Culture Clash

In the end, most companies die. Sure, product life cycles come and go, but there’s no natural or market rationale for business extinction. Rather, companies do themselves in. Blinkered by their own success, they succumb to new competition or changing market dynamics that everybody else but them can see. For 50 years, newspapers were prized value stocks because they were seen to be stable companies that reliably posted healthy returns year over year. But, predictable profitability is fatal without leadership committed to constantly challenging the assumptions on which it is based. Internet disruption of the media business has underscored the importance of sustaining a high-performance business culture. After all, it’s one thing to climb the mountain. It’s quite another to live up there.

On March 31, 2014, six years and more than 2,500 regular readers ago, I published my first BlastofWinter post. In it, I wrote:

The future is never a straight line projection of the past. In business, how you perceive events is often more important than the events themselves. If your view of the market is blinkered by inbuilt cultural bias you are guaranteed to misread the nature and potential of any new technology, and to impose on it a false and confining perspective drawn from your particular institutional experience. When challenged in the past, very few newspaper companies had successfully migrated from one media platform to the next. Most had dismissed radio. Then they missed television. Then cable. They always simply assumed they were in the newspaper business… forever.

This is a familiar tale. When you analyze business failure you come, in the end, after all the marketplace misreads, missed performance objectives and product shortcomings, to the same answer — a breakdown in the company’s culture. Each of the operational problems can be traced back to that. The converse is true, too. When you analyze recurrent business success, you find that it always has its roots in the development and maintenance of a driven, high-performance culture. Jeff Bezos put it best:

I’ve been reminding people that it’s Day 1 for a couple of decades. Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1. How do you fend off Day 2? Such a question can’t have a simple answer. There will be many elements, multiple paths, and many traps…

Jeffrey Bezos, Founder, Chairman and Chief Executive, Amazon.com, 2016 Letter to Shareholders

I love that explanation for Amazon’s half-crazed competitive streak. In fact, it is our slogan on the other side of the house, where we occasionally consult on business culture: www.pwinterco.com

Newspapers are dying because deep inside newspaper companies, their culture inhibited adaptation. They weren’t “killed by the internet.” Google and Facebook didn’t “steal their customers.” None of the lazy, fashionable tropes hold true.

In fact, if you talk to people at both Google and Facebook and in the ad agency world — which to my astonishment few in the media commentariat appear to have done — you’ll hear that 65% -75% of the money spent on the Duopoly is money that was never spent on traditional advertising. It’s coming from SMEs (small to medium enterprises) and local businesses so small they might have spent in classified advertising but probably not even that. Facebook has eight million advertisers, it said earlier this year, and of those, the highest-spending 100 brands accounted for $4.2 billion in ad revenues. Sounds like a lot, but it’s only about 6% of the platform’s total ad revenue, according to market research firm Pathmatics.

The bulk of the Duopoly’s ad revenues comes from advertisers so small they found newspaper advertising too expensive, especially since it was not quantifiable and therefore hard to justify.  You cannot categorize their advertising intent as branding. It’s promotional by nature and direct response by intent. It’s efficient, and it’s measurable, because it’s sales, not marketing. I’ve written about that before, too: You Gotta Pick Your Shots

So, no, it’s not Google’s fault. Nor Facebook’s. Newspapers killed themselves — and that is a function of their impoverished leadership.

Newspaper executives and managers, including editors, proved  unable or unwilling to deconstruct and regenerate the myopic culture of their companies and their newsrooms. All the incentives of career climb and compensation were geared to the perpetuation of the status quo. Would you put all that at risk?

Transforming the culture of a company is the biggest challenge any new CEO and executive team faces. But if you don’t methodically set your culture and work to refine and update it, then it will set itself, and that is usually problematic. The trouble is that the term “culture” is amorphous and often seen by employees as a soft, wishy-washy concept, irrelevant to the day-to-day effort of getting the job done. It’s right up there with “team-building.” I spoke out at Google recently and they said “what are you going to talk about?” And I said “Well, what would like me to talk about?” And they said, “What do you usually talk about?” And I said, “Leadership, culture, the internal sell, that kind of thing…” And they said, “Great, Just don’t give us any team-building crap. We get that bullshit all the time.”

This impression of “culture” isn’t helped by the hundreds of consulting companies called in to run company retreats where speeches are made and silly games played but all to no effect; nothing subsequently changes in day-to-day interpersonal productivity or the  management capability of the group. Communicating to skeptical employees how there is a direct, pragmatic connection between culture and results is a big part of the challenge. I mean, what is business culture, anyway?

Is it dogs at work? Ping pong tables in the breakroom? Lavish on-site lunches? Nope. They’re perks. “Signaling” perks, we call them. They’re supposed to signal the company loves its people.

Is it a vision statement, or a list of corporate values, like “the customer is always right” or “our customers are our partners.”  Nope, they’re aspirations. And they can devolve quickly into empty cliché.

Culture resides lower down. Culture is the set of deep underlying assumptions employees hold about their company. It governs how they behave when no-one’s looking. Since behavior is contagious — much of what we do results from unconscious mimicry of others around us — the assumptions are incorporated even by newcomers. A productive culture is so strong, clearly articulated and felt that employees can expound on it for 30 minutes — and they can also explain what’s wrong with it

A company’s culture provides the answer to general questions like these:

• Is the quality of this document good enough or should I keep working on it?
• Now that I’m working from home, do I really have to put in eight hours or more?
• Is winning in the marketplace more important than doing the right thing?
• Should I fly upfront or back in economy? Should I bring my boyfriend on the business trip with me?
• Should I tell that vice president to whom I report that everybody thinks his poorly-managed meetings are a giant waste of time?
• Is that phone call so important that I need to return it today before I leave, or can it wait until tomorrow?
• When I negotiate that contract, what’s more important, the points or the strategic partnership?

There’s no right answer here. The answer depends on what kind of company your company is. It depends on your company’s DNA.

Beyond operating characteristics or styles such as these, culture also determines the basic marketplace assumptions a company brings into play automatically, instinctively, as it performs its specific work. Now then, this is where things get dangerous.

Take the New York Times, for example.

Opinion editor James Bennet resigned recently after the paper published a controversial opinion essay by U.S. Senator Tom Cotton that advocated using the military to put down protests.

Screenshot, New York Times

Many young reporters at the paper were thrown into an uproar when the piece was published. The newsroom was ignited by very same hubris that had brought the paper to its knees before the subscriber windfall triggered by Trump’s election. The staffers participated in a public social media campaign aimed at the paper’s leadership, asking for factual corrections and an editor’s note explaining what was wrong with the essay. There was to be zero tolerance for an alternative viewpoint, one expressed not in the news pages by the way, but on the Opinion page. You know, the Opinion page, where different points of view are aired, so that the reader — remember the reader? — can make up his own mind.

It was a time for executive and newsroom leadership to stand up, to lead.

Perhaps it was time for the company to re-affirm its self-proclaimed commitment to “objectivity” and “quality journalism,” and its tradition of using the Opinion page to provide alternative points of view. Perhaps a redesign of the Opinion page to delineate it more clearly from the news product might be a useful first-step in the process? But, leadership caved. Bennet was thrown under the bus. Don’t tell me that culture is an amorphous concept of limited business consequence. Swept away by the post-George Floyd zeitgeist, the Times has cast off any pretense of journalistic neutrality.  Rather, it has confirmed that in its now overt liberal orthodoxy, it is no more righteous than Fox News.

Subsequently, Bari Weiss, a Times opinion page staff editor, also resigned – click here for her resignation letter

Is this really that surprising? One reason that Kay Graham of the Washington Post is remembered with such fondness is her remarkable fearlessness in the face of power. Leadership of that caliber is rare in the media business and rarer still in newspapers, where publishers and editors typically came out of newsrooms and had no training or experience or interest in the art and science of  leadership.

In the real world, a CEO is hired because the board believes in her plan. In newspapers, the publisher was hired because he could be relied upon to ensure the proven formula was applied year after year to protect the current business and the dividends it provided.

In the real world, the CEO — and her team — is evaluated on the results of her plan. To execute well, the CEO needs to articulate and promote the strategy internally, recruit her own team, install and reinforce the culture she deems necessary to the mission, and then, through her management team, oversee the execution of her plan. The cultural norms she defines and reinforces will decide who will get promoted, who will get paid what, who will be given added responsibility, and so on, for the CEO cannot do all the work herself. She is a CEO, not a manager.

The roles are fundamentally different: a manager is a subject matter expert while a leader is an expert in managing people. So often, we see subject-matter experts promoted to leadership positions when they lack even basic people skills. We see them say “Go!” when a leader would say “Let’s Go!” The best leaders, as the saying goes, eat last. They put their people first. Employees respond well to that. It galvanizes them to action.

The secret to business leadership is seeing through the eyes of your constituents, each of them, simultaneously, customers, employees, suppliers, shareholders, the community served, each of them, and making sure that everything you do is structured in such a way they each feel like they’re winning. That means a leader must design a culture to which the employee constituency can commit, that makes the work worthwhile, that gives it purpose, because without that as a base platform, no other constituency can be satisfied. Most of us want to commit to a company that affirms what we believe about ourselves, or at least makes us proud when we walk through the door each morning. We give more of ourselves when that happens.

So, culture and leadership are two sides of the same coin.

But no strategy, no operating plan, is permanently relevant. So it also falls to the CEO to challenge, continuously, the established assumptions by which a company operates in its sector.

The CEO cannot impact industry trends beyond her control.

But the CEO can choose whether or not to accept reality, and in so doing, to impact the worldview of all those she leads.

That sounds glib, and it’s not as easy as it sounds.

If the most important thing that leaders do is create and manage the culture of the organizations they lead, then the ultimate act of leadership is to stand up to deficient culture, even to destroy it, when it becomes dysfunctional or outdated and threatens the health of the business.

This is very hard to do. I would say that it is the hardest test of leadership.

Here’s what the late great Clayton Christensen had to say about such a leadership challenge:

It’s one thing to see into the foggy future with acuity and chart the course corrections that the company must make. But it’s quite another to persuade employees who might not see the changes ahead to line up and work cooperatively to take the company in that new direction. Knowing what tools to wield to elicit the needed cooperation is a critical managerial skill.

Harvard Business Review, July–August 2010

When basic assumptions about how a company gets about its business have slipped from the conscious to the unconscious, the ability to think differently is constrained. Challenge to institutional assumptions creates anxiety, sometimes even anger, in that institution. In his seminal book on business culture, “Organizational Culture and Leadership,” Edgar Schein writes: “…we tend to want to perceive the events around us as congruent with our assumptions, even if that means distorting, denying, projecting , or in other ways falsifying to ourselves what may be going on around us. It is in this psychological process that culture has its ultimate power.”

For it is the habit of humanity to entrust to careless hope what they long for, and to use sovereign reason to thrust aside what they do not fancy.

Thucydides, The Peloponnesian War

In other words, we have a tendency to endorse existing beliefs about our position in the marketplace rather than update them or seek new ones. This is called “motivated reasoning,” or, “confirmation bias.”

I saw this first-hand when I ran internet strategy at Cox Enterprises in the 90s and labored on as divisional president there. With more than 30 daily newspapers, about the same number of local television stations, a public radio company with 90 or more radio stations, a public cable company with six million subscribers nicely clustered in six major markets, a direct mail business, a 50% share of Trader magazines, the largest automotive auction business in the U.S., international holdings that included Gazeta, the largest media company in Poland, the company had over 90,00 employees working in 48 states. By 2003 the private holdings of the company were producing annual revenues of more than $11 billion, which dwarfed most other media companies, especially those who talked about themselves more loudly.

Obviously, the internet posed a major threat to the company’s traditional media holdings. Cox is a local media company. We saw, earlier than most, that the monopoly position of our local media outlets was about to be overrun. Our 25% or higher margins were unsustainable. Reflexively, we built a network of local websites in our key markets to defend ourselves. Our newspapers fought bitterly over control of those websites in their markets, unable to see that their news product was about to be dismantled by an army of competitors now just one click away, and seduced by the notion that all they had to do was produce an “online newspaper” and life would carry on pretty much as it always had. They could not imagine the notion of decline and scoffed at those who warned them of it.

Then the cultural DNA of Cox kicked in.

Cox can trace its roots all the way back to 1898, when Governor Jimmy Cox of Ohio bought the seventh newspaper — out of seven — in Dayton. The company never looked back. It was the first newspaper company to get into the radio business, then among the first to get into television, then one of the few television companies to compete for and win cable television franchises.

As it made each of those jumps into the new media of the time, the company faced fierce internal dissent. As power transferred, internal investment capital moved and the established interests of predecessor media were threatened, the internal political battles proved distracting and demotivating. But each time, leadership stood firm. Playing offense, risk-taking, jumping in were embedded in company culture. Playing the victim, rolling over, was not.

Self-disruption is better, in the long run, than managed decline, because through it, with the requisite self-belief, new franchises can often be created. Subsequently, Cox founded AutoTrader.com, and in so doing destroyed the classified automotive classifieds category in local newspapers everywhere, including their own. A key revenue engine in supporting local journalism in markets where Cox newspapers operated was deliberately blown up. You can read more about that adventure here: Cox, Tribune and a story of self-disruption AutoTrader.com now throws off more than $2 billion in annual revenue. There’s the bottom line benefit to sustaining a fiercely competitive culture.

But it takes tough-minded leadership to pull off something like that. A media luminary once asked me if I could introduce him to Jim Kennedy, then the chairman of Cox. “I’d be happy to,” I said. “Do you mind if I ask why you would like to meet him?” “Because he must have testicles like solar systems,” he said.

Most leaders lack the necessary equipment to regenerate the culture of their companies — and through that, their company’s strategic vision, operating performance and competitive vitality. It takes an independent perspective, thinking like an investor, ensuring ownership up and down the line, executing relentlessly and continuously questioning the established belief systems upon which the culture and business are built. Above all, it takes constant communication. No, more than than that, it takes persuasion. You can never assume that employees understand why the company has to operate in a different way in the future.

If you don’t believe me, look at what happened to newspapers.