Culture eats Strategy for Breakfast
There is an old saying in business that “culture eats strategy for breakfast”. This means that without a healthy vibrant culture in which employees are happy to be there, it often doesn’t matter what well-intentioned plans the board agrees on, the outcome won’t be good.
I recently came across a mid-sized business whereby a change of ownership and management, the culture and a significant part of the business’s value was destroyed. This business had a strategic plan, a board structure, a signed shareholders agreement, and a management structure in place. Yet over a few short years, the culture of the business had been eroded, staff turnover rose to unacceptable levels, clients were unhappy and leaving, profits were falling and therefore business value had declined significantly. This was a business that had slipped from being a shining light in terms of culture, innovation and business value, to a business struggling for direction and relevance in the space of a few short years.
What caused a well structured and organised business to decline in this way?
There is another old saying in business that says that “a fish rots from the head down”. The culture and values of a business must be lived and displayed by the Chief Executive Officer (CEO) and the owners before the rest of the organisation and its stakeholders can come on board. In the case of this business, even though at first glance they appeared to have their bases covered, the following crucial errors had been made:
- They did not engage the help of an independent adviser to help guide them through the transition in ownership and management. This could have involved the establishment of an advisory board and a structured process to manage the transition. Instead, the process was handled internally.
- The wrong person was selected as the new CEO; a person who didn’t understand that an organisation’s people are its greatest resource.
- The board engaged in Groupthink where a couple of strong voices dominated decision making. Without an independent chair to facilitate an environment where everyone is heard, bad decisions were made.
- There seemed to be a lack of understanding by both the CEO and the board of the impact of non-financial factors on the business’s value. Goodwill is hard-won and easily lost or eroded.
- The business lost sight of its core business and the importance of providing good old-fashioned customer service.
This business was not one of our clients, but sadly one that could have had a much better outcome had they engaged some help along the way. There is a lesson here for all of us to heed.
If you are concerned your business may find itself in a similar situation, get in touch to speak with an Accredited Adviser. These things are best addressed in advance before issues arise, so a forward-thinking and proactive approach is always best.