Get Off Your High Horse: 15 Ideas to Develop a Merit-Based, Results-Oriented Company Culture

“Executives and owners are simply employees of the company and therefore subject to the same policy and procedure endured by any associate.”
Sometimes the Bull Wins

The Lead Up to the First All-Hands Meeting
Once my eyes adjusted to the change from a Fortune 50 firm to a small regional business, I quickly recognized there was a solid list of apparent and overlooked positives. The company had many strong client relationships. The team was deep with talent; the top tier of associates could have played at any level of the industry. It was a lot of fun being around the employees; there was a natural camaraderie and a rich jocular style that comes with a young demographic mix. And beyond their doubts and concerns, I sensed the associates were ready to commit.

The real central question was the one on their minds: Was their employer viable, well-led, and worth a career commitment? The associates were right to have been harboring concerns about the company’s future. Cash had not been generated for two-plus years. The last audited financial for FY1988 indicated the losses had exceeded $1.2M. There had been a number of layoffs. Job security and the company’s survival was on every associate’s mind.

The root cause of most business failure is found somewhere in the mix of strategy, structure, and business process. The final symptom of failure is a working capital collapse. However, for employees the impression is less academic. Serious financial stress in a company is experienced by the rank and file associates as a values crisis. Commitments that had been made are not met; which calls into question the credibility of key executives. While budgets are slashed, and jobs are disappearing all around, employees are no longer sure what the organization stands for or believes in. Long-term office alliances and relationships are strained while associates compete for job security. In an organization in decline, it is easy to personify problems that find real root in business fundamentals. This is especially the case for young people who have not experienced the ups and downs of a business cycle.

To reverse the decline, an organization needs (1) a transfusion of working capital, (2) an effective strategy and viable model, and (3) reestablishment of a merit-based, results-oriented culture. A week into my new role, Jon and I were starting to wade into that sequence. That is when I scheduled my first all-hands meeting.

The objective of the meeting was not to make my introduction — we instead wanted to organize my comments around their interest — “security”, “career” and “opportunity”. With this group I knew my tone needed to be both light and serious. One objective for that meeting was to shift focus from the past. I wanted to legitimize how they were feeling, while challenging the team to move forward. Unfortunately, a sequence of former executives had made a practice of disparaging predecessors. I had never seen the value in judging predecessors. Beyond poor taste, there are at least three reasons why this is a bad idea: The criticism is usually inaccurate and out of context; there is no gain – in fact predecessor blame is counterproductive; and it is bad karma — since we will all eventually be part of the emeriti. It was important for me to get the associates’ energy out of the past — and I thought I may be able to have fun expressing that view.

The First All-Hands Meeting
At the beginning of my comments, I made a few lead-in points:
• It is a privilege to be part of the team. I know good talent. It is obvious to me the culture is rich with tradition, and the team is deep in ability. I have worked in award-winning Fortune 50 branch offices my entire career and this organization could compete with any of them.
• Their sacrifice has been crucial to our survival, and hasn’t gone unnoticed. All should be proud indeed of the collective efforts.
• Our firm has made it nearly to the end of the recession because of those efforts. There is tremendous opportunity for the firms that will make it through. If we push to the other side, with this talent we have a chance to go on a run that this team, our competitors, and the market would not soon forget.

I knew the audience was curious about my management style, so I let the group know I had a cautionary tale to share about my viewpoints on management. With a smile, I leapt right into the tale:

“An executive had been recruited to be the new president of a regional high tech product and service company. As he walked into his new office, his predecessor was just leaving holding a box of personal possessions. Startled, they exchanged strained cordialities. The outgoing exec broke the ice and said, “Listen, I wish you the best of luck. I know you probably don’t need any advice from me, but just in case it helps, I have left three envelopes marked “#1”, “#2” and “#3”. I placed these out of the way in a hanging Pendaflex folder in the credenza drawer. If you want — open these one at a time when you confront a crisis.” He quickly ducked around the corner and exited the business.

The honeymoon went along smoothly for the new president, but four months into his role, revenue plummeted unexpectedly. Working late that evening, with a slight bead of sweat pouring off his brow, the president came across those numbered envelopes. He took out the envelope marked “#1” and opened it. The message read, “Blame it on your predecessor.”

The president acted. He called his managers together, and with nuanced cleverness, he laid the entire blame on the previous president. From this point forward, things were going to change. The old style was out — things were going to be different. Old meetings were cancelled and new meetings defined. Team building, rope courses and performance coaches were introduced. People learned about each other’s communication preferences. Favorite business books were distributed. Revenue cycled up, and the crisis passed.

All went along well. However, about a year later, the company was again experiencing a revenue decline. Yet the crisis was compounded with a serious expense control problem. Late one night in his office, in a deep state of panic, the president recalled those envelopes. He hurriedly ripped open envelope “#2”. The message simply read, “Reorganize.”

The president jumped into the task. He brought the team together, announced he was moving the managers around to new roles. He renamed all the departments, changed all management titles, and “sales representatives” became “territory managers”. Fast-trackers were identified, and company mentors were assigned to them. The president then developed a presentation with the new org charts and visited every team to tell the story. The chairman and the board congratulated the president for his insightful efforts. Revenue cycled up, expenses fell back into line, and the crisis passed.

After several consecutive profitable quarters, the company faced a third crisis. Revenue declined, expense increased out of control, clients were concerned with delivery and quality, fast-trackers — fed up with “being mentored” — resigned, and projects were neither on-time nor at budget. The president went to his office late that evening in a cold sweat, closed the door and opened envelope “#3”. The note said, “Prepare three envelopes.”

The crowd burst out in laughter. The story was good therapy. The team appreciated the self-deprecating message about my station, and by synching up with their doubts, I was developing credibility. Most importantly, my message inferred we were going on an altogether different journey.

It was time to introduce the ownership structure of the soon to be carved-out entity. I started by asking if any in the group knew the difference between the words “committed” and “involved”. A number of hands went up, and someone spoke out, “The hen was involved in the ham and egg breakfast, but the pig was committed!” Then I announced, “The revolving door of leadership has stopped. Jon and I signed over everything we own, and executed agreements to buy 50% of the firm each. We are all the way in – we bet the farms on your success.” I emphasized that Jon Peacock was not just the other 50% shareholder, but an individual I admired more than any I had met in my career. I was proud to call him my friend and partner. His reputation across the community was stellar and it was his leadership that kept the creditors and vendors positioned to support our new business. “We are committed to your security and careers and this firm’s future.”

In the interest of drawing their attention to the future, two far-fetched goals were identified. I said, “As you walk to your cars after our meeting, look down Old Seward Highway and spot the top of British Petroleum’s building through the trees. BP and the others like it are the type of accounts we are going to pursue and capture. We are definitely heading up-market.” In addition to an “up-market” focus, I followed with the point that our top line mix was going to emphasize higher levels of service revenue content. We were going to chase large-scale, long term service projects in corporate and institutional accounts. A five sentence version of our new business positioning was handed out to make it easy for all to understand and explain.

To begin the wrap-up, I emphasized to the group that their expressed concerns were appreciated and understandable. We would be making critical changes in the next 90 days that they could count on, including: Leasing a new upscale office within three months, and securing substantial financial commitments from the largest bank and the fastest growing telecom company in the state. I asked that they write those promises down and hold us accountable to the commitment.

I finished my first meeting by saying, “We will need a little more of your indulgence — we won’t fix all the problems tomorrow. You will see profound change in the coming weeks and months. But don’t take long to buy in — as much as you have already given, I have to ask more from each of you. Your support, confidence, and attention to the little things are needed in extraordinary measure. Your collective commitment will create the critical momentum. You can trust that it will pay off in better job security for all, interesting career paths in the future, and a professional journey you won’t forget.”

We got a great response from the associates. Now it was time to meet our list of promises. We were not taking a chance on our credibility. Jon had been architecting the credit relationships, the stock purchase agreements, leases and floor plans. We had a high confidence we would get all of these objectives accomplished.

15 Ideas for Small and Mid-Sized Businesses to Impact Culture
Jon and I collected a number of values, recommended acts, and insights from our conversations and readings that we intended to embrace in the new “corporate culture”. Listed below are 15 of those ideas.

1. Owners and executives are simply employees of the company and therefore subject to the same policy and procedure endured by any associate.
2. Principal’s intent on building shareholder value should take conservative salaries, and reinvest earnings in the company.
3. Avoid the appearance of privilege. Principals of emerging enterprises should look conservative. New cars, fancy offices, Rolex watches, and Armani suits produce unintended consequences.
4. People notice hypocrisy. Principals should set the standard for work ethic; at least collectively, principals should be at work the earliest and stay the latest.
5. Executives don’t really need a big office. The manager with the most direct reports should get the largest office, along with a table and chairs. Conference room usage will be more efficient that way. And get rid of the stuffed blue marlin on your office wall. It sends the wrong message.
6. Vendor benefits, gifts, and prizes are not for the ownership team or salesperson. These SPIFs (i.e. special product incentive fund) are best applied to the company and/or for the employee reward and recognition programs and distributed based on merit. SPIFs should not be distributed to the principals for their personal use.
7. Culture is the collective of what the organization stands for and what it believes in; the central beliefs and attitudes. A practical definition of company culture is how employees act when management is not around.
8. Cultural health can be gauged in part by each employee’s understanding of their purpose in the context of the plan; their self-confidence to act to achieve that purpose; and belief that good performance will be recognized.
9. Eliminate bottlenecks and increase the degree of freedom. Performance happens if associates who know their jobs – and have the freedom to do the job – are matched with an intelligent plan that has room for innovation. In this environment, the business will grow, job security will improve, careers will advance, and associate confidence in leadership will be earned.
10. A motto, business principles, and mission statement will produce widespread cynicism if there are significant differences from common perceptions. What may work better is to lay out the strategic positioning and the tenants of the business plan in five or less simple sentences. Once everyone buys in — delegate.
11. Organize the company around recognition events. Hold regular meetings for the employee workforce. Reward and recognize associates publicly and often. Create ritual around reward and recognition. Also reward employees for telling you what is broken; then think of ways to have fun with the discoveries. Fix the processes causing issues.
12. “Egalitarian” and “more” recognition will work well. “Inner-circle” and “less” recognition will not work at all. If you are a principle or key executive, tell your direct reports that unfortunately their positions will have to be public recognition enough.
13. Take a sincere interest in the employees. Be approachable. It is more enjoyable to be involved at this level.
14. Get the organization involved in the community and in charitable organizations. It brings meaning to work, creates opportunity for camaraderie, and good community association.
15. Have informal non-business gatherings including picnics, potlucks, and holiday parties. Dispense with speeches about the business at these events – and make sure you thank the spouses and their loved ones for their indulgence and understanding.

Please add your own ideas to the list and share your comments.

©2009 Ancala Equity Partners / Timothy P. Fargo all rights reserved
Next: The tactics of strategy.

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5 Responses to “Get Off Your High Horse: 15 Ideas to Develop a Merit-Based, Results-Oriented Company Culture”

  1. Dwight Pond says:

    Tim,

    Once again, this is not just a set of good ideas but behavior that generates effective action. I remember being in that meeting. We were skeptical; we were cynical; and we were cautiously optimistic when you arrived. We were tired and the business was free falling. Somehow, you had to stop the fall and build hope.

    It was the humor mixed with reality wrapped in possibilities that was the difference. You left that day and we began thinking maybe it could be different.

    The rest is history. And by the way, my wife views your leadership as one of the bright spots in my overall career.

  2. Thanks Dwight. Please give Connie and family my warmest regards. You may know that one of my prized possessions is a photo album Mike and Kim presented when I left Alaska. The album took its theme from that old story about the three envelopes. They also preserved the original 5-sentence handout from that meeting, along with many pics, org charts, and letters. One fun memory I have is that over the next 10 years, it seemed every time I presented an org chart to the team after that introductory meeting in 1989, someone in the crowd held up two fingers — reminding me what envelope I was on.

  3. Jeff Ballard says:

    Tim,

    Great article. Having worked with you closely over the last four years and indirectly longer than that, you definitely practice what you preach.

    Venita still talks about the gift cards you gave the spouses at one of the holiday parties. That might have something to do with the fact she used it towards the purchase of a Coach purse. :)

    Jeff

  4. Thanks Jeff. I was delighted to hear that gift card was put to good use!

    Best ~ Tim

  5. Great list. It’s amazing how many of these core concepts are forgotten because people try to forget them. Meaning the CEO knows these ideas down deep, but still ignores these feelings.

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