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Q&A With Larry Bennigson: Managing Corporate Culture to Support Business Growth
For Sage Partners Director Larry Bennigson, the key to a company’s success lies in its ability to take advantage of past achievements while planning for the inevitable changes that awaitin the future. This requires a keen understanding of the cultural underpinnings that define every enterprise. Bennigson, who has spent the past 45 years focusing on the intersection of growth, management and corporate culture, knows firsthand what it takes to shepherd a company through the many phases of its corporate life. He served as Chairman of SBS Technologies, Inc., President of the Scandinavian Institutes for Administrative Research in the U.S., as Managing Partner of The MAC Group and Senior Vice President of Gemini Consulting and served on the Advisory Board of Toffler Associates. As a management consultant he has helped hundreds of organizations. Bennigson was on the faculty of the Harvard Business School and taught at Stanford University, London Business School and Lund University Graduate School of Business Sweden. Currently he is also a Senior Fellow of Harvard Business School Executive Education. Prior to his teaching and consulting career, Bennigson served for six years in the US Navy where he competed in the 1960 Olympic Trials in crew, served on destroyers in the Pacific and taught Naval Science at Stanford University. The Skouting Report caught up with Bennigson to learn how a company’s culture can mean the difference between surviving and thriving; how the lessons learned fromhis most memorable corporate “turn arounds” can help nervous businesses weather the current economic downturn; and, how the US Navy and the sport of crew informed his career as a corporate consultant.
The Skouting Report: You’ve been helping management teams improve their performance and productivity for over four decades. When did you become aware of the impact of a company’s culture on its ultimate ability to survive and thrive?
Larry Bennigson: The notion of organizational culture is far from new. The concept that groups exert power to influence how we think and how we behave is historically a familiar one. Not long ago I climbed Mt. Sinai and, when I got to the top and looked at those rolling hills and steep valleys, I pictured Moses looking out at thousands of people on the grassy plains below. I saw Moses then as a strategic leader and could imagine as he looked down that he was probably thinking that these people are out of control, I have to change their behavior and I have to use the group to do it. He was reframing the culture for thousands of people. This fundamental concept that social forces influence how we think and what we do is not new. What is more recent is the labeling of corporate culture and bringing awareness of these forces and power into our organizations.
Back in the 1960s, I was working with a research and consulting group in Scandinavia. They were exploring how groups of people and organizations develop ideas and ways of thinking. They had a great understanding of historical forces and how the history of an organization accounts for how people in an organization currently think and behave. Often we find instincts within a company today that can be traced to the initial conditions a company faced at start up or how pivotal problems were solved in the past. History plays a major role in shaping a company’s culture.
TSR: How has the business world evolved in terms of its approach to the value of corporate culture?
Bennigson: Great business leaders have a significant appreciation of the power of culture to impact performance. Take Jack Welch, who succeeded Reginald Jones as CEO of General Electric. Welch inherited an enterprise that had a high tolerance for bureaucracy and layers of staff. A lot of what Welch did was shift the company from its bureaucratic culture to a performance and learning-oriented culture. Welch changed the company’s values to align them with business performance and he was very aware he was leading a cultural shift. Then there’s the shift at IBM from a hardware culture to a service-oriented culture. These cultural shifts are required and understood as an explanation for success and failure.
Look at Kodak, which built a successful company on chemical based imaging technology. The culture valued chemistry and was accordingly risk averse. This shaped a Kodak culture that made it difficult to learn a new technology, to act quickly and to take risks that were all necessary in a rapidly developing digital world. The old culture was like concrete: It was really hard to break up and it controlled career building and resource allocation.
There is a lot of recognition now that culture is relevant -- awareness is not where the gap is. The need is for tools and skill to manage culture more effectively.
TSR:What would you say are your most memorable “turn-arounds” in the business world?
Bennigson: One great story is about an oil and gas company which I started to work with in the 1980s because the CEO was very frustrated. For years, the price of oil was going up every week and the corporation had adapted to this fact by ignoring cost control. The CEO had been trying for three years to change this. He had one simple powerful idea: He wanted everyone in the company to behave as if the price of oil was going down. He was right because that would happen someday.
We looked at the company and eventually zeroed in on its leading group of eight senior executives. They all sang the same tune and saluted the CEO, yet in their hearts each had a different view of the industry and the company’s future. When they went back to their divisions they would give mixed signals. We helped them understand that as long as the group was unable to “truly” share where the company was going -- as well as espouse common company values -- the CEO’s new strategy didn’t stand a chance. These leaders were the hearts and souls of the company and the company needed one heart and one soul.
Another company in the medical supply business was a leader in the surgical sutures market. In the early 1990s, within the organization, a new would closure technology, staples, was invented. Ultimately the staples initiative fizzled out and they ended up selling it to another company -- which went on to make it a stunning success. Management knew they needed to take another run at what was quickly becoming important to the future of the industry, mechanical staples. We helped them recognize the differences between the culture of sutures and the culture of staples. Sutures were a mature technology and didn’t involve risk while staples were experimental, developmental and required taking risks. The chances of being able to develop these different kinds of behavior and ways of thinking in the same organization were low. The company risked eroding the basic underlying strength of sutures if it supported staples. From an organizational and management point of view, two distinct organizations with two different cultures needed to be created. That’s what they decided to do and they became a leader in staples too. If they had thought about this initially, they probably wouldn’t have taken the losses they did and they wouldn’t have had to recover.
TSR: How much of our current financial difficulties can be traced to a willful ignorance of the impact of corporate culture on performance?
Bennigson: I don’t think it’s a case of willful ignorance. It’s a case of willing exuberance. There were so many different things going on contributing to the basic problem but one of them is that the culture of the financial institutions came to value winning at the expense of also valuing risk management and that’s where they let us down. From the model builders to the traders to the boards, they all failed to address systemic risk -- choosing instead to devalue risk assessment and risk management -- and it is fair to identify this as a cultural issue. If the risk management people had power, we’d all be better off. Corporate cultures enable certain behaviors and de-power other behaviors.
TSR: What would be your message to businesses struggling to make it through the current recession in light of your years of experience?
Bennigson: Culture can be very hard to move and slow to change -- especially when things are going well. In times of crises, culture is more malleable and the established ways of doing things can more easily become unhinged for better or for worse. This can be a problem in a recession. It’s amazing how fast a growth-oriented company that shifts to focus on short-term costs can snuff out the vitality and creativity of the organization. I worked with a major US company in the consumer packaged food business. They had acquired a large number of diversified companies which had taken them into industries they were unfamiliar with. When the economy went into a recession, a lot of power was given to the CFO, who implemented processes to stop diversification and “get back to basics.” That CFO became the CEO who eventually wanted to get the company back on a growth track. When I became involved, I talked with the business leaders all over the world. The story was the same everywhere. The people had exciting ideas for growth but they didn’t think the CEO wanted to hear them. What had been done to slow the company down had become entrenched and the guy who had slowed everything down was now running the show. Perception plays a very heavy role in shaping the culture of an organization. A big challenge for leaders is to manage how people interpret their situations. Interpretation becomes reality. For a company struggling through a recession that means not letting short-term performance needs shape the long-term culture.
TSR: I noticed you were in the Navy and competed in the 1960 Olympic trials in crew. How did those experiences inform the emphasis of your career as a corporate consultant?
Bennigson: As I think back on it -- whether it’s how a ship performs or how a crew performs -- high performance requires the alignment of people and culture and leadership and process. But there’s another side to the issue of alignment and a strong culture. As soon as the environment changes, externally or internally, the culture needs to adapt and in some ways the stronger the culture the harder it is to adapt. I find that a lot of companies are wrestling with duality. A company could be a leader in the industry with mature products and it needs to perform well against tough competitors so it keeps costs down and improves quality and service. It needs its culture to support that. But if that’s all they do, others will pass them by. A company can’t just be good at managing mature products or services; it also needs to nurture new things. It needs to figure out how to be what some of my colleagues refer to as an ambidextrous organization. Some companies choose to split up but sometimes a lot of the knowledge that is within the mature business will be relevant to the new, developing one and they’ll want to take advantage of these assets.
Increasingly we are moving from a world where companies had the luxury of maintaining a single-minded focus. Now, with stronger competition, more rapidly changing technologies and fewer resources, the question becomes, how do we do more than one thing really well at the same time? Culture plays a big role here.
