Fabrizio Palmucci, CFA
I was in business school taking an organisational behaviour course when I first read the quotes of Lou Gerstner, the chief executive of officer of IBM from 1993 until 2002. When he said: “The thing I have learned at IBM is that culture is everything” and “I came to see… that culture isn’t just one aspect of the game; it is the game”, I didn’t fully appreciate what he meant.
Academic studies show that successful companies tend to be rooted with strong values that are shared by every staff member and demonstrated both internally and externally. This is critically important for a company going through rapid growth, both in terms of personnel and business. And Source is one of them. The number of people at Source has grown from fewer than 50 to almost 100 in the last 18 months while our assets under management have tripled in less than five years, to $21 billion today.
A common understanding on how people work as a team, that is, the culture, is not only important to get people to work efficiently together, it helps to implement the business strategy seamlessly. In that sense, I agree with Lou, “culture is the game”.
That doesn’t happen overnight, and I suggest that genuine success requires the company to put in place processes that ensure the values are embedded in each and every person in the company. That is easier said than done, and the following describes the approach we have taken at Source and some of the lessons we learned – and are continuing to learn – along the way.
GETTING VALUES ON THE AGENDA
In April 2015, Source was embarking on the second phase of an accelerated growth programme, largely funded by a private equity rm that had recently taken a majority stake in the company, and this expansion included personnel. At a company- wide o site that month, a glance around the crowded room showed that more than half had been with Source for less than two years. ere was no doubting the fact that ours was a company in the midst of a growth spurt and taking on hosts of new people with di erent experiences and from different backgrounds.
At the day’s final session, I asked the facilitator: “Where does our culture fit into all this change?”
OUR BOTTOM-UP PROCESS
Following the offsite, and after concluding that this was actually very important, a team of three employees, approached senior management to gain support and determine the next steps.
The management team empowered the company to decide the values. While we did not appreciate it at the time, the process would make a material difference.
Our initial thought was that the three of us could agree upon the values. We quickly vetoed this notion, as it wouldn’t have been the company’s culture and therefore it would have been more difficult to get it adopted. We also thought about involving the entire company in the process, but this too seemed impractical, even for a company like ours with just under 100 people. We, instead, used the “adoption curve” and identified a small group of people in the company who are “early adopters”, and together we came up with a de ned list of values. Effectively, we were the “bottom rung” of the process. We then needed to progress it up the ladder.
To involve everyone in the company, each of our smaller team met individually with 10 people. is step of the process was used to gauge the values we had de ned, to receive feedback and adjust those values if necessary…article continued in the Summer 2016 issue of Professional Investor [login required].