“Culture Eats Strategy for Breakfast” – Peter Drucker

 

Over the past 15 years we have worked with many companies in every type of industry and with a wide range of revenue and level of profitability.

In virtually every situation, we were asked to help our client improve operations and profitability.

While our approach includes a number of tasks, one of the most important things we focus on is corporate culture. Corporate culture is the foundation by which any company operates.

Our experience includes working with clients that have many different types of culture.

We have learned, however, that there is a direct correlation between the culture of a company and it’s operating performance and related profitability.

This relationship is extremely important and we are devoting the next two blogs to this topic.

This blog post will discuss the cause and effect of a bad culture and how it negatively impacts companies. Our next blog will discuss the elements of a productive culture and how it contributes to the success of companies.

 

“CULTURE” DEFINED …

It is important to look at the definition of an organizational culture.

In a paper published in the Academy of Management Journal, in 2006, Ravasi and Schultz characterize organizational culture as a “set of shared assumptions that guide behaviors.

It is also the pattern of such collective behaviors and assumptions that are taught to new organizational members as a way of perceiving and, even thinking and feeling.

Thus, organizational culture affects the way people and groups interact with each other, with clients, and with stakeholders.

In addition, organizational culture may affect how much employees identify with an organization.”

 

BAD CULTURE WILL …

Inherently, bad corporate culture ultimately leads to poor performance, operating losses and sometimes the failure of a business.

Some cultures can be labeled negative or toxic and originate from a leader, management team or a management style that promotes an environment that every person should fend for themselves.

There is typically a heightened sense of individualism and an environment that encourages individuals to get ahead at the expense of everyone else.

Management typically encourages conflict and promotes a combative style of behavior by encouraging an “Us versus Them” mentality.

 

ANOTHER EXAMPLE SKILLS …

Another example of poor company culture we have found in troubled companies, is a situation where there is a void in leadership.

The company typically does not have a clear leader and the management group is incapable of making even the most basic decisions.

When decisions are made, it is by group think and is often a compromise instead of making the best decision for the business.

Furthermore, no one is responsible for looking at the big picture and setting strategy even for the near-term operations of the business.

This results in a lack of clarity with the middle and lower level management of the business.

The end result is a lot of people wasting time on tasks that really do not move the business forward.

 

6 EARLY WARNING SIGNS …

There are many more examples of poor company culture, however, we would like to highlight some early warning signs of a bad culture that if recognized, should result in rethinking the approach to the current cultural environment.

Poor management and leadership
• Lack of empathy
• Micromanagement
• Low office productivity
• Poor internal communication
• Lack of Discipline

When working with a company, we look for one or more of these warning signs early in the process. If they are prevalent, changing the culture becomes a critical element in developing a plan for improving operations.

 

IS YOUR CULTURE EFFECTIVE?

These issues are addressed early in the process and checkpoints are established along the way to assess if the culture is changing.

Ensuring that the cultural change is occurring is an important benchmark and contributes to the success of achieving our objectives.

No company’s culture can ever be perfect.

Our experience, however, in working with many companies, reflects that working toward an effective corporate culture will result in a more productive and profitable business.

Our next blog will focus on the attributes of an effective corporate culture and how it positively impacts a business.

 

Revitalization Partners specializes in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations. Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering or Receivership/Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.

Unfinished Business: Lessons from the NFL

 
 

RP-picAt the beginning of the NFL season, there was great anticipation by Seattle Seahawks’ fans for a third trip to the Super Bowl.

After seven games, however, the Seahawks’ have struggled to achieve a winning record and in fact have lost more games than they have won.

There have been numerous articles written by the pundits regarding the Seahawks’ lack of achievement. How can a winning football team with two successive Super Bowl appearances, with a strong defense, great running game and a star quarterback fall so fast?

 

Why The Seahawks Are Struggling …

A recent article by Charles Roberts of Yahoo sports summarizes his theory of why the Seattle Seahawks’ are struggling:

AP_328695375850“The truth is this isn’t just one person or coach or incident. It’s not just one play or contract issue. Aside from issues with Percy Harvin and the loss of Golden Tate, the Seahawks’ had a few years of continuity and focus and talent melding. And then a sudden explosion of success. Now that serenity – which allowed the previous buildup – has been fractured. Maybe some of the core values and focus have been lost. Maybe it’s just not the same old Seattle we’ve known for so long, and NFL Darwinism is taking its toll.”

 

From A Business Perspective …

Focus-ImageFrom a business perspective, the Seattle Seahawks’ have lost focus. They have deviated from the game plan, or strategy, that was put in place four years ago to build a winning super bowl team.

They have lost key players and members of the coaching staff which has seriously impacted their ability to sustain their strategy of winning. Looking at this from a business perspective one could ask, “Why did they not anticipate this disruption? Why did Seahawks’ management and coaching staff not have a Plan B?”

 

A Frequent Theme …

064The Seahawks’ current problems bring to mind a frequent theme that we see in our work as business advisors. Our clients typically have a string of successful years with improved year over year sales and profitability, followed by a significant downturn in their business.

There are many reasons for the shift in fortunes and in most cases the downturn is a result of “unforeseen events” that negatively impact their business.

 

Warning Signs …

1656330357-c7cee078bd25307f839e4a7281fc74adIn our experience, business owners have the ability to anticipate some disruption in their business. There are typically warning signs that surface early in the business cycle that when recognized should result in a corrective action.

The problem, however, is that while evident the early warning signs are often ignored, or rationalized by assuming they are short term and things will “get better soon”. As the problems progress, management continues to hold out “hope” that things will change, instead of dealing with the issues when they occur.

 

Understanding Key Factors …

We have seen many examples of this in our business including a software engineering company whose revenue declined from $200 Million to $2 Million in two years as their largest customer changed their strategy, or the consumer services’ company whose revenue declined from $400 Million to $100 Million in four years as the approach to their customers became outdated. Both companies incurred substantial losses as a result of the rapid decline in sales. Our role with these companies was to quickly understand the key factors leading to the “unforeseen events” and develop a plan to return the company to profitability.

 

If Management Would Have …

indemnity-insurance-thinkstockphotos-480344582In both examples, we found a number of early warning signs that were ignored including increased regulatory oversight; competitive forces that negatively impacted the price of their products; and a shift in marketplace technology that significantly impacted the way the company reached their consumers.

If management would have recognized these problems earlier in the downturn, they could have taken steps to mitigate losses and if necessary ask for outside help to accelerate their effort to improve performance.

 

Ability To Realistically Understand …

sad-seattle-fansThe Seattle Seahawks are in a state of distress very similar to businesses we work with.

Their ability to improve performance is directly tied to their ability to realistically understand what went wrong, take corrective action and return to achieving successful outcomes.

From a fans perspective, they still have “unfinished business” when it comes to succeeding as they have in the past.