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Emerald Article: From beast to beauty: The culture makeover at Walt Disney

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To cite this document: (2007),"From beast to beauty: The culture makeover at Walt Disney", Strategic Direction, Vol. 23 Iss: 9 pp. 5 - 8 Permanent link to this document: http://dx.doi.org/10.1108/02580540710779681 Downloaded on: 30-05-2012 References: This document contains references to 3 other documents To copy this document: permissions@emeraldinsight.com This document has been downloaded 4112 times since 2007. *

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From beast to beauty

The culture makeover at Walt Disney

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words.

ack in the late 1800s, John Abbott said that every mans ability may be strengthened or increased by culture. Well over a century may have passed since then, but time has not dulled the signicance of the former Canadian prime ministers

Disneys world of conict and harmony

Just ask the folks at Walt Disney. Mere mention of the entertainment giants name invariably conjures up memories of lovable characters and unparalleled fun for the young and not so young alike. At the company itself, however, fun seemed no longer part of the equation. And the reason for this? The prohibitive culture that soured boardroom relations. Under autocratic former CEO Michael Eisner, control rather than collaboration was the norm and unit heads became afraid or unable to make decisions. With Disney vying for a share of the digital market, the timing of the upheaval could hardly have been worse. Talk about pressing the self-destruct button. Fortunately, new chief executive Bob Iger is a completely different animal to Eisner and immediately set out to restore harmony. Achieving this involved transforming the culture almost beyond recognition. Unlike his predecessor, Iger:
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rules by consensus; shows faith in his subordinates; and is more willing to keep a low prole and let others take the plaudits.

With Hollywood awash with massive egos jostling unashamedly for wealth and power, Iger provides a breath of fresh air. His executives probably think so, too. No longer shackled by central control, key players in the organization now enjoy greater freedom to call the shots. And while Eisner overtly pooh-poohed any ideas he did not like, Iger values and encourages the contributions of others. Consequently, during weekly meetings the dialogue no longer ows just one way. And then there are the little things that often make all the difference. The CEO, for example:
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visits the rank and le to show them that their efforts are appreciated; and has made his ofce a warmer and more welcoming place.

Trivial gestures to some, but the effect on morale can be priceless. But perhaps Igers most signicant attribute is the trust he places in his people to get the job done. In contrast, Eisner cramped the style of others by insisting on being involved in anything and everything. No wonder Disney had gained a reputation for being slow to react.

DOI 10.1108/02580540710779681

VOL. 23 NO. 9 2007, pp. 5-8, Q Emerald Group Publishing Limited, ISSN 0258-0543

STRATEGIC DIRECTION

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 At the company itself, however, fun seemed no longer part of the equation.

Not any more. When something is feasible, Iger tells his people to go for it and he will often only get involved when it is absolutely necessary. Igers back seat style of leadership has allowed:
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scriptwriters more freedom; the studio chief greater decision-making power; and the Pixar animation team almost a free rein.

Given that the unit makes around a third of studio prots, Igers decision to remain in the wings is even more remarkable. But thanks to mentor Thomas Murphy such actions are second nature to the former TV weatherman. Iger rst encountered Murphy and his belief in encouraging talented youngsters to experiment when he joined ABC sports in 1974. This inuence has barely diminished since. Iger sanctions risk taking and believes that people can learn valuable lessons when things go pear shaped. A prime illustration of this philosophy occurred when an ESPN branded phone relaying sports content and results proved a costly op. Who did the CEO rebuke for this disaster? No one. Relaxing control invariably has its drawbacks and this is apparent at Disney. Take Pixar, for instance. The unit seems hell bent on enjoying its newfound freedom even if it means making decisions that would ordinarily not be approved. One example occurred when the launch of a DVD was delayed, even though a toy promotion had been arranged to coincide with the original release. Marketing opportunities are likewise affected by Pixars reluctance to develop sequels. The animations team prides itself on quality. But being perfectionist comes at a price because output is usually restricted to one movie per year. Coaxing more from Pixar is therefore one of the challenges facing Iger as he strives to continue Disneys forward momentum. This comes in addition to completing a revamp of the Paris and Hong Kong theme parks and sustaining ABCs revival. Since his elevation to the hot seat, the CEO has unied the organization, boosted income and seen the stock price soar. In typically modest fashion, however, Iger credits his predecessor for putting many of the foundations in place while refusing to blame him for the discord. Others may be less charitable.

Janus: the cost of recklessness

If Disneys culture had the power to disrupt, then the ethos at Janus functioned like the proverbial time-bomb. During the 1990s, the fund house adopted a gung-ho mentality towards investing and placed few nancial restrictions when chasing what it believed was the next big growth stock. It seems that no one knew the denition of restraint, let alone how to exercise it. With activities largely centering on telecommunications and technology, Janus was also guilty of putting too many eggs in too few baskets. But the all or nothing approach initially worked wonders and investors ocked to get in on the act. Then the dot.com crash arrived and Janus paid a hefty price for its rashness. Assets and reputation were both left in tatters. From boasting a 47 percent total return in 1999, the organization endured three years of substantial loss and ranked among the worst equity performers over a six-year period. The stock price plunged accordingly from $54 in 2000 to just $9 two years later. And if all that was not bad enough, the company had to pay out $225 million for indulging in some dodgy business practices.

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Fortunately, things have now changed. Most of the old guard has ed the nest and the cavalier approach has disappeared along with them. Thanks largely to new CEO Gary Black, a welcome sobriety has taken its place. Black became chief investment ofcer in 2004 and landed the top job two years later. Since then the culture at Janus has altered dramatically. The company has:
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introduced comprehensive risk management policies that were virtually non-existent before (choices are now scrutinized closely and managers have to justify any suspect decisions); almost doubled its number of analysts, while demanding that most new recruits have previous experience; signicantly increased the amount of stocks covered and the number in the non-US category; rened its remuneration schemes (the company now measures performance over a longer term); and started to sell funds through brokers and nancial advisors to provide a valuable link between the company and its clients.

Janus now diffuses its funds across a diverse range of sectors, while similarly reducing its holdings in individual companies. Spreading the investment clearly makes sense, not least because the risk is spread, too. Black insists that the company does its homework before making a move. Research is part of company tradition and the CEO has often demonstrated his own prowess in this area. Consequently, Janus people now grill customers and suppliers of any target organization and sometimes even try out the products themselves. It goes without saying that any investment has to be at the right price. The culture transformation has halted the decline at Janus. Results have been steady rather than spectacular and the stock has recovered slightly as a result. All Black has to do now is convince investors that the foundations are in place for a more sustained recovery.

Why Siemens resists change

But its difcult to please everyone, as Klaus Kleinfeld will surely testify. The Siemens CEO is scheduled to meet demanding internal targets just a couple of years after taking the helm at the giant electronics and engineering company. Sales and prot growth is higher than at General Electric (GE), while the organization is also making a bigger splash than its US rival within developing markets like India. With stocks up 26 percent, it is little wonder that many investors are delighted. Unfortunately, those within the Munich-based organization fail to share the excitement and have instead expressed their discontent as the CEO has repositioned Siemens as global leader in the provision of power plants, medical equipments and infrastructures. According to Kleinfeld, this has also left the company perfectly situated to exploit opportunities arising from a global shift that will see developing nations becoming wealthier. So why the disapproval? Because the German workforce opposes globalization and their chiefs adoption of what they see as uncaring US-style management practices he witnessed

When something is feasible, Iger tells his people to go for it and he will often only get involved when it is absolutely necessary.

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at rst hand during a three year stint fronting Siemens operations in the country. Such practices have led to him demanding:
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speedier decisions; greater accountability; and that the company delivers on its promises.

The CEO models himself on Jack Welch, so upping the stakes comes naturally. Kleinfeld leads by example and regularly demonstrates levels of energy and commitment characteristic of the legendary GE leader. In Kleinfelds eyes, being technologically brilliant does not compensate for the inadequacies elsewhere that have learned the company a reputation for sluggishness and restricted overall prot margins. However, implementing change is not easy within a sprawling company whose major business units have separate boards and unique cultures. But the CEO has shown himself willing to make harsh decisions even at the cost of being labeled impatient and demanding. He:
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broke up one unprotable division within a matter of weeks, transferring some parts and shedding others; and sold off communications businesses even though the work was part of company heritage.

There is clearly little room for sentiment where Kleinfeld is concerned. In a country strong on unions and worker solidarity, the resistance to change is hardly surprising. But this is not the CEOs only concern. The organization is caught up in a bribes scandal and Kleinfeld has attracted criticism for his handling of the matter, despite the fact he is not personally implicated. Some shareholders have even taken the unprecedented step of tabling a motion to withhold approval of the companys management board.

Comment
The review is based upon: Siemens culture clash by Jack Ewing, How Bob Iger unchained Disney by Ronald Grover and Janus sobers up by Michael Maiello. The rst piece details how the Siemens CEO is striving to reshape the culture at the German organization. The author describes the changes imposed and how this has helped improve performance. He also points out the level of workforce opposition and the unease that has ensued. This informative article contains many important implications, particularly when change leads to a conict with tradition. Grover provides an account of the culture change that has occurred since Bob Iger became chief executive at the Disney organization. The author compares the CEO with his predecessor and details how subordinates now enjoy greater decision-making power. Another valuable piece that provides signicant insight for any practitioner. The nal article reveals how the prevailing culture contributed to the reckless approach that once typied Janus. Maiello details the companys rise and fall and how the new CEO has reshaped the culture to bring stability to the organization. Once again, the article perfectly illustrates the relationship between corporate culture and performance.

Keywords: Organizational culture, Leadership, Management styles

References
Ewing, J. (2007), Siemens culture clash, Business Week, No. 4019, January 29, pp. 42-6. Grover, R. (2007), How Bob Iger unchained Disney, Business Week, No. 4020, February 5, pp. 74-9. Maiello, M. (2007), Janus sobers up, Forbes, Vol. 179 No. 2, pp. 81-4.

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