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HR Magazine, January 2004 - Ensuring Lasting Foundations

By Pamela Babcock  1/1/2005
 
HR Magazine, January 2004

Vol. 49, No. 1

Influencial founders may mold a company's culture, but HR must take steps—before founders leave—to keep that culture going strong.

Sargento is one of many companies actively working to retain a corporate culture based in large part on the personality of one or more founding members—which is a situation that presents both benefits and challenges to HR professionals tasked with maintaining that culture.

On one hand, a vibrant, charismatic leader can embody the sometimes intangible or nebulous elements that can make up a healthy and positive company culture. (For information on the difficulty of defining corporate culture, see “Is Your Company Two-Faced?")

For example, Charles Schwab, the founder of the investment firm Charles Schwab & Co., successfully instilled in employees and managers the idea that they should follow the company’s four core values religiously—or risk being fired. The values at the core of Schwab’s culture include paying brokers salaries (rather than commissions), putting customers first and prohibiting selling or providing investment advice.

Schwab’s son—Charles “Sandy” Schwab Jr.—was training as a customer service representative, but was “withdrawn from that opportunity” when he couldn’t avoid offering investment advice, says John Kador of Geneva, Ill., who interviewed hundreds of current and former Schwab employees for his book Charles Schwab: How One Company Beat Wall Street and Reinvented the Brokerage Industry (John Wiley & Sons, 2002).

“The supervisor felt that the value of [avoiding advice] was so strong that it would protect him from disciplining the founder’s own son,” says Kador. “And he was right. The value was stronger than the nepotism.”

On the other hand, when a company’s culture includes a public image based on the personality of a founder or leader, that image can suffer if the founder is involved in personal scandal, lack of financial performance or questionable public behavior—even after leaving the company.

“Every culture that’s pegged on an individual who is alive needs to be very careful, because the commodity is very fragile,” says Kador. “The best circumstance for a company is to have a beloved founder who is conveniently no longer alive, so the example he set cannot be overshadowed by human foibles.”

Kador says that after Henry Ford stepped down from Ford Motor Co., “he got involved in politics and anti-Semitism and became a huge embarrassment for Ford.” In the present day, he notes that Martha Stewart carefully crafted her brand based on her personal image. As a result, her businesses took a hit when she was charged last year with securities fraud.

Other companies, however, have successfully maintained a late founder’s spirit by using that founder’s image as the firm’s public face. KFC’s Colonel Sanders and Disney’s Walt are examples.

Maintaining such cultures is too vital to a business’ success to leave anything to chance. For HR professionals, then, the challenge is to establish a means of capturing and protecting a founder’s positive cultural imprint before that individual leaves the company.

HR: Maintaining Culture

HR plays an important role in maintaining corporate culture because it’s the keeper of the selection, socialization, training and development, and evaluation systems.

“All those systems are used, whether knowingly or not, to maintain the existing culture,” says Dick Blackburn, an associate professor at the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill. By hiring people who fit the culture, training them in the values the company promotes and evaluating them based on how well they carry out the employer’s priorities, HR is at the center of culture.

“The role of the HR professional is to continue to embed [the founder’s] values into the different HR programs,” says Donna Morris, senior director of global talent for Adobe Systems Inc. of San Jose, Calif., which uses several techniques to maintain the culture of founders John Warnock and Chuck Geschke.

Says Morris: “We’ve woven the values into our award and recognition program, but it begins with looking at talent and continues as you develop those employees.”

Kelly Vrtis agrees. A spokeswoman for Dallas-based The Container Store, which owes a great deal of its culture to founders Kip Tindell and Garrett Boone, Vrtis says, “The key to sustaining your culture is to have people in your company who truly have a passion for what the founder is doing and a dedication to carrying out that original vision through the culture.

“Of course,” she adds, “it’s much more difficult to continue a culture if it’s not incredibly strong to begin with.”

While HR can be a driving force, other company leaders also must be on board. “Some CEOs sort of delegate [culture] to HR and say ‘That’s your problem,’ but it needs to be owned by everybody,” says Libby Sartain, SPHR, CCP, senior vice president of human resources for Yahoo! Inc. in Sunnyvale, Calif., and former board chair of the Society for Human Resource Management.

How can HR build that ownership? Employers with strong founders offer some ideas to help build a culture based on the founders’ values while also preparing to maintain that culture after those founders leave.

Recognition, Communication

Peg employee recognition to the corporate culture. Each year, The Container Store treats 11 employees—those who best exemplify the values of founders Tindell and Boone—to a weeklong Colorado getaway with the duo at Boone’s cabin.

Similarly, each year Adobe presents six employees with Founders’ Awards, which honor those workers who embody the company founders’ core values and beliefs. These values include integrity, respect, innovation, leadership, operational excellence, customer focus and community involvement.

Customer care supervisor Carlos R. Soto, a winner of the award in 2002, enjoyed an intimate dinner with the founders, five extra days off and a $5,000 travel voucher. On its intranet site, Adobe touted Soto as balancing “the needs of our most vocal customers with the requirements of our business. His constant upbeat attitude and high expectations inspire respect and gain him loyalty within our company.”

In praising him, one colleague said Soto had “turned hopeless situations around and actually endeared us to customers” who otherwise might have criticized the firm.

Soto says he received congratulatory phone calls from around the company and was even asked to sign a few autographs.

Unlike The Container Store and Adobe, Sargento does not commit to presenting its award each year. Even so, eight employees—from company officers to an hourly plant employee—have earned a Sargento Founder’s Ring since 1992.

Connect culture to the bottom line. A company’s culture, from how it treats employees to how it approaches crises, can affect its finances—a point HR needs to keep in front of founders and other top officials.

For example, Kador says that following the October 1987 stock market dive, brokerage firms were forced to write off unsecured debts of customers who couldn’t pay. “Based on its ‘customers first’ ethic, Schwab was much more conciliatory than its competitors,” who were suing customers.

The result? Kador says the securities industry as a whole recovered only 23 cents on the dollar for unsecured debts, while Schwab recovered 77 cents on the dollar. “Schwab’s compassion and flexibility went straight to the bottom line,” Kador adds.

Emphasize the company’s history. Sargento continues to work diligently to maintain the family culture begun in 1953 by Leonard Gentine.

“Whenever appropriate, we continue to bring up the important role my father had in starting the organization,” says Lou Gentine, the third son of the founder and current CEO and chairman. “There’s one quote that we often use and always attribute back to him, which is, ‘In order to be successful, you have to surround yourself with good people and treat them like family.’ ”

“We have photos of [my father] and my mother in each of our lobbies to kind of bring back the spirit of the past, and we recently celebrated our 50th anniversary and have a very attractive timeline with photos and memorabilia of when Leonard was here with us,” Gentine says.

Sargento also communicates Leonard Gentine’s story to employees. A few years ago, Sargento developed a company culture brochure with input from employees at all levels. All new employees receive a copy of the 50-page culture handbook, which emphasizes the company’s three Ps—people, pride and progress.

The company also videotaped Leonard Gentine in his later years “primarily for the people who would never know him personally. We’ve used some excerpts of that video continually in employee meetings and orientations so people could get a sense of what my father was all about,” Gentine says. (For more on using a founder’s image to brand a culture, see “Keeping the Image Alive,” above.)

Communicate constantly with all levels of employees. The Container Store’s Tindell and Boone strive to instill a sense of ownership in all employees, from workers loading trucks at the Dallas distribution center to store managers to college students working part-time, spokeswoman Vrtis says.

To help build that ownership, the company communicates information such as financial data and real estate expansion plans to all employees. Tindell and Boone also make sure employees feel valued by such means as handwritten notes of praise. “We like to say that communication and leadership are one and the same,” Vrtis says.

Training is part of that communication. All full-time employees receive 241 hours of training in their first year. During Foundation Week, which is the first week of training, new workers learn about The Container Store’s products, culture and philosophy. All employees take part in the training, including those in headquarters who rarely work the sales floor.

The goal is to get everyone on the same page, says Vrtis. “What that ultimately means is that when Kip and Garrett retire, there are people that know what their vision is because they’ve been communicated to. That certainly will make it much easier to continue with their vision and keep that culture alive.”

Selling Succession Planning

Coaxing founders to consider culture and other succession planning issues before they leave may be difficult. Leaders often have trouble letting go or even fathoming the day they’ll depart. But without succession planning, CEOs and other leaders may hang on beyond their expiration date.

How does HR make the case that there’s a financial need for succession planning? Kador says that a clear succession strategy makes potential investors more confident that a business will “make an orderly transition to the next generation of leaders,” which means stability and, in the end, higher returns for investors.

At Adobe, co-founders Warnock and Geschke stepped down from day-to-day operations as CEO and president, respectively, in 2000. But efforts to ensure that the company’s values would endure began years earlier when the computer software firm began hiring and promoting people who shared those values.

“John and Chuck knew they were going to be retiring one day and they very deliberately selected executive team leaders and senior leaders that they felt embodied the culture,” says Angela Szymusiak, Adobe’s HR manager of engagement and diversity initiatives and a past Founder’s Award recipient.

Having such individuals in place can ensure that a company’s values and culture remain both effective and in effect. As Sargento’s Lou Gentine says, company culture “if lived every day” will maintain itself long after a founder leaves.

Pamela Babcock is a freelance writer based in the New York City area.

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