John Lefferts' Blog

Monday, February 15, 2010

Culture Clash

Since the great recession has put companies and businesses into lock-down in the Fall of 2008, there's been little activity other than cost cutting, downsizing and basically staying alive while waiting out the storm. But there are signs that this paralysis is about to give way to consolidation and convergence in the financial services sector. We've seen it forced already in the wirehouse world where today there are literally only 4 major firms left. In the cover story for this month's "On Wall Street" magazine, the lead article is titled "The Front Lines of the Culture Wars" taking the mergers of AG Edwards into Wachovia into Wells Fargo as cases in point. And it raises the question, does culture matter?

Culture is like the air we breathe. We can't touch it or see it (except in LA on occasion), but it's always there for our sustenance. If it's good, we feel good. And if it's bad, it can likewise make us feel bad. I've had the experience of having worked with consulting firms who assist senior management in developing strategic plans. They are masterful at creating "decks" of charts, data and bullet points explaining all the "metrics", as they call it in consultant speak. Consultants have a knack for taking simple concepts you already know, give it a fancy name, and sell it back to you. Their general philosophy is if you can't measure it, it's not a factor. And this is where they're dead wrong.

Every leader worth his or her stripes knows that the culture they create will determine the success or failure of their organization. Why is it that within the same company with the same products, training, recognition, compensation, support, etc a branch say in Dallas succeeds exponentially where a branch in Boston fails miserably. The quote "the speed of the leader determines the rate of the pack" is in play here. It happens at a local, regional and national level. Leadership makes a difference...both positive and negative, but a difference nonetheless.

That brings me back to the issue of what I see as a spate of mergers about to happen. About 5 years ago, the firm I was with, AXA-Equitable, merged (bought) MONY. Each brought its own style, way of doing business, traditions, values, beliefs, attitudes and character to the equation. All those "intangibles" were lost on the consultants advising on the merger strategy. They couldn't measure it so they didn't get it. MONY had a field force numbering in the thousands and today only a handful are left. Why did they leave? If you ask any of them, the overriding theme they'll say comes down to culture. Unfortunately, in attempting to maintain two different cultures, often you damage them both as was the case here.

It's a big question mark as to whether the cultures that had built and kept the likes of Merrill Lynch, AG Edwards, Smith Barney, etc intact can survive the influence of the vastly different banking cultures they are now affiliated with. It's going to come down to leadership at all levels of the companies. It's a constant balancing act between maintaining the culture that made them successful while eliminating the one's that led to their failure. And having lived a merger, the best advice I can give is if you must use consultants, use them for what they know and not that for which they do not. Those in leadership positions would do well to focus on creating and maintaining success cultures rather than listening to consultants tell them what they are supposed to already know.


Machen said...

John, Great insights. Especially, enjoyed your comments on "Culture".

Lisa P. said...

John, Good Executive Recruiters in the financial industry have made good money by indentifying culture fit. You are right on point!