How Culture Rescued a Company during a Time of Crisis

Neenan Archistruction prides itself as an industry disruptor when it comes to developing, designing, and building physical structures. It even coined and trademarked the term “Archistruction” to characterize the completeness of its approach to managing projects from design through to construction. David Neenan purchased a small construction franchise company in 1973 with the vision of creating a great culture and a great reputation for ethical business practices. He transformed his vision into a successful company that grew in stature. In 1995, Neenan Archistruction was awarded the Colorado Business of the Year, and in 2013 it received the American Business Ethics Award. Considering the construction industry’s overall reputation for questionable ethics, the latter award was quite an achievement.

David Shigekane succeeded David Neenan as CEO in 2014 with a vision of his own. Aware that the expectations of Neenan senior leadership were not totally aligned with those of its employees, he took on the role of change agent, dedicating his leadership to building a culture that promoted self-awareness, self-improvement, and teamwork. Unknown to Shigekane at the time, this culture would pay dividends in managing a challenge that occurred shortly after he became CEO.

A “black swan event” is a term used to define a rare, unpredictable event with catastrophic consequences. This is indeed what faced Shigekane when he learned that many of the buildings Neenan Archistruction had built were structurally unsound. The company identified the problem as being related to the work of a single structural engineer who had used a substandard structural design on over 100 different building projects over several years. There was a public outcry and tremendous damage to the reputation of the company, which had formerly been recognized as one of the best. Facing both public humiliation and financial ruin, the company had a decision to make. The easy choice would have been to declare bankruptcy and close the company. This was clearly an option, as the financial damage far exceeded the company’s resources.

David Neenan, who was majority owner and chairman of the board, took a courageous stand. He made a commitment that the company would fix each building, whatever the cost, and reclaim its reputation as a responsible, ethical company. Just how the company would do this was up to Shigekane and his executive leadership team.

With no new revenue expected until the company fixed over 100 buildings, layoffs were inevitable. The company trimmed its staff from over 200 employees to just 68. Everyone who remained took a pay cut. The company used all its cash reserves to cover the expenses of fixing its flawed buildings. Still, with no new business coming in, they quickly ran out of money. Faced with this dilemma, 50 of the 68 remaining staff invested $2 million to keep the company solvent. When asked why employees were willing to take the financial risk in the struggling company, the response was enlightening. The employees said they stayed and invested in the company because they believed in the company and that it was the right thing to do. This loyalty and resilience were a strong testimonial to the power of the company culture. It took 3 years for the company to bring over 100 buildings up to code. Employees worked nights and weekends so they would not disturb the ongoing businesses that worked in those buildings.

Not all black swan events have a happy ending. This one did. Neenan repaired and rebuilt its damaged reputation and regained its position as an admired company for its dedication and commitment to fixing its mistakes. As a result, its book of business mushroomed. In 2020, the company received the Better Business Bureau Torch Award for Ethics. It had come full circle to regain its previous reputation as an outstanding company to do business with.

The company gained many lessons from this experience. These include a best-in-class quality management program, companywide leadership training, and success metrics including employee satisfaction that continue to galvanize and reshape the company’s culture. Below are details of a few of these significant changes that resulted from the black swan experience.

The company built a quality assurance/quality control program to ensure the quality of all future projects. This is a four-step process that reviews each project at four stages:  design, pre-construction with installers, inspection, and punch-list completion. This program also reduced waste and caught mistakes before they happened, resulting in significant cost savings to Neenan and its customers.

The company reinforced its culture by creating a 2-year leadership program dedicated to making better, intentional choices. The program designed by a local leadership expert, Gloria Kelly, focuses on self-awareness as a predeterminant of behavioral change. To summarize the thinking of Shigekane, employees who are self-aware of their strengths and liabilities are better positioned to break old habits and adopt more productive behaviors that lead to teamwork and better working relationships. Shigekane attributed his commitment to this program to his parents, who were both psychologists, and his background as a liberal arts major studying pre-nineteenth century English literature. This humanistic approach to self-improvement has removed much of the drama that diverts human energy and refocuses that energy to more productive pursuits.

Neenan has created a comprehensive set of metrics to evaluate its success. These include client satisfaction, employee satisfaction, financial performance, quality of work, and safety. These metrics are carefully monitored as leading indicators to the health of the company. Regarding employee satisfaction, the company has identified the following seven indicators that it tracks on each employee: career advancement, relationship with supervisor, team dynamics, workload, compensation, training, and appreciation. The company executive team reviews employee comments on a regular basis, looking for concerns that need attention. A strong indicator of a healthy culture is how a company deals with employees who fall short of expectations due to poor attitude or performance. At Neenan, these employees are asked a simple question that applies to every employee at the company, “Who do you want to be.” If they choose to improve, the company will support them with coaching; if not, they will be asked to leave the company.

Neenan Archistruction gives us an example of the power of a company culture in guiding it through the most difficult of times. The company survived a catastrophic event because its leadership and employees believed in the company. There was no mass exodus or attempt to rationalize the reality of its crisis. Instead, it confronted its challenges with unity and emerged as a stronger company. Most importantly, it has incorporated many of the lessons learned from its black swan event into its current business strategy and culture.