A CEO is the sum of his thoughts, words, and actions. Ability is important but skill without those foundational elements is a waste.
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A company is the sum of its leaders, the employees and the product or services they produce, as well as their thoughts, words and actions.
The good companies embrace that notion. They write about it in annual reports, they frame it and hang it in the hallways, and talk about it, albeit somewhat superficially, but they do waltz through the paces.
The great companies believe it, live it and act on it with passion every day. They make it personal. There is an incredible energy and enormous leverage associated with that kind of cultural commitment. It literally defines the company.
To get to that point – this cultural nirvana – it takes an amazing leader with the energy to set the stage to change the thousands, even hundreds of thousands of employee habits that play out each day in executing the business plan. The trick is to be able to channel those habits so that they consistently reinforce what the company thinks, how they talk about their beliefs, and how they act.
This is no easy task. This complex process requires some adept and heavy leadership lifting.
However, the threat to those organizations that succeed in achieving this cultural sweet spot is change, sometimes so subtle, that it erodes the foundation.
Rapid growth, turmoil, and distraction can do great harm.
The list of companies that have achieved that enviable cultural position but then fell from grace is long and distinguished. If you want to look at a list of diverse but fairly recent examples, consider Mercedes, Continental Airlines and now, perhaps even Southwest Airlines.
Mercedes, aka Daimler Benz, merged with Chrysler in 1998 in the largest cross border merger in history. The business experts predicted great things. Mercedes’ quality and Chrysler’s innovation and supply chain management skills would create a powerful force in the marketplace. So much for the conventional wisdom of synergy. As mergers go, it was a dud.
While the corporate teams squabbled for control, Mercedes slipped, and slipped badly, in the one area they could least afford to stumble: quality. Their leaders were so distracted with gaining control of Chrysler that they forgot to pay attention to one of their most important core pillars. Once lost, quality is not easy to regain and, in fact, it took Mercedes years to recover and millions upon millions of dollars to re-establish their quality leadership in the minds of consumers. Daimler eventually dumped Chrysler, after stripping out their knowledge leadership in computerized design and supply chain management, but both companies ended up battered and bruised. Chrysler, after a brief, but unsuccessful romance with private equity, filed for Chapter 11 in the Great Recession, and is now controlled by Italian automaker Fiat.
When Continental and United Airlines merged, the complex challenges of joining two diverse operating and service cultures, and the silly squabbling that resulted, badly damaged Continental’s once sterling reputation as the best legacy airline. United, well, they were not as bad as American, but that was not saying much at the time. (Disclosure: I am a frequent United flyer with elite status). These two merged companies have stumbled badly in the transition and financial losses and service lapses continue even though the “new” United is being run by many of the same Continental executives who built the latter’s superb reputation. Delta may have been the template for a good merger, but it is now looking like the Continental team’s merger template is one that should be forgotten.
Now comes Southwest Airlines, once one of the airline darlings of Wall Street and beloved by its loyal customers. But they, too, may be on the verge of a slide. A weekend article in the Dallas Morning News reported that morale was suffering and their cherished on-time performance had plummeted to new lows, below even United and American. This is due, in part, to their move from their original business model, serving secondary airports like Dallas Love Field, Houston Hobby, and Chicago Midway. They have expanded their route system – in part from their AirTran merger and to chase increased revenue – to airports with notorious ATC delays like Denver, San Francisco, Washington National and New York’s Newark and LaGuardia airports. Profits are still good, and investors are happy, but they are typically the last people in the world to recognize a derailment in the making.
Now the morale piece of the Southwest story may be about some union executives who have no guilt in dissing their airline in hopes of finding some advantage in contract negotiations, and the DMN report acknowledged that. But if you have flown on SWA in the last couple of years, you sense that there have been some changes that are outside the original cultural and financial model.
Health systems, hospitals and other healthcare service providers should take note; they face similar challenges. CEOs must be mindful that their thoughts, words and actions will be what saves them from a big, and costly, cultural blunder.