Archives for posts with tag: Culture

Not many firms have had the continued bad press as Uber has over the past couple years. Sued on their business and employment practices and then on their self-driving car technology. Employees filing numerous sexual harassment and discrimination suits. Now the private Board throws out the Founder and CEO, Travis Kalanick. Mr. Kalanick is a self-described bad boy who admitted before his firing that he needed help managing the company. He is also the person most people believe created and encouraged the firm’s toxic culture.

Uber has fired some twenty managers and brought a couple female executives on board. But all of these measures may be too little and too late.  So what is Uber to do?

Leadership and Culture are the flip side of each other. What Uber needs is not only a new CEO but a new senior management team. Uber should also replace most of the Board, especially the long time Directors.  Mr. Kalanick is no longer CEO but he was allowed to remain on the Board, which is another mistake. Why? Because it will take a new CEO, senior team and Board to create a new corporate culture. This is not an easy or a quick thing to do. Leadership starts at the top and that is the Board. If the existing Board could not figure out the many legal problems and ethical missteps that Mr. Kalanick and his team were subjecting the firm to, they need to be replaced. Actions speak much louder than words. And major cultural change, in this and most cases, must start at the top. The Board is who everyone in a company look to for guidance.

Uber is often cited as an example of industry disruption as taxi cabs are disappearing. But Uber has other capable competitors like Lyft. These competitors may find a way to gain an advantage while Uber tries to rebuild both its Leadership and Culture. We will see if Uber can truly change and survive.

Linkedin just had an article about the best places to work today. The usual suspects are listed: Google,  Facebook and Amazon and some newer, and surprising  ones to me,  Uber (lots of bad press and legal issues)  and Tesla (who makes no profits and may run out of money, not gas.)

But was really struck me was how few of the top companies even existed 25 let alone 10 years ago! The ones that remain have changed a lot: Time Warner (magazines to cable), JPMorgan (a dozen mergers later started as Chemical Bank) and Disney which looks like it may be around forever and never age like Mickey Mouse!

Fortune magazine had an article that stated that 88% of their 500 largest firms from the 1950’s are gone and predicted that 40% of today’s largest firms will be gone in 10 years.

Since I constantly advise graduates and young people where to work, this got me thinking. People used to get a job right out of college and then retire there 40 years later with a good pension. None of this is true today for millennials.

In my book, I stressed that as one moves up in their careers, they needed to study beforehand the leadership and culture of the next company they wanted to work for to try to gauge their personal fit and thus improve the chance to succeed. Now I believe that even graduates and young working people need to do this plus reading all they can about their targeted potential employer. What is their overall strategy, how sophisticated are they on technology and social media, are they well financed? And is their own business model sustainable or will they be the next industry subject to what we increasingly call disruptive innovation, like Uber to taxicabs?

Even though young graduates may work for a half dozen or more organizations in their career, they need to try to look down the road to try to figure out if their next employer will even be around! I believe this new group of millennials are better equipped and more comfortable, than my generation ever was, to research and analyze all the available, on-line information that now.  After all it is their future world. This may also be one of those few areas where most well meaning parents are just not able to help. Looking for your first job or your next job has always been difficult and in this rapidly changing world it just got harder!

A new movie is coming about the life of McDonald’s Founder, Ray Kroc who created late in life not only a major company but a whole new type of business.

The consulting firm Bain & Company has a study and a new book called The Founder’s Mentality. In their study, Bain points out that founder-led companies delivered three time higher returns to shareholders than other large public firms.

Bain cites three main traits that they believe help founder-led firms to perform so well. In a Wall Street Journal article they relate their work to McDonalds and Ray Kroc. Having worked in my formative years for Donn Corporations’s founder, Don Brown, I wanted to add some thoughts to this important topic.

The three traits that Bain describe that distinguish founder-led firms are:

1. Insurgency where the firm declares war on its industry. For McDonald’s that involved  a whole new way of delivering food with their fast service. At Donn, we had a sense of urgency in everything we did and a disregard for traditional corporate hierarchy or functions like Human Resources.

2. Obsession with how customers are treated. At McDonalds this occurred with watching every detail from the size of the burgers to what potatoes were used for their fries. At Donn we were the first to create customer incentive trips for our customers plus unlimited expense accounts to entertain them including a yacht and condo in the Bahamas!  I would add here that I think the best founder-led firms also treat their own employees in special ways as well. For a small firm, Donn had annual employee outings, turkeys at Thanksgiving and Christmas gifts for our employee children in every world-wide location.

3. Companies are steeped in the owner’s mindset. For Ray Kroc this meant setting up a next generation of founders in his unique franchise system. For Donn Corporation, Don Brown’s vision and values formed its culture and leadership style that caused the company to grew rapidly and prosper. Much of the culture was based on respect, trust and faith in each other. Thirty years after Donn was sold to USG Corporation over 125 former employees signed up for a potential reunion.

In my book, The Business Zoo, on Amazon the ending chapter is on Leadership and Culture. Ray Kroc built that at McDonalds as did Donn’s founder, Don Brown.

I wish all my readers of this blog or my book a wonderful Holiday Season and great 2017!

The Wall Street Journal recently ran an article about the engine emission crisis at Volkswagon (VW). Senior executives of VW acknowledged that their firm had a “culture of tolerance for rule breaking” that lead to this “chain of mistakes”. Although the article did not name exactly who ordered their engineers to install the software to fool the tests, the article did state that it found no evidence that “VW executive or supervisory Boards were involved in the fraud”.

Yeh. Heard that one before. After British Petroleum (BP) had the disastrous oil spill in the Gulf, a top writer from Fortune magazine stated that BP’s long time focus on cost cutting versus safety goes back directly to the Board of Directors. The Gulf spill was proceeded by several major safety events including a huge explosion in Texas that killed a dozen workers. All organizations look for guidance or direction from the top and a Board is the ultimate top. It appears that maximizing profits through cost cutting was a top priority over safety for BP and its Board.

At my old firm, USG Corporation, every meeting, even the Board meetings, started with a review of safety. This goes back to when USG started as a gypsum mining firm. Major accidents, especially deaths, are reviewed in often grisly details. Senior people, including myself, would attend safety dinners when a plant reached an accident free milestone. Safety was a core value at USG Corporation.

Sadly in most of these disasters like BP and VW often a few, token senior people are fired but with huge severance packages. But a lot of staff or line engineers at these firms lose their job and often their livelihoods because of their presumed role.

At VW, the Board and the senior executives looked the other way or showed a tolerance for rule breaking or it would not have occurred. And  German car companies are known for their excellence in their engineering and engines. That makes this all the more unbelievable to me.

In my view, senior executives and Board members must be held to higher standards than they are and at times, they need to bear the blame and responsibility for not focusing on what is right.  Read the rest of this entry »

The Wall Street Journal just had an article about how the federal regulators are trying to figure out if the Banking industry has some inherent flaws that somehow tie to a Bank’s culture. The regulators are worried that the specific crimes or security violations we read about are not just isolated examples, but relate to deeper issues in the Banks. But the regulators are having trouble figuring out how to define each Bank’s “culture”. Even the Banks themselves are hiring legions of Consultants to help them define their own culture. One well known Bank created a “happy to grumpy” ratio of their employees as one way to measure culture.

Well, if they had only asked certain retired Chief Financial Officers, like me, who had worked with Banks, they could have learned a few things in a hurry. The reason I chose “retired” CFOs is that they can be more honest now than when they worked for companies who needed the Banks to survive or grow.

Wall Street Bankers are certainly a unique breed. In my book, The Business Zoo, I have a lot of stories that relate to Bankers and their culture. A few of these are as follows:

“It’s only Business, not Personal.” This means a Banker can lie to you, but because it’s about business, he is not a bad person. Heh.

“I would sell my mother for an eight of a point!” This means that in a large deal, even a very small extra fee or interest charge, is worth doing almost any unthinkable thing to achieve. This can include breaking laws or client confidentiality or whatever. That quote is word for word from a senior U.S. banker.

“Dining with Wolves, Rats and other adversaries”.  Does this one really need more of an explanation? Let me just say I admire and respect wolves.

Bankers also have the same trait that relates to many Consultants. They believe they are smarter or better than the rest of the world. Even in my youth in public accounting, at the now defunct Arthur Andersen & Co., we were taught this. It becomes part of the ‘Culture” that these firms use to distinguish themselves from others. But it can also lead to trouble.

But the most fascinating aspect of this WSJ article was how both Bankers and their Regulators are apparently having trouble identifying Culture and are even hiring outside consultants (often with their own problems) to help!

So here are a couple of tips about Culture from my final chapter in The Business Zoo. 

Culture and Leadership are the flip side of each other. Study the Bank’s past and current leaders and you will learn about the firm’s culture as well. The good, the bad and the ugly.

Culture, as defined in the Royal British Columbia Museum, is a complex system of tools, language, arts and beliefs that help humans survive. To determine any organizations’s culture you must spent time studying their systems, procedure, policies, whether written and unwritten, or formal or, more importantly, informal. To study and define a bank’s Culture, Regulators will need to invest a lot of time and hard work.

Or you could hire a few retired CFOs who have spent decades around Banks!

My 14 year old grandson with his younger sister were in Chicago this fall for a visit. He and I went to lunch for his favorite food, snow crab legs, while my wife, Tricia, took the grand daughter shopping on Michigan Avenue.

While watching my grandson devour his second order of snow crab legs, I am trying to engage him in a conversation. Conversations with teenagers are always a challenge.  I cover one of his favorite topics, the latest super hero movies-is the new Thor (God of Thunder or something) movie the second one in the series? No, Grandpa Brad, he politely says, it is the third. Who would know? Are D.C. and Marvel movies and super heroes the same group? No, again. I should have known since decades ago, I read comic books!

I decide to try to teach him something about business using one of his other favorite subjects, Minecraft. For those of you not familiar with Minecraft, it is described, on the source of all wisdom, Wikipedia, as a sandbox indie game involving building structures in a 3D generated world. Like most video games it involves exploring, acquiring resources, combat and survival. Which really does sound like business or The Business Zoo! Any parent or grandparent with a teenage boy especially knows about Minecraft. It actually seems more civilized and almost educational compared to most video games which focus on zombies or flying birds attacking hungry pigs. It was originally developed by a Swede called “Notch” and has a cult like following.

The week before my grandson arrived in Chicago, Microsoft, the software giant of Bill Gates, agreed to buy Minecraft for a couple billion dollars. “Notch” will not be part of the new business but will walk away with a lot of marbles and a lot of swedish krona.

I, sadly, tell my grandson to enjoy Minecraft now because it will either become boring to its fans or it will disappear once Microsoft gets their hands on it. Why he asks me? I tell him the sad corporate truth. Big, sleepy giant firms like Microsoft love to buy smaller, trendy niche companies like Minecraft but they almost always destroy the unique Culture and Leadership the smaller company had. The big firms can not help themselves. They want to make the new, smaller firm just like them and by doing so they ruin it. Microsoft has been around almost 40 years and they believe they are much smarter than the people at 4 year old Minecraft. As I have written before, within three years of a takeover like this, two thirds of all the senior and upper level people at the acquired firm, Minecraft, will be gone. With the founder leaving here it will even be accelerated.  Sorry, grandson, that’s the way business and deals work.

My grandson shrugs and he goes back to explaining to me the difference between the Justice League (D.C. Comics) and The Avengers (Marvel Comics).

Happy New Year to all!

We have written a lot here about Culture and Leadership as the over riding and most defining aspects of most organizations. Now I am reminded of this again as the news media covers in great detail General Motors’s recall issues.

When the new GM CEO, Mary Barra,  discusses what apparently happened in countless internal GM meetings, she refers to the GM Nod. This is described as when everyone seems to nod their head as if they agree Something must be done, but then Nothing happens. She also is quoted discussing a similar issue, that GM, at times, seemed to have a “troubling disavowal of responsibility” . To help resolve all of this, she vows to upend the corporate culture responsible for this “pattern of incompetence”. To this I add, Good Luck!

General Motors has been around a very long time. For much of that time they were one of the greatest corporations in the world and, along with Ford and Chrysler, a wonderful training ground for decades of leaders inside and outside the auto industry. During that time, the Culture of GM was formed, in part by the Leaders. They were the best and they believed their way was The Only Way. During the last twenty years with the invasion, as they called it,  of “foreign cars” from Europe and Asia, things have not been as rosy. But, trust me on this one, the Culture of GM stayed essentially the same. If you read reports of the GM bankruptcy, the outside experts that the government sent in to “help” GM were amazed on how insular and isolated the GM leaders were. So a whole generation of them were retired or fired. But the Culture stayed on.

But the issue is not just with GM. As I consult or mentor young people, I hear similar stories. Two hour meetings of 20 people from four or five different operating and staff  groups that accomplish nothing except to hear people talk. Sometimes at the end of one of these meetings, some “Leader” will announce that is was great that we talked about this! Today, especially in large organizations, no one wants to show initiative or take responsibility for anything because they are Afraid. And as you have learned by now, fear should have no space in business or in a zoo!

The answer to this at GM and elsewhere is not first in trying to change the culture. It should be the leaders, who act, encourage and reward others to take personal initiatives. And to assume responsibility. I was taught, years ago, that if I was in any way responsible for something, I had to assume that responsibility and not try to Nod it off to others.

The last Chapter of my book, The Business Zoo, covers Culture and Leadership and how they are the flip side of each other and how either can make or destroy an organization. Good luck to GM CEO, Mary Barra. A lot of leaders try to change culture but often the culture wins!

 

The Wall Street Journal recently ran a story “Making Sure the Boss is the Right Fit”. The article cites some recent examples where seemingly exceptional leaders, from places such as Google, failed to mesh with the people or culture of their new firm.

We could go on with dozens of examples of this problem. The wizard from Apple who tried to transform J.C. Penney or the revolving door of leaders that Hewlett Packard had in the last decade.

One fascinating comment in the article was that it should take a lot more than interviews to avoid costly mistakes when hiring a new leader. And we will come to that. But one failure that both companies and potential executive candidates are guilty of, is not enough of or the right kind of interview. The higher the position is, in my mind, the more number and diverse the interviews should be.

My old private firm boss, Don Brown, had 7 interviews with a very qualified and ultimately successful candidate (that I had personally found!)  That seems like a lot and it is. But we had individual interviews, two on one interviews, two separate, private dinner interviews and even a dinner with spouse interview. Dinner interviews are especially critical and revealing. In an hour or so in the office, you can gloss over  a number of issues that can be much more fully explored or discussed in a two to three hour dinner. I am not saying that 7 is the right number, but too often in our fast paced world of business, we don’t spend enough time with interviews.

Which brings us to who should or could be included as part of the interview process. The direct boss, of course, and a couple other superiors who could be Board members. Also, a wide sample of the people who will report to the new hire. In the case of a potential CEO, the list should include the CFO, the heads of a couple businesses, the head lawyer and, my favorite, the head of HR. But smart firms also add to this list. Perhaps some very bright up-and-comer who is not shy. Maybe a soon to retire old, salty veteran who really knows the firm, its people and its culture. With a mix like this both the firm and the candidate could learn something about the possible fit.

But the hardest thing to analyze with any candidate is their fit or ability to adapt to the company’s culture. In my book, The Business Zoo, we talk extensively about this. Leadership and Culture, another famous business writer said, are the flip side of each other. A strong and dominate culture can destroy a new, very differently focused, leader. A weak or fading culture can be remade or revitalized by a new, strong leader. But most situations are somewhere in the middle. Candidates should study the hiring firm’s culture through the interview process and by doing their own research. With the internet this is certainly easier. Articles in business magazines or trade journals or a firm’s own written histories can tell you a ton. And the hiring firm needs to do research themselves, and not just with a search firm, on the candidate’s style and approach to people and problems as well.

Think of it like due diligence in a major purchase of a merger. The upfront, extra time and costs invested to improve the new leader’s chance of being successful is minor compared to the cost of a failed new leader and its impact on the company.

Leaders need to fit or adapt to a firm’s culture or they will fail; not the other way around!

Take more time and make more effort when hiring new leaders and when being hired.

No, this was not the opening on The Today Show or announced on Fox or CNN recently. Rather this is the subject of a new book published by Harper Collins by a dual Canadian-American citizen, a Ms. Francis.

Normally, or never, have I done a book review on this blog. We will not start now but we will make several observations about the book and its main premise.

Ms. Francis’ main points involve the economic logic of the two geographic neighbors becoming more of a “more perfect North American union” to compete in the world’s economy. The two countries would have an economy larger than the European Union and a wealth of nature resources, energy, water and technology.  Each country would gain something to compete better in the global economy. And the two countries (and Mexico) already cooperate on a number of fronts.  All of that actually makes sense.

But, as with many grand ideas, this starts to fall apart in the detail and especially in what I will call the “softer” issues.

First and foremost is that U.S. citizens call our selves, Americans. We believe that we are the one and only Americans. Technically, of course, we have other neighbors like Canada that could say that but only we do. Why is that? Because we believe we are, to quote Ali, The Greatest! We really never think about Canada. If U.S. citizens are asked to name some famous Canadians, we might stumble on a sports figure like Wayne Gretzky or the younger kids might say Justin Beiber but we struggle to name anyone from up there. And do not ask us who the current Prime Minister is yet alone his party. We really do not think much about Canada or Canadians. Sorry about that.

Second, and Ms. Francis does mention this, is that both countries have strong regional issues. In Canada and in Quebec province we have the French. An equal language with English. U.S. citizens do not get that one at all. Of course, we have a third of our population whose primary language is Spanish, which the Canadians might find confusing. And as different as the U.S. is with its south and west, let alone its Texas and California, Canada has very unique cultural differences between the Maritimes in the east to the their own cowboys in Calgary.

But lastly and maybe the most importantly is a small Canadian secret. Ms. Francis talks about our two countries as best friends. As noted above, one of the friends knows or cares nothing about the other. But worst than that is something my old boss Don Brown taught me. Mr. Brown was born in Canada but spent most of his life and built his business in the States. One day, on one of our private lunches or helicopter flights together he asks me a question. Brad, you have traveled all around the world for my company and met a lot of people. Which country do you believe dislikes the U.S. the most? I assumed he meant France, since the French seem to dislike everyone so that was my answer. He smiled and said, No, it was his birthplace and our neighbor, Canada. The Canadians, he explained, are so close to the U.S. and all it offers but are not here. So they are jealous and secretly dislike the U.S. Over the years, I have asked a number of Canadian friends and they all privately agree.

So, no merger of the U.S. and Canada anytime soon!

Disclosure: I own a very modest amount of the stock of Office Depot. I brought it because the people who work in the Chicago and Florida stores we frequent are so helpful and polite (and thus well managed). They even talked me into their frequent buyer program and each year I get about $20, which is enough for a modest bottle of wine.

Because of my vast ownership, I and thousands of others, received the Joint Proxy Statement to announce their merger and to get my vote. The second line on the cover announces that this is “A Merger Of Equals”.

So, I naturally found this lead-in fascinating enough to actually read much of the important parts of the 250plus page Proxy. In the finer print, you find some interesting details: 1. Office Depot shareholders will get 55% ownership to 45% for Office Max, very interesting.  2. Office Max legally will become a subsidiary of Office Depot, also interesting. 3. For tax purposes, they hope to qualify the merger as a tax-free reorganization which makes sense. 4. For accounting purposes, this will be an acquisition by Office Depot of Office Max, those pesky accountants just don’t like equals! 5. The new Board will have equal representatives from both and will elect a new Chairman,  senior team, and headquarter location. That meeting would be fun to listen in on.

I am very sorry to tell the fine employees of both firms, but there are “No Mergers of Equals!” The banking world loves this phrase and uses it constantly. It sounds friendly and cooperative and even nice. But if you look at the history of bank mergers, someone always brought someone, period. Modern day JP Morgan/Chase goes back to Chemical Bank buying half their New York competitors. Most of the deals were called mergers of equals. But the old Chemical Bankers always came out on top. And within three to five years, two thirds of the other bank’s senior people were gone, “to pursue other interests”. Yes, Jamie Dimon, a non Chemical banker,  is now Chairman, but that is another story.

The reason most mergers can not be mergers of equals is that people in the same industry, whether it’s banking or office supplies, hate their main competitors at worst, and distrust and dislike them at best. Even in the same industry, the culture and leadership style of each firm is always unique and never easy to blend. That is the nature of companies and the people who run them. It is a dog-eat-dog world out there and in my forthcoming book, The Business Zoo. Deal with it.

Who will come out as the real buyer and winner of this deal? I don’t know but I am rooting for my Office Depot team!

Note to self: send in that Proxy, my shares may turn the tide!