Put Culture First and Forever

Excerpt from Chapter 5 of “The Transformative CEO” by Robert Reiss and Jeff Fox (©2012, McGraw-Hill Professional).

By Robert Reiss and Jeff Fox

There are three sustaining factors in business: winning culture, marketing, and innovation. That’s it. Three factors.

Marketing is the identification, attraction, getting and keeping of okay customers. Innovation is creating new products, new ideas, new ways, new processes, new anything.

Having a profitable customer is the most important factor for company success. No customers; no company. No money; no mission. No pesos; no purpose. But it is the corporate culture that attracts, screens, and retains the kind of people who get and keep the company’s target, customers. It is the culture that lures the best, the brightest,the hungriest, the most innovative.

Good people may not fit in a good company’s culture. That’s okay. Not every good soldier wants to be a U.S. Marine. Not every top-notch marketing person wants to work at Procter & Gamble. Not every buttoned-up MBA graduate can flourish in a buttoned-up company.

Company culture is an immune system: It works to protect the organization from intruders. A healthy immune system is crucial to any organization’s existence.

Bernie Marcus (Founding CEO, Home Depot): “I had a boss who was the meanest S.O.B. who ever existed. He was proud of being mean and tough. He was a bully. He wanted people to fear him. He told me that when he hired someone, he wanted to hurt the person financially, emotionally, even physically. That loser taught me what a CEO should never be. I knew that I would build a company from scratch with values exactly the opposite of those of my old boss.

“I wanted Home Depot to have a new kind of retailer culture, a transformative culture. I developed a culture based on marvelous customer service. I wanted every employee to know they worked with Arthur Blank, my cofounder, and me, and not for us. We didn’t just talk about being a true team, we proved it. Unlike other founders, owners, and CEOs, Arthur and I did not take stock options. We owned enough stock to make us wealthy. We created 4,000 millionaires, many of them just high school graduates.

“And we were going to have a culture that helps the communities where our customers and employees live. Our communities know that if there is a problem where we can help, we will. Home Depot does not gouge customers looking to buy plywood before or after a devastating hurricane. We help board up our neighbors’ windows. The winning, helping, sharing culture we built at our very beginning, in 1979, is alive and cherished today.”

Tony Hsieh (CEO, Zappos): “Lots of companies have core values, but they usually end up as posters on the wall that nobody ever looks at. Zappos has 10 core values and we make sure everyone in the company has those core values, and lives them.”

Jim McCann (CEO, 1-800-Flowers): “It is tough to maintain your culture as you grow. Every time someone new comes into the company, or you add a new division, the culture is affected, influenced, even a little bit. My job is to be our ‘cultural engineer.’ So I am always thinking about what things do we celebrate, what do we reward, and what do we simply not tolerate? And what kind of example am I setting? Should I set?”

In winning companies, you can cut the culture with a knife. Every 16-year-old knows that his motor vehicles department treats him differently than the local Starbucks does. There is a cultural difference between the people who work for the IRS and those who work for Doctors Without Borders.

A rich, strong culture is a competitive business strategy.

The Beekley Corp. innovates, makes, and sells products that are used to improve diagnoses by radiologists. Beekley has the highest positives from customers than any of its competitors. But Beekley has a tough selling job. Competitors offer “almost as good” or “good enough” knock-off products at 30 to 80 percent lower prices than Beekley. Beekley’s customers are in health care, an industry pummeled to reduce its prices, which, in turn, passes that pummeling on to its suppliers. Beekley sells its products via the phone. Beekley’s “teleteachers” are motivated, well-trained, and well-compensated, but selling over the phone can be painful.

These challenges are the rationale for one of the most unique, indeed incomparable, company cultures found anywhere.

Ayn LaPlant (CEO, Beekley Corp.): “Beekley created the business of diagnostic skin markers to help radiologists better read mammograms and x-rays. In the beginning, our competition was makeshift markers. For example, an x-ray tech might tape a vitamin E pill on the patient. In the customer’s eyes, makeshift markers—a pill and tape—cost practically nothing. So from day one, Beekley was both a missionary company and a seller of value. Missionaries face rejection. We established a culture to reduce the pain of rejection, and to get high performance people.”

“Our culture has many features. We have core values, and every single person in the company can quote these values from memory and abides by them. We constantly focus on growth and innovation. Our new headquarters building is named the ‘Beekley Growth and Innovation Center.’ Every day, every associate walks beneath that name. We are a learning culture. We have a psychology of achievement. We have a high-expectations, high-performance environment. Our associates invest up to 15 percent of their work time in training and learning programs, and these programs are aligned to someone’s skill needs, experience, job function, and so on.

“We are big on symbols. For example, a core value is ARC: Attitude, Results, Continuous improvement. So we talk about ‘getting aboard the ARC.’ We offer ‘lifeboats’ to associates who are struggling. We ‘make footprints’ that encourage associates to go where no one has gone before. We have lots of fun events. Celebrations. Bell ringing. Prizes. Raffles. ‘High-stakes’ bingo. Occasionally we will get a limo bus, the ARC, and winners will ‘board the ARC’ and continue to a celebration event.

“Our mission is to save lives by improving diagnoses. Our direct customers are medical facilities, and we totally believe in ‘World Class Customer Care.’ We are constantly talking and listening to our customers. World Class Customer Care, in part, means  anticipating customers’ needs and exceeding those needs. Instead of the traditional department designation such as Marketing, Manufacturing, Finance, we have a ‘Customer Care Team,’ a ‘Customer Enhancement Team,’ and a ‘Customer Astonishment Team.’”

Culture is about the people and the way they interact with each other and with customers. Get the culture right, and you will always hire the right people, who will always do the right thing.

The transformative CEO is the custodian of the culture and the cultivator.

Excerpt from Chapter 5 of “The Transformative CEO” by Robert Reiss and Jeff Fox (©2012, McGraw-Hill Professional). Reprinted with permission of the publisher. For more information, visit http://mhprofessional.com/product.php?isbn=0071794980. Click here to purchase the book.

Jeffrey Fox is the business author of 11 books, including New York Times bestseller “How to Become a CEO” and Audie Award winner “Rain.” Founder of Fox and Company, Fox works with Fortune 500 companies such as General Electric, IBM, and Office Depot, among others.

Robert Reiss is the host of The CEO Show, syndicated to more than 600,000 listeners. In addition to publishing The CEO Forum,a quarterly magazine whose subscription base is exclusively 10,000 top CEOs, Reiss writes a monthly column for Forbes.com and is a keynote speaker.

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