Management Trumps Culture Every Time

by BILL WADDELL

There is a fundamental lesson to be learned from the BP debacle in the Gulf of Mexico – that management rules – not culture or leadership.  BP boss Tony Hayward promised to make safety BP's top priority – to "focus like a laser" on it.  He probably was sincere.  The problem is that few people actually work for Tony Hayward.  Most BP employees have probably seen more of him over the last few months on TV than they saw him – or any other BP exec – over the span of their careers.  So while he may well be a devout safety crusader, BP's employees worked for people far down the ladder who were driven not by Tony Hayward's speeches or priorities, but by the management infrastructure under which they worked. 

"Mr. Shaw, the Gulf of Mexico head, made the point at a meeting for top managers in Phoenix in April 2008. His aim, according to an internal BP communication, was to instill a 'much stronger performance culture' in the organization, based on strictly managing costs and ''this notion that every dollar does matter.' ", according to the Wall Street Journal.   So the boss can say the culture is whatever he wants it to be, but the true culture of the organization is a function of "performance targets, which determined bonuses for top managers and low-level workers alike."  Apparently bonuses were not tied to  "Total Recordable Incident Rate"—normally measured as total number of incidents resulting in injury or illness for every 200,000 man-hours worked …  The rate was 0.97 for the Gulf drilling unit, over the target of 0.62."

So which do you suppose drove the culture and decision making at BP – Tony Hayward's 'laser focus' on safety, or bonuses tied to hitting cost targets?  That's a rhetorical question for any of you who might have missed the fact that the Gulf of Mexico is slowly taking on the character of the La Brea Tar Pits.

Now most managers are not putting the global environment at risk with their failure to follow up on their grand cultural pronouncements with a re-enforcing management infrastructure – but they often put their companies at risk.  Usually the gap is between platitudes about the employees being the most valuable asset – and accounting systems that say employees are a variable cost, and performance metrics that reward headcount reductions; or between statements about customers being #1 and financial processes that lead management to think that moving everything 9,000 miles away from the customers to some Chinese manufacturing site with dubious quality is a good idea.

Don't get me wrong.  Leadership and culture are essential elements of success, but what the big boss says is not particularly important – it is what he or she does to follow through with the management processes that matter.  People are clearly not the most important asset in management schemes that view labor savings as the primary (often sole) justification for automation.  Customers are not going to be particularly important in a company that does not measure value adding for customers – just costs.

A strong enough leader can force his cultural will on the company for a while.  Bob Galvin did when he personally hammered Six Sigma throughout the Motorola organization back in the 1980's, but without a supporting management structure it cannot possibly sustain.  Galvin's chair was barely warm before it began to unravel and within a few short years Mot had gone from perhaps the leading manufacturer in the world – on par with Toyota – to shutting down plants and laying off better than 60,000 employees in their rush to outsource.  You see, Galvin didn't change Motorola accounting, he simply used the power of his position to ignore the accounting data and over-rule the accountants.  When he left, the old accounting driven management shceme was still there, and it drove Motorola back to its old form.

Wiremold did not fall from being one of the truly great lean companies to just another mediocre manufacturer because the French owners don't like people or customers. They fell from their lofty heights as a result of how their new owners make decisions – mostly by using traditional, flawed accounting data.

You can see the opposite at play at Barry-Wehmiller, where Bob Chapman is a cultural crusader of near maniacal zeal, but the culture is solidly backed up by Jerry Solomon instilling lean accounting principles, and a guy named Dick Ryan spreading lean operational principles throughout the companies.  When backed up by such management processes that align the data and criteria for decision making with the culture, excellence can and will be sustained.

The road to hell is truly paved with good intentions.  Management is far more often than not sincere in wanting to do well by the stakeholders, and to run rewarding, safe, customer driven companies.  But when they deploy the same old management systems and processes – accounting, performance metrics, top down org structures, ROI based investment decisions – it isn't going to happen.  And there are empty beaches in Florida to prove it.