As the economy turns south, companies need to realise that a strong culture is key to survival.
In a recent article in Fortune, the author Jim Collins (author of Good to Great) pondered the seeming fickleness of growth and success. Bear Sterns, the venerable Wall St securities company, with over eight decades of growth to being number 156 on the Fortune 500 list, disappeared in one weekend.
Most of us are aware that there have been many companies that have seemed to have their place in the sun only to disappear in a cloud of blown fortunes. Enron, World Com, ITT, to name a few. Australia has had Bell Resources, FAI Insurance and HIH, all of which grew dramatically but collapsed in a heap of debt and dishonesty. There are other companies that just fade away while stalwarts like BHP just keep going.
All that this means of course is that growth by itself does not guarantee success. There is a temptation, when things are turning south, to suggest that the economy is the culprit, but as Collins points out, the more successful companies are able to manage their way through economic downturn and not only stay in business but go from strength to strength.
So the question has to be asked; why is it that some companies grow and continue to be successful and yet others grow and then regress, sometimes to extinction? This question is particularly relevant to companies that have enjoyed roller coaster rides in recent years, particularly start ups that have never known a down turn. The economy has turned, asset prices are under threat and interest rates are killing people who relied on debt to grow, not to mention the Aussie battlers who are so integral to the success of the retail industry.
Business schools turn out case studies by the thousands as though we will find in them some alchemy that ensures continued success. Yet, many of the businesses studied at these schools have fallen by the wayside.
However, there does appear to be one straw in the wind for those who are looking for the magic wand of continuing success, and it can be summed up in the word “culture”. It is not the economy or a tsunami or El Nino that brings businesses unstuck. What brings them unstuck is the failure to build a culture that will endure despite adversity.
Without the support of rigorous research but based upon many years of experience, I suspect that companies that fail are built around a culture of turning everything into a buck. In other words, companies run by bean counters generally come unstuck.
As against that, companies that have a culture of what we might call “product integrity”, which involves continually ensuring that the product being sold represents value for money to the customer, is more likely to be one that respects the individual before the dollar and has something more enduring to cling to in times of crisis.
This is not to overlook the respect that companies should have for money. Indeed, there is a close relationship between respecting the individual and respect for money. Companies that respect the individual do not take on risk that might put the business and the future of their employees at risk. The companies like Citibank and Merrill Lynch that were run by bean counters who saw a buck in every deal, squandered billions of shareholder value and cost the jobs of thousands of innocent employees.
In uncertain times, it will be the conservatively managed company thjat survives. One that has carefully managed its money and its people so that it has cash reserves that will enable it to ride out the tough times, maintain its people and build on the culture of respect for the customer, the employee and the money that will achieve ongoing success.
Jeff Bezos, the founder of Amazon and one of the few dot-com companies to come out of the crash of 2001, says that he would hope in years to come that everyone would look upon his company as the one that was the most accessible, the quickest in delivery and the most competitive in price. He maintains that so long as you focus on these fundamental values and share them with everyone with whom you work and ensure that they carry over to the customer, it is difficult to believe that you won’t be in business in 20 or 40 years from now.
So, just a reminder as we sail into more uncertain waters, as Jim Collins says: “Firms don’t fall because of what the world does, but because of what they do to themselves”. Just ask Rodney Adler.
Louis Coutts left law and became a successful entrepreneur. His blog examines the mistakes, follies and strokes of genius that create bigger, better businesses. Click here to find out more.
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