Beware of the culture

In my career as a consultant, I’ve had the opportunity to get inside many companies.

Every company is unique. Not just because of its product or service, but because of its culture. You can feel it when you walk in. You get an even stronger feeling when you talk to the managers and employees. It’s that difficult-to-describe way the company operates, how its people work together, how they treat each other, how they do their work.

It shows in the sense of urgency, in the cleanliness and orderliness, in the decorating and in the dress codes. There always seems to be a strong relationship between the success of the company and the strength of the culture.

Culture reflects the leader

There is no question that General Electric has a Jack Welsh culture. He knows how he wants the company to operate and he has been focused on developing a culture that reinforces it.

In smaller, closely held businesses, the owner has an even stronger effect on the organizational culture. The longer the entrepreneur leads the company, the stronger the culture becomes.

But what happens years later when that entrepreneur sells the company to a new owner or the leadership is turned over to the next generation?

It is likely that the new leadership, whether from outside the company or from another generation, has a different idea about what the culture of the business should be. What happens to the culture then?

When the leader changes, the culture changes

Organizations tend to attract and keep people who fit its culture, so most employees are likely comfortable with the existing culture. Even those who may not have been a great fit when they were hired have probably gotten used to the way it is. The task facing a new leader attempting to change the culture to better reflect his or her management style is a challenging one.

All of the factors affecting the acceptance of change in organizations apply here. Involvement, communication, understanding and all of the other suggested practices are important. The basic problem, though, is that many new leaders are either not aware of the need to pay attention to the issue of culture change and its effect on the organization or they simply downplay its importance.

Someone purchasing a business who is not aware or chooses to ignore the effect that new leadership will have on the organization and its culture is in for a big surprise.

In the past, companies assessing a merger or acquisition usually performed their analysis, due diligence and planning from strictly the financial and operational aspect. Now, many are starting to assess the fit and culture of each company to determine the prospect for success in merging the cultures.

They have begun to realize that no matter how good the financial fit, if the cultural fit is not right, the chances for long term success may be hurt.

Family business succession

In a family business planning for succession to the next generation, there is a great opportunity to plan not only management succession but also culture succession. This enables a more gradual succession or change in the culture and thus can ease the pain.

It is unlikely, unless the members of the second generation ownership are clones of the first generation, that there will not be an eventual change in the culture. For the greatest success, the first generation leader must be ready to not only to start letting go of the title and the tasks of leadership but also of the culture.

Here are some tips to help you start the process:

  • Define the current culture in the organization.
  • Determine the strength of the culture and the employees’ attachment to it.
  • Determine how far this culture is from the culture you want.
  • Develop a gradual plan for implementing the new culture.
  • Think culture succession as well as management succession.
  • Remember, you can’t change culture by decree, it takes action, trust and commitment.

Joel Strom ([email protected]) is president of Joel Strom Associates, Inc., Growth Management. His firm works exclusively with closely held businesses and their ownership, helping them set and achieve their growth objectives while maximizing their profitability and value. Reach him at (216) 831-2663.