Company Culture Is An Intangible Asset!

Michael D. Moberly   July 31, 2012

Let’s start by taking a look at some intriguing language the Securities and Exchange Commission obliged Omnimedia to state in its 2007 Annual Report regarding Martha Stewart…

Ms. Stewart’s efforts, personality, and leadership have been and continue to be critical to our success…the repeated diminution, or loss of her services, due to disability, death, or some other cause…could have a material adverse effect on our business…

Admittedly, I am one, among many, who acknowledge Stewart’s accumulation of presence and on-camera demeanor, etc., constitute an influential, valuable, and strategic package of intangible assets which, for the most part, have been effectively bundled and leveraged (managed) etc., before, during, and following her temporary change of address to Alderson, West Virginia.

But, interestingly, Grant McCracken of ‘chief culture officer’ fame, rather emphatically characterizes ‘Stewart’s gift of intangible assets (to Omnimedia) being neither mysterious, nor imponderable, or irreproducible. Even more hard hitting, McCracken states, the intangible assets that have emerged from Ms. Stewart and subsequently brought to the business table, are not even essential.  Respectfully, McCracken’s view on this particular aspect is where we depart, practically and philosophically. I’m not so sure Apple employees, board, stockholders, their brand loyal consumers, and the bevy of Apple analysts and pundits would agree with McCracken’s view on this, at least not for awhile anyway.  On the other hand, we must be reminded that GE continues to exist and function profitably following the departure of their version of Steve Jobs, i.e., the iconoclastic Jack Welch.

McCracken notes in his book ‘Chief Culture Officer: How To Create A Living, Breathing Corporation’ that probably the two most significant errors made in characterizing a company’s culture, are (a.) presuming the culture evolves from the presence of a single individual, or (b.) that an individuals’ personality is synonymous with an organization’s culture.

While I do not consider myself to be a ‘company culture’ expert, I have held numerous positions of leadership and here’s what (a.) I do know, and (b.) what I can recognize.  First, a company’s culture can be a useful and influential intangible asset that can garner – deliver a great deal of value and competitive advantages to an organization, large or small, in a variety of ways and in many different venues.  That is, providing of course, employees, as well as stakeholders believe it and the culture is understood and recognized as such!

Let me take this a step further by assuming some literary license from a comment attributed to a former USSC Justice regarding obscenity, i.e., I’m unsure, he said, how to define it, but I know it when I see it!   That’s largely how I, and I believe many of my colleagues, characterize company culture, that is, we’re quite sure that we can recognize a good one when we see (experience) it.

Even more intriguing to me is McCracken’s opinion that most intangible assets, which collectively converge as a companies’ culture, can be reverse engineered.  While I am certainly not denying reverse engineering of intangible assets can and does occur, it seldom does so overnight, rather over periods of time to the point ‘a culture changes’ fully manifests itself in competitors and/or economic – competitive advantage adversaries.  And, should such intangible asset reverse engineering occur, c-suites and boards in my view would have engaged in substantial fiduciary irresponsibility, especially if there were no initiatives (processes, procedures) in place to counter and/or mitigate such inevitabilities.

But, let’s examine company culture a bit further by drawing upon some perspectives found in reputation risk (management).  As has been noted in this blog previously, studies – surveys conducted by respected reputation risk experts routinely find in companies that experience a significant and cascading reputation risk, it may take 3-5 years for that company to recover (partially, fully)from  lost and/or diminished revenue, market space competitive advantages, and consumer-brand loyalty, etc.

In this context, I just don’t believe it’s a circumstance of comparing apples to oranges to suggest there are very plausible correlations between a companies’ reputation (risk) and its culture. More specifically, I believe a company’s reputation risk elevates when a substantial, resilient, and somewhat permanent culture exists.

That is to say, using the Martha Stewart example, I’m quite confident I would be hard pressed to find one reputation risk colleague who would disagree that Omnimedia took a major hit to its reputation before and throughout Ms. Stewart’s trial, including her acceptance of a plea and subsequent incarceration.  Rather obviously though, one of Stewart’s enduring legacies was the existence of a sustainable pipeline of intangible assets, i.e., brand, consumer loyalty, innovation, energy, etc., that did not evaporate either during the trial or her subsequent absence.  Instead, those intangibles rapidly re-emerged upon her return and as strong, profitable, and even perhaps a more sustainable culture.

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