Horrible Failures Happen Because Your Culture is Broken and the Board Failed to Fix It

https://lnkd.in/e--gMJvP

How this sort of bonkers failure happens is usually pretty complex but has one foundational, simple, and necessary requirement.

"...after an investigation into a?safety?scandal?found issues at some 64 models, including 22 sold under the Toyota brand."

Daihatsu said in April last year it had?rigged side-collision?safety?tests carried out for 88k small?cars, mostly sold under the Toyota brand."

How does "rigging side-collison safety tests" become okay?

Happens More Than You Would Think

This is not just Toyota. Think of the messes at Boeing, VW test fraud, the Coast Guard, carcinogens in talc, hair dye, baby clothes, the self-immolating Pinto way back, the Ajax fighting vehicle or Silicon Valley Bank.

Think of all of the behaviors that are a drag on performance, brand, talent supply/retention, cost structure , customer experience and agility that are a level below the egregious stuff above.

The foundational element that opens the door for this type of behavior is the failure of the board to see that Culture Execution is effective at a company.

What the heck is Cultural Execution?

In the early days of FedEx, our culture was a huge asset. It drove groundbreaking service at scale and employee and customer loyalty levels that were worth gold.

Genius, born to lead Fred drove home the mantra of P-S-P. People Service Profit. Take care of the people; they will take care of the service and that takes care of the profit. Also important was that we were process control wizards and tech mavens and were incented to innovate, experiment, fall down, and grow. I was not really qualified for my first two big promotions. Upper management knew I would stumble and break some things. They did that on purpose. Terrifying at first but turned me into a much better me,

All employees took a confidential survey ranking their manager on 10 behaviors we thought were important for success. No matter your tenure or rank, if you scored badly on that, you were sent to management boot camp and resurveyed six months later. If you again scored badly you were removed from management. My boss's boss (an SVP) lost the followership of his team after 15 years at the firm and had two bad surveys. He was given a meaty individual contributor job and was no longer allowed to manage people.

The cultural execution at early FedEx was purposeful; it had teeth, and it worked.

What is Culture?

Culture is a complex thing at a societal level. The culture of France includes cuisine, dance, theatre, art, literature, regional variations, military history, fables/stories, centuries of story-based evolution, and 1200 cheeses certified by Institut National de l'Origine et de la Qualité (INAO).

The culture of a company is clearly not the same thing and is quite simple. To start with I hope you don't have a cheese certification function.

To be clear and obvious, your company culture is not what is in your mission statement or on the plaques adorning HQ corridors.

I worked at a firm for years where the last line on the ever-present plaques was always about continuous improvement. I never set foot in a meeting where that was a topic—not once. At FedEx, it was baked into the budget cycle. The first step in justifying next year's budget was explaining how,throughout the year, you had made your existing operation/group 5% more efficient, so your baseline was your annual budget minus 5%.

How Company Culture Functions

Company culture works (or fails) like this:

1. Understanding the mission needed to execute the strategy.

2. Clarity and impact on the communication around behaviors we reward in support of the mission and the behaviors we punish.

3. Real, visible action on rewards and punishments that truly, truly drive those behaviors.

Most firms are not very good about the punishment side, especially as you go up the organizational chart. How long did the bad behavior of Hurd, Wynn, Jefferies, Davidar go on before they were exited?

4. The big news flash is that the sum of the behaviors is the culture at an enterprise.

So it is essential that the board look at Cultural Execution and review the clarity and effectiveness of comms, rewards, and punishments starting from the top down.

In all of the trainwreck incidents above, there were cultures that made that behavior okay. Nothing happened to anyone before they were 'caught' publicly.

In almost every company I have visited or worked at there is a culture of hit your plan that is backed up by punishments and rewards. Often that is in the form of brutal quarterly ops reviews anchored in stoplight charts.

Most often, they run out of time and just say a brief, insincere, near-content-free thanks to all the programs with a green stoplight before proceeding to wallop the poor folks with the red stoplights. Sound familiar?

That reinforces the behaviors of padding plans, not risking too much, and almost never having serious stretch or innovation risk in plans. Running a firm like that is a board-level failure.

Another example is how Chief Information Officers get rewarded and punished. They get punished for breaking stuff or being late on deliverables. What behaviors do you think that creates?

How often does a CIO/CTO get rewarded for the hack that didn't happen? How often do you reward a failed innovation attempt? How often does an exec get rewarded for eliminating her job?

Culture is a Force Multiplier but it is not the Key

To be clear, no great company culture will save you from bad strategy/mission, but given that you got that right, cultural execution isn't mind-bending complex, but it does require leadership and execution from the board on down.

Anna Catalano Wendy Howell Dr. Misty Blowers Zachary Davis Timothy Chou Amanda Reed Janis Skriveris Ellen Levy Nick Dew Pete 'Rocky' Rochelle Nikhil Deogun Gamiel Gran Michael Crow Ryan Vega MD, MSHA ?sa Tamsons Jake McGee Deborah Lafer Scher Laura Jana Chunka Mui Robert C. Wolcott Dan Ariely Walter Parkes Jorge De Cossio Jaie Genadt Jennifer S. John Sviokla Stuart Evans

p.s. New book relevant to all this Proximity by Rob Wolcott

p.p.s. I spent a couple of years working on a big S&T project for Sec Def inside the Center for Global Security Research inside Lawrence Livermore National. Our reports turned into a book. My chapter (15, p.253) has a sections on Innovation Culture, why culture does not eat strategy for breakfast , and how using a culutral artifact (Powerpoint) with HLI (explained in the piece)can drive positive cultural change.

/https://cgsr.llnl.gov/content/assets/docs/STATEGIC_LATENCY_Book-WEB.pdf