Oct 102013
digital tools like smartphones and the Internet make management hard

“How can you create a great organisation of people and be that mean a person?” Asks funds manager Julian Robertson about Apple founder Steve Jobs.

Robertson, who based the decision to sell his Apple shares on the details in Walter Isaacson’s biography of Steve Jobs, was largely ridiculed for his decision but the veteran investor has a very good point.

A company’s culture develops from the top – if the senior management are paranoid, rogues or thieves then those attributes will eventually percolate through the company.

The Tyco Lesson

During the 1990s I had the unfortunate experience of working for Tyco International at the time it was led by Dennis Kozlowski, a man listed by Time Magazine as one of the ten most crooked CEOs of all time, senior management’s attitude of treating the company’s funds as their own piggy bank was copied throughout the organisation.

Tyco suffered badly during that period and subsequent management has had to work hard to undo the influence of Kozlowski and his cronies’ poor leadership.

One organisation I’ve watched closely over the last few years has been Australia’s NBNCo, the state owned company set up to build the nation’s National Broadband Network.

In under four years of operation the company has developed a dysfunctional management culture that saw the project miss its targets by over 70%.

For the NBN, a hands off attitude by senior management allowed bureaucratic silos to develop in a relatively small and young organisation. Those silos then started perpetuating bad habits as managers hired their friends and ignored good management processes. A lack of process and management accountability have been the main reasons the company has failed to meet its targets.

Apple’s challenge

In Apple’s case, Jobs created a culture of fear and secrecy with the company going as far as creating its own secret police designed to intimidate staff. The entire company was beholden to, and evolved around, one man’s vision, ego and quirks.

While Jobs was ahead of the game, all was good for Apple shareholders but the risk was always that Jobs would make a major mistake or leave the company. It turned out to be the latter when Jobs passed away.

As with any company built in the image of its founder, Apple now struggles to adapting to life without Steve Jobs and his successors have to reinvent the company’s culture around a more collegiate management structure than an often not-so-benign dictatorship.

Microsoft are facing a similar transition as Steve Ballmer leaves the company. Like Apple, Microsoft is an immensely profitable facing a changing market at the very time they are transitioning to a new generation of leaders.

Leaders such as Steve Cook at Apple and Ballmer’s successors at Microsoft have a massive task in changing their company’s culture as they try to undo a generation of management habits and this is why Robertson’s reasoning about selling his stake makes sense.

Culture matters in an organisation. While a positive culture doesn’t guarantee success, it does make it more likely a company will survive its founders.

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