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Editor-in-Chief JP Donlon: Why Competing Through Culture Matters More Than Ever

The complexity of today’s business world is far beyond what one leader can handle, and the CEO of a large company cannot possibly reach every single employee. That’s where culture ultimately determines how effective a CEO and his senior team really are. Chief Executive magazine editor-in-chief JP Donlon discusses the importance of culture for sustaining long-term growth.

Every year since 1986 We have gathered a selection committee of chief executives to sift through finalists nominated by their peers to be considered for the honor of being Chief Executive of the Year. As one might expect every finalist would have to be an outstanding performer, but financial returns only take one so far. Over the years various committees have thrashed out the criteria they use to sort out the very good from the excellent. Invariably people issue surface in these discussion when considering one candidate versus another. It’s obvious why this should be so. In 2008 and 2009 H.J. Heinz CEO Bill Johnson was in the midst of his own leadership development and succession planning and wanted to get direct input frpm other business leaers like himself. He commissioned the Continuous Learning Group (CLG) to undertake a study with some 25 prominent CEOs that was later published under the title “What I Wish I Knew.” The CEOs who participated apart from Johnson himself included such leaders as Brad Anderson of Best Buy, to Indra Nooyi of Pepsico, to William Weldon of Johnson & Johnson and Patricia Woertz of Archer Daniels Midland. The study found that the group settled on eight key things they wished they knew in the beginning.

One of the eight was the care and nurturing the culture of the organization and the people issues that make this happen—in short how best to build an effective culture. The CEOs participating were emphatic and passionate about their commitment to people. A CEO’s success is visibly dependent on the success of the people around him or her. According to Walter Isaacson’s recent biography of Steve Jobs, Apple’s mercurial CEO and co-founder is said to have told President Obama early in his Presidency that, a CEO (or world leader) can achieve nothing without working effectively through people. And this ability to work through people remains to this day one of the 11 key criteria by which peers judge anyone considered for the honor of Chief Executive of the Year. In the end culture trumps.

“Most of what I actually do as a CEO,” said one participant, “is through our key leadership team. I would estimate that well over one half my influence is through eight people or fewer, another one-fourth is through the next 35, and the last one-fourth is more widely dispersed across thousands of folks, including employees of all levels, customers, suppliers, and important other constituents.”

But what about the remaining thousands or tens of thousands the CEO cannot reach even directly? This is where culture determines how effective the CEO and his senior team really are. The complexity of today’s business world is far beyond what one leader can handle. You need more than a great team, you need a seamless culture to win. A recent personal experience underscored this truth. The freak October snowstorm which dumped 9 to 12 inches of snow in the northeast caused tree limbs and power lines to come down everywhere. My old chain was not up to the job of clearing down branches and I went to two well known big box retailers to find a new one.

The first, a Lowes, had friendly people, but virtually no product that met my needs. At the store I visited the advertised special promotion item was not even in stock. When asked when the item would be replenished the fellow sheepishly said that six were on back order but that he had no idea when they would be delivered. I was out of luck. No product and not much help.

Several miles away was a Home Depot, which I also visited. A young woman in an orange apron cheerfully asked if she could help saying “I know a bit but there’s someone else here who knows everything about chain saws. “ Within a minute she produced another orange aproned fellow named Bob whose Paul Bunyan-like beard immediately suggested a woodsman. The two asked numerous questions about how I intended to use the saw and took me through the pros and cons of various products, how they worked-but just as importantly what the relative shortcoming were. It was clear they were more interested that I get the product that best suited my needs not their need to move inventory. At one point, Bob, the woodsman, suggested I go online to survey what everyone was offering so I could assess the broader inventory by all makers before I settled on a choice.

The difference between the two retailers was clearly evident in their culture as experienced by me a prospective customer. One was friendly but hardly empowered and not given much in the way of tools to help. Given that FedEx can identify where a package is at any time in its transit to its destination, why can’t Lowe’s tell its service people when six chain saws in its supply chain will arrive at a given location? The culture of the Home Depot, on the other hand, wanted to ensure that I would be delighted with my choice—even if I didn’t buy the unit at their store! No prizes for guessing which store is going to get my business.

Every company everywhere is competing through its culture whether a leader realizes it or not. This is why Chief Executive is hosting a special roundtable discussion at our forthcoming CEO2CEO Leadership Summit on December 13 at the NYSE in lower Manhattan. It’s called: A Strategy Map for Competing through Culture: How culture and values can leverage hidden potential and differentiate one’s competitive edge in a low-growth environment.

Our roundtables are geared to sharing practical ideas and methods that have been tested. This should be a compelling session for all business leaders, regardless of size, who realize they need to create value and grow with fewer resources. We are inviting people who wish to learn and also share how to leverage culture in specific ways. Only by aligning ones values, beliefs and behavior can an enterprise galvanize the discretionary effort of its people to generate true value and deliver it in a way that generates sustainable growth.

Click here to learn more about the CEO2CEO Leadership Summit 2011.

About J.P. Donlon

J.P. Donlon
J.P. Donlon is Editor Emeritus of Chief Executive magazine.