DS Cohen & Associates
Sometimes you come across an important article that’s great at describing trees and still misses the forest – that’s the feeling I got reading “When Corporate Cultures Go Toxic, From Lehman to Volkswagen” by Morgan Witzel.
Witzel’s point is that it’s too easy to blame the CEO for the fall of a once-great company – it’s the culture to blame. Chalk up another one for apologists of disproportionate CEO pay… not only are they worth all the tens of millions they get for running a company, but they’re not to blame either when things go wrong!
Witzel elaborates. Each of the CEOs he mentions (from companies as diverse as Lululemon and BlackBerry to IBM and Motorola) was steeped in a toxic culture which encouraged the CEO to make bad decisions… then presto… the organization went off the rails.
Is that how it works? At the same time, Witzel also talks about how cultures become toxic… IBM stopped valuing innovative outcasts. Lehman got too money hungry. Motorola and BlackBerry became too smitten with their own technology and missed the evolution of customer demands.
Is that a problem of culture?
Witzel answers his own question, even though he misses the point of that answer (forest meet trees.) “Their leaders were guilty of neglect,” he writes, “but not deliberate error. They took their eye off the ball, and let the cultures of their companies slide.”
To which I say… yeah, exactly. And… isn’t that one of those things (watch over culture) that a CEO is supposed to do?
Lehman did not go broke because of its culture; it went broke because its leadership (and therefore its managers and rank-and-file employees) did not respect, value, and live its culture.
Cultures don’t become toxic… not in the sense that Witzel means… but they do lose their way, especially when their CEOs stop paying attention to what’s happening in the organization that’s contrary to the culture or actively value behaviors and results that are disconnected from those cultures.
New CEOs do this all the time, especially when they come from outside the company. (See Home Depot, Nardelli.) They have their own values and way of doing things that runs afoul of the culture… people get confused as a result… and some do things they shouldn’t according to that culture’s values, while others are valued for things that run against that culture.
CEOs steeped in a culture who stop respecting or valuing that culture also confuse people. The CEO is an incredibly powerful role model. If she indicates something that used to be valued is no longer valued or not valued as much as something new… how are people supposed to act?
There’s a Yiddish expression that put this in perspective: A fish begins to stink from its head. Witzel talks about the need for CEO’s to be vigilant about minding their culture – and that is the answer. If a slew of Volkswagen engineers believed it was okay to fake environmental data that was either 1) always okay in Volkeswagen’s culture or 2) became acceptable under the CEO’s watch.
Companies that stay true to themselves or resist the easy fixes or enticing rewards that did in Volkswagen or Lehman have leaders with the courage to do what is right according to that culture regardless of pressure or temptation.
That’s what we mean when we say a company has integrity. It’s being true to the values of its culture. Companies with integrity are more successful in the long run. Companies without integrity have CEOs who deserve to get canned.
A note to readers: On Sept 24, 2015, it was reported that Volkswagen CEO Martin Winterkorn could potentially receive a 60 million Euros payoff. It seems to pay for the CEO to do what is good for short-term profit and not what is right by the company values.
