Tone at the Top
Following a session on how to build a high-performing board, a Monday plenary session at the NACD Board Leadership Conference took the discussion a level further to what that board can do. Moderated by Bob Hotz, chairman of Pep Boys, director of Universal Health Services, and senior managing director of Houlihan Lokey, the session focused on tone at the top and how the board can act as stewards of corporate culture.
The panel brought together three executives with a wide range of experiences in bolstering effective corporate cultures. As a director of Hewlett Packard and General Motors, Patricia Russo was charged with transforming cultures that had proven to be corporate liabilities. At Honest Tea, founder, president, and CEO Seth Goldman was able to establish his company’s tone from the ground-level. Dr. Ralph Sorenson, director of Whole Foods, has first-hand experience with the company’s very unique culture.
From Russo’s perspective, at companies with a dysfunctional tone, it is critical to set a culture that exemplifies what the company needs to do to get back on track and how it will do that. The board has a very important role in this process. First, the board needs to get behind the CEO and support that person in every way possible. In times of change, it is critical that the board is more active, more engaged, and even more visible in its support for the CEO. Russo also stressed the importance of clear, constructive communications. It is essential for directors to be clear about their alignment with management.
TeaEO Seth Goldman contrasted his experiences with merging Honest Tea’s culture following its acquisition by Coca-Cola. His situation was unique: For the first three years, Coca-Cola was a minority shareholder of Honest Tea, allowing the smaller company’s culture to flourish. The company was still able to experiment with innovative marketing strategies, including establishing pop-up “Honest Stores,” which sold tea for $1 per bottle based on the honor code. Today, Honest Tea has been able to maintain its original tone, while utilizing Coca-Cola’s organization to expand its reach significantly.
Sorenson praised Whole Foods for its strategy of placing employees and customers at the center of its culture. From his perspective, the CEO’s most critical job is to create a culture that is designed to bring out the best in everybody associated with that enterprise. Although he has served on 15 public company boards, Sorenson noted that he has learned more from serving on the Whole Foods board than all the other boards combined.
According to Sorenson, Whole Foods’ success starts with its tone at the top. Established by Co-CEOs John Mackey and Walter Robb, the organization is based on a culture of “shared fate,” commitment to honesty, leading by example, transparency, and an embedded fundamental respect for all team members. Autonomy and responsibility are pushed down through the organization: Team members are hired by peers not team leaders.
Although not every company can follow the Whole Foods model, Sorenson recommended its use. “It’s almost like Camelot. I’ve never seen anything like this company.”