The Primacy of Culture
On a few occasions, I’ve heard the phrase “Culture eats strategy for breakfast.” Wow, I love that! What an interesting and strong statement. I’ve learned that the phrase originated with the well-known former Wall Street financier Peter Drucker. Mr. Drucker wrote the book Beating the Street that was a #1 New York Times Best Seller a number of years ago, as well as managed Fidelity’s Magellan Fund during its heyday.
Right now I am reading a book by Ken Langone called I Love Capitalism. If you aren’t familiar with Mr. Langone, he along with Bernie Marcus and Arthur Blank is credited with founding Home Depot.
In the book, he provides an excellent example of culture eating strategy. In 2000, Bob Nardelli was among the top 3 executives at General Electric (GE), and as such was a candidate to succeed GE’s then Chairman and CEO Jack Welch when Mr. Welch retired. You can imagine how successful Nardelli’s career at GE must have been! When he was not selected for the GE CEO position, Mr. Langone immediately swooped in and hired him to be the CEO of Home Depot.
At that point, Home Depot had been around for about 20 years. It was the first national chain to provide one-stop-shopping to allow homeowners to repair and enhance their homes on their own. Home Depot store associates were, typically, skilled handymen themselves; knowledgeable and passionate about helping customers to be successful do-it-yourselfers. They were on the store floor constantly and were available to customers for consultation and advice. A Home Depot store was a happy and successful place.
During his six years as CEO, Mr. Nardelli executed his strategy flawlessly and, by financial measures, the company was highly successful. Applying the principles of Six Sigma, he flattened the organization’s hierarchical structure saving millions of dollars in overhead. He installed processes and streamlined operations including implementing a computerized automated inventory system. Annual Revenue increased by 78% and net earnings by 125%.
Culture vs Strategy
However, he wasn’t paying attention to the corporation’s culture and over time that began to take its toll. The full-time knowledgeable store associates with experience in the trades were replaced with part-time help with little relevant experience. The impact of this on customer service, company morale, market share and stock price was significant and Mr. Nardelli was fired in January of 2007.
What can we learn from Home Depot?
Finally, it’s not a question of whether you have a culture or not – trust me, you’ve got one. The question is rather, does your culture inspire and motivate employees to be loyal and to contribute beyond their obligations? Or is it one where employees are just putting in time and collecting a paycheck? A company’s culture can be its secret sauce. Happy and engaged employees are an extension of your brand. A strong positive culture can be instrumental in an organization’s success over the long term and help it to weather any difficulties that it may encounter.
