Summit Group Partners Blog

Culture: What is it and does it have value?

What is culture? Many companies claim to have a corporate or company culture. Many will state it is one of learning, continuous improvement or growth. That is a great corporate statement but does that really define your company’s culture?

 

For me culture is defined by the people who work there and how they operate. It is more of the accumulation of conversations, the behaviors exhibited and the informal norms that develop. How these manifest themselves will define the culture the company has. Listen to what is said on breaks, in the lunch room and around the water cooler. If the conversations are around how to make the product safer, more reliable, at a lower cost and more marketable you have a culture of continuous improvement. If on the other hand the conversations center on the need for better pay, are layoffs coming and management doesn’t have a clue, then the culture is a negative and divisive one that will result in different behaviors then management may want. The behaviors will be seen in people taking longer breaks, possibly high turnover, initiatives that have no punch or excitement and results that at times management cannot explain. The executive teams struggles with why the results are not being achieved because it has said all the right things and put in place the right initiatives and strategies. The culture may not allow them to be successful.

 

The impact of a poor culture has far reaching implications. Sales can stagnate or even if sales are strong, profits seem to never meet their potential. Costs may rise without explanation and everyone is on edge as to what is causing the business to suffer. In the short run it may cause decisions to be made that are not based on the root causes but on symptoms. In the long run, it could impact overall enterprise value.

 

On the other hand a strong and positive culture can bring significant value to the business and for a possible transaction, all of which is hard to calculate. An Inc. Magazine Article, “What is Your Culture Worth” by Bo Burlingham, (http://www.inc.com/magazine/20010901/23349.html) does a great job of exploring this phenomenon from the perspective of a potential acquisition. In the article Bo explores a company who was a high acquisition target for many companies not because of great synergies, strategic fit or overall market position but because of the culture they had and how contagious it was. They wanted to figure out how to “bottle it” and transport it into their organization.

 

Well it is not as easy as that. Most acquisitions fail due to a poor cultural fit and not because the synergies didn’t make sense. Integration of cultures is so very critical to the success of the transaction but most times it is forgotten and not part of either the due diligence or the integration planning. In all the due diligence that I do for clients and have done in my previous corporate roles, I focus a big part on the cultural aspect of the acquired business with the buyer’s. How will they fit? Who are the informal leaders and what influence will they have to help the integration be successful or not? The point is that the cultural side of the equation should have as much priority as how much in costs can be saved through facility consolidation or the system integration.

 

So what to do to change the culture if needed?

• Change the conversations. Open up the dialogue between the executive team and the organization. Have frank open discussion on the issues holding the firm back from exceeding its goals
• Go deep into the organization and not focus on the top. Culture is deeply rooted and goes to the lowest level of the organization
• Listen and then take action. Respond back to the organization that they were heard, here are the actions that will be taken and have a report card on how you are doing against these changes
• Find leaders throughout the business to lead the change effort. Although commitment must come from the top, it will be the entire company that has to participate in implementing the solution
• Senior management must be transformational leaders who have not only vision for the business but the qualities to lead and be open to change
• For acquisitions, try to integrate both businesses into a single culture by taking the best aspects of both companies

 

Having the right culture along with the right strategy can be a catalyst to a business taking off, expanding beyond its own self-imposed limits and being the business that employees want to work for, competitors want to be and investors want to own.

 

To see more on the subject of the importance of understanding the cultural fit of a new acquisition along with change management please see the my answers section on my public profile on LinkedIn

About the author

Kevin Lombardo
Kevin P. Lombardo, Founder and CEO

Kevin founded Summit Group Partners to support businesses throughout the United States in their quest to accelerate a transformation and achieve sustainable change through strategies of growth, expansion and operational excellence. His passion is to help businesses and executives maximize their potential. Throughout his consulting career, Kevin has formally coached over 25 CEOs and business owners representing 10,000 employees’ globally and nearly $2 billion in revenues and helped them to unlock human potential and shareholder value. With 14 years of direct P&L leadership and over two decades of management and consulting experience in multiple industries Kevin can quickly bring the resources together to make an immediate impact on any organization. Kevin participates on various industry panels and has spoken at corporate and industry events throughout the country on the topic of accelerated sustainable change. Furthermore, he has authored numerous articles on corresponding subjects and has been interviewed by media outlets throughout the country.

Kevin directs all engagements for Summit Group Partners from inception and guides their progress throughout in order to ensure consistency and efficiency in all services delivered. He also manages client relationships and develops optimum solutions tailored for each client’s specific need. He has extensive experience assisting both healthy and distressed companies with M&A transaction leadership, revenue growth, operational improvements, restructuring debt, negotiating with creditors and unions along with locating financing.

Prior to forming Summit Group Partners, Kevin built two nationally renowned consulting practices from 2004 through 2010. Kevin has held numerous senior executive positions including CEO, President, CRO, EVP and CFO of publicly traded, privately held, Fortune 500 and private equity led businesses. Kevin has an extensive background in business leadership, strategic planning, growing revenue, profits and shareholder value of numerous businesses, executive development, entrepreneurship and turnaround management. As CEO of a $300 million dollar supplier of print services, Kevin led the transformation from a stale business model to a growth engine for the parent company, achieving revenue growth of 7% after multiple years of decline, reaching and sustaining the number one market share position and supporting the stock price increase of 300% within 15 months of taking the leadership role. He has held the position of CRO multiple times and has three times led businesses through the Chapter 11 bankruptcy process with each company successfully emerging with a confirmed plan of reorganization. He has led and executed the management of the merger, acquisition, divestiture and integration of over two dozen businesses with total transaction value in excess of $1.5 billion. Kevin received both his BS and MBA from the State University of New York at Buffalo. In addition, he holds a graduate certificate from Cornell University in Human Resource Management.

Comments

Culture Article

Kevin - I enjoyed reading this article. It is a great reminder of how important the culture is. As Leaders we need to take out time and work on Culture more during our busy days.

Thank you,

Tom Fidler

Tuesday, 26 April 2011
Entrepreneur in residence, Flywheel Ventures

Every company/organization has a culture, whether they like it or not. The number one job of the CEO is to be intentional about what the culture rather than allow default culture. To establish the kind of culture he/she believes will attract and support the talent and deliver the performance needed. Culture, if you will, ties together all the other hot buttons of today: strategy, leadership, execution, transformational change, etc. It is what the VC's and M&A folks I've worked with consider first and foremost in their deals. Without the right culture, everything else in the company is at much greater risk and much greater costs.

Two great, current books on culture are Ann Rhoades Built on Values, and The Thank You Economy by Gary Vaynerchuk

Wednesday, 04 May 2011
BI Architect

Well said..Many lost these values in todays highly paced environment

Thursday, 12 May 2011
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posted by Aimee Miller on Tuesday, 03 April 2012

Kevin Lombardo has been appointed as interim CEO by the Hopi Tribe Economic Development Corporation (HTEDC) in Flagstaff, AZ.

posted by Aimee Miller on Monday, 05 March 2012

Guest Blogger Jeff Trump discusses the concept of continuous improvement, which he believes should be thriving in every organization. Read real life examples in practice.