“Culture eats strategy for breakfast”
Peter Drucker
Early in my career I worked at Lazard Freres, a legendary Wall Street firm. As a junior associate, I had no idea of the firm’s strategy. I never heard anyone talk about it. They may not have had one. But I definitely understood the culture from the very first interview.
We were there to make money. Lots of it. And the more money we made in our team, the more money we would get paid.
I worked my ass off because everyone else was working their asses off. I was shocked at how caught up in the spirit I was. Days and nights slipped by chasing deals.
That lesson of culture stayed with me. The Lazard culture quickly wrapped me up and wrung my greatest efforts while I was under its spell.
If you have worked in or with a company with a bad culture, you know how debilitating it is. Work vacillates between furious firefighting and lazily getting to Friday. Some seem to be drowning in work and others seem to be barely working. Edicts du jour are handed down from the CEO and leadership. Plans made are quickly and quietly abandoned. Nothing seems to change the company’s trajectory. The best people leave.
What separates the good cultures from the bad cultures is the clarity of purpose. At Lazard Freres, the purpose was to make money. At other companies, the purpose is unclear:
- to secure another round of funding?
- to hit a revenue target for the board?
- to launch new product XYZ?
- to achieve our OKR’s?
- to exit at a big valuation?
This is why the story of Ben Perkins saving his brand resonates. Ben’s brand, &Collar, faced certain death due to a debt spiral. While Ben made a lot of smart tactical moves to save himself, he made one huge move on culture. This enabled everything else.
By his own admission, his leadership prior to the crisis was feckless and unaccountable. But in crisis, he gave everyone a personal P&L. They had a weekly gross profit goal and they met weekly to understand if they achieved it or not. They didn’t get hung up on attribution because they realized that making sure everyone understood that the goal was to generate profits would result in more profits. The results were stunning. Seven of his thirteen employees wanted no part of it and left. But the remaining six turned into superstars. Those six were doing more faster than when they had those additional seven. They not only saved their company, they have returned to growth and a level of profitability they couldn’t imagine before their crisis.
In my experience, the companies with the bad cultures, the ones that are perpetually struggling, the ones that can’t seem to get out of their own way, almost always share a lack of clarity about their purpose. Making the change is hard! If it were easy, everyone would do it and you as a leader would have done it.
An existential crisis can help. For Ben Perkins, it was the threat of going under from escalating debt payments. Tariffs have brought another crisis. And while it’s easy to focus on the immediate tactics and responses, the best leaders will use this moment as a catalyst to drive a change to a culture of generating profits and cash.
Your culture must be matched to your rewards. It’s no use to say we are focused on driving profits and cash, but no one is rewarded for doing so. At Lazard, making money for the team meant bigger bonuses. Simple. And highly motivating.
For Ben Perkins, the remaining six people had bigger goals, but they made more money, learned more faster and accelerated their careers.
As a brand leader, the tariff crisis is your opportunity to dramatically change your culture to focus on driving profit and cash. You make the change impactful and permanent by changing your incentives to match.
I help brand leaders make step changes in their financial performance. If you want help in setting up the right culture and incentives to do this, reach out.