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@example.com) 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.
In August, I discussed company culture, addressing the issue of handling and changing a culture that was inherited though acquisition or succession.
There is a strong relationship between the success of the business and the strength of the culture. But how can you maintain that culture as the company grows?
As a company grows, the organization needs to change. The question is, does the organization's culture also need to change or should it be maintained?
In most cases, culture should be the exception to the rule and maintained as the company grows. In many successful, growing companies, the culture has played a major role in their success. It has enabled many of these companies to stand out from the crowd.
Culture plays a major role in a business owner's ability to differentiate his company from the competitors. And, it is often tied closely to a company's critical success factors.
Culture and critical success factors
Critical success factors are those things your company does that truly make your customers your customers. They are why customers buy from you instead of from your competition.
They are practices and products that have been critical to your business achieving its current level of success and will continue to be critical to maintaining that success and growth in the future.
Business owners who realize this connection between the organization's culture and its critical success factors understand the importance of maintaining the company culture. Whether it is quick delivery, how employees handle customers or the continuing development of new products and innovative services, maintaining these factors must be top priority. The stronger the culture and the stronger the tie between critical success factors and company culture, the greater the need to maintain the culture.
Ask employees at Southwest Airlines what role their company culture has played. They know their niche, they know their customers, they know what differentiates them from their competition, they have a clear vision and they know how their unique company culture enables them to satisfy that niche and accomplish that vision.
Getting it done
Every company's culture is unique. Therefore, the methods employed by a company to maintain its culture also need to be unique.
But there is one factor that can affect the maintenance effort in any company -- strength of the culture. The stronger the culture, the more likelihood there is that the culture is important to the maintenance of the critical success factors and the easier it is to maintain.
One reason is the company's employees. Strong cultures tend to attract employees who fit well into that culture. They feel very comfortable within the culture and they want to maintain it.
Their cooperation and support make the task easier, but it is by no means a sure thing. The key to maintaining the culture still rests with management's commitment to making it a top priority.
Again, consider Southwest Airlines. Its work force more than doubled from 1991 to 1995, from fewer than 9,000 employees to nearly 20,000. It has been able to utilize numerous practices that fit perfectly into its culture, including animated videos, an employee culture exchange and a culture committee.
The culture committee, formed in 1990, has one purpose -- to perpetuate the Southwest spirit and culture. It is composed of representatives throughout the organization who believe in and are focused on maintaining that culture. Ironically, Southwest's culture frowns on committees, so it has very few of them.
Yet, it believes that the culture committee is not only necessary, it is its most important committee. If you're looking to strengthen your business, perhaps you should follow Southwest's lead. Joel Strom (firstname.lastname@example.org) 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.
Use historical events carefully
A company's history has its place in the planning process. Use it to avoid reinventing the wheel or making the same mistakes. However, your focus needs to be on what the future holds and how the business can prosper from it. Use history as a guide, not a basis for the future.
To grow and prosper, you need to forge new paths. At the rate of change in most industries today, historical paths may actually take you backwards. New ideas, concepts and sometimes far-out thoughts can lead you down new paths that can take a company to new heights.
Avoiding the rearview mirror
It is the job of the leader and the management to look to the future and get the rest of the organization pointed in the same direction. They need to help the organization keep the right perspective on the past. This can prove frustrating. Some people insist on continuing to look in the rearview mirror rather than through the windshield into the future.
Recently, I was involved in a situation in which a company had not been performing very well. Management committed to a plan that involved major changes and improvements in the operation of the company -- changes that could have a major impact on future profitability and help ensure a successful business for the employees and owners.
The frustration came when, at various departmental meetings to discuss the plan, much of the feedback and questions related back to how it had been done in the past. Time and again, management refocused the discussion and pointed everyone toward the new plan and the future, only to have someone turn it back to the past.
Especially in situations like this, when the past was not very pleasant, members of management cannot give up. They need to continually do whatever they can to keep the organization looking ahead and focused on the opportunities awaiting in the future.
Learn from real life
The concept of forward focus, like so many other management practices, is not limited to business. There are many examples in nonfiction adventure books. In "South, The Endurance Expedition," about Ernest Shackleton's 1915 Antarctic expedition, Shackleton and his men faced adversities and setbacks that we can only imagine.
Their ship was crushed in the ice, they were adrift on ice flows, they endured a lack of food and consistently wet clothing in extremely cold temperatures and they had no way to communicate with the rest of the world. It was very bleak and the probability of survival was not very high.
But they did survive, for nearly two years, in those conditions, primarily because of Shackleton's leadership. He understood the need to continually develop plans for tomorrow, no matter what had happened today or yesterday. By keeping his men focused on the future rather than on the nightmare of the past, he was able to maintain their resolve and save their lives.
He got them past the initial disappointment of not achieving their original expedition objective and kept them focused on their new objective, getting home alive.
Shackleton's expedition story is extreme. I hope you never face crises and problems of that magnitude.
It is, however, a great example of a leader who understood the importance of maintaining a focus on the future. Joel Strom (email@example.com) is director of Joel Strom Associates LLC, the growth management practice of C&P Advisors LLC. The firm works exclusively with closely held businesses and their ownership, helping them set and achieve growth objectives while maximizing profitability and value. Contact him at (216) 831-2663.
It's a fact that companies cannot grow if the owner insists on being involved in everything. The more owners can distance themselves from the day-to-day operations, the greater the value of the business.
Few owners would disagree. Making it happen, however, isn't easy. Fear of failure and personal ego often get in the way. But it's imperative to understand that making it happen is an owner's most important job.
The secret to letting go is in knowing what your job is as an owner. Actually, there are five distinct jobs that, if understood, can enable you to focus on building your business.
Set and communicate the vision
This is one job that can not be delegated. It is the owner's privilege and responsibility to set the vision of the company. Without it, the company lacks a clear direction and focus.
But having a vision doesn't do much if you're the only person in the organization who knows what it is. The job of owner requires you to be communicator, proponent and promoter of the vision until everyone understands it and is focused on it.
Strengthen the culture
Companies that have grown successfully and have been able to sustain their growth and success usually have one thing in common -- a strong culture.
One of your jobs as owner is to define and strengthen your company's culture. The culture must be one you believe is aligned with your vision and management style, that will help and not hinder your need to let go. Your commitment to it has to be strong and continually reinforced through your actions.
Build the team
If your responsibility as owner is to work on the business, you need the right team in place to work in the business.
Building a team is different than team building, and different than simply placing bodies into organizational slots. Building a team is pulling together the right people who understand and buy in to the vision, who fit into the culture, and who make you confident that, when you give them the ball, they will run with it in the right direction.
This is one job where you cannot afford to skimp. Within your budget constraints, you need the best possible people. You also need to let your ego go and seek out a team that can do its jobs better than you could have done them.
Be the leader
Working on the business does not move you out of your business. It simply shifts your focus to leading the organization with a strong but gentle pull rather than by pushing it.
With a team in place, the business is operating in a strong culture and is focused on a clear vision. With this happening, you shouldn't have to manage so much as lead.
Let go and work on the future
The excuses are gone. If you're performing your first four jobs, there should be no reason for not letting go.
Even understanding the jobs of the owner, is letting go easy? No. But it is worth the effort. Without it, real growth is impossible. Building real value cannot happen as long as you are in total control.
So grip the edge of your desk, let it happen and get ready for the ride. Joel Strom (firstname.lastname@example.org) is director of Joel Strom Associates LLC, the growth management practice of C&P Advisors LLC. The firm works exclusively with closely held businesses and their ownership, helping them set and achieve growth objectives while maximizing their profitability and value. Contact him at (216) 831-2663.
Every business owner needs time away from the business to reflect, think and plan.
I recently spent some time in the Southwest, where I reflected a bit and pursued some of my favorite recreational activities such as hiking, biking and golfing in the desert.
One morning, while biking through the desert, I realized again just how similar the strategies and practices that are used to ensure a successful adventure are to those needed to successfully manage a business. Here are four of my business strategies from the desert.
Don't skimp on equipment
Equipment without skill or ability won't make you a champion. However, a lack of the right equipment can result in a less than enjoyable experience and prevent you from excelling.
In the worst-case situation, bad equipment can be unsafe and cause injury. The money I save on a pair of low-cost hiking boots at the local discount store will be little consolation to the pain and inconvenience of my blisters and sprains.
Instead, understand the limits on equipment and set your objectives to match. Understanding how the quality and capabilities of your equipment and resources affect your ability to compete and excel will help you choose the right strategies.
But, while matching objectives and goals to capacities and capabilities may be a good short-term strategy, it can limit your long-term growth. To reach your long-term objectives, your long-term strategy should begin with improving the capacity and capability of your equipment.
If your goal is to be the best, and your strategy is to compete and win in the top classes, you can't do it with amateur equipment.
Know your limits
While the right equipment may help you implement strategies and reach goals, it can also be dangerous because it could provide a false sense of security. Even more important than equipment are the skills and abilities of the person operating it.
If you are biking or climbing up a steep mountain slope, not knowing or accepting your limits is not only foolish, it can also be very painful. But, as in business, taking risks is part of the game. Avoiding them will limit your potential for growth and reaching the summit.
The key is knowing what type of risks to take. If an honest assessment of your abilities reveals they may be preventing you from achieving your goals, then your short-term objectives and strategies should become clear: Improve your abilities and raise your limits.
Focus in front of you
One way to avoid an unpleasant experience when biking down a rocky mountain trail is to focus on the condition of the trail you are approaching.
Looking down and focusing on your front wheel is a natural tendency, but it doesn't provide enough time to react to changes in the trail. Being aware of the road ahead helps avoid last second panic adjustments, where the cure can be worse than the problem.
Spending your day watching every detail of the day-to-day activities of your business is like watching the front wheel rather than the trail. You stand a good chance of being surprised when the trail conditions change.
The trick in business, as well as in biking, is that when you are moving forward, be focused just far enough ahead to enable you to remain in control while avoiding surprises.
When hiking or biking, there are always portions of the trip that require more intense effort and concentration than others. If a mishap occurs, it's usually not caused by lack of attention.
My personal experience, however, is that mishaps tend to occur not at these times, but at times when the trail seems easier and you let down your guard.
This doesn't mean that whether you're in business dealings or in the desert that you should be in a constant state of paranoia. But it also doesn't mean you shouldn't celebrate successes (in fact, these celebrations often provide the motivation for continuing the adventure).
Instead, simply stay alert at all times to avoid the unexpected. The trail or the competition doesn't care whether you are concentrating. It will move along with -- or without -- you. Joel Strom (email@example.com) is director of Joel Strom Associates LLC, the growth management practice of C&P Advisors LLC. The firm works exclusively with closely held businesses and their ownership, helping them set and achieve growth objectives while maximizing profitability and value. Contact him at (216) 831-2663.
This is a tale of two companies. Both have great products with excellent growth potential. However, each operates under completely different management philosophies and cultures.
Focus on quality or dollars?
The ownership of Company One, a 15-year-old service-oriented organization, has followed a strict philosophy of focusing on the quality of its products and its level of service, and in building the best company possible.
Decisions are made based on the value brought to the company's clients, not on short-term profits. Ownership has always believed that by providing the best possible products and services, and continuously exceeding clients' expectations, sales and profits will grow.
Company Two, a competing service-oriented organization, has not been in business as long as Company One. It is still building its client base and establishing its reputation. Its ownership, however, has a different management philosophy. It is focused on, and managed by, the bottom line. Decision-making is based on short-term profitability rather than on customer desires, and that has affected its product and service quality.
Recently, some of Company One's largest clients decided to consolidate vendors. It has made the short list of every one of its clients. This means a 50 percent increase in volume over the coming year.
To management, this confirms the belief that maintaining focus on the product, service, people and customers will continue to pay off.
Ownership at Company Two desires that same type of growth, but is having a hard time making it happen. Its focus on short-term profitability has created an unstable environment that is not in sync with the owners' desires.
The rules change continuously, as does the organizational structure. Communication is poor. The result is employees who believe in the product but are unsure of ownership's focus or commitment to the customer. Clients also feel the uncertainty, and the company's growth is stagnating when it should be exploding.
It would be foolish to suggest that profits, whether short- or long-term, are not important. The question, however, is whether an obsessive focus on short-term profitability or an obsessive focus on the customer and the product will produce greater returns.
If you have an opinion or other tales to tell, I'd like to hear from you.
JOEL STROM is the founder of Joel Strom Associates. His firm works with closely held businesses and their ownership, helping them set and achieve growth objectives while maximizing profitability and value. Reach him at (216) 831-2663 or firstname.lastname@example.org.
The game is hauntingly familiar if you're one of many CEOs who have ever spent a day chasing problems and, at the end of the day, felt you were no further ahead than you were when the day began.
Everyone has these days, but when they become the norm rather than the exception, it's time to re-examine your team and the company's focus.
Whack-a-Mole-type businesses result when the culture is to attack the symptoms of a problem rather than the cause. In these cultures, the "moles" (crises) continuously reappear because everyone is so busy whacking the symptom of the current crisis that they never have time to address the cause. Solving the problem on the surface just pushes the "mole" back into his hole. Then, just as you think things are running smoothly again, out he pops.
As long as the root cause of the problem is not addressed, the mole will continue to reappear and your job will become nothing more than chasing and whacking all day long.
One 150-employee firm had moles popping up throughout the day as customer issues, problems and complaints came in. Employees addressed the customers' problems and issues, and some customers were even happy again, but nothing was done to make tomorrow any different.
Finally, after losing clients and employees, as well as money, the CEO committed to stopping the cycle. He committed to the time and resources to implement a process that found and eliminated the moles one at a time. And in the process, the demeanor of everyone -- from employees to customers -- changed.
Today, the employees still have to whack a few moles, but it's become the exception rather than the rule.
Joel Strom (email@example.com) is the founder of Joel Strom Associates. His firm works 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.
* "My salespeople are not selling as much as I expect them to."
* "My administrative people are always coming in late."
* "My engineers never seem to finish their projects on time."
* "My service people don't treat our customers as they should."
I hear comments like these all too often from business owners who don't understand why these things are happening. My response is simple -- have you given these employees expectations?
Consider two construction companies that perform similar work. Company One's trucks are dirty, looking like they haven't been washed since they left the factory. In contrast, the trucks from Company Two look brand new. They are well-cared-for, have no dents and are clean inside.
Is it a coincidence that Company Two outperforms Company One?
While the condition of the trucks isn't the primary factor that makes a difference, the trucks are an indicator of major differences between the businesses. Company Two's culture is based on setting expectations for the performance of the company and its employees. Expectations are set for everything from sales to quality to profits to how employees should treat equipment. Setting high expectations, then holding people accountable, is the norm at Company Two.
Company One's culture is the opposite, and its trucks reflect that. No expectations are set for how to treat and take care of the trucks or for any other employee performance or behavior.
It is difficult -- if not impossible -- for companies to succeed unless their employees are performing up to expectation. But employees need to understand what those expectations are. Management must set and communicate expectations so that they can hold their staff members accountable.
Being told what performance and behavior are expected and being held accountable is a major shift from many companies' old cultures. And, like any other culture change, changing to an expectation and accountability-based culture requires strong management commitment, a good deal of time and effort and a lot of grief.
However, few investments pay off as well. Organizations with cultures that are based on performance expectations and accountability, where employees know what is expected of them, outperform their competition.
Joel Strom (firstname.lastname@example.org) is the founder of Joel Strom Associates. His firm works 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.
On the bag is a story by company founder and President Jack Aronson about how he began making salsa in his restaurant in Michigan. His customers liked it and the restaurant became known for it. His restaurant, however, was not as successful as his salsa.
Aronson's accountant insisted that if he wanted to make money, he needed to reduce the cost of his products by purchasing less expensive ingredients. But he stuck to his belief that to produce the quality salsa both he and his customers demanded, he had to use only the best ingredients.
This didn't make his accountant happy, until one day, the president of a chain of grocery stores tasted the salsa and insisted that Aronson let him sell it in his stores. The rest, as they say, is history.
Aronson's success came from the fact that he understood and was committed to his vision for producing only the best product. He felt, as do many entrepreneurs, that how he does something is as important, or perhaps more important, than what he does.
Unfortunately, not everyone is fortunate enough to have a potential customer walk in the front door and demand to buy huge quantities of their product. But there are hundreds of entrepreneurs who have a strong passion for their vision, a commitment for their values and who are willing to sacrifice short-term profitability for long-term success.
So do you follow the vision and, like the Garden Fresh people, use only the finest ingredients, no matter the cost? Or do you listen to your accountant and sacrifice your values for profit?
Assuming that the vision is based on reality and there are customers who appreciate that vision and are willing to buy the products that result from it, most successful entrepreneurs would listen to their accountant's arguments, do more testing of their vision with potential customers, then hold on to their values and continue to pursue their vision.
And that accountant who wanted Aronson to cut costs with inferior ingredients? He saw the light and the wisdom of Aronson's way. Today, he is the company's CFO.
Unfortunately, too often, that decision-making help remains only a potential because it is not converted into usable information. Why do so few companies take advantage of this opportunity?
In some cases, the difference between data and information is not fully understood. Many business owners express pride in the volume of data their systems produce, yet, when considering a major business decision, they have no usable information to help make a decision. Others understand data alone is not enough, but are reluctant to invest in ways to convert data to information.
I recently worked with a company to develop a strategic growth plan. Decisions made today will affect the business for many years and could mean the difference between long-term success and failure.
Although the company had sophisticated systems for gathering data, there was little usable information. Nothing could easily extrapolate the data and convert it to usable information. This led to another dilemma -- should management invest in ways to create information to help them make informed decisions regarding their future strategies or should they forge ahead with strategy decisions based on partial information and best guesses?
Investing in the creation of information costs money and delays development of the plan. But the information it will yield will increase the odds for developing successful strategies.
Good information is crucial to a positive outcome. Too often, owners and managers bemoan their inabilities to determine which areas of the company are profitable, the territories that yield the strongest sales and the markets where the company's presence is strongest. But with the right information, all of these questions and more can be accurately distilled.
No matter what my client decides,we are in an environment where we may not have the luxury of a do-over on decisions. We need to be as smart as possible. That requires a high level of business intelligence, and that comes only from having accurate, usable information. Joel Strom (email@example.com) is director of Joel Strom Associates, LLC, the growth management practice of C&P Advisors LLC. The firm works exclusively with closely held businesses and their ownership, helping them set and achieve growth objectives while maximizing their profitability and value. Reach him at (216) 831-2663.