LESSONS FOR CREATING A GOOD CORPORATE CULTURE

Many of you are aware that I often write about the importance of creating and maintaining a values based and strong corporate culture. In my opinion, it goes hand in hand with the importance of strong leadership. In fact, it is one of the longest lasting, most pervasive and highest return initiatives that an outstanding leader can accomplish for their organization.

Two Harvard Business School professors wrote a book entitled The Ownership Quotient on the subject. In the book, they discuss the top 10 lessons of those that create and nurture the best cultures. Here are the 10 lessons (as adapted from an HBR article):
1) Leaders must state the organizations purpose, values and vision and set the example by living the values through their behavior, the measures the set and monitor and each of their actions.
2) The values have to have "teeth" in them so that there are consequences if you do not adhere to the values.
3) The culture is so strong that it is noticeable and commented upon by employees in expressions such as " that would not be allowed in the culture" etc. When the informal comments begin to mock the culture take warning that you are not living the values.
4) Organizations with good and strong cultures have effective succession processes as the culture enables the development of leaders and will ease the transition.
5) The values of the organization are also used to select the "right" customers as well as the "right" employees. The values are so strong that the company will not violate their values to generate revenue.
6) The result is "the best serving the best".
7) Organizations with values based and strong cultures enjoy outstanding employee and customer loyalty.
8) Organizations with good and strong cultures enjoy labor cost advantages. This advantage is due to many reasons but one major reason is that employees know what is expected of them and work well as teams for a common good.
9) One of the risks to be managed with a strong culture is creating a cult that thinks they have all the answers. A good culture is one that is not only strong but adaptive and creates an open minded atmosphere.
10) Nurturing and maintaining a good and strong culture starts at the top with leaders who remember who they are there to serve (not the other way around) and hold themselves to the same values, not above them.

I will repeat my favorite definition of corporate values and culture which is how your employees act and the decisions they make when no one is watching. How does your organization measure up on this list of the top ten lessons learned?
Till Next Time,
Gail

CIVICS LESSON AND BUSINESS LESSON

Regardless of which side you are on regarding health care reform, we have all been getting a civics lesson along the way. Apparently, the Senate Parliamentarian will be on TV today! In addition to a civics lesson, there is another lesson in all of this drama. Rules and structure do not matter until something goes wrong and then they mean everything. Mike does a great session in our leadership workshops on the need to stop before approving something new and ask the question "what if it does not work"? Good risk management requires that you have thought about what you will do if it does not work out the way you had planned. Do you have the best structures and rules in place?

I am sure that both Democrats and Republicans have been reading rules that they have not thought about for years, if ever.

So in addition to the civics lesson, use this moment in history to also learn a business lesson. Structure and governance rules seem unimportant until the moment that they are crucial. Do not wait till the crisis. Check your organization's governance today. A good site for board governance is www.boardmember.com.

Until Next Time,
Gail

ICELAND - A GLIMPSE AT THE FUTURE?

A few years ago we took a great trip to Iceland. We hopped around the island hiking and traveling to remote locations from black sand beaches to an inactive volcano rim to tiny towns tucked in nordic style locations on the water.

The year after, Iceland went bankrupt. The Cliffnotes version is that Iceland's three largest banks offered above market interest on deposits, borrowed in the public markets and lent the incoming funds out in a very aggressive manner to speculative borrowers.

The overleveraged borrowers who overpaid for assets all of a sudden could not service their debts. Then the great asset bubbles deflated and the borrowers could no longer pay back the banks. The three largest Iceland banks, that somehow grew to 10 times the size of Iceland's GDP, failed.

The Iceland kroner crashed as did the banks and the Icelandic economy. Google the Financial Times for a good series on Iceland. One bank was an internet bank, Icesave. Icesave had attracted over $5 billion of deposits from UK and Dutch depositors. Of course when the banks failed, the tiny Iceland deposit insurance fund was instantly bankrupt.

What did the UK and Dutch governments do? They reimbursed all their citizens deposits with Icesave? Why would they do this? They were not UK and Dutch obligations. Hey, all those "innocent" depositors were getting an above market interest rate. Did they think there was no risk?

So, the UK and Dutch governments now want Iceland to repay the $5 billion. In today's jaded financial world, $5 billion sounds like a rounding error. It is only $5 billion. Let me show you how much $5 billion is to Iceland.

Iceland only has 300,000 citizens. That's right, 300,000; about the size of Cincinnati. So $5 billion amounts to $18,000 for each citizen. Not each family, each citizen. So on Saturday, the citizens of Iceland voted on whether or not to ratify an agreement made by their government to repay the UK and Dutch governments. They voted 93% against paying them back. 93%!!!!

The UK and Dutch governments have pledged to keep Iceland out of the EU. The IMF has threatened to hold back more loans to try to stop Iceland's freefall. The threats fell on deaf ears.

I can hear the Icelanders at the polls now. 'I have a family of four. I am not voting to take on $76,000 of debt because some bankers took deposits, paid themselves big salaries and then lent the money to companies that couldn't pay them back. So they won't let us into the EU. Big deal. And so what the IMF won't lend us money. The money Iceland borrows is just to repay the money all the banks borrowed and threw away.'

This referendum appeared to be a way the Icelanders could finally show how frustrated and angry they are at all involved. The way out? That will take a much longer blog.

But here is today's thought. How many more countries will go through an Icelandic event?

Cheers

SHOULD GREECE SELL ISLANDS?

There appears to be some in the German government that think that Greece should sell some of its islands to raise money to reduce debt. Once again sounds like creditors dealing with a financially troubled company. Sell your non-core assets. This will not be the last time or the last country where you will hear this.

I expect to hear suggestions such as these for the next 10 years. What do I hear for this Mediterranean island? These works of art? This slightly used military hardware?

Stay tuned.

SOVEREIGN DEBT & THE EMPEROR WITH NO CLOTHES

There has been much written and spoken about the financial state of various countries, especially Greece at the moment. I received an email from a friend regarding a one page piece written by George Soros on the situation which on one hand offered a solution and on the other hand admitted the solution wouldn't work.

When I returned from the golf course, where I have successfully raised my handicap (it is easier than lowering it), I sent off this rambling reply.

As for the Soros piece, I am afraid the situation is too complicated and interrelated to address in a one pager. We appear to live in a world where the vast majority of the countries on the planet are overlevered by any measure and especially against GDP. Think of the situation as an industry where most of the players have too much debt and supply far outstrips demand (only much more complicated.)

The past two decades of globalized growth were fueled by easy and cheap credit which overstated global demand and inflated asset values as we all know now. Add to that the large recession we have been enduring (oh, that's right it is over, I forgot) and you get worldwide deleveraging of the consumer, albeit involuntarily, and unprecedented leveraging by governments to mitigate the short term effects of the recession.

The various governments had to print money (stimulus programs) to replace trillions of credit which disappeared due to the Lehman failure. (Please thank the US and UK governments for this.)

Some countries have and will blow up. See Iceland for a small but meaningful story of asset bubbles and overleverage. Following in short order, Dubai, Greece, Spain, Ireland, Portugal, Italy, Eastern European countries, Baltic countries and oh yea, Argentina which still has its leftover debt problems.

Behind the curtain is the UK. The UK has massive levels of consumer debt; much more than the US. This will restrain the consumer from spending and spurring the growth required to address the problem. The UK will have to push the pound down to import customers from other countries to be the UK's consumer. Good luck.

So, back to our troubled industry of broken countries (technical term). All these overleveraged countries need growth like troubled companies need sales. However, their infrastructures assume credit driven growth which isn't on the horizon. In fact they are all relatively shrinking as tax revenues have nose dived everywhere. As a result, they will have to cut expenses (read 'formerly essential services'). This will lead to anywhere from protests to riots (again see Iceland and Greece).

Interest rates are artificially low right now. Personally, I see this as a transfer of wealth from savers (getting nothing for their money) to borrowers (paying nothing for their money). These low interest rates have propped up asset values somewhat because 'what else can you do with your money?' if you have any. Asset values have also been propped up by convenient accounting changes to mark to market accounting which is further propping up commercial real estate and the banking industry.

Moreover, the current interest rates are not indicative of the true credit risk of these countries. The low rates are a stop gap to stop the recession (I forgot again that the recession is over). I see devaluations and hyperinflation in the future. This is the time honored way financially troubled countries deal with their debt when they can't pay back the debtholders.

Finally, the US continues to skate by as the biggest debtor nation on the planet (think the emperor with no clothes). Curiously, not only is there no plan in sight to reduce the debt, there isn't even a plan to stop the debt from growing. And this is the world's reserve currency? Only because all the other currencies are worse.

More to follow in the future.

THE NEW CONSULTANT

Recently, I read three different WSJ articles that all made me think of the changes in the consulting industry. The first article, The Campus Consultant is about the growing numbers of companies that are using professors from University Executive Education programs instead of hiring consulting firms to assist them in assessing the best path forward for the company. The second article, Interim Managers Take Longer Roles is about the growing numbers of companies that are using interim managers for longer periods of time and for a wider variety of projects and purposes. The third article, SAP Sees Return To Growth covers SAP beginning to see top line growth in both software and consulting services.

Many years ago, the consulting industry learned how to work cooperatively with the major software vendors to serve clients. Although neither party particularly likes to work together, they were forced to do so by the market. Interim managers has, until now, been the province of the restructuring and bankruptcy consulting firms not a service of the large multi- service firms. Strategy work has largely been the property of the boutique strategy firms, although all the large multi-service firms have some offering. The Universities always had professors doing some strategy consulting work but they were not a major competitor to the large firms.

The large firms have learned to team and partner with the software firms, as noted earlier. The future will require them to significantly expand their teaming abilities. With the number of retired executives expected to grow dramatically over the next few years, there will be countless numbers of qualified semi-retired executives that companies can hire on a project basis. The multi-service consulting firms would be smart to begin now to expand the types of services they offer through teaming arrangements rather than only by their full time staff. The should have a stable of semi-retired executives available and a relationship with a University through its executive education programs.

What about your industry? What changes do you need to consider?
Until Next Time,
Gail

EXECUTIVE WOMEN NETWORKING

Happy New Year!! Similar to Mike, I am ready to blog again. Hope you are all ready to read and comment.

Last week, I went out to dinner and to see a play with a group of 25 business women. We had a great time and I made several good contacts. This evening of fun came about as a plan one night while I was out to dinner. Anita, Cindy and I were having dinner to discuss some Shelter Our Sisters business. Anita began to recommend a play to us that she had recently seen. Cindy made the comment that it would be a fun girls night out to go see the play. We each began to ask friends if they were interested and the next thing we knew it had grown to 25 women. Thank goodness Anita was willing to do all the coordination. Since every woman was invited, there was a level of trust that does not exist when you attend a formal "networking" event. I made three very good contacts that I believe can help me in my business and two contacts that I believe I can help in their business. That is a very successful night especially when you consider I was only there to have fun and see a great show. By the way, dinner and the show were great.

For those of you that have been following the blog for some time, you know that I am a recent convert to the idea that women should network to create the "old girls club". I am not suggesting that women should exclude men from their networks or in anyway be unfair or biased. However, I have recently come to realize that women should add networking with other women to their other connections. However, I have been struggling with how to do this in a way that works for me. Personally, I find formal networking organizations too forced and artificial for my taste. The other night, I found what works for me. Small, personal, social events that assist in connecting some of the women in each of three women's networks to one another. It was great!

While I am writing about women networks, this can be applied to any group. So get a friend or two and plan a social evening doing something you enjoy. Then each of you invites a few of your friends and the group grows. The night of the event, just let everyone meet one another! Simple but effective.

Until Next Time,
Gail

CEO AS CHIEF LISTENING OFFICER

Pretty good comments to ponder in this Forbes Article. A former CEO, A.G.Lafley of Proctor & Gamble, speaks briefly about how to listen to your various stakeholders. He lays out six steps.

1. Pay attention

2. Suspend judgment

3. Reflect

4. Clarify

5. Summarize

6. Share

I have a little piece on #5 in our book. It is on page 133 and entitled, "Let Me Repeat it Back to You". This is a tool that I have used for many years. I used it with co-workers, clients, company personnel all the way up to the CEO/owner level.

I would simply listen to what someone was saying and then I would say, "Let me repeat it back to you to make sure that I understand what you said." It is a surefire way to ensure that I understand what is said and to make the other person know that I was listening.

When I raise this at our MBA sessions, this gets more flack than anything else Gail and I say. People have said that it sounds condescending or trite or just plain ridiculous. I am always surprised at that reaction because I have used this tool thousands of times without any negative feedback, other than my son rolling his eyes wondering how he got into this conversation in the first place.

It is all about where you come from when you speak. If you are genuinely trying to close the loop and make sure you understand, people will get that. On the other hand, if you are being condescending, they will get that.

Every once in a while, I ran into potentially confrontational people who would say something like, "don't you understand what I just said?" I would reply, "I think I understand but I would like to confirm my understanding. You don't want me to go down the wrong road and waste time do you?"

I think from the feedback, some people are reluctant to incur the ire of the less enlightened boss and take the chance that they know exactly what their boss wants. Here is the problem though, the same person you are reluctant to repeat it back to is the same person that has done a poor job explaining what they want you to do. They go hand in hand.

Repeat it back or take the consequences of 'doing what they asked for but not what they wanted.'

Cheers, Mike

SERIOUSLY, WHERE IS THE BLOG?

Recently someone asked me, what happened to the blog? I gave some lame explanation like, 'you can't believe how much time doing nothing takes'.

But this morning, I was looking at a golf blog, wegoblogger31.com to revisit pictures about a golf course in Colorado. The author recently wrote a book about a golf addict (himself and two friends) for other golf addicts. As I was looking through his blog there was a list of blogs he follows. It was a short list as these lists go.

But much to my shock, there was "Excuse Me Leaders" in the list. I thought hmmm, how did he find out about this blog that Gail and I have kept so well hidden?

So, I figure since I really am doing nothing that I should write a few more posts and see if anyone cares. You are hereby forewarned that I will start writing on a "as the spirit moves me basis". So use this time to delete the blog from Google Reader or whatever while there is still time.

Cheers, Mike

MONEY MUST START TO FLOW BEFORE THE JOBS WILL GROW

Jobs, that is what this economy needs. So how do we create jobs? Well, we need to get the money flowing and businesses investing before there will be any meaningful jobs growth.

I read the first positive and thoughtful article on this subject recently. Corporate America's Huge Pile of Cash is an interesting read.

While, in my opinion, it leaves out a key risk factor which is the amount of uncertainty. Corporate executives will remain cautious with their cash if they continue to be concerned and uncertain of the outcome regarding taxes, health care costs, and inflation. However, at some point, these same executives will conclude that they can wait no longer. I am hopeful they will reach that conclusion soon. If they begin to spend the piles of cash they have accumulated, jobs will be created and we can begin a growth curve. Clearly, this will be more moderate and steady growth than in past recoveries. But growth is better than flat or decline.

To growth and job creation!
Until Next Time,
Gail

A FRAUD WITH AN EXIT STRATEGY

Go figure, according to the NY Times, a key figure in the Swiss banking tax evasion matter has been sentenced to 4 years in a prison. He is also applying (suing?) for a whistleblower's award of billions of dollars based on the IRS collection of taxes based on the information he gave.

He is apparently trying to sneak through a small loophole. His attorney appears to be very pleased with himself and is looking forward to arguing the matter. Should the attorney really be proud of himself for championing this effort? Go figure.

Cheers, Mike

SOMETIMES, THE BEST ACQUISITION IS THE ONE YOU DON'T MAKE

In the troubled company advisory world, failed mergers and acquisitions provide a steady stream of work. Many spreadsheets are used to support acquiring a company rather than growing organically. After all, do you know how long it takes to grow organically? Way too long in this digital age.

So it is somewhat refreshing to see a management team decide that a planned acquisition just may be more than they can handle. The Koenigsegg Group in Sweden had originally planned to acquire the struggling SAAB franchise from GM. The definition of 'struggling'? SAAB has not been profitable in any year that it has been owned by GM.

Koenigsegg is a niche high end, low volume auto manufacturer. They looked at this acquisition, with the help of the Swedish government, as a way to step up in size. Fortunately for them, the pieces were slow to fall into place and finally someone there must have said, "can we really handle this?" The answer to this question apparently was 'no'. So, Koenigsegg has backed out of the purchase.

So, now what happens to SAAB? As the WSJ article says, SAAB accounts for only 1% of the sales of GM and it requires billions to be competitive. Will they make the right decision? Let's see how their new board of directors handle this one.

Cheers, Mike

VILLANOVA'S EXECUTIVE MBA PROGRAM

On Friday and Saturday, Mike and I were the instructors for a leadership session at Villanova's Executive MBA program. Similar to the session i wrote about on October 16 that we did at the US Military Academy at West Point, we get as much or more from the session as we give to the attendees.
This was a great group in this class. I was struck by their desire to learn, to consider, to ponder, to challenge, and to grow. My favorite part of the class was when we asked a question and then facilitated debate and discussion among the attendees. Try it yourself. Instead of immediately providing your answer or solution, what if you asked more questions? What if you facilitated productive debate and discussion? What if you could then synthesize the ideas? I think you would get a better solution than your original answer. Just a thought.
It was a great two days. I was in the company of leaders striving to become even better leaders. That is invigorating! As these and other leaders continue to progress in their careers, I know our future is bright. It is easy to focus on our failed leaders since they garner the headlines. Our regular readers know that I believe we do have a leadership deficit in many organizations. But great leaders and future leaders are out there. We need their leaders to unleash their talent!
Thanks again to Villanova's EMBA program for inviting us and thanks to the class for a great weekend.
Until Next Time,
Gail

AMERICA'S BEST LEADERS 2009

US News and World Report has named America's Best Leaders 2009 which is worth reading. The definition of leadership that they used was- someone who motivates people to work collectively to accomplish great things. The criteria they assessed in order to select the list were: sets direction; achieves results; and cultivates a culture of growth.
There is also a commentary written by David Gergen The National Deficit- Of Leadership in which he discusses the need for good followers as well as good leaders. I would argue that we have a global deficit of strong leaders.

Many of our readers are great leaders. The global economy is in a mess. But the opportunity in this crisis, is that you could step up and speak and act as the leader that you are inside. Others will follow. Good luck!

THE PATRIOTS & RISK AND REWARD

Every leader is faced with decisions that require her/him to weigh the risks and rewards of key decisions. Usually a leader first looks at the risk. What is the level of the risk? If it is a high risk, the leader must carefully weigh the risks, the rewards and less risky options to arrive at the correct course of action.

Last night I watched incredulously as at the 2 minute mark of the New England Patriots / Indianapolis Colts game, the Patriots' leader chose the extremely high risk move of going for a first down on fourth and two at the Patriots' 28 yard line.

The risk was that if the Patriots failed to get the first down, the Colts would only have to go 28 yards for a game winning touchdown. Such a failure would leave the Colts with a very high probability to score a touchdown. The reward was probably a win for the Patriots. But the risk was probably a loss.

This is the point in time when the leader must weigh all the options. Yes, the Patriots offense is superior to its defense this year. And yes, they have made first downs on fourth and short in their own territory other times this year. But, if they punt the ball and gain a net forty yards, the Colts have to go 70 yards for a touchdown, not 28. The odds of a touchdown by the Colts, while entirely possible with their star quarterback Peyton Manning, are much lower than from the 28.

A failure at the 28 yard line would be catastrophic disaster. It was basically a bet the ranch bet that only teams losing at that point in time would make. Unprecedented for a winning team to make such a bet and unlikely for another team to try.

So was it the leader's supreme confidence in his offense? His lack of confidence in his defense? (And his lack of a vote of confidence that they couldn't prevent a touchdown at the end of the game from 70 yards.) Or was it the unbridled arrogance of the leader?

Cheers, Mike

CIT, BACK TO REAL BANKRUPTCIES

It is good to see that troubled companies are back to following the rules. CIT has actually filed for bankruptcy and the matter is following the time honored rules of Chapter 11 and not the Treasury dictated rules of auto bankruptcies past.

In the absence of a government bailout, the various stakeholders are acting in their own best interests and trying to maximize the value of the company. How novel. The appropriate debtholders and third-party lenders extended more loans on commercially reasonable terms.

CIT essentially filed a pre-packaged plan of reorganization. This means that over 50% of the number of claimants representing over 67% of the dollars in each class already agreed to the plan of reorganization. These are the required levels of support for a plan to pass in bankruptcy. The bankruptcy was necessary because CIT couldn't get 100% of the debtholders to agree to the plan.

By the way, business bankruptcies increased in October from September. Look for more filings to occur in commercial real estate and retail. As banks continue to increase profits by getting funding for free, they will be less inclined to extend and pretend such loans are good.

Cheers, Mike

A WOMAN'S NATION

This month a new book was released The Shriver Report: A Woman's Nation Changes Everything and the Time Magazine cover story is The State of the American Woman. The impetus for the press coverage about women is that it is expected that by the end of the year, for the first time in history, the majority of American workers will be women. Now this is being driven by advances of women in the workplace but unfortunately also largely by the economic downturn which has hit men harder than it hit women.

I have not yet read the Shriver Report so I will let you know my thoughts after I read it. But I have heard her in various interviews about the book. I have read the various articles and polls within Time Magazine. As you would expect there are several interesting statistics on the progress made over the last 40 years. In 1972, only 7% of students playing high school sports were girls; now the number is six times as high. Close to half of all law and medical degrees go to women, up from fewer than 10% in 1970. But there are also statistics on challenges that remain. Women are only about 10% of civil engineers and a third of physicians and surgeons. We have previously discussed on this blog that boardrooms and corner offices are still filled mainly by men. The detail in the magazine on the polls and the different answers based on demographics is worth reading. The overall conclusion is clear, the roles of men and women have changed dramatically in the last 40 years.

To me, the most interesting part of all of this has been that men and women agree on a major remaining challenge. They agree that government and businesses have failed to adjust enough to the changes in the family. Has your company changed enough? The statistics would suggest a dramatic shift in reality happened slowly over the last 40 years. Should we stop and re-evaluate top to bottom what needs to change in business to address the new reality? Last week's post was on Corporate Cultures, do they reflect the new reality of the American workforce?

Until Next Time,
Gail

NURTURE CORPORATE CULTURE

Mike's post on October 20 Oh, The Culture, combined with the questions we get at many of our leadership session including the one we recently did at West Point, have caused me to spend a significant amount of time thinking about corporate culture. Mike ended his post with the following two sentences. "In a crisis, you reap what you sow from your culture. Address the culture now so it will serve you well in the crisis." As usual, I completely agree.

This post is about the need to nurture the culture and reinforce the values or risk an erosion of the company's culture that can eventually cause the crisis. Let me share some of my research and thoughts on this topic. We should probably start with a definition of corporate culture.

The easiest way I have found to describe corporate culture is how your employees act and the decisions they make when no one is watching. I found two articles with more in depth definitions. Corporate Culture Definition is quite good in describing the various layers within culture. Another article Definition of Corporate Culture is also good and uses an analogy of culture as the invisible energy field or electricity that runs throughout a company and either enables or restricts its ability to achieve strategic objectives. I would submit that the invisible energy source known as culture needs to be constantly reinforced and nurtured or you run the risk of erosion particularly in the area of values and ethics. Another interesting article is about corporate culture and brand entitled Corporate Culture is Brand, and Brand is Corporate Culture which highlights that how your employees act is much more the brand than any logo or advertisement. Lastly, my research uncovered some articles on measuring corporate culture, although I did not find anything that provided REAL measures. The two articles I liked were Human Resources: Measuring Corporate Culture which differentiates artifacts, espoused values, and basic underlying assumptions. This article refers to corporate culture as the Other Bottom Line. In my experience, the erosion happens within the basic underlying assumptions that can change over time. It is fine if it is an intentional change but lax risk management and not reinforcing the values will erode the culture even if not intentional. The other article Corporate Culture covers small businesses and culture definitions. The reason I included it here with measurement is that there were a few questions that are very helpful to assess what the culture is and could over time help you to measure any changes. The five questions are:

• What 10 words best describe your company?
• What is really important around here?
• Who gets promoted here and why?
• What behaviors get rewarded here?
• What type of people are the "in" crowd and the "not in" crowd?

During my 30 years in the consulting industry, I learned that I needed to understand two things at each of my clients in order to be successful- what was their corporate culture and how they compensated their executive team. If I knew these two things I would know what they would and would not buy, how to handle myself in meetings, and what problems I could and could not recover from with them and how to do it. In addition to observing the cultures at each of my clients that enabled or restricted performance, I watched a strong culture at Arthur Andersen that truly was the other bottom line (it may have even been the cause of the true bottom line) erode over time and cause the crisis that destroyed the firm. Hindsight has allowed me to see now the signs that were there before the crisis. At Bearingpoint I saw a culture that destroyed value. I know first hand what can and does happen if you do not nurture the right corporate culture. BTW, does anyone know of any good measurement tools for corporate culture?

This is NOT soft stuff. Companies need strong, healthy cultures and CEO's need to focus on nurturing it or the culture will erode and so will profitability and corporate sustainability.

Until Next Time,

Gail

OH, THE CULTURE!

Every company has a culture. Usually culture is a by-product of how the company is run by the current CEO or how it was run by the last CEO. It is rare in my experience for the CEO to say, "I don't like the culture and we are going to change it." Or to say, "What culture do I want at my company?" Yes, there are the rare CEO's that actually focus on the culture. But for the most part, it is about running a profitable business as if culture isn't that important.

And yet, a company's culture is an invisible force that runs throughout the company and affects everything that is done. Fortune has an article that point to the culture of Bear Stearns and that a few of its alumni may have been inflicted with the dark side of that culture.

Whether that is true or not or whether one can't paint with such a broad brush is neither here nor there. The real questions for today's leaders are the following:

What is your company's culture? Is it the culture you want? How are you going to get the culture you want?

Gail often says that she and her team at Andersen's Business Consulting Group were able to keep the group together because of the culture. In a crisis, you reap what you sow from your culture. Address the culture now so it will serve you well in a crisis.

Cheers, Mike

GALLEON, HEDGE FUND IN CRISIS?

On Friday, the founder of Galleon was arrested and charged with insider trading. Put aside whether he is guilty or innocent. The remaining managers of the fund have to deal with the resultant crisis.

In a crisis such as this, the remaining managers must decide what individual or small group of individual should be in charge of the fund in the interim. They must realize that the fund is a separate and distinct entity from its founder. Each party will have their own legal issues to address.

Next the management must get the right team on board. This will include at least, special counsel, a crisis public relations firm and a financial crisis expert. One part of the management team should be dedicated to dealing with the crisis and one part of the management team needs to address the day-to-day operations of the fund.

All of the stakeholders have to be identified and addressed. The stakeholders will include, investors, employees, lenders, companies invested in by the fund, SEC, state regulatory agencies including the attorney general, and other parties.

The communications from the firm must be carefully managed and critically previewed with counsel. All the stakeholders will have questions, some of which can be answered and some of which cannot be answered at this time. All employees need to be briefed with a list of questions and answers and instructed to send parties to a central communication point. If this does not occur, misinformation will cause additional problems that will have to be addressed.

The interim fund management may also have to decide whether it must pursue its own internal investigation. This will be a very sticky wicket which will require constant legal advice every step of the way.

It is not what the innocent managers bought into. But it doesn't matter that they don't like it, they have to deal with it. Such is the challenge of dealing with a crisis.

Cheers, Mike