Culture Beginnings Through Founder/Leader Actions: Fred Smithfield Enterprises

Smithfield built a chain of financial service organizations using sophisti­cated financial analysis techniques in an area of the country where insur­ance companies, mutual funds, and banks were only beginning to use such techniques. He was the conceptualizer and salesman, but once he had the idea for a new kind of service organization, he got others to invest in, build, and manage it.

Smithfield believed that he should put only a very small amount of his own money into each enterprise because if he could not convince others to put up money, maybe there was something wrong with the idea. He made the initial assumption that he did not know enough about the market to gamble with his own money, and he reinforced this assumption publicly by telling a story about the one enterprise in which he had failed. He had opened a retail store in a Midwestern city to sell ocean fish because he loved it. He assumed that others felt as he did, trusted his own judgment about what the market would want, and failed. Had he tried to get many others to invest in the enterprise, he would have learned that his own tastes were not necessarily a good predictor of what others would want.

Because Smithfield saw himself as a creative conceptualizer but not as a manager, he not only kept his financial investment minimal but also did not get very personally involved with his enterprises. After he put together the package, he found people whom he could trust to manage the new organization. These were usually people like himself who were fairly open in their approach to business and not too concerned with imposing their own assumptions about how things should be done.

We can infer that Smithfield ’s assumptions about concrete goals, the best means to achieve them, how to measure results, and how to repair things when they were going wrong were essentially pragmatic. Whereas Sam Steinberg had a strong need to be involved in everything, Smithfield seemed to lose interest after the new organization was on its feet and functioning. His theory seemed to be to have a clear concept of the basic mission, test it by selling it to the investors, bring in good people who understand what the mission is, and then leave them alone to implement and run the organization, using only financial criteria as ultimate perfor­mance measures.

If Smithfield had assumptions about how an organization should be run internally, he kept them to himself. The cultures that each of his enterprises developed therefore had more to do with the assumptions of the people he brought in to manage them. As it turned out, those assumptions varied a good deal. And if we analyze Smithfield Enterprises as a total organiza­tion, we would find little evidence of a corporate culture because there was no group that had a shared history and shared learning experiences. But each of the separate enterprises would have a culture that derived from the beliefs, values, and assumptions of their Smithfield-appointed managers.

This brief case illustrates that there is nothing automatic about founders imposing themselves on their organizations. It depends on their personal needs to externalize their various assumptions. For Smithfield, the ultimate personal validation lay in having each of his enterprises become financially successful and in his ability to continue to form creative new ones. His creative needs were such that after a decade or so of founding financial service organizations, he turned his attention to real estate ventures, then became a lobbyist on behalf of an environmental organization, tried his hand at politics for a while, and then went back into business, first with an oil company and later with a diamond mining company. Eventually, he became interested in teaching, and ended up at a Midwestern business school developing a curriculum on entrepreneurship!

Source: Schein Edgar H. (2010), Organizational Culture and Leadership, Jossey-Bass; 4th edition.

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