Culture makes the difference.
At a recent speaking engagement I was asked “What is it that makes one organisation stand out from another when they are essentially offering the same products and services?” My summary answer was “The organisation’s culture that the CEO drives.”
What will make us ‘stand out’?
There are many things that an organisation can do to stand out from their competitors. These may include superior advertising, applying more direct sales effort, increasing unique features in the offerings, promotions, lowering prices, superior manufacturing capability, best quality or a combination of so many more options to be different.
The issue with all of these actions is that they can be imitated. Some of them, especially cutting prices, may impact the profitability of the organisation to the extent that the business is no longer viable. What cannot be easily imitated is the culture of the organisation that attracts and retains the best people who in turn provide superior customer service.
Culture
I will deal with culture in a later article but it is important to define it for the purpose of how the CEO drives culture. The literal definition of culture is “the arts, customs, and institutions of a nation, people or group” (Oxford University, 2001). In the business organisation, this translates to ‘what we value as an organisation and the way we do things around here’.
When all things are equal for a customer choosing between two very similar offerings, the customer will default to the offering that comes from the organisation that they trust, that is easiest to do business with and whose method of doing business best aligns with their values. Stated another way, the customer will choose based on their experience of the potential supplier’s culture.
Culture begins with the CEO
No matter how small or large the organisation, the CEO is the owner of its culture. Businesses exist to generate a positive return on investment to the owners. The Board represents the owners of the organisation. It is responsible for providing governance to ensure achievement of the organisation’s ‘triple bottom line’ which is the return to the shareholders, the contribution to the community and its positive impact on the environment (“Profit, People, and Planet” – see https://en.wikipedia.org/wiki/Triple_bottom_line )
The board appoints the CEO to operate the business to achieve the triple bottom line. The overall company strategy is approved by the board who then delegate the responsibility for its execution to the CEO and their appointed leadership. Whilst operating under the general guidelines as set by the board, the CEO determines how the strategy is executed. It is how the CEO drives the execution of the strategy that will set the culture.
Key CEO Culture metrics
When discussing culture we are dealing with the art of leadership as opposed to the science of management. How the CEO sets the culture is an art and hence there are limitless ways that the culture is determined and upheld. During my career, I have been able to witness firsthand how CEOs have set the culture and ensured that it endured under their leadership. The key areas that I have observed include the following areas:
Personal values
Before a CEO can influence the culture of their organisation, they must first understand their own values and how they apply them to their role. As a CEO, areas to consider include:
- Do you pride yourself on punctuality or are agreed times simply something to aim for?
- Do you aspire to the highest ethics or are you prepared to ‘do what it takes’ to do business?
- Will you happily delegate to others or do you believe that to get a job done well you must do it yourself?
- Are you a ‘team player’ or do you believe in ‘command and control’?
- Do you expect all the fancy trappings that your title entitles you to or are you satisfied with the necessary items that your position requires for you to do the job?
- Are you a CEO because you crave the status/remuneration or did you take the role to make a difference; especially for the customers, people, community, environment and the owners?
- Is your mission to have the status of having as many people work for you as possible or is your mission to develop as many people as possible whilst satisfying as many customers as possible on behalf of the owners?
Alignment with Company values
Whether they are written or not, organisations have values that they apply to their operations. Having no written and communicated company values is in itself a statement about the company and its values. Clearly such an organisation does not value its culture and leaves it to the individual to ‘make it up as they go along’. The CEO of a start-up has the opportunity to apply their own values to the organisation such that it will satisfy their chosen market. Where a CEO considers accepting a role with a new organisation, it is essential that they assess the values of the organisation and how they match their own personal values. Where the organisation has deeply entrenched values that are fully supported by the board, it is virtually impossible for a new CEO to change those organisation’s values. If their personal values do not align with the organisation they are considering, it is best that they do not accept the position. If the CEO is being appointed by the board as a change agent, it is important for the prospective CEO to ensure that their personal values are totally in line with those that the board expects the organisation to adopt.
Attitude
The attitude of the CEO is a major factor in determining the culture of the organisation. ‘Can Do’ CEOs achieve a ‘can do’ culture in their organisation due to ‘can do’ people feeling empowered to act in the same way as the CEO. Cynical CEOs will encourage other cynical managers to mimic their attitude. Attitude is contagious. The people continually observe the CEOs attitude and assume that is the attitude that is acceptable and hence that they are expected or able to exhibit.
Actions
People follow actions, not words. How the CEO acts will determine what people see as acceptable. If the CEO exhibits energy and consistency in their actions, it is noticed by their team and sets the example of how the team are expected to behave. The CEO sets the standard for behaviour in such areas as expenses, diversity, acceptable language, dress, punctuality, work-health and safety, corporate citizenship, benevolence and more. Even personal areas such as fitness and health consciousness of the CEO are observed and seen as acceptable. A great example of this was John Morgridge, the CEO and Chairman of Cisco Systems in the late 80s/early 90s, who set the course for the company to be the behemoth it is today. His mantra was ‘frugality’ which he exhibited in his choice of hotel rooms, flights and the vehicles he drove. His focus on frugality became legendary and was even depicted in a Simpsons episode with him driving his pickup truck at home on the farm.
Artefacts
It is easy to gain a first impression of the culture of an organisation by the artefacts around the premises. The CEO sets the tone for the organisation by the artefacts that they display in their office. For example, if the CEO’s artefacts in their office are aggressive, all-male artefacts such as football teams, shooting trophies or the like, with no gender balance or inclusion of other cultural or community participation, the people gain the impression that the culture is aggressive and gender specific. Sporting paraphernalia in their offices and boardrooms demonstrate that they ascribe to the ethos of the teams that they support. I have visited with CEOs that only have model cars, photos of fishing trips etc. in their offices which demonstrates that they care more about their personal hobbies than the culture of the organisation and its success. I have found that where there are displays of awards for charitable donations or organisational participation in benevolent events displayed by the CEO, the organisation culture is one that values being a good corporate citizen. Charts of production, customer satisfaction, quality statistics and other organisation metrics on prominent display around the premises, such as I witnessed in the staff corridor of a Ningbo, China factory recently, demonstrate that the organisation is focused on results and wants the people to care about the areas displayed.
Team
The CEO is responsible for the organisation’s leadership team. As with the CEO, the actions of the members of the leaders will result in the culture of their organisations. In selecting members for the leadership team, it is imperative that they are chosen such that their values align with those of the organisation and its values. Importantly, where a team member acts in conflict with the values and the culture, the CEO must demonstrate that actions that are counter to the values and culture of the organisation will not be tolerated. Where the CEO chooses to turn a ‘blind eye’ to a leader acting counter to the values and the culture, the people will see that this behaviour is acceptable, thereby undermining the values and the culture.
Engagement
To ensure the desired culture is operating in the organisation, the CEO must be actively engaged with the people. In very large organisations, it is impossible to be ‘face to face’ with every staff member so it is important to hold regular virtual updates, visit locations, perform ‘town hall’ updates and where possible talk directly to people where they work. The values, and examples of them in operation, must be continually highlighted in these engagements. The leaders in the locations must be aligned with the values and the culture and see themselves as the ‘on site’ representative of the CEO and the company values. Rapid, regular updates should be provided to the organisation’s leaders so that they are able to constantly ‘live’ the values, communicate them and uphold the culture.
The CEO is the cultural architect of the organisation
The people make the difference for organisations. How they operate is what will attract or repel customers. Ensuring that the culture is one that attracts and retains the best people is of critical importance to the success or otherwise of the organisation and should be at the highest level of the CEO’s list of priorities.
© Philip Belcher, LSE Consulting Pty Ltd.
Please contact LSE Consulting to find out how we can assist you in your CEO role or any other strategic business issues.
LSE Consulting is a specialist management consulting company. The purpose of the company is to assist business leaders to improve their organisation’s results, turn around underperforming businesses/business units and prepare for successful exit. The LSE Consulting method focuses on Leadership, Strategy and Execution, hence ‘LSE’, with a strong emphasis on business strategy aligned marketing and sales. The company was founded by Philip Belcher to assist business leaders through interventions that are based on his 30+ years’ experience in leading, turning around and successfully exiting businesses.
