Pizza, Pizza

Leave a reply

“I guess I just don’t like the characterization that most of what I do, as a manager is manipulation. I always thought of myself as a motivational leader,” Helen explained.

“When you think about motivation, do you think it is something that exists inside of a person or outside?” I asked.

“Well, inside. Motivation has to come from the inside,” she replied.

“And, manipulation, inside or outside?”

She looked at me with squinting pushback.  “Manipulation would come from the outside.”.

“You may be looking at the difference as good and bad, but manipulation isn’t necessarily bad,” I said. “Let’s say you need the team to stay after for a half hour and load the last truck of the day. And if they do that, you promise a pizza lunch. Motivation or manipulation?”

“It’s outside, external, manipulation,” Helen answered.

“So, is the pizza lunch good or bad?” I wanted to know.

“Neither, really, kind of neutral.”

“Manipulation isn’t necessarily bad, but it’s different than motivation. With manipulation, it is dependent on the reward or punishment. Remove the reward and the behavior goes away, it doesn’t last very long. And, the proximity of the manager, you most likely will have to be there and pitch in. If you leave before the truck is loaded, they might leave too. So, it doesn’t last and you have to be there.”

“And, motivation?” Helen answered her own question. “Motivation doesn’t depend on an external reward and the behavior happens whether the manager is there or not.”

Not Our Intent, But It’s What Happens

Leave a reply

Helen’s face dropped. Her smile disappeared.

“Sounds like manipulation,” I said.

“But, but, what do you mean?” she gasped, not in desperation, but surprise.

“I mean, most of the things we do, as managers, fall in line with manipulation. We create expectations of performance, we get the performance, the team member gets a reward. Or more clearly, we create expectations, if we don’t get the performance, the team member gets reprimanded. Either way you look at it, most of what we do as managers, is manipulation.”

They Admitted Their Pizza Was Terrible

1 Reply

How did the joke go? When you finished eating the pizza, you could eat the box, because it tasted about the same. Unfortunately for Domino’s, customers weren’t joking. By 2008, customer research confirmed what many people already believed.

Patrick Doyle arrived as CEO and admitted as much about the cardboard box. They used real customer testimonials to support the claim about the cardboard. This story isn’t about the remaking of a pizza recipe. The real story is what did Patrick Doyle have to believe to publicly admit the findings of their internal customer surveys?

Customers didn’t suddenly trust Domino’s because the pizza improved. They trusted Domino’s because the company admitted it had a problem. The new recipe simply made that honesty believable.

Translate that shift in management belief to observable behaviors.

  • Publicly acknowledged the problem.
  • Changed the recipe.
  • Invited criticism instead of hiding from it.
  • Invited customers to judge their pizza again.

Most companies believe their job is to protect the brand. Patrick Doyle appeared to believe something different. “Protect the customer’s trust.”

What would your company have to admit before customers trusted you more?

But We Don’t Sell Tires

Leave a reply

No one knows whether it actually happened. The story goes that a customer walked into a Nordstrom store carrying a set of tires and asked for a refund. The employee refunded the purchase.

There’s only one problem.

Nordstrom didn’t sell tires. This story has been told for decades. It may be true. It may be an urban legend. But that isn’t what makes it interesting.

The story is real. What would management have to believe for this story to become part of the company’s identity?

Most companies answer customer service questions with policies.

  • You must have a receipt.
  • The receipt must be dated within thirty days of purchase.
  • You must pay a restocking fee.

Policies tell employees what they may do. Stories tell employees what they should do. The Nordstrom tire story isn’t really about tires. It’s about trust, something invisible. It creates and communicates.

  • The lifetime value of a customer is greater than the cost of resolving a single complaint.
  • Removing a customer’s fear is more valuable than protecting against every possible abuse.
  • Remarkable service becomes remarkable marketing because customers tell stories.

Whether the tire story actually happened doesn’t matter anymore. The story survives because employees continue to hear it. Customers continue to repeat it. It is now part of the company’s customs and rituals. That’s how culture works.

Policies are written in manuals. Beliefs are written in stories.

So, here’s the question. What stories do people tell about your company when you’re not in the room? Those stories, not your mission statement are often the clearest expression of your culture.

What Management Reinforces, Gets Repeated

Leave a reply

Every behavior begins with a belief. Every system begins with an assumption about the way the world works.  The interesting question isn’t how the Wells Fargo scandal happened, or even why it happened. The more interesting question is: What did management have to believe for those behaviors to make sense?

The Behaviors
Between 2011 and 2015, employees at Wells Fargo opened millions of deposit and credit card accounts that customers had not authorized in order to meet aggressive sales goals. Wells Fargo acknowledged that at least 2 million accounts may have been unauthorized, and later reviews increased that estimate to approximately 3.5 million. Regulators concluded that compensation incentives and sales targets contributed to the misconduct.

The Consequences of Reality
On September 8, 2016, the CFPB, OCC, and the Los Angeles City Attorney announced a combined $185 million settlement against Wells Fargo. More than 5,000 employees were terminated over the sales-practices scandal, and CEO John Stumpf resigned shortly afterward amid intense public and congressional scrutiny. In 2018, the Federal Reserve imposed an unprecedented asset cap on Wells Fargo until governance and risk management deficiencies were corrected. That restriction remained in place until 2025, illustrating how long cultural failures can affect an organization.

Customs and Rituals
None of us were in the room, so we should resist inventing conversations that may not have occurred. What we do know is that sales goals and incentive compensation established the rules of the game. Employees rarely invent the scorecard. They simply learn how to win the game management designs. When promotions, recognition, and compensation reinforce one behavior, that behavior is repeated.

Over time, those repeated behaviors become customs and rituals. Those rituals eventually reinforce the original management belief, that success is measured by the scorecard. Whether that belief is intentional or accidental, culture quietly shapes itself around what management consistently rewards.

Start With Behaviors

1 Reply

From the Ask Tom mailbag –

Question:
In your book Premeditated Culture, you focus on four elements of a defined culture cycle. I was always taught that the first step for intentional culture is to focus on and define our belief system. That’s where mission and vision statements come from. You seem to jump right to behaviors.

Response:
Beliefs are invisible, assumptions are invisible, the way we see the world is invisible. Even people inside an organization often struggle to describe the beliefs that actually drive their decisions. They can usually recite the mission statement hanging in the lobby, but that’s not necessarily the belief system that governs their work.

Behavior is different.  Behavior is observable.  I don’t spend much time listening to what organizations say about themselves. I watch what they do.

But even behaviors can be misleading. Some behaviors survive. Others disappear because reality has a way of sorting good ideas from bad ones. The consequences of our decisions determine which behaviors become habits and which are abandoned.

The behaviors that survive become customs and rituals. We repeat them. We tell stories about them. We celebrate them. We teach them to new employees.

Eventually those rituals reinforce the very beliefs that produced the behaviors in the first place.

The culture cycle begins with beliefs.  But culture analysis begins with behaviors.

If you want to understand an organization’s culture, don’t start with its mission statement.  Start by watching what management consistently rewards, tolerates, and repeats.

Everything else follows.

IKEA and Their Furniture (Store)

Leave a reply

Strategic decisions drive the culture. Beliefs drive behavior.

Most retailers try to make shopping easier.  IKEA moves most of the work onto the customer.  Yet, customers see this as a fair trade-off .

Combine  American sensitivity to price with European minimalism and you have an IKEA store. IKEA created a strategy that reduced the cost structure that customers saw as a reasonable value proposition. Entering the store, customers are handed a pick ticket used by the warehouse to pull the selected item from inventory. The journey through the store, in a maze of lines on the floor, requires the customer to consider featured items in a process to build the purchase ticket. The path isn’t simply about navigation. It is designed to expose customers to ideas they weren’t planning to buy.

Manicured assembly instructions complete the trade, customers are willing to self-assemble in exchange for a more reasonable price. The instructions are part of a carefully flat packed item designed to fit inside most every American automobile. Delivery may be available, but the strategy is to get it all in the customer vehicle and get them on their way. IKEA intentionally leaves the final steps of manufacturing and delivery to the customer. In return, the customer receives a lower price.  Assembly and last mile logistics are not part of the IKEA business model.

IKEA isn’t successful because it sells inexpensive furniture.  It succeeds because management believed customers would willingly trade convenience for value.  The store, the warehouse, the flat-pack box, the assembly instructions—even the maze through the showroom—are simply observable behaviors flowing from that single belief.

Two cultures, minimalism and price sensitivity, meet inside of a business model that endures. It’s the way we see the world.

Invisible Conflict

Leave a reply

There was no ticker-tape parade. It was much too early to celebrate. In May of 1998, Wall Street celebrated one of the largest corporate mergers in history. Daimler-Benz, the maker of Mercedes-Benz automobiles, and Chrysler Corporation announced a “merger of equals.” The combined company was valued at more than $36 billion, and analysts predicted more than $1 billion in bottom line value creation. It looked like the perfect strategic fit.

Chrysler brought strong North American distribution, a line-up of mini-vans, Jeep models and light trucks. Daimler brought German engineering in a luxury brand. Each company had a successful culture that sparked a conflict of invisible disagreement. Each had its own unwritten set of rules that were about to collide.

At Mercedes, precision mattered. Decisions were deliberate, carefully documented and followed a formal process. Chrysler built its success on speed. Cross-functional teams solved problems quickly and products cycled to market faster.

Neither company was wrong in its own world, they were just wrong together. The merger failed. It wasn’t engineering. It wasn’t manufacturing. It wasn’t finance. It was the belief system held by each respective management team.

The breakup was a war of attrition, not a visible conflict. Meetings became longer. Decison making slowed. Impatient Chrysler executives left. The power dynamic shifted. To many Chrysler executives, the merger of equals increasingly felt like a takeover.   The individual belief systems could not exist in the same container.

After paying $36B to acquire, Daimler made the decision in 2007 to sell 80 percent of Chrysler to Cerberus Capital Management for $7.4B. Chrysler was eventually purchased out of bankruptcy by Fiat and is now part of Stellantis North America.

The most interesting question isn’t why the merger failed.  The question is “What did Daimler have to believe for its management system to make perfect sense?”  And, “what did Chrysler have to believe for its management system to make perfect sense?” Financial models are remarkably good at estimating purchasing efficiencies, manufacturing savings, and economies of scale. They are much less effective at estimating what happens when two organizations bring fundamentally different beliefs about authority, decision making, accountability, and risk into the same conference room.

Culture isn’t an employee engagement survey. It isn’t a list of values framed in the lobby. Culture is the collection of management decisions that become so consistent they eventually define “the way we do things around here.”

The Daimler-Chrysler merger wasn’t undone by incompatible automobiles. It was undone by incompatible beliefs.
—
Premeditated Culture is now available on Amazon.

Just One Thing

Leave a reply

“But, if Herb Kellerher’s mindset was the difference in Southwest’s success, the open seating, the free bags, why did Southwest abandon those things?” Christopher pushed back.

“What makes you think they abandoned them?” I asked.

“Now, they have assigned seating, they charge for bags,” he paused. “They are starting to look like every other airline.”

“Those are behaviors,” I nodded. “What do behaviors usually tell us?”

“That something underneath has changed,” Christopher said.

“You know, your question may be more interesting than the answer,” I replied. “Let’s look at your question. You observed the system that created Southwest and now you see it has abandoned those very things. You traced their success to a mindset, to a belief about Southwest’s place in the airline industry, more specifically about their place in the transportation industry. What change must have occurred in the mindset of Southwest, specifically the current board of directors to cause them to abandon their historic operational differences?”

“Did they start losing money?” Christopher wanted to know.

“You’re a smart guy, with a phone. Look it up,” I instructed.

Christopher was a smart guy and thirty seconds later had his answer. “They lost money during COVID, but so did everyone else.”

“And then?” I prompted.

“And then they made money. And the year after, and the year after, they made money every year.”

“So, they weren’t going bankrupt?” I assured him. “What management beliefs produce almost 47 consecutive years of net profit where every other airline is subject to down cycles?”

Christopher sat with the question. “I can’t see the beliefs,” he said. “All I can see are the pieces of a coherent system. One type of aircraft, fast gate turns, secondary airports, low fares, free bags, open seating. Every one of those things fits together.”

“And what happens when you change just one thing?” I asked.

Christopher didn’t hesitate. “It doesn’t just change one thing.”

Buses Don’t Fly

Leave a reply

“They had a disadvantage, didn’t they?” Christopher answered. “They had to fly out of Dallas Love Field, an old antique airport, against American Airlines flying out of the newer DFW airport, with upgraded terminals and a Skytrain.”

“Then why did Southwest consistently make profit during most years, when other airlines, including American lost money during down cycles?” I smiled.

“Well, they were a lower cost airline,” Christopher ventured.

“Low cost doesn’t guarantee profit,” I replied. “What was different about the way they ran things? Starting with the founder, Herb Kelleher?”

“Well, I heard he liked bourbon and had some wacky ideas like no reserved seating and free luggage.”

“Besides the bourbon, what impact did open seating and free luggage have to do with airline operations?” I pressed.

“Well, I suppose, you can find your seat a lot quicker if you don’t have one. And if I can check bags for free, I am going to do that instead of competing for overhead bin space on board. It seems to make the boarding process smoother, maybe faster?”

“And where did Herb Kelleher come up with those ideas?” I asked. “And, here’s a hint. He did not get the idea from another airline. What public transportation has open seating and doesn’t charge for checking bags?”

Christopher had to think, but it finally dawned on him. “A bus?”

“And, what business did Herb Kellerher think he was in?” I prodded.

“The airline business?” he guessed.

I waited. Slowly shook my head.

“The transportation business,” Christoper guessed again.

I continued to wait.

“He was competing with the bus company,” he finally blurted.

“And, they opened up a whole new category of airline customer, used to riding buses, and who could afford a few dollars more,” I described. “And an antique airline terminal is still a step up from the bus station. But, here is the next question. If it was so consistently profitable, why didn’t another airline copy them?”

“But there were other airlines,” Christopher protested. “What about ValuJet, People Express and Spirit?”

“Yes,” I nodded. “Those airlines, and others, copied parts of Southwest, but no one adopted the entire system, even though the system was in plain sight for anyone to copy. What was different?”

Christopher was still. I let the silence do the heavy lifting. He finally spoke. “Low fares. They all charged low fares. None of them copied the way Herb thought. It was a mindset. It was a mindset that created the culture.”

“So, the airplanes weren’t different? The airports weren’t really different? The fares weren’t different?” I asked.

“No,” Christopher insisted. “The belief was different.”
—
Premeditated Culture is now available on Amazon.