David Russo: Why Culture Matters and How to Manage It

This is a great talk because it explains why ‘company culture’ is an important thing in any business, the five principle kinds of company culture, and what you can, and cannot do to manage company culture successfully.

David Russo ran the HR function at the SaS Institute as it grew from 50 to 5000 people. The SaS Institute is consistently named as one of the best places to work in the US. In this talk, he discusses the impact of culture in business, shows why culture matters from startup throuhg IPO and beyond. He also discussses why you need to adapt your management practices to the culture your organisation has, rather than try to change the culture itself.

Favourite quotes:

“Leaders are human beings – for the most part anyway.”

“It is all about the DNA of startups and emerging companies.”

“Don’t hire great people, hire the right great people, they have to fit.”

Transcript

Neil Davidson: Ok. Next up we’ve got David Russo. David’s a HR consultant; I’ve had the pleasure of working with him over the past couple of years as he’s helped me get to a better place than I’d be without his involvement. But before that David worked for 20 years at the SAS Institute. The SAS Institute is the world’s largest privately held software company. He was there and he helped it grow from 50 up to 5000 people and is consistently named as the United States’ best place to work in the country. So he’s the guy who’s travelled the path that all of us are hoping to travel as well. So can you please welcome David Russo.

David Russo: Thank you, Neil. Pleasure to be here. The idea that I would be speaking at a meeting where I see about a hundred and twelve laptops staring me in the face, is just phenomenal, because the meetings I typically go to, the laptops are used as doorstops or paper-weights because they’re HR people, and they’re a bit technology averse.

What I’d like to talk to you today and talk with you about today has to do with the DNA of startups and emerging companies. How do startups and emerging companies get to be who they are and how they are. So at the risk of boring you, I’m going to say a little bit about myself, and why I believe, and some others have told me that it is ok for me to talk about this stuff… My company is me, Eno River Associates. Eno River is a small river in North Carolina, where I live. I thought it was pretty obnoxious to call it “David Russo and Associates”, so I picked the river behind the house and I worked for 20 years for SAS Institute.

It was a joy. It is the world’s largest independently held and privately held Software Company. $2 billion of revenue in 2010, and this year was named by the Fortune Magazine as the no. 1 Best Company to work for in this country.

Out of my SAS experience and out of some experiences since, last year at the urging of some friends, I think they’re friends, but they urged me to put together my thoughts on leadership, into a book and Financial Times Press published this thing called “17 Rules Successful Companies Use to Attract and Keep Top Talent”. The idea behind the book is this. Everybody as a human being likes to be treated in certain ways and respond to certain types of behaviors on the part of their leadership. And leaders are human beings – for the most part anyway – and suddenly when one gets into a position of authority, high levels of accountability, high levels of responsibility and positions of power, we begin to forget that the people who are responsible to us to do good work, produce goods and services and be effective and efficient and brilliant, are people too. And we start to treat them not like we would want to be treated were we in their positions. And we do stupid things as leaders.

So, the book is all about some rules that we should apply as leaders to make our places to work great places to work, joyful work, joyful people, high levels of productivity, and, therefore, fanatical response to the leadership that we provide. That’s the idea. Nowhere in the book and nowhere in anything that I’ve said or done in my career, do I think that managing a company, leading a company, is a charitable event.

You’re in business for 2 reasons.

No. 1 is to be profitable and No. 2 is to stay in business. Either of those being a failure on your part, the word business just flies away from you. It is not there anymore. So being a great leader is not about being Mother Teresa or St. Francis of Assisi. Being a great leader is about applying the skills and the technologies and all the things that one has learnt, into a “stew”, if you will, that produces high quality products, high quality services and a high camaraderie workplace that is sustainable for your business.

Now what I’m going to talk about in particular today is some research that was done a few years ago by a friend of mine, Diane Burton, who at that time was moving from Harvard to MIT. It is all about the DNA of startups and emerging companies. And the reason that it struck me as so important is that my last years at SAS people would come up to me and say, “How do you do this? What’s the magic? Are you doing something special to make your people work so hard, to make your people produce so well, to make your people seem to care so much?” And I would say, “Well, I don’t think so.”

There was a standing joke at SAS because every Wednesday we filled up jars on each of the floors in the buildings, we filled up jars with M&Ms and let the employees have at them for a little sweetness break. And there was a joke that the M&Ms were some kind of a magic pill to make these people work hard. I couldn’t convince folks from large and small companies that we didn’t provide M&Ms, and we didn’t provide special treats, and we didn’t provide certain types of human resources policies in order to get the people to work harder, or smarter, or be more productive. We were able to provide M&Ms and do special human resources type policies and procedures because the employees worked harder and worked smarter and cared more about the company. They felt even though they were not owners that they felt ownership and behaved like owners.

So, when I saw Dianne’s research it struck me that maybe some of these companies were looking to me for help were looking to me for help I couldn’t give them because their behaviors differed from our behaviors at SAS because their behaviors were in the cultural DNA of the organization. So I looked deeper into Diane’s research and she did this research for some folks from Harvard and some folks from Stanford, and came up with this, that, the founders, the entrepreneurs, the investors, the initial senior executives in an organization, startups, emerging organizations, are responsible certainly for long term success, growth, failure of the enterprise, but not always for reasons they understand. You see, each of those persons, these groups of people bring to the organization, personal philosophies and background and experience that contribute to their world view, of how people are in the workplace, why people are in the workplace, what needs to be done in the workplace, that sets the tone for how the company lives and breathes at the outset. Ok?

And those world views, those philosophies, those experiences and those personalities that come to play are in large part responsible over the long haul, whether the business succeeds or fails, grows or diminishes. Now the world views I’m talking about, and, again, I’m talking from a leadership role and a people perspective, is how the folks, how the founders, view people, their roles, their values, their influences, their proper influences in the workplace. How do the people who found an organization, how do people who put the money in to the organization, how do people who are the initial leadership, the CEOs, the COOs, the CTOs, how do they view people in the workplace. What is their view of people?

The second factor is what is that leadership group’s or individual’s need for authoritarian control. How much control do they need to have? How much impact they personally need to have on outcomes, on day-to-day policies, on procedures. Not only on what people do but how they do it. And, what is that first group’s view on the way you attract and retain people. What do they see as the logical bonding agent between the personnel, the staff, the brilliant programmers or the marketers or the sales people? What do they see as the bonding agent between company, institution, enterprise and individuals?

This DNA stew that I described, in the research, Diane shows that 3 critical factors, and it all centered around the employment model, how the org begins its process of employing folks to serve the enterprise.

Piece No.1 is the criteria for selection. How do you go about finding people, how do you go about hiring people.

2. Co-ordination and control levers. What things do you put in place to coordinate effort, to control outcomes and

3. What do you set up for the basis for attachment and retention?

So the first ingredient is selection criteria. How and where do they search for folks, for assistance?

It’s a classic thing in my experience that the first HR person in our company was the CEO’s administrative assistant for a while. The first finance expert was somebody who is a book keeper or who is the Tax Manager of the CEO or one of the investors, somebody who did their personal Income Taxes and ran their finances. The first marketing person that they ever had was somebody that they knew who was a sales person in some software organization somewhere else. And, what I’m saying is that the shortest distance, you know, between two points is a straight line and we do a lot of straight lines things in establishing.

First of all, typically we do it because of ease and availability. We do it because of cost, and, or, we do it because of previous relationships. Now, historically, some of you have already found that that’s a bad recipe for bringing staff on board. Because, typically down the line, you’re going to have a gut-wrenching experience when you have to disengage those relationships.

And what sources do they use, those are the kind of people that they get, what sources do entrepreneurs or founders use? Well, typically they network. They don’t use professional sources, they network. Somebody who knows somebody, you know, “My sister-in-law’s husband is a great marketer or brilliant programmer”, you know, “worked with 7 different companies over the last 7 years and just been brilliant”, and so on and so forth, and the networking, rather than some type of a more engineered or a serious process, and typically is done, once again because of need for speed and need to conserve resources and time.

The third piece of the selection process is what skills do you value? What do you bring in? What attributes of the individuals that you bring on board do startup organizations and emerging companies tent to tend to value. Well, typically, one looks for skill more than talent or potential because it is the hit the ground, I need this now, in fact I needed it yesterday.

And so, very seldom does one look for long term growth potential, very seldom does one look for deep and broad talent, or brilliance. They may think they are looking for brilliance, but, in fact, what they go for is the ability to hit the ground, running a current requirement, to a skill that applies immediately to an immediate need.

Look for the fit with a culture… a fit with the kind of place this is going to be…

When you build a company from the ground up, you are basically birthing a tribe you are beginning to develop a camaraderie, especially when it is a cadre of 8, 6, 4 people, the need for fit and how people interact, and the need for high levels of camaraderie are critical. Do organizations look for people who value the same things as the founders?

So these are issues. So selection criteria are ingredient no. 1.

Ingredient no. 2 in this stew that I talk about is how do you propose and value types of behaviors? How does the leadership plan on … types of behaviors to control monitoring of the organization, or are you depending on horizontal management, we lean on each other and therefore certain types of behaviors are considered good or not so good by the group. And, or, do you monitor behaviors through policies and procedures or are you dependent upon a charismatic leader? Somebody that everybody looks at as the lighthouse, so anytime that someone may be going astray the power of the charisma of the leadership is something that you use as a homing device on behaviors and efforts and coordination. And last, of this stew, is retention and attraction hooks.

Do you buy talent, do you go out and put as much money as it takes, and promise or deliver tangible compensation in order to get the people who can do the job?

Or do you use the value, and a lot of times if you look at your own organizations, use the value of you of the work you’re doing, the excitement of the work that is being done, is that the magnet to get people to come? We’re really doing cool stuff and that’s great. Or, do you use, and latch on to the fact that you’re building tribe; you’re building community, as an attraction? High levels of camaraderie and of course, the French equality, fraternity and freedom? You get to do things here with a great group of people. You’re going to like the people you’re going to work with. They’re going to lift you up and you’re going to lift them, and so on and so forth. So what are the attachment and retention hooks?

Now, once you have determined and accept that these are the things that are necessary, you have to understand that different organizations use these pieces or these ingredients in this recipe in different ways to come up with different results.

The research shows how these 3 ingredients go in to this DNA stew in many ways determines the model of employment, in many ways determines how the organization will live and breathe for the long haul.

Because those ingredients mixed together come up with, according to the research, 5 cultural models:

The Bureaucracy model, the model I think that we’re pretty familiar with and I don’t think that anybody in this room would be too excited about;

the Autocracy model, which is pretty straight-forward, leadership from the top and everything drives from the top, and I’m pretty sure that this would be something that most of the folks in this room would reject;

The Engineering model, which is an interesting model, that is, for me, having been in high tech for a number of years, is a little less put-offish, so to speak but still has some issues;

The Star model, which some of you may be working with and may be comfortable with and

The Commitment model, which is a model that, surprisingly, (to me it was a surprise), has a lot of values that I didn’t see in the outcomes before I examined the research.

Now, bureaucracy has a characteristic set that I found pretty interesting. Typically bureaucracy model of emerging companies has its selection based on competence, and you heard what [?] had to say about competence, was interesting pretty defining from a perspective. So you choose people based on their current competence. What can they deliver to the enterprise now? Bureaucracies have lots of policies and procedures in place.

Most public institutions are bureaucracy models. They run on policy, procedures need to be followed. Bureaucracy also, for some reason that the research shows, delivers the work and the value of the work is a way to attract and keep people. So public institutions for sure, social agencies, and voluntary organizations, research organizations, sometimes would lean to be bureaucracies.

And the values that they deliver on, or that they’re interested in are typically procedures, documentation, methodologies, and, I think, you can just imagine, a government or a voluntary organization, or even a research organization, particularly biological or medical research organization, fitting into this because of a number of external or internal factors.

The Autocracy model, the research shows, once again, competence is the selection criteria, and very very much direct control.

And I say it is the Wal Mart model, I don’t know whether you know much about Wal Mart, but people in middle management at Wal Mart don’t make many decisions. The decisions are all made at the top. And I had a Wal Mart executive say once, a couple of years ago, that it is pretty much when I want your opinion I’ll give it to you. Now, are they successful? Absolutely. There is no doubt that if your name isn’t Walden, or your name isn’t a subset of the Walden name, you cannot make any decisions. Alright?

And the attachment is dollars and cents. When people with high levels of brilliance, high levels of achievement go to work for Wal Mart, they know that they’re being bought. But many times, in my experience, great people who work for Wal Mart, can be lured away for as little as five or six thousand dollars a year in salary. Because if you have any ambition, if you have any ideas, the purpose of being a part of Wal Mart is to be paid to follow orders. And the value system is, there’s no consensus management here. It goes back to the coordination control. So they do not value at Wal Mart lots of input, lots of camaraderie, particularly around the work, or the outcomes.

The Engineering model, on the other hand, although, the selection criterion is based on competence, engineers, it’s a culture. “I’m an engineer and you’re not”. Now, I don’t mean electrical engineers only or mechanical engineers only or software engineers, but there’s a secret sauce that people with technological competence and technological brilliance have and if you’re not part of that club, then you really can’t be part of that mix that determines the direction of the organization.

Now I use Westin House. Westin House used to be a company, by the way, [laughter], but I had the experience back in my teen years, back in the late sixties and early seventies, I worked in Westin House. And they made a departure from their typical leadership model because they chose, when an engineer who was running the company, the CEO, retired, Westin House chose somebody who was a marketer to take over the company. And he lasted less than 18 months. And the chairman of the board of directors of Westin House said that never again will a non-engineer run this company.

You see, he didn’t know the handshake, he didn’t have the terminology correct, he was working in a different world. And it was not acceptable to the culture. It was an engineering culture. And the attachment, of course, in engineering is, “we do cool stuff”, “we do challenging stuff”. It’s all about the work. Whether it is design, whether it is detail, whatever it might be, the attraction is in the work. And the value? It’s about performance, it’s about focus, it’s about achievement. This is the typical model that the research found.

Now, the Star model is a little different that the other three in pretty significant ways. The Star model says we’re going to pick people on the basis of their upside, what they can deliver down the road. You pick from elite resources. In the Star model, they would pick a Harvard graduate over a SUNY of New York graduate, without even asking, because there’s no value to their image by bringing somebody in from the State University of New York, in a role that could be filled by a Harvard person. It’s all about the star quality of the organization. You see, if I’m famous and I work for you, then the organization wins. So they’re tied to that. Alright?

Their coordination and control is basically, what I call, “push me pull you”, you’re being pushed all the time and asked to pull people again. If you begin to lose your brilliance, or you are panache disappears, or you stumble and fall, and have a visible failure in your work, whatever it might be, chances are that you fall to the bottom of the list and they find a way to exit you from the organization. It’s “what have you done for me lately?” and I use the example of Booz Allen Hamilton, the consulting firm here in the States, that has (had, I don’t know whether it still exists), this unstated philosophy that if you didn’t make a certain stage of visible achievement in 5 years they wanted you gone because they knew that there was someone out there, again a star in waiting, to come in and take your place. So it is a continuous “up or out” philosophy, ok? And what do these Star organizations value? Well, autonomy. You’re on your own, independence and rapid growth. This is their perspective.

And the last is the Commitment organization, and this is the tribal look that Seth Godin talked about. They hire for fit. There is a classic example in the United States and the classic example is South West Airlines, a huge organization. They state that we want people who fit in with our culture because that it is much more important to us that the people who work with us get fit than they know it. If they need to know it, we can teach it to them. So they hire for fit. They want people who will assimilate rapidly. Their way, the way to coordinate and control, is a cultural control.

At South West and companies like South West, people are a band of brothers. They lean on each other, they support each other, they control each other. A company that is a large company, with high levels of tribal perspective is WH Gore, it’s a Korean company. In WH Gore, they don’t have job titles, they don’t hierarchy and they’re well over a thousand employees now, and they do really cool stuff. And the struggle in Gore is to maintain culture, so they work very hard to maintain culture. The retention strategy in a Commitment organization is basically love. We invite you in to our house, to our tribe, we’re going to care about you, and all we ask is that you focus not on “you” but on the person next to you and the person out there. It’s an externally focused organization. They value long-term relationships. They don’t hire for specific periods of time, they hire forever. It hurts organizations with Commitment characteristics when anybody leaves. It really hurts them in their heart and soul, because they believe they were in a long-term relationship, almost a marriage, so to speak. And, they see themselves as extended family. In these organizations, the family is critical, the extended family, you’re part of the family, the Red Gate family, the Balsamiq family, the SAS family the South West family.

Now, if you take those 5 cultural styles, if you will, and you look at the business strategies of these new developments, what the research shows is that 49% of the companies, 49% believe they’re doing radical, disruptive innovation. They really believe they’re doing something new and exciting. They believe they’re doing something radically different. And what radically different, disruptive innovation really means is like a skunk works. And the culture of a skunk works has to fit the culture that it is built in.

So it is difficult for bureaucracy and autocracy and even an engineering culture to do radical innovation. There are too many impediments, much easier in Star and much easier in Commitment, where things like sporadic success, constant failure, constant stress, detours, back-pedaling, all that kind of stuff, aren’t just natural. And it is ok. Because are tribe, or we, are brilliant beyond expectation. 20% of the new companies that were in the research see themselves as doing technological advancements and the definition of technological advancement is pretty specific and it is important to know that it is about updating, upgrading, changing or improving an existing technology. Basically someone in the company had a brilliant idea and they couldn’t make a business out of it. Someone else picked up on it and said, “Son-of-a-gun, I can make this work”, enhanced it and they made the business. And I don’t know that it is so unfamiliar to anyone in this room but you probably know 10 or 15 people who got brilliant ideas but couldn’t make them go and somewhere down the road you see the same idea in a going concern, because someone saw the value and turned this idea into a business.

And it is pretty interesting that there’s a bell curve on technological advancement in business, that once you’ve developed success, you need to find out some new technological advancement because once your success becomes “state-of-the-art”, so to speak, what they day “strikes home again”

You’re headed towards the bottom.

Technological advancements organizations continually have to come up with other things to be able to have a sustainable business model. 14% were about sales, marketing and services organizations. These are organization that depend on analyzing customer, analyzing themselves, looking at collaboration possibilities, looking at competitors and segmenting their industry and then going after specific pieces based on analysis. So the product is already out there, the services already available, the perspectives is already available, what they do is analyze and then go after something. They are not blanketing the world going after specific thing and these organizations are typically 14% of this start ups.

Smaller group do things that are commonly called control or cost reversal, for e.g. a lot of the green companies are quote all about protecting the environment are really taking advantage of heightened perspective on green and turning it into a business either reversing something that is seen as an issue and going after the market that way or controlling cost doing a better job with cost.

And then there is 10% or hybrid of the others. Interesting enough the stars, typically are innovation and enhancement organizations.

The commitments are typically the sales, marketing, services organization.

Engineering crosses all of them.

The autocracies typically are cost, you know, the Walmart strikes again, what’s their mantra? the “lowest price” always.

And bureaucracies are about enhancement, sales, marketing, service and of course that strikes at the public perspective.

Now, should an organization, should a startup, should an emerging company invest in a model?

Is it worth it to pick one of these models, that this is the kind of organization we’re going to be. Now, clinging to a specific model, whether you like it or are worried about it, lot of experts in the research told Diane and her fellow researchers that clinging to a model is a source of failure. You have to let the model flow. Some advice that was given was, “be successful first, and worry about your culture later”, and putting culture first is a bad priority.

And one of the most interesting pieces of data was that Hewlett Packard didn’t have a value system or written objectives, and the company had been in business for 20 years. However, this research shows that regardless, of how you try to avoid a cultural model, it’s going to evolve.

I’ve said to people for the last fifteen years, “don’t worry about building culture, just try to identify the culture you have, because you’ve got one. Whether you like it or not is a whole different story.”

And there is evidence that shows that having a model from the very beginning is a big advantage to growth and development of the organization. Another piece that I thought was pretty interesting was changing models was very very disruptive. Associating with one model or the other reduces the likelihood of IPO by 50%, but in the organizational study it triples the likelihood of a failure in business and it reduces the likelihood of market cap growth.

The thing that is obvious to me is, when you’re in business, you have people, and wrenching people from one perspective to another causes a disruption and that disruption can throw the entire organization off its feet, so to speak. Shifting to an engineering model seemed to be the least disruptive. And bureaucracy and autocratic models, high-tech firms just cannot operate within that, it’s just kind of intuitive. And of course, changing models accelerates turnover, and the turnover that accelerates in changing a model, is usually your longest-term employees, the people who’ve been with you the longest and so invested in whatever model was existing before. The most interesting thing about the performance of an organization, emerging or startup organization based on a model is that the Commitment models have shown that they’re fastest to go public and in spite of the tribal nature and the camaraderie being a highly energized value in the organization, they’re very very financially successful and are less likely to fail.

Now, the conclusions from the researches are these:

• The philosophies of the founders have a huge impact and lasting consequences on the success or failure of the organization.
• That people do make a difference but not for the reasons that are always on the surface, not for their brilliance, not for their technical contribution, but for deep-seated, if you will, psychological, philosophical, reasons for their dedication to the organization and
• Finding out what kind of culture you have can be a valuable compass to an organization as it grows and develops. If an organization is sure of its market value then we have a business out there. There is a market, we can do this, what we do is desirable, it’s of high quality, it’s deliverable. But run sure about the scalability of the organization, “is it scalable?”.

Everything that Diane and her group did shows two things.

• Changing the model is a bad idea.
• But, you can change your management practices in such a way to get the best out of the model you have, and allow natural evolution to a different type or a different outcome based upon how you manage the organization.

One of the things that I learned when I was at SAS a number of years ago, was that most people in starting an organization, most entrepreneurs, most founders, are really about delivering something that they’re passionate needs to be done. This product needs to be done, this service, this change, this really needs to be out there.

People need to see this, people need to participate in this, people need to buy this, people need to use this. Few start an organization with the premise of “well, this is the kind of organization I want to build”. At risk of telling you an old story, Jim Goodnight, some of you may have met him, some of you may have seen him, Jim Goodnight is I think, this year the 63rd richest person in America, I think he has a personal worth of about $11 billion, and he is the primary owner of SAS. When I met him in 1977, his plan was based upon an experience he had with General Electric. He’s a statistician, PhD statistician. And he was working on the Apollo project. And he was working in Boca, right down in Florida, in a building, and it really sort of grated on him that the executives on 11th floor had lunch on china and drank coffee that was served out of stainless steel carafes, and he and the other engineers, who were working on all the stuff downstairs, were getting sandwiches out of a vending machine and drinking coffee for 25 cents a cup, that tasted awful.

And he declared to himself that when he decided to do this, that his objective was to start a company that was as good for the employees as it was for the ownership.

And that was his basis of starting a company. For him, it was about working at a place that he would want to work if he was an average employee. All entrepreneurs, all founders, all investors, raise capital to follow their dream with a passion. Some risk their livelihood, some risk family relationships, some risk phenomenal pain and suffering, if they fail. But they go after it with a passion. His passion was to do that, for sure, but to do that in a place where everybody around him could have the same good feelings that he hoped to have. That perspective built SAS as a commitment relationship.

When a founder begins to evolve a culture, there are ways to evolve, what we consider, high performance management behaviors, that, regardless of the model, generate the likelihood of a dedicated, interested, caring workforce that will help you deliver on the passion you have in leadership.

First criteria is who you hire.

The second criterion is how you treat them and the

third criteria is what you can expect from them and they can expect from you, that honesty, that straight-forward perspective. So, high performance management in a culture says that you provide as much as you can secure employment, and mutual commitment. You are as committed to the employee or staff member as he or she is to you. It’s a shared commitment.

Selective recruitment: it is just mind-boggling to me how organizations, even large organizations, with lots of infrastructures, spend about 10% of the time in hiring a person that they dedicate to getting rid of one.

You hire somebody and you do it quickly and you find out six months in that they’re a bad person and you hire them in ten days and it takes you ten months to get rid of them. In some countries it is even more difficult than that. So hiring is a critical factor.

“Don’t hire great people, hire the right great people, they have to fit”.

Invest in your folks, it’s a critical management perspective. As often as you can, decentralization of decision making, you hire brilliant people, please let them be brilliant, don’t pay for individual performance. Remember that, everything is related, no one wins a war by himself. No one makes a sale by himself. No one develops a product by herself, or very seldom develops a product by herself. The idea is that the team is more important than the individual, the outcome is more important than the work, these great companies promote from within, open book management, tell the truth, let your folks know what’s going on at all times and as much as possible reduce distinctions of status.

Now, in order to have different results than the common results that go on in business, you have to do things differently and to do things differently you have to think differently. And to think differently you have to have different perspectives. And one of the perspectives you have to have, absolutely must have as a leader in an organization is that people matter.

And if you have the perspective that people matter then you have to understand that people watch, watch how you behave as a leader, and they generate their own behavior based on how you behave, and the way they behave dictates the way they treat each other, and the way they treat each other dictates the way they treat the customer, the client, the prospect, and the way they treat the prospect dictates how you are viewed in the workplace, and how you are viewed in the market place, and how you are viewed in the workplace and market place dictates your ability to attract and keep people and dictates your ability to attract and keep customers and clients and your ability to attract and keep clients dictates the revenue that allows you to sustain yourself. It is not uncommon for companies to have a negative image in the marketplace, generated by the behavior of leadership internally, and never know and never be aware of.

It is not uncommon for employees to say things about the company that are denigrating to the company’s image and the organization to never know. Talked about the attitude of leadership and leaders are in the service of the company and the employee, not the opposite. And if you are brilliant, and you are a visionary, and you are without peer in your technology, and you in your leadership role spend your time controlling the small things in the organization, where you should be spending your time externally focused, you can’t win. So if you have a specific need to control and to have a perspective of “me-ism”, if you will in your organization, that the organization is about you, then you have a chance to fail without knowing you are ever going to fail.

If you are an individual who has caring for external focus, where your role in the organization is to be the leader who sets the expectations, sets the goals, sets things in motion and allows your folks to do what they do best, then you have a unique opportunity to be successful, because that very action releases you to do what leaders do. It is critical, in my way of thinking, based on what I’ve seen in the research, that nobody who has ever led a going concern to long term success, has managed down in the organization. People who lead to long term success are always looking externally. People who have terrific outcomes are people who care that the product, the service, the deliverable, is managed at the lowest level while they manage the vision, while they manage the perspective, while they manage the future. Now, I think it is worthwhile for me to say that everybody in this room knows what to do. You’ve been trained, you’ve been taught, and you’ve been lectured to time and time again about entrepreneurial leadership. But there’s a huge gap between knowing and doing. And the gap exists because of the fear of making a mistake or an error and it is important that you follow your instincts of doing what is right, what is correct for the organization and also what is right for your culture.

Now, by and large, I believe, and I have believed for years, I sincerely believe that the commitment model where the tribal perspective is the most valuable to attract, retain and nurture brilliance, positive outcomes and longevity in organizations. I think that high-tech companies are tuned in to that model. I think it is appropriate, I think it is easy, because of the sharing, of the natural camaraderie. But I also think that it takes hard work and dedication for an individual leader or group of leaders, to stay the course with that model, because of the attraction of marketplace and revenue.

Now, I think I’m out of my time, I have just a few minutes for questions. If there are any questions I’ll be glad to answer them. I want to thank you for your time and your attention. Yes, anybody? Yes, Sir? [Applause]

Audience: What makes SAS the no. 1 company to work for?

David Russo. What makes SAS the no. 1 company to work for?

SAS became the no. 1 company to work for because it behaves consistently on the philosophy of,

“if you believe that people can make the difference, and you behave like people make the difference, they will make the difference”.

At any particular time, at any particular place in all these years, SAS has always trusted its people to do the right thing for the company. And I describe it this way,

“At SAS Institute and the great companies that I’ve experienced, when the nickel stands on edge on any issue, and this is an American term, the nickel stands on edge on any issue, the company always pushes the nickel on the side of the employee. So if there’s an issue that could go either way, the company says, “we’re going to do it in the employee’s favor”. And when the nickel stands on edge, the employee always says, “well, this is my company” and they push it over to the company’s favor. So you never have to worry about people going that extra mile, they’re going to do it because it is their company. And you never have to worry about the company saying, “oh, well! We’re going to cut a corner there” because they’re always going to push it on the employees. And that yin and yang, so to speak is what drives this high level of camaraderie.

One of the things that drives people at SAS, to me, Neil, and a few other people, was very unique about SAS is that there is little need for management and a lot of need for leadership.

And what I mean when I say little need for management is that the employees manage themselves in companies like this. You don’t have to have a manager come and say, “Mary, you’re doing wrong”, because the person in the next workstation has already straightened Mary out. There’s the SAS way, there’s the Red Gate way, there’s the Apple way, whatever it might be.

So what made SAS no. 1 is the continuing camaraderie that builds this cultural core, it is an overused term, where the company cares about people, people care about company, and what comes out of this thing is a tremendous workplace image, and a tremendous company image that attracts clients and customers to want to do business with companies like SAS. Scott Farquhar said this in a way in his presentation, I’ve been saying this for years. There’s a natural attraction, the tribal attraction that Seth Godin talked about, people want to do business with companies where they can be proud that they do business with them.

Why do people buy Apple? I don’t know Apple technology, but some people buy it because it is an Apple. And I can say, “I have an iPhone”, but most of the people who have iPhones don’t know even how to use the darn thing effectively. But they have them because it’s a badge. So companies that have that image of being great and great places to work, naturally attract, it is not the only way they attract, but people want to do business with companies where they can be proud of the relationship.

Thank you. [Applause].

David Russo

David Russo is Principal and CEO of Eno River Associates, Inc., a consulting practice which helps executives build high performing organizations by developing win-win relationships with the workforce.  Russo has consulted with many global companies, including American Express, Johnson & Johnson, Minitab Inc., American Eagle Outfitters, and the CIA.  Before his retirement in 1999, he was the senior HR executive for SAS Institute, the world’s largest privately held software company, known as a perennial Fortune “Best Place to Work” for its quality work environment and focus on its people.

More from David.

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