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Your Corporate Culture: A Boon or a Bane?

By Theodore F. di Stefano
Jul 22, 2005 7:00 AM PT

Too many executives either ignore or are unaware of corporate culture. Yet, it is absolutely critical to the success of their company. Whether you know it or not, corporate culture permeates your organization -- for good or for bad.

Your Corporate Culture: A Boon or a Bane?

There are actually many definitions of corporate culture, and you can find a load of information about it on the Web. I look at it simply as the collective state of mind of an organization's employees. One could also term it a habit of mind. It's the manner in which people go about their workday, how they treat one another, and how they treat their customers and clients.

Who Is Responsible for It?

It might not come as much of a surprise, but the CEO of a company bears the ultimate responsibility for his or her enterprise's culture. He or she sets the tone and shows by example what will be tolerated and what will not. It's an invisible presence. Though not seen, it is very powerful. Neglect it at your peril.

I was recently asked by a business acquaintance to serve on his board. He founded an enterprise that has grown dramatically over the last 10 years. The annual sales volume of his company now exceeds $500 million. Not bad!

Nevertheless, I did not accept his offer. I was afraid that the company was surely heading down the wrong path, possibly to its financial destruction. This is not a situation of malfeasance. There has been no executive fraud. It is not comparable to an Enron or other sorry stories that we have read about of late.

The problem is that the CEO is making many poor business decisions that are draining his corporate coffers. On the one hand, he is a brilliant individual who has brought his company from almost nothing to being a major player in its field. On the other hand, once he created this impressive company, his success seemed to go to his head, and he became a very self-centered person.

How Did He Get Into This Predicament?

The problem, as I see it, is that he became quite enamored with his success and business prowess. He then went on an acquisition binge that drained, instead of helped, his company. And he did so in a non-stop fashion that would make your head spin.

I was performing some advisory work for his company with the goal of doing an IPO for him when I began to notice that he increasingly surrounded himself with people who were quick to sing his praises and afraid to criticize him. He had created a corporate culture of yes men and yes women.

As he became more successful, he seemed to develop certain traits that were quickly picked up by his staff. After a while, these traits permeated his entire organization.

The Bad Traits

He stopped returning most phone calls, unless he thought the caller could be useful to him. If the caller were a "big-wig" from Washington who could introduce him to the heady world of power and influence, he would be quick to return the call.

However, if the caller were a dissatisfied customer or a creditor who was not being paid promptly, he would not give the satisfaction of a return call. He seemed to think that he was too important to waste his time returning an "underling's" call.

Soon, I noticed, most of his people adopted the same attitude. Those who stayed with the organization became very arrogant and self-impressed. They seldom returned calls promptly or, in many instances, didn't return them at all. They had become too "important" as well. How sad.

I once arranged an important meeting between a personal friend of mine, a very successful businessman in his own right, and the CEO's executive vice president (EVP). I was doing the CEO a favor by arranging the meeting. Although my friend is extremely busy, he agreed to travel to the home office of this company and meet with the EVP.

Long-Term Future in Jeopardy

The upshot of it all was that the EVP did not attend the meeting but, at the last minute, sent word to my friend that he had another meeting, and left my friend to one of his underlings, a young, inexperienced employee of the organization. My friend was justifiably furious. When he returned to his office, he called both the CEO and the EVP to complain. He never received a return call.

This was the last major contact that I had with this company. It was simply too frustrating to continue to deal with them. When a CEO doesn't examine his behavior and the cultural climate that it has created, there isn't much hope for the long-term future of the company.

Setting the Right Tone

How can you avoid a situation like the one described above? You can do this by setting the standard -- the right tone for your company.

There are some easy ways by which you can accomplish this. Honesty is the first requisite, followed by a good work ethic, and consideration for your fellow workers and customers.

When you arrive at work in the morning, leave your ego at the front door. Realize that everyone in your organization is important and critical to its success. Everyone is a virtual ambassador for your company.

Expect total professionalism from yourself and your employees. This means seeing people on time and returning phone calls. To put it rather succinctly, everyone in your organization, yourself included, of course, should treat everyone with whom they come into contact with respect. It's really that simple.

Choose the Right Board of Directors

Although there certainly are instances when a board of directors has its own culture, quite apart from that of the corporation that they oversee, a board can be a "cultural watchdog," ensuring that the company it oversees is functioning in a respectable manner.

Therefore, here's one final piece of advice. Having the "right" board of directors is critical to the success of an organization. You should choose board members who are encouraged to disagree with you, as explained in my recent article Choosing Your Board of Directors. Choosing an independent, vigorous board might take some courage, but it's in the best interest of your organization.

Finally, remember that good corporate culture starts at the top. The CEO sets an example, not just by words, but also by actions. Is your company setting the best example?

Good luck!


Theodore F. di Stefano is a founder and managing partner at Capital Source Partners, which deals in bringing small-cap companies public. He also is a frequent speaker on the subject of financial advice for small businesses as well as the IPO process. He can be contacted at Ted@capitalsourcepartners.com.


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