Happy Companies: Truth or Fiction?

My wife and I are attending a five-week parenting class. If nothing else, listening to the behavioral challenges that other parents face helps to put into perspective our doubts about our own parental performance. The discussions helped us realize there’s nothing wrong with the way we’re helping our children to grow, even if the occasional melt-down in the middle of the grocery store aisle makes me want to disappear like Frodo hiding from the Nazgûl in Lord of the Rings. The truth is, raising children is fraught with challenges with no easy answers, and failure and disappointment (for the parent nearly as much as for the children) are part of the game. To that point, our parenting class facilitator made an interesting observation: “A happy family is a family you don’t know very well.” Leo Tolstoy took a slightly different perspective when he observed, “All happy families resemble one another, each unhappy family is unhappy in its own way.” 

Companies are the same way. Even the best loved companies have their ups and down, and leaders strive to build cultures that are productive and engaging. As it is with parenting, the keys to building a successful company culture are clarity and consistency. But clarity and consistency are only revealed over time, never in a moment. For that reason, “culture” is something that is not easy to define.

Megan McArdle describes corporate culture as “a sort of black box; from the outside, you can’t see what’s going on. You have to wait to see what emerges.” In her March 2012 article in The Atlantic, she describes how General Motors’ 2010 IPO – “the largest IPO in American history” – was followed by its stock price declining by a third within months. The stock price is observable, but what’s driving the price is not easily known. This isn’t the first time GMs stock has dropped after missing high expectations. McArdle interviews a number of analysts who describe a culture of denial and hubris that, over a course of decades, has been put in check during hard times only to re-emerge during times of plenty as a hallmark of GMs dysfunction. [1] (Read McArdle’s excellent article “Why Companies Fail”.) 

The truth is, even if you are inside a culture, you may never really know what makes it tick. In fact, sometimes it’s because you are inside the culture that you can’t see what’s happening. Take the analogy of a family being like a company and myself as a case in point: I struggle to get my kids to brush their teeth, put on their pajamas and get to bed. When they don’t listen to me, I raise my voice. That may have worked once or twice, but now they laugh if I raise my voice. Obviously, this is a dysfunctional approach, but it’s a pattern that I’m likely to continue unless I recognize the pattern and choose to change it. ...And mind you, changing patterns like these are easier said than done.

Again, companies are the same way. One of my clients worked with the same supplier for many years, even though the supplier had repeatedly missed the mark on performance specifications. Both companies' owners were good friends, and the unspoken rule among my client’s management team was that the supplier was untouchable. My client had a clearly articulated corporate vision, of which this one relationship made a mockery, and the management team felt powerless to act. It took someone with an outside perspective to point out the glaring gap between their vision and reality and, as soon as the veil was lifted, my client could see what needed to be done as clear as day. All it took was a 20-minute discussion for my client to reach a decision they had avoided making for years, and within a short time a new supplier had been chosen. 

As with raising families, building successful companies typically has less to do with knowing what’s right in a given situation than it does with clearly and consistently choosing what you already know is right, even when (especially when) the choices require difficult trade-offs. While making the choices is the hard part, it is important that leaders measure their people's engagement so they accurately understand the culture that exists (as opposed to the culture that they wish existed).  Such assessment can create understanding among leaders about the factors that drive engagement and provide rich insight into how to improve it.