As Callan’s executive chairman, Ron meets regularly with fellow employees and industry leaders to discuss issues of broad concern to institutional investors. In this blog post, drawn from his recent paper “Nurturing Strong Cultures at Professional Firms,” Ron outlines a set of principles for creating and maintaining an effective corporate culture.
What It Is: Culture is the sum total of how we work together to get things done. Culture is grounded in an organization’s strategic plan and values, and the nature of a robust culture should be apparent to all stakeholders. In many ways culture is equivalent to an organization’s brand; it is the foundation on which the firm stands and the higher purpose it serves.
How to Maintain It: Culture is a living thing that constantly reacts as people work together to navigate the evolving business environment. It must continually be monitored to understand—and managed to correct—any behavior that isn’t additive. The ethical values shaped by the culture, and practiced by both management and employees, are the foundation of any lasting professional enterprise.
How Pay Fits In: Financial incentives can be the strongest drivers of behavior and, therefore, the culture. Be sure the incentives are aligned with the culture that management wants to maintain and that they avoid conflicts of interest with clients or dissonance issues with employees. To align financial incentives correctly and to handle the inevitable consequences, intended or not, a firm needs to employ an ethical mindset that is driven by its values, governance, and service to all stakeholders.
The Role of Fairness: The perception of fairness is one of the greatest building blocks of a successful culture. Employees care a great deal about how they perceive decisions are made regarding compensation and their careers. The perception that decisions on these matters are based on favoritism, poor information, or other improper factors can be devastating to productivity and a positive, collaborative culture. Generosity to the community also creates a perception of fairness in the culture. If a firm gives back to its communities and the industry, it will more likely be fair in rewarding its employees. And I have found that if you want your clients treated well, you must first treat your associates well. After all it is the associates, not management, who control the direct client experience.
Engaging Employees Is Vital: Building a healthy and diverse culture requires hard work, consistency, tolerance, and respect—but most of all, it requires paying attention to employees, listening to them, and hearing their aspirations. Talent has many possible nuances and it can be found in the many valuable attributes of diverse individuals. But management must look for that talent and find ways to develop and integrate it effectively into its operations. If you enjoy people for their differences and pay close attention to what they can be if properly encouraged, you will recognize the talent in everyone.
Make Room for Personal Issues: The best cultures allow associates to leave their personal issues at the door with the understanding that they will be given the flexibility to take care of those challenges as necessary, even in “prime time.” They also should know they will receive plenty of support from everyone at work when a crisis occurs. Employees should do their best to brighten everyone else’s day and be there for the hard times that everyone will eventually go through. In addition, having a strong social purpose to our work is both motivating and unifying to any culture, and gratifying to employees.
The Fun Factor: Humor—in good taste—goes a long way in establishing rapport. Just as importantly, tasteful humor can foster a “fun” culture that motivates people to come to work every day. It is hard to collaborate in organizations where people take themselves too seriously. A sense of humor, particularly from management, is seen as authentic, reduces stress, and helps to create trusted working relationships.
Avoid Politics: Politics are corrosive to any culture. Politics can create distrust, cliques, and divisiveness. Given enough time and information, diverse and intelligent people should arrive at some generally accepted consensus without the negative drama politics creates in an organization.
The Importance of Owners: Ownership is the final important element of a culture. Ownership can disrupt or completely override management, impacting the behavior of all associates. Owners must earn the trust of employees, just as management must.
From my time at Callan, I have learned that developing a strong and effective culture is both easy and difficult. The framework supporting the culture is built from timeless principles: fairness, integrity, transparency, collaboration, and inclusion. These are simple but powerful ideas, and they are vital to developing the right culture. But the hard part, of course, is that maintaining a strong culture requires ongoing vigilance and diligence, and that the culture must be reinforced at every opportunity and in every major engagement between every stakeholder. You may talk the talk, as the saying goes, but you also need to walk the walk—every day.