Tight times a test for rah-rah firms

High-loyalty companies work hard to build a familial culture. It can be tough to maintain.

On a hot, muggy, summer night, more than 100 buses pull up in front of Radio City Music Hall. Thousands of revelers in red boas, sequined hats, and flashing bow ties gather outside the theater.

With their party horns and shrieks, the crowd looks and sounds as if it's gearing up for a wild New Year's Eve celebration - about six months too early.

In fact, this is a company party: Commerce Bancorp's Fifth Annual WOW! Awards Ceremony. And the employees seem unanimously enthusiastic about their jobs.

Commerce Bank is among many companies trying to foster a high-loyalty, employee-friendly culture. Working for one of these firms can be a heady, fulfilling experience.

But before you join such an organization, know the pitfalls, corporate experts warn. Such cultures are difficult to maintain. Corporate loyalty can blind workers to corporate misdeeds à la Enron.

And if things go wrong, even for reasons outside the company's control, the backlash from the workforce can be enormous.

That has made corporate-culture building a complicated - but often effective - undertaking.

"It's the oldest trick in the hills, and it works," says Robert Sutton, professor of organizational behavior at Stanford University's graduate business school in California.

Not surprisingly, these cultures are particularly evident in family businesses and direct-sales organizations, says Nicole Biggart, dean of the management school at the University of California at Davis.

Organizations such as Mary Kay and Amway don't manage with rules and regulations and hierarchy. Instead, they foster an emotional and social commitment to the organization, she adds. "That commitment keeps people working and attached to the organization."

Some larger companies, such as Microsoft, General Motors, and Marriott International, also have excelled at developing "strong-pride-builder cultures," says Jon Katzenbach, senior partner at Katzenbach Partners, a strategic and organizational consulting firm in New York.

When it works, benefits flow both to employee and employer. For workers, the rewards extend beyond their earnings.

"Money doesn't motivate," Mr. Katzenbach says. Instead, personal connections and the pride employees feel about their jobs power their loyalty.

That pride, he says, mirrors how a parent's praise might feel.

"Your mom probably didn't reward you with money," he says, "but she made you feel proud when you did get better grades."

When employees believe their employer has their interests at heart and when they're consistently rewarded for small successes, "that's a very powerful motivator for many people who don't get that praise or recognition in their everyday lives," says Dr. Biggart. "People still want to feel important and that they're part of something useful."

Companies also benefit from these strong cultures. For example, employees at organizations with strong cultures typically require little supervision, says Dr. Sutton of Stanford. At a traditional plant, an employee's job is "do your job and fool the boss," he says.

But in one of these more culturally controlled organizations, he says, "peers watch one another and keep each other in line." The net result is that employees will either do what's right, or they'll leave.

Employee turnover also tends to go down. People don't leave companies where there's trust and passion, Katzenbach says.

The average tenure at Southwest Airlines, for example, stands at about seven years, according to a company spokesperson.

There can be such a thing as too much of a good thing, however. In the case of Enron, the company's pride had negative effects, says Katzenbach. Employees began to take pride in the money they earned as a company and as individuals. That pride blinded them to the company's ethical behavior. "More important, it got people into a self-serving mode," he says.

High-loyalty cultures also tend to be cyclical, says Shoshana Zuboff, coauthor of "The Support Economy: Why Corporations are Failing Individuals and the Next Episode of Capitalism."

They're particularly difficult to achieve in publicly held companies responsible to Wall Street - and they're difficult to sustain, she says.

For one thing, they depend on the personality of the leadership group. When a leader leaves or is forced out of the company, the culture can be jeopardized. These cultures also rely on incentives that tie employees into the performance of the company, such as stock. When an industry falters and stock prices plummet, the culture may also suffer.

People's Express airline was one of the early companies to use its family culture and loyalty to compete, Ms. Zuboff points out. Initially, the culture proved healthy and productive. It contributed to the employees' emotional well-being and to the company's performance and profitability. But "the culture hit a wall when the growth hit a wall," she adds.

Problems can also arise when incentives, which are linked to stock and stock prices, fall and employees are asked to work longer hours, Zuboff says. She cites Continental, United, and Delta, all of which "ricocheted from one end of the pendulum to the other."

Consistently high-performing companies continue to recognize employees through good and bad times, says Ann Rhoades, president of People Ink, a human-resources consulting company in Scottsdale, Ariz. That's how they survive, she says, "and probably exceed expectations" in difficult times.

During Desert Storm, for example, Southwest continued its recognition programs for employees. The company remained committed to motivating its employees, she says, so it could maintain its customer base and keep the customers happy. "Employees become part of the solution rather than part of the problem," she says.

Many companies cut training programs and staff during crisis periods, however, which is shortsighted, says Ms. Rhoades, because it tends to trigger a vicious cycle: Service declines and customers become dissatisfied, making the firm a less enjoyable place to work and hurting the quality of service even more.

At Commerce, the bank's philosophy is "to grow the company by servicing the sneakers off the customers," according to Dennis DiFlorio, executive vice president and chief retail officer. [Editor's note: The original version of this story misreported a bank officer's name and gave him a correct, but incomplete, title.]

With its WOW! department, WOW! patrol, WOW! van and WOW! Awards at Radio City, the bank is committed to recognizing - and rewarding - employees for providing exceptional customer service. Rather than penalize employees for making mistakes, Commerce attempts to "catch" people for doing things right.

"When you're in the service industry, you can't service your employees enough," says Chas Hermann, senior vice president of marketing. "The tone you send to the employee is transmitted to the customer."

But cultivating this culture isn't easy. "You can't convert it, acquire it, or wave a magic wand and create it," says Mr. DiFlorio. "They just don't sell that kind of pixie dust to make people become service-oriented. This is a result of a lot of people with a lot of passion and energy to get it to where it is."

For a company like Commerce, fostering a we-are-family sort of culture distinguishes it from larger banks such as Citibank and Morgan Stanley, Biggart comments. "It becomes a way of saying: 'We're different.' "