Culture Beginnings Through Founder/Leader Actions: Sam Steinberg

Sam Steinberg was an immigrant whose parents had started a corner grocery store in Montreal. His parents, particularly his mother, taught him some basic attitudes toward customers and helped him form the vision that he could succeed in building a successful enterprise. He assumed from the beginning that if he did things right, he would succeed and could build a major organi­zation that would bring him and his family a fortune. Ultimately, he built a large chain of supermarkets, department stores, and related businesses that became for many decades the dominant force in its market area.

Sam Steinberg was the major ideological force in his company through­out its history and continued to impose his assumptions on the company until his death in his late seventies. He assumed that his primary mission was to supply a high-quality, reliable product to customers in clean, attractive surroundings and that his customers’ needs were the primary consideration in all major decisions. There are many stories about how Sam Steinberg, as a young man operating the corner grocery store with his wife, gave custom­ers credit and thus displayed trust in them. He always took products back if there was the slightest complaint, and he kept his store absolutely spotless to inspire customer confidence in his products. Each of these attitudes later became a major policy in his chain of stores and was taught and reinforced by close personal supervision.

Sam Steinberg believed that only personal examples and close supervi­sion would ensure adequate performance by subordinates. He would show up at his stores unexpectedly, inspect even minor details, and then—by personal example, by stories of how other stores were solving the problems identified, by articulating rules, and by exhortation—would “teach” the staff what they should be doing. He often lost his temper and berated sub­ordinates who did not follow the rules or principles he had laid down. Sam Steinberg expected his store managers to be highly visible, to be very much on top of their own jobs, to supervise closely in the same way he did, to set a good example and to teach subordinates the “right way” to do things.

Most of the founding group in this company consisted of Sam Steinberg’s three brothers, but one “l ieutenant” who was not a family member was recruited early and became, in addition to the founder, the main leader and culture carrier. He shared the founder’ s basic assumptions about “vis­ible management” and set up formal systems to ensure that those principles became the basis for operating realities. After Sam Steinberg ’s death, this man became the CEO and continued to perpetuate those same manage­ment practices.

Sam Steinberg assumed that you could win in the marketplace only by being highly innovative and technically in the forefront. He always encouraged his managers to try new approaches, brought in a variety of consultants who advocated new approaches to human resource manage­ment, started selection and development programs through assessment centers long before other companies tried this approach, and traveled to conventions and other businesses where new technological innovations were displayed. This passion for innovation resulted in Steinbergs being one of the first companies in the supermarket industry to introduce the bar code technology and one of the first to use assessment centers in select­ing store managers. Steinberg was always willing to experiment to improve the business. His view of truth and reality was that you had to find them wherever you could; therefore, you must be open to your environment and never take it for granted that you have all the answers. If things worked, Sam Steinberg encouraged their adoption; if they did not, he ordered them to be dropped. He trusted only those managers who operated by assump­tions similar to his own, and he clearly had favorites to whom he delegated more authority.

Power and authority in this organization remained very centralized, in that everyone knew that Sam Steinberg or his chief lieutenant could and would override decisions made by division or other unit managers without consultation and often in a very peremptory fashion. The ultimate source of power, the voting shares of stock, were owned entirely by Sam Steinberg and his wife, so that after his death, his wife was in total control of the company.

Though he was interested in developing good managers throughout the organization, he never shared ownership through granting stock options. He paid his key managers very well, but his assumption was that ownership was strictly a family matter, to the point that he was not even willing to share stock with his chief lieutenant, close friend, and virtual co-builder of the company.

Sam Steinberg introduced several members of his own family into the firm and gave them key managerial positions. As the firm diversified, family members were made heads of divisions, often with relatively little man­agement experience. If a family member performed poorly, he would be bolstered by having a good manager introduced under him. If the opera­tion then improved, the family member would likely be given the credit. If things continued badly, the family member would be moved out, but with various face-saving excuses. Though he wanted open communication and a high level of trust among all members of the organization, he never realized that his own assumptions about the role of the family and the cor­rect way to manage were, to a large degree, in conflict with each other. He did not perceive his own conflicts and inconsistencies and hence could not understand why some of his best young managers failed to respond to his competitive incentives and even left the company. He thought he was adequately motivating them and could not see that for some of them, the political climate, the absence of stock options, and the arbitrary reward­ing of family members made their own career progress too uncertain. Sam Steinberg was perplexed and angry about much of this, blaming the young managers while holding onto his own assumptions and conflicts.

Several points should be noted about the description given thus far. By definition, something can become part of the culture only if it works in the sense of making the organization successful and reducing the anxiety of the members. Steinberg ’s assumptions about how things should be done were congruent with the kind of environment in which he operated, so he and the founding group received strong reinforcement for those assumptions.

Following Sam Steinberg’s death, the company experienced a long period of cultural turmoil because of the vacuum created by both his absence and the retirement of several other key culture carriers, but the basic philosophy of how to run stores was thoroughly embedded and was carried on by Steinberg ’s chief lieutenant. When he retired, a period of instability set in marked by the discovery that some of the managers who had been developed under Sam Steinberg were not as strong and capable as had been assumed. None of Sam Steinberg’s daughters or their spouses were able to take over the business decisively, so various other family members continued to run the company. None of them had Sam Steinberg’s business skills, so an outside person was brought in to run the company. This person predictably failed because he could not adapt to the culture and to the fam­ily. After two more failures with CEOs drawn from other companies, the family turned to a manager who had originally been with the company and had subsequently made a fortune outside the company in various real estate enterprises. This manager stabilized the business because he had more cred­ibility by virtue of his prior history and his knowledge of how to handle family members. Under his leadership, some of the original assumptions began to evolve in new directions. Eventually, the family decided to sell the company, and this manager and one of Sam Steinberg’s cousins started a company of their own, which ended up competing with Steinbergs.

One clear lesson from this example is that a culture does not survive if the main culture carriers depart and if the bulk of the members of the orga­nization are experiencing some degree of conflict because of a mixed mes­sage that emanates from the leaders during the growth period. Steinbergs had a strong culture, but Sam Steinberg’s own conflicts became embedded in that culture, creating conflict and ultimately lack of stability.

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