July 19, 2017
A company’s leadership approach and organizational culture must be designed to deliver on its customer promise. Every kind of for-profit and nonprofit enterprise falls into one of four categories determined by (and named after) the customer promise:
Simply put, a nuclear power plant, a high-tech business, a PR firm, and a day care center have fundamentally different promises and must be led differently. Choose leadership and cultural practices that fit your customer promise and company type, and your organization can thrive. Apply the wrong practices, and the contradictions will cause conflicts that pull the company apart.
Consider these examples: Microsoft dominated its market in 1998. Its software operating systems ran on 86.3% of all personal computers in the U.S. Then something happened to bring the giant to its knees: The technology group stopped reporting directly to Bill Gates and began focusing on reporting profits and losses. Instead of developing new and more effective technology for consumers, the company insisted that the technology group only propose ideas that could turn a quick profit. In three short years Microsoft lost more than half its value.
Ron Johnson, successful senior VP of retail operations at Apple, left to take over the helm at J.C. Penney in 2011. He immediately changed J.C. Penney’s practice of leadership, power, and compensation. He did what he had done so successfully at Apple. But two years later, J.C. Penney’s sales had plunged 25% and he was asked to leave.
Why did the companies run into trouble? Gates implemented the leadership, power, and compensation practices of a predictable and dependable enterprise in a best-in-class enterprise. Johnson did the opposite. He adopted the leadership, power, and compensation practices of a best-in-class enterprise in a predictable and dependable enterprise.
All enterprises fall into one of the four basic types described above, and each has corresponding types of customer promise, culture, and leadership. To succeed, companies need to use the right kinds of practices for their type and connect them the right way.
When we promise a product or service to customers, we form an immediate interdependence with them. They are now “depending upon” us to deliver on our promise. Our promise connects them with our living people system. They are not “outside” our enterprise. Every enterprise exists to deliver on its promise to customers, and this promise determines your culture and leadership approach.
Culture means how we hire, structure, deploy, compensate, and develop our employees to deliver on our customer promise. It establishes and underpins factors such as structure, membership criteria, conditions for judging effective performance, communication patterns, expectations and priorities, the nature of reward and compensation, the nature and use of power, decision-making practices, and teaming practices.
Culture is about our community of employees. It is about how we do things in order to fully deliver on the promise and succeed in the marketplace. It is all about implementation. Over time, if we are more and more successful, culture becomes equivalent to our identity (e.g., the GE way, the Disney way, the Apple way). The more successful our enterprise is, the stronger our culture becomes. Culture is not a compilation of individual people’s values.
Leadership means to set a direction for our enterprise based on the customer promise, mobilize commitment, and build enterprise capability. It is where greater power exists to influence events within the enterprise. Leadership includes people who lack observable rank or title. The more versatile the leader, the more effective he or she is. Versatile leaders adapt their core approach to leadership to the strategic and cultural requirements inherent in their type of enterprise. In the end, leadership is about creating unity and empowering people to live up to the enterprise’s customer promise.
Adapted, with permission of the publisher, from Lead Right for Your Company’s Type: How to Connect Your Culture with Your Customer Promise by William E. Schneider. Copyright 2017, William E. Schneider. Published by AMACOM.