237. The Heart of an Organization

Welcome to another episode of at the Table with Patrick Lincione, where everything we talk about is related to organizational health and the world of work. I'm your host, Pat Lyncione, joined by the full crew, Tracy, Cody, and Bo. It's good to see you all. Tracy's. I mean, Karen is sitting next to me. She's back. And. And Matt is behind the glass producing. What's the title of our episode today, Cody?

The Heart of the Organization.

The heart of the Organization. This is a really important episode and an important topic. I'm really excited to talk about it, too, because sometimes we don't understand that there is, like, what is the core of an organization? What makes it? What's its DNA, if you will, what's its heart? And we like to describe it as the answer to the first two questions and the six critical questions in organizational health is why do we exist and what are our values? How do we behave? Jim Collins used to call this core ideology what it is. It's the essence of an organization. And if you lose that essence, you're essentially losing the organization. You might as well start it from scratch. And the reason why I want to talk about this is because when we don't understand what makes up the core of an organization, the heart, we run the risk of killing an organization, thinking that we're helping it, but we're actually creating its demise. And there's an example in the world today. We actually talked about this company in a couple episodes. We've talked about it more than any other company on our podcast over the years, and it's Southwest Airlines. Now, most people think what's going on at Southwest Airlines right now is this massive change in that they're going to change the way they board their planes. And we talked about that before, but there's something far more dangerous and. And like, exponentially heavier going on there right now. Most people don't know about this, but there is a group of investors, shareholders, who are trying to do kind of a hostile takeover, and they want to oust the current CEO and the chairman of the board, who was the former CEO, and replace them and replace the board with an executive from another airline and some people that used to work at high levels of the government because they don't think that the company is performing the right way. Now, I am fully aware in a public company, when there's performance issues, there's a board and they try to take. They try to change things, but what's going on there right now is the equivalent of not understanding they're trying to help the patient get a little healthier. And they thought, hey, if we could just take this heart out, we'd save a lot of room in this body. And what's happening right now is a very threat to one of what I believe is the most amazingly successful companies in the history of American business, notwithstanding the fact that the last couple of years have been hard for them and other airlines. But this is a company that in 1969, started up with a different way of doing business and treating one another and treating their customers. And their financial performance over the last 50 years has been unmatched in that industry or any other. And suddenly some people come along who think we're smarter than the people who built this thing. We're going to tweak it by going to the core of the organization and changing its essence. And that's what I want to talk about today. And I want to talk about how other people have done this and how they create case studies that people will study for decades about the best way to destroy a fabulous organization. So that's what we're going to talk about today.

Pat, since you're talking about that example, I wonder if you could maybe guess or maybe, you know, why is that? What is it that. Why is it that a group would want to do that? Why would somebody want to come in and take the heart? It's interesting that Southwest sort of known for their heart. Their symbol is Luv. To take the heart out of. Why would they want to do that?

You know, I think it's either it must be one or the other of these two things or a combination. It's ignorance. They just don't understand that the culture of Southwest Airlines, and I don't mean that in an esoteric way, that's what made it great. That's what attracted customers and employees and leaders. Or it's arrogance, which is like, I know better. It might even be. It might be a little bit of envy. Like, yeah, they think they're smart. I'm gonna show them that I could do it better than they do, which would be fine if you wanted to start an upstart airline and challenge them. And people have tried to do that, and they haven't really been successful, but to go in and say, I'm gonna take that airline and. And change it from the inside out. So I don't know if it's ignorance, arrogance, envy. All I know, it's not wisdom. It's not wisdom because the people that want to do this aren't acknowledging what Makes that airline great. They think, oh, we'll change the price structure, we'll change the fees, we'll change this and we'll change that and we'll make a little bit more money for shareholders. And it's like you are going to throw the baby right out with the bathwater.

In some ways, Pat, as you're describing that, I'm thinking like, this is why it's so critically important for companies to articulate the answers to these questions. Questions because, because there are some companies out there where the, the founder has articulated that internally. This is why they started the company to begin with. And they, they sort of know the spirit, the heart of the organization. And then their job as it grows is to sort of codify that in the DNA of, of all the people in that organization. And so even answering the question, Pat, when you said ignorance, it's like if they're coming in and they're unaware of that, that is the, the, the, the lifeblood of the organization. And they're just changed. They think they're just tweaking the dial somewhere when, in, when in actuality they're taking the heart out. So, so they, so in one way we're saying, like, hey, it's important for us to articulate these, to have answers to that question. And I will say this very often in consulting engagements, when they've lost their way, when we've engaged a leadership team that is like we're helping answer that question, we will say, well, why did, why did this get started in the first place? To try to go back to the origin of the company? Because maybe there's been a generation or a turnover of the leadership or somebody has moved on. And that is so important because if you, you, if you can't articulate why it was started in the first place, it's hard to even understand where you're headed from from that point on.

Yeah, you know, it's funny and you look at Southwest Airlines, the reason why they got started, it really came down to, like, democracy. That Herb Kelleher was like, how come poor people or small businesses can't take a flight to go to their aunt's funeral or go visit a customer? He said, I think everybody should be able to do this. It was largely expensive and it was for the elites and it was very formal. And he said, let's create intra city, not inner city, but intra city mass transit. And we joke about it. It's like, yeah, it's like having a bus. And so for years it was like, so many people go Places go on vacations because they can afford to. It's affordable. There's not this elitism to it. And that's how their flight attendants were, that's how their executives are. That's what it's like to fly there. And we all know what we're getting. And the world needed that. And it still does. But if you don't understand that, the reason why they started and the reason why the world still needs it, then you're going to toss that out in the hope of efficiency improvements or, or incremental improvements in the stock price from quarter to quarter. And it's like you might as well just shut it down and start a whole new company.

It's interesting. You know, really great companies that have a really clear heart. Your customers often know what that heart is. They could describe what that culture is. They could describe the heart of the organization. Any of us. Southwest is such a great example because for years any of us would have said, oh, this is what makes them stand out and be different. I'm wondering, and again, I like making you asking you a hypothetical question you may know. I actually know the answer is, do you think that they're trying to change that mission from democratizing travel or do you think that they think they can have their cake and eat it too? Now, we can still keep that mission, but we'll just cheat it a little bit. We'll just find a way to make some more money and try to have a second mission.

Well, I think when people do this, they usually give lip service to the heart of it. I honestly believe. And there's so many people like this. And we talk about the difference between organizational health and being smart, you know, And I think the world is full of people that go, yeah, yeah, yeah, that culture thing is important, but. But really what it comes down to is this. And people will say, well, Southwest is successful, okay? They have the culture thing that's soft and touchy feely, but it's the fuel hedge or it's the. It's this strategic anchor that they had. And what it is, it's. They just don't understand that you can't just still advertise something. It's about how you go about hiring executives. It's how you treat people when you onboard them. It's about how you make decisions. The culture is embedded in the way you get things done. And I was involved in another organization that had been very successful. It had a clear heart. And some board members came in and decided, hey, you know something, we think we can make it better. And the people in the organization, okay, but we need a couple things. They're like, no, no, no, no, no. We're going to tear this thing down and rebuild. We're going to. We're going to turn it into a more efficient organization. And the people that built it were like, but that's not what it's about. And we're all for being more efficient, but if we think efficiency is what's going to drive success, you're not understanding why we started this. You're not understanding our values. And I think people are like, no, no, no, we know better. And then one after another, the people who built the organization leave, and it's a shell of an organization, and the board members are trying to justify why they did it and they're destroying it. And so that's why it's so important that we understand what the heart of an organization is and that the body cannot live without that heart.

I'll go back to something you said at the beginning, Pat, because you mentioned this is part of the six critical questions. The first two, I've heard you say many times in this way, like, if you change the first two questions, which are why we exist and how we behave, you're refounding the company, whether. And I think what you're, you know. The second two you say, which are what do we do and how will we succeed? Those can change if the market needs it to change. Right. They don't change as often, but they do. They can change depending on market conditions. And then finally, what's most important and who does what. Those change pretty regularly, you know, And I think it's interesting, companies so often are so used to changing some of those middle two questions, the what do we do and how will we succeed? And they don't realize that, you know, I don't know a better analogy, but when God said, like, eat all the fruit in the garden, but not that tree, it's like, don't touch that one. You know, like, there's all these other things we can play with to try to increase our success as an organization, but there's some core ones that if you start to tweak the dials, it is refounding the company. And some of that refounding, if you're not careful, means the demise of it first.

And it's funny. And you go to the fruit on the tree and it's pride and arrogance that goes, no, I can. Maybe that's exactly what I want. Then maybe I think I can prove that I can that I can violate the culture, but we're going to make more money, and I'll show them, you know, And I think sometimes success attracts, like, you wonder, like, these investors. Like, go find a fledgling airline and try this out.

Yeah.

But they're like, oh, no, we're going to ride the backs up. We're going to jump on the back of all the success. 50 years of this, and we're going to show them that we're smart enough to tweak it and make it better. And they're not understanding what it took to build the foundation and the fundamentals. And you're right, Cody. I love looking at, like, strategy. That's why when Southwest stopped serving peanuts, like, my kids have peanut allergies, and people are like, oh, well, if you're not gonna serve peanuts, they're like, that's terrible. It's like, no, that's an ancillary thing. Painful though it may be, even changing the boarding process might be the right thing to do. Who knows? But if you're doing any of those things and it's not serving the reason you started it and the culture that you've built, you are selling your soul. And once you sell your soul, it's a lot harder to get it back than holding onto it.

That's so true, Pat. So what is your advice to Southwest, then? I mean, that's a big question. What would you say to them?

Well, here's the bad thing about public companies. And when you're an airline, you kind of have to be, because the capital requirements and everything else. But I always say when people go public, it's like, my condolences, because you've lost your ability to influence us. And for years, Southwest, through their allegiance to their culture and their performance, was able to be a public company that was largely protected from that. But finally, somebody is daring to try to break through. And so it's not even in South. I think what Southwest needs to do is go to their investors, go to their shareholders, and say, you don't understand what you're about to do. And if you really think that the ROI of selling our soul is worth discarding 50 years of culture building, then please understand what the havoc you're about to wreak. I mean, they're going to need to appeal to people, to the wisdom of not throwing that baby out with the bathwater, because once the baby's gone, it's gone. But the CEO. And so I think it's going to be a plea to wisdom among the people who can make this decision.

We did an episode, I don't know, in the last six months about smelling your customers. And it makes me think that maybe part of what this board is failing to do is be close to their customers. That your customers are sort of the lived and breathed mission. Right. And when you get far away from your mission, it's easier to start to not believe your mission. And what I'm thinking about is the ripple effects when other companies have done this, when they have distanced themselves from their mission because they think they'll make money. It almost always the opposite happens because you make money from customers and customers have an experience and they buy in to this way of being an airline. That's part of why they have been so loyal. Is this investment. And yes, this is what I love and believe in.

Yeah, you're really underestimating why people are loyal to you. And it's not something you can put on a spreadsheet. That's why I remember when I took accounting, I couldn't stand accounting. But there was this thing on the, on the balance sheet that was called goodwill. And it's like, what is goodwill worth? You know, and it's like that's the, the loyalty of your customers and their connection to your culture. You know, I would. There's another example, because this is. There's so many companies that have done this. I worked for, I won't say the name of it, but I worked for a software company once and it was the number two player in the industry. And there was a big, big company that was number one. They were the dominant company. And they were not known to love on their customers. They kind of, they were a sales and marketing machine. And so they were out there selling and pushing things and cramming and frankly getting customers to buy things that they didn't need. And they were always making their number. And they were the darling of Wall street, but they weren't a great company to either work for or to be a customer of, to be frank. And so there was a second company who was actually really into their customers. And the founders were like, no, we want to do the right things and we would rather miss our number by a little bit and treat our customers well and know they're going to buy the same amount or more after that. We are going to do things our customers. And the loyalty of their customers was great. The people that worked there loved that they didn't have to work for the bigger company. And they were, they became very successful. But what they did is they started hiring executives who didn't come along with that DNA and who didn't understand it, and they started to go, well, maybe we can hire this executive or that executive and they'll help us do even better. And eventually those executives, you know what they started to do, and it happens all the time. They started emulating the number one player in the market, and they took for granted the heart of that company. That company is not a player today. People don't even talk about it. The number one is still there because they know who they are. But this company lost its soul, and again, they've never been able to get it back. But what happens is they take for granted the cultural, the core, the heart, the baby, if, whatever analogy you want to use. And they started thinking, we can be smart enough to. To do better without those core things. And it never works that way.

I think too bad that's so common when you think about that. I've seen it happen in professional sports where a head coach will bring their entire, you know, their offensive coordinator, their defensive coordinator, and they think, oh, all we have to do is implement. You know, we knew how to do it at this other team that we ran, so let's just do the same thing here. And I think that happens so often. There was a company that I wouldn't even say privilege of working with, but the experience of working with, where they tried to roll up a couple smaller companies into one and they hired the best CTO person that they could think of and this CEO who had formerly taken another company public. And I was in the room watching the head, the. The previous heads of the companies advocate for this very thing, like you're ripping the heart out of this organization. Not in those words, but they were saying, like, you're, you're changing it in a way that is actually going to frustrate just not even our customers, but the people that work here. And they thought, well, we have the technical expertise like we have. We have this rock star cast of executives that's going to figure it out, and they still have it. And I think that it was. It was this in a microcosm, watching the founders of these other organizations say, no, you're ripping the heart out. You can't do that. And even in the midst of kind of pleading for that, the executive's thinking, well, we're smart enough to get this done.

Exactly. And again, there's some combination of ignorance and arrogance that's involved in that, and we're all susceptible to those things, but we need people around us to go, whoa, whoa, whoa. I think in the world of sports, I think about a team called the Miami Heat. And what I love about the Miami Heat, these teams now have a million different uniforms and different floors that they put down when they play. But one of them Miami Heat secondary slogans is Heat culture. And Eric Spoelstra is the coach there. And yes, we know him, but we can't take credit for this, but we've worked with him a little bit. He lives for culture, he knows. And Pat Riley is the general manager and the president of the organization and he's all about the culture of the organization too. And Eric Spoelstra has been through three or four different waves of new players coming in and they always overperform. And it's because they understand that he helped build that. They're going to stick with that. They can change their offensive strategy, they can bring in different players and all that, but what they're not going to do is violate the organization's culture, which is why this is a team that never just falls off and does terrible because they know who they are. And as Jim Collins used to say, preserve the core and innovate around all the rest. But so many places destroy the core thinking it is going to be a short term game.

We're about to the kickoff of the NFL season. When we're recording this, I'm thinking about another team which is the Lions, which just have this work hard culture that their coach Dan Campbell has initiated. And here's what's going to happen is we're good halfway through the season and there will be sports commentators talking about teams that are underperforming and they will say they just don't know who they are, they don't have an identity on offense, they haven't figured out who their team is. So Pat, what advice would you have about figuring that out? You talked a little bit ago, Cody, about think about the founder's original vision. What else would you do if you are unclear about why your organization exists? What would you do to get that clarity?

Oh, you know what? Something just occurred to me and that is you have to remind people that the healthiest of organizations is going to go through challenges. And the reason why the Lions have been so bad for so many years because they cycle through coaches like underwear. And finally they have this coach and a culture and they're building something there. And if they have a bad year because you know people get injured or things happen and if they go, oh, we can't tolerate that, we're going to swap out that coach again, then it's only going to continue. And Southwest Airline has had the most amazing run of success financially, culturally, everything else. And yeah, they've hit a few speed bumps. And the idea is this. Who does not hit speed bumps? They're not hemorrhaging right now, by the way. It's not horrible there at all. They need to correct some things, but the last thing they need to do is go take out the heart. We think we can do something smarter. This will go down in history. This will be one of those case studies. Thirty years from now, people are going to be saying, can you believe maybe the people that are engineering this? I would like to say to them, know that you are going to be the subject of a case study for dismantling something that needed patience and some external tweaks and a recommitment to the core. If anything, what they need to be doing now is going back and recommitting to the core to get healthy. So I think what I would say is this to any organizational leader, if you think you're not going to have a downturn, then you are probably going to panic when it happens. And the Miami Heat may have a bad year, one year, but they're not going to throw the baby out. I think that's what I would say. All right, I think that's the end of our podcast today.

Pat, you have the unpaid ad today.

The unpaid ad. Did we ever figure out what the unpaid ad was going to be? Okay, so I'm going to say that the unpaid ad is for donuts. And I know we try to. I mean, I just. There's all these innovations in food and in wonderful things, but let me tell you something. I've still. Nobody's perfected the donut. More on today. I was coming into the office and I stopped by Dunkin Donuts. Frankly, I'm just going to tell you this. There's all different kinds of donut places, but just the donut itself. I mean, the worst donut in the world is pretty darn good.

That's true.

You know, it really is true. And we have different kinds. But you walk into a donut shop and nobody goes, yeah, let's get out of here. I don't like this place. You are going to find wonderful things. So I'm going to say I'm pro donut. I think that we need to go back to the.

What kind of donut did you get this morning?

Well, for me, it was a coconut iced coconut donut. I'm a. I love all things coconut. I found that most people either love or hate coconut.

Yeah. The worst donut in the world is the maple bar.

Disagree.

Oh, I love the maple bar.

Not a fan.

Yeah.

I like going to our local donut place and getting a dozen donuts and then cutting them into fourths and then wondering where they all went.

That's what I like to do.

And then go. I didn't actually have a whole one. I just had quarters of it. Now, here's the new thing about donuts I think worth talking about is. Okay, Krispy Kreme. Okay, I love Krispy Kreme. I do. I do. But it's different. I mean, I could shove in eight Krispy Kreme doughnuts before I know what's going on, and then I'm sick for the rest of the day. Whereas with regular donuts, I find after two, I'm pretty full. But Krispy Kreme, I mean, if you ever want to do an eating contest and you really wanted to win, I would go with Krispy Kreme because I.

Could just keep glazed air. Really?

It's just glazed air.

Yeah.

Hey, and that glaze is fantastic. All right, thanks for joining us. Go out and get yourself a donut. And remember that the heart of your organization needs to be preserved. It's what makes an organization an organization. Thanks for joining us. We'll talk to you next time on at the Table. God bless.