March 11, 2021
TPL Insights: Building Peak-Performance Cultures #58 – Why Cultural Health is So Perishable and How to Protect It
The number of organizations with strong, healthy peak performance cultures I’ve seen deteriorate over the four decades I’ve been paying attention is staggering. The first exceptional culture I saw disintegrate before my very eyes was the Safeway Houston Division for which I managed one of its highest volume stores. For eight years, at age 24, I had been a part of an organization which had grown from 3 stores to 91 and from less than one percent of its market to a commanding 23%. We were the best in town, and everyone knew it. We had the best store conditions, the best customer experience, the best employees, and the best profits. We also had a leader named Don Gates, who had built a culture of peak performance.
I am quite certain that Gates, our Retail Operations Director, never heard or thought about that term, as it didn’t exist in those days. I am also certain he didn’t learn about it in business school because he had a high school education and spent ten years as a produce department manager. He certainly was not out of central casting. What he did know was how to build a unified leadership team that extended all the way to individual department heads. We were perfectly aligned. We knew our purpose, even though we didn’t call it that. Gates treated us like adults, with dignity and respect. He smiled and was friendly with everyone he met. He was also tough as nails and had very high standards. Even though he demanded exceptional performance, we weren’t afraid of him. We just didn’t want to let him down.
In February of 1978, Gates was promoted to Division President in Butte, Montana. He set records for sales and profits in Butte, and repeated his performance in the Kansas City, West Coast, Eastern and Phoenix divisions. Unfortunately, the man who replaced Gates did not get it. Inside of a year, he lost 44 store managers and four out of eight district managers. The culture Gates built over eight years came tumbling down and it started almost immediately. The new man was all business and all numbers. He never smiled when we walked through a store and only spoke to the store manager. In a flash, he took away all the autonomy we enjoyed under Gates. He treated us like children. No longer was it about pleasing Mrs. Jones, it was about pleasing him. We lost our purpose, our dignity, our pride, our will to win and our market share. What confused me then and baffles me now, is how or why none of the executives above this man noticed what was going on and took action to correct it.
Over many years, I’ve seen the exact same movie as Randalls, Dominic’s and Genuardi’s disintegrated after being sold, Home Depot declined after Bob Nardelli took over, Continental Airlines tanked after Gordon Bethune left, Save A Lot Food Stores declined after Eric Claus left, Apple declined after Steve Jobs left, and the list goes on. Of course, cultures can be restored, as Lou Gerstner rebuilt IBM, Julie Sweet rebuilt Accenture, Lynsi Snyder rebuilt In-N-Out Burger and Charles Butt rebuilt H-E-B. Culture starts at the top. One of the complicating factors is that there are subcultures within organizations that can be failing under an ineffective leader while the whole is still relatively healthy.
Cultures are incredibly perishable and even the healthiest need to be monitored, adjusted, and nurtured. The analogy between cultural health and physical health is still the best one I can think of. Analogous to physical health, there are definite indicators of optimal cultural health and they are measurable. In January of 2019, I finally came to realize that self-diagnosis was an exercise in futility and hired an outside consultant to do for my own firm what we do for our clients. It was a humbling yet profoundly valuable experience to discover toxicity within that had to be cut out. My experience in working within client systems for many years is that there are usually a few folks that are holding the entire organization back. In most cases, this unproductive behavior goes unnoticed or unaddressed by superiors. It has also been my experience that some of these people are not bad apples they just have not been given the proper coaching and/or mentoring. I can think of dozens of executives off the top of my head that were practicing bad behavior and simply didn’t realize it. Many of these went on to become peak performing leaders once someone who cared enough about them told them the kind truth and held them accountable.
When examining leadership teams, I look for healthy respect among members, diversity of thought, debate around tough issues, careful listening, courtesy among participants, shared vision, clear responsibilities, clarity around objectives and key results, open mindedness, effective decision making and genuine concern for all stakeholders. When looking for leadership effectiveness, I go to the front lines to see if what I observe on the shop floor aligns with what I observed in the boardroom. Signs that leadership needs attention are listlessness, disrespect, disengagement, long faces, no real debate, group think, talking over one another, dominant players, obvious favorites, no clear purpose, fuzzy values, lack of clarity, defensiveness, and lack of alignment on the frontlines.
Indicators of cultural health around communications, hiring, purpose, customer experience, cost leadership, clarity and innovation are also evident if you know what you’re looking for and what diagnostic tools to use. We’ll get into those in subsequent posts. For now, ask yourself, your board, your leadership team, your frontline workers, your shareholders, and your customers: “How healthy is our culture”? Remember that a healthy culture can deteriorate quickly unless it is monitored and nurtured. Every elite athletic team has a gaggle of professionals constantly monitoring its readiness to compete. Peak performing organizations are no different.
The purpose of all these blog posts is to share what we’re learning about building cultures of peak performance. In future posts, we’ll dig further into how rule breakers of every variety are building companies that dominate their sectors. These are organizations that practice the nine principles we’ve observed in organizations that outperform their peers: Unified Leadership, Disciplined Hiring, Leading with Purpose, Stakeholder Engagement, Cost Leadership, Measuring Everything that Matters, Customer Experience, Clarity in Everything and Staying Ahead of the Curve. If you’d like to talk about how we can help your organization, or if you’d like a thought partner, please give us a call.
Consultants in Retained Search, Interim Executives & Leadership Advisory