Your culture is what you let slide

"And, as usual in human affairs, what determines the behavior are incentives for the decision maker." Charlie Munger said that at USC in 1994, closing a passage on why what makes sense for a manager is rarely what makes sense for the owner.

His own example was pay. Federal Express fixed a night shift that kept running late by paying people by the shift rather than by the hour. Change the arithmetic and the behaviour follows.

Take him at his word and then go further than the pay design, because most of what your team responds to was never priced at all. The largest unpriced incentive in your business is the answer to a question they ask quietly, every time: what happened last time?

Every company runs two cultures

The first is the one you wrote down. Values, a set of behaviours, a slide in the induction pack. The second is the record of what has actually been allowed to happen without comment. Only the second one governs anything, because only the second one has evidence behind it.

Nobody is reading the values page. They are watching. Watching whether the top biller can be short with the operations team and keep their desk. Whether the deadline is real for everyone or only for the people without leverage. Whether the report that arrived late in March was ever mentioned in April.

Each of those is a small decision by you, and each one sets a price. Tolerated once, a behaviour is an exception. Twice, it is a precedent. Three times and it is policy, and reversing it then means telling someone that a thing you accepted is suddenly unacceptable.

Why you tolerate it

The reasons are always sensible in the moment.

• The person is good. They bill, they ship, they hold a client. So you price their output and ignore what their conduct costs the people around them.
• You are busy. The conversation takes twenty minutes you do not have, so it moves to next week, and then it is no longer current enough to raise.
• You told yourself it is personality. It is not personality. It is a pattern, and it repeats because nothing has interrupted it.
• It is you. You cannot enforce a standard you visibly break. If you send emails at midnight and then talk about balance, the midnight email is the policy.

Where I set a standard by saying nothing

I have been an owner-operator of serviced apartments and a venue, with full profit and loss responsibility. Hospitality strips this argument bare, because your culture walks into a guest's room within hours of you setting it.

You cannot write a standard for a made bed that survives contact with a busy Tuesday. The real standard is whatever the last inspection accepted. If I walked a floor, saw a room that was almost right and said nothing because the team was under pressure, then almost right was the standard by Friday. It never drifted back on its own. Nobody voted for that change. I made it, by saying nothing.

The team were not being difficult. They were being sensible. They had watched the person who sets the standard look at the work and accept it, and that is a clearer instruction than anything written in a manual. The same mechanism runs in an office, only slower, because nobody has to sleep in the room.

Write the second column

Write down the last five things that went wrong in your business. A missed deadline, a customer complaint, a meeting someone left angry, a number that turned out to be wrong, a promise you did not keep. Next to each, write what happened afterwards. Not what you intended. What was said, by whom, and when.

Wherever the second column is blank, you have found your actual culture: a list of things your business has learned are acceptable.

Pick the one that will cost you most if it becomes permanent, and have that conversation this week. Five minutes, no ambush. Name the behaviour, name the standard, name what happens if it repeats. Then watch what you do the next time it comes up, because that is the part they are reading. Not what you said. Whether you meant it.