Management falls victim to tech's Wild West culture

But when it comes to effective management, tech companies don't have a clue.

That's the message of Dr. Thomas Steding, former CEO of Metacode Technologies and a veteran Silicon Valley consultant. In three decades of work with companies, ranging from start-ups to Hewlett-Packard, Novell and Yahoo, Steding has concluded that roughly 95 percent of technology companies are "random organizations"--dens of dysfunction where doubt, fear, conflict, isolation and a mediocre status quo reign.

The only good news: The current economic downturn is likely to purge the most wicked executives and rotten office environments, making the tech sector a better place to work after the shakeout.

Steding just finished a new book, "Built on Trust: Gaining Competitive Advantage in Any Organization," with fellow consultant Arky Ciancutti. Steding sat down with CNET News.com reporter Rachel Konrad and discussed Silicon Valley cowboys, "toxic gossip," and whether the technology industry--pimpled with foosball tables and free Coke machines--will ever grow up.

What's the essence of your new book?
"Built on Trust" is about how to build a high-performance team around the concept of earned trust. The basic--and somewhat radical--notion is that you can engineer the kind of culture you want.

We make a distinction between the random organization, which is about 95 percent of the cases, and the leadership organization. The random environment is based on the eccentric personalities of the founder or founders, and it's allowed to evolve without attention to culture. And the other form is the leadership organization, where you can engineer your culture.

Draw a sketch of the stereotypically random organization for me.
A random company--and there are thousands of them in the (San Francisco) Bay Area--has a founder who is a cowboy who shoots from the hip, never admits he doesn't understand something or know something, intimidates the troops, and thinks fear is a good way to motivate people. He changes his mind without explanation, communicates only when convenient to him, and basically has a more or less imperious attitude toward his role.

Who's a real-world example of this kind of cowboy?
(Oracle founder and CEO) Larry Ellison. But there are a lot of them, and they exist at many levels of the executive ranks--not just at the top. They hire people who reinforce that approach and also are victimized by it.

Is it just me, or are there more cowboys in the tech industry than in broader Corporate America? Why?
It's not just you. I think it's grounded in the Wild West mindset, the shoot-from-the-hip mindset where younger people that don't have a lot of experience can still get into seriously high positions in management. And it's unusually true in Silicon Valley--the fast pace, the excitement, the adventure.

What's the opposite of a random organization? What's that manager like?
A leadership organization has a leader with some very different qualities. First of all, he respects the importance and value of culture and is willing to work with a team to define what those values are and then sets them down in such a way that he's held accountable to them. He creates an agreement that's bigger than anybody, including the leader. He understands the importance of living by principles because if you write down these values and put them on the wall and don't live by them, it's just another portrait of hypocrisy.

Also important is telling the truth in its entirety--respect for each other. When you have a direct communication culture, you need to counterbalance it with the notion of tact and respect because otherwise you might engender a confrontational culture, and people might beat each other up, and they can claim they were just being direct.

What's a real-world example of a leadership organization?
A number of companies seem to have more of that than others. Intel is a classic confrontational culture...but in a high-trust environment. You want to allow people to speak up, not just to say something that's safe, but to let people give out their hunches, their instincts, their half-baked ideas, their "What about this?" suggestions in a way that you can pass intelligence around freely in what we call the connected team.

I've seen scores of highfalutin mission statements and value charts at tech companies. Even Oracle's employment site says it's a place where people can "make a difference" and "collaborate with the brightest minds from countries worldwide." What part of your ideal value statement are so many companies missing?
The main idea is you create a "trust model," which is a superordinate agreement that sets down exactly how you're going to conduct business and what are the core values in the organization. Then we go further and say what values should be included in that core statement. They have to do with two key issues: closure and commitment...We encourage people to close all communications by a certain end date, and we also talk a lot about how false commitments often become a habit in an organization...

You can talk about profitability and having fun, but there are some fundamental ideas that have to be there--closure and avoiding false commitments--and so you have to understand the devastating impact of false commitments and how they lead to dramatization in the organization. If somebody told you something, and you were counting on it, and then they changed their mind, how did you feel about it, and what happened? There's always drama that follows. In other words, you have to emphasize direct communication--avoiding buzzing and toxic gossip and its pernicious effects.

Toxic gossip sounds like a heavy-metal band from high school. What is it in the business sense?
Toxic gossip is because people care about their work, but they're frustrated in trying to solve a problem and all other communication paths are blocked. So instead of going to the appropriate person who can help solve the problem, they go to a co-worker at lunch and say, "Can you believe that I'm supposed to do this?" or "Have you heard about this rumor that's flying around?" They want to talk about what's going on, even if the person they're talking to can't provide answers.

The vast majority of tech workers aren't senior executives or cowboys, yet they spend eight or 10 hours a day in a random organization. How does this employee carve out a little niche of happiness amid the toxic gossip, false commitments, and gun-slinging crossfire?
That's a great question. It's hard. The key is to live by the closure and commitment principles and only engage in direct communication. You can understand how you participate in the problem and work from there. How do you make false commitments? Do you participate in toxic gossip or buzzing or in any dysfunctional mode? Build a track record for yourself with a manager who speaks clearly and makes direct commitments. Draw boundaries around you.

For example, if you want to find out about layoffs, you go to a person who knows about the layoffs, and you ask, "Can you tell me about the layoffs?" And they hem and haw, and they say they can't talk about it. But then you ask them when they can talk about the layoffs. Would they be willing to make a commitment or promise about when they would be willing to give you that information? If they say no to that, at some point you may reach the end of your rope: It ain't going to work in this culture. But you run a series of steps that exhaust the possibility that you can make it work. And at that point, you should probably make a decision about the quality of life and where you want to work. My recommendation at that point is you run, don't walk, to someplace else.

But if 95 percent of tech companies are random organizations, your odds of running from your current random organization into another one--possibly a more toxic one--are pretty high. How do you find one of those hallowed leadership organizations?
Check out the culture before you get into it...but if every company, every environment around you is swirling with dysfunction, there really is very little you can do. That's why we created this book. We would really like to start a revolution in management thought. What we found out is that companies that are run well attract the best people, and we're serious about it being a competitive advantage that enhances team performance. Companies that have adopted this approach excel, and as a result, others have to follow. We just have to get the process started.

Lots of toxic gossip is swirling around the tech industry now because of massive layoffs, stock downturns, and revenue slumps in recent months. As the economy cools, and the tech sector gasps for breath, is the industry likely to become even more dysfunctional?
I think what's going to shake out disproportionately is the end of this grand experiment that we've been running in unbridled greed--the idea that you don't need to build long-term organizations or even a business plan. To hand over venture money to someone who's not practiced in building a team, not aware of cultures--that's building a house of cards. You pay very little attention to the long-term ideology of the business because in the long term, you're going to be laying on the beach, rich. That ran itself out in a predictable, spectacular, catastrophic collapse. That's what we're going through now, and fortunately it seems like it's at an end.