in the right direction toward finding a culture that suits their business.

December 11, 2014

In September, I published an article targeting the younger recruits in the industry titled, “25 Years, 25 Lessons Learned.” My goal was to establish a list of truths that can help those new to the industry avoid considerable pain and suffering, if they just followed them. Easier said than done, of course, but maybe I can at least point them in the right direction. A compilation of things I learned working with more than 200 builders in five countries over 25 years, I sent the article out to our builder clients and asked for their contributions—what they would add or what they thought I missed. Contribute, they did (see the October issue). Out of the 27 responses received, I was struck by how many specifically singled out “culture” as an absolutely critical ingredient for success. I completely agree but was surprised because it is rare to find builders who take deliberate steps to create the culture they want. The great majority just do what they do and hope it develops in the right direction. With strong leadership, deeply involved in the company, that sometimes works; but it is the exception.

 

We think back on legendary cultures over the years featured in books such as Tom Peters’ “In Search of Excellence” or Jim Collins’ “Good to Great.” Companies such as General Electric, IBM, and Merck among the giants and comparatively smaller but powerful firms such as Nucor Steel, QuadGraphics, and L.L. Bean, to name just a few out of the hundreds you might study. If you do, you’ll be amazed by the variations you find. There is no such thing as the ideal cultural model, and successful cultures can be vastly different. But the standouts have at least one thing in common—leadership and vision that brings everyone together to focus on a shared, superordinate goal. In contrast, the least successful companies display a culture that, in hindsight, directly contributes to their downfall.

 

 

The Dark Side of Culture

 

You may, in fact, not like some of those successful cultures at all. A strong culture that produces wins for its constituents can generate a boatload of uglines for those outside of it. Most insidious, a culture that gets an

organization—be it a school, church, sports team, company, or country—to a certain level can also become its very undoing. Think back through the various organizations with which you have been associated, the cultures nurtured by their leadership, and the impact they had on you, your associates, and those outside the group. Out of college I went to U.S. Steel’s South Works in Chicago. Being tough, cold, and calloused was worn as a badge of honor. Everyone was guilty until proven innocent, especially the union and the workers. U.S. Steel grew to be the largest steel company in the world, but ultimately the culture was so macho and arrogant that the company completely discounted the sweeping changes going on in their industry both in the U.S. and abroad. I am reminded of Lily Tomlin’s famous phone operator bit when she declared, “We’re the phone company … we don’t have to care.” (Those under 40 substitute “cable company.”) The party line, though never stated explicitly, was “We are U.S. Steel. That does not apply to us.” The industry grew away from them while Nucor and others stepped in to change forever the way steel is made and sold.

 

 

Just recently, the General Motors culture was roundly criticized for allowing the problem with a steering column key-lock mechanism to remain buried for years—long enough to result in multiple deaths that could have been avoided. Anyone from the Detroit area can tell you that there has been significant positive cultural change at GM during the past decade, but that offers a key lesson. It can take years and more years to change a strongly entrenched culture, as Mary Barra, the new president of GM, is finding out. I think she is up to the job, however, and someday she’ll write an engaging book about it.

 

 

Some companies are highly self-aware when it comes to culture, while others seem contentedly ignorant. When I interviewed with IBM after graduate school, both of us learned enough about each other by the second interview to say, “Thanks, but no thanks.” They knew who they were, and I was too much of an independent thinker to conform to their mores. Although much of their culture made them great, it also blinded them to the PC revolution. I went to Motorola, instead. At that time this once-proud company was beginning an agonizing search for its identity following their exit from the consumer products business. That search went on for decades. The “engineer culture” was challenged by the vagaries of fickle markets and the Japanese electronics juggernaut of the ‘60s and ‘70s. While U.S. Steel’s culture was decidedly negative and Motorola’s distinctly positive, they both faced the same obstacles when they lost a sense of who they were. At least at Motorola, I never went home angry and wanting to kick the dog. Another lesson learned.

 

Culture Wars

 

I next worked out of Chicago with two large consulting firms. The culture of the first, based in Minneapolis, was built in the founder’s image and so well-established that after you passed an unofficial probation period, a ceremony was held to bestow upon you a genuine Swissmade Mickey Mouse watch. The founder explained that Mickey was there to remind you, each time you looked at him, that you should be having fun or you should find another job. It was indeed a fun place the first few years, and we did great work for great companies until our success brought us down. Our heady growth led to the hire of a CEO who could hardly care less about the team, the products, and the clients. His sole objective was to generate a big personal payday. The founder soon sold the company to a large, stodgy, New York publisher who wanted to get into the world of our impressive client

list through our young, creative, high-energy team. In no time, the owner was completely transformed by his eight-figure payday, and not for the better. He resigned and bought a ranch out West to do “transformational leadership stuff.” The senior management that followed did not have a clue about the culture and soon the internal wars began. Another six months and it was painfully obvious that Mickey and I were having more bad days than good, so I left. The culture change led to a slow but steady crash of a once-great firm.

 

 

My next stop was with a competitor, a similar consulting and training outfit from Boston that likewise had developed an impressive national client list around an inspirational and charismatic leader, a genuinely good

person. Just as a strong performance culture was being built, the leader drew back his presence and pulled into different directions, while his lieutenants jostled for position, influence, and control. The “Eastern-elite” managers disagreed over everything except one shared belief—that intelligent life pretty much ended on the east bank of the Hudson River. They found a multitude of ways to telegraph this to employees and clients alike, much to the chagrin of the founder. The fuse was lit when the Boston firm hired an expert to consult with mthem on growth and, in one of the great ironies of my career, it was the very guy most responsible for the demise of the Minneapolis outfit. I updated my resume and escaped this culture bomb just prior to the big bang.

 

I arrived at a big national builder in 1989 and today, 25 years later, there is not one person left from that original group. They had been through very similar things, mwith the unconventionally charismatic founder having pulled back from the day-to-day and focused largely on other interests. It was actually his return to more “active duty” in the company that led to the creation of my job, as vice president of quality and customer commitment. That was a mouthful, and the job was just about one micron short of what I could handle. The founder had built a strong, customer-focused culture and had true partnering with suppliers and trades, yet that remained in force only in remote corners of the company. A team made up of mostly financial brains had transformed the firm into more of a holding company that would make money anywhere they thought they could—land development, banks, a mortgage company, an insurance company, software, and even some of the first portable computers. Ironically, housing still generated most of the money yet was almost an afterthought.

 

 

Reviving Culture

 

When the founder could not get resolution on which of two obvious candidates to make president, he hired a dark horse who as luck would have it, knew something about culture and quickly saw how important it was to rekindle the former fire. Looking back, it was my job along with eight or 10 others to help restore that positive culture, and we began to grow in a much more constructive way. We did it largely though continual senior management reinforcement and training across the board, although the work we did with higher-level managers was under the guise of “planning process” because they will almost never submit to “training.” We launched company-wide functional councils that brought people together outside of their everyday work teams, which opened them up to sharing and new approaches. We surveyed and focus-grouped our customers and set up a genuine, ongoing feedback system. For the first five or six years, it was intense, exhausting, and incredibly rewarding to see a culture evolve to a truly high level. The culmination was literally smoking the industry on the J.D. Power surveys nationwide the first four or five years it came out. Despite uninformed claims to the contrary, everyone was measured the same way, and you could not “rig the results.” The culture and its impact were real.

 

 

Without constant attention, even good cultures find a way to undo themselves, and some would say the same thing happened at this firm. All I can say is that as we got more and more successful, our desire to grow, expand, and become Wall Street heroes led to a lot of external hiring. With a few notable exceptions, most of these folks cared little for the culture and why would they unless deliberate, prescriptive steps were taken to transfer that knowledge and zeal? At some point, efforts to maintain the previous culture fell aside. An impartial observer, which I am not, would describe the new culture as not better or worse, but simply different. I do encounter the “exes” from that firm almost every week in other companies though. Get them talking and nearly every one speaks wistfully about a former time and place when they were not just allowed to care, but encouraged and supported. While they speak I hear strains of “Camelot” rising in the background.

 

 

Culture in Disarray

 

It is a dangerous thing to spend too much time dwelling on “the old used-to-be.” That was then and this is now, and there is no reason whatsoever that now cannot be better. That would be my challenge to my former national builder employer, and that is my challenge to you. If you have been paying attention over the years, you will conclude that there is nothing in an organization worth building so much as a strong, positive, high-performance culture. Yet in my continual travels throughout the industry, what I see coming out of the great crash of the late 2000s are cultures that are at best a mish-mash of influences that wander about, searching for their raison d’être, while at worst a loosely held conglomeration of battling elements focused more on one-upping each other rather than beating the competition. Coming out of the downturn, the builders that survived often have only 10-to-20 percent of their original team members. The grandfather who started things, Gus, ran construction, and Louise, who ran sales for years, are gone, and dad is retiring soon. Companies have hired good people from all over who mean well, but did not grow up together and do not yet share a common goal and a sense

of who we are as a company and how we do things day-to-day. That comes from an unquestioned sense of your culture with well-developed, shared processes and values, and it happens on its own only in the rarest of circumstances. Culture is essential and your performance is limited unless you take specific and tangible steps to build that culture, beginning today.

 

 

A search for “Workplace Culture” in books on Amazon.com gives you 3,174 titles to choose from and, having read 12 to 15 of them, I guess that makes me an expert. Only 3,160 to go. I created this link to take you there, so copy it into your browser or click if you are online and be amazed: www.tinyurl.com/bizculture. There are wonderful exceptions to the culture malaise I describe above, such as my recent experience with Bill Saint and his Classica Homes in Charlotte. In just four years, Bill built a remarkable culture of true-believers for their collective cause. I also think of Goodall Homes, which has risen from an also-ran to the top against fierce competition in the Nashville market with a relentless pursuit of excellence in all forms of the business. Personally witnessing such powerful cultures lays waste to anyone who claims it doesn’t matter or that it cannot be done. It is purely a matter of senior management’s will. You either have it, or you don’t. PB

 

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