Putnam Investments: Rebuilding the Culture

Putnam Investments faced difficulties in 2003 when it became a target of scrutiny investigation, because the firm was involved in the issues of market timing and late trading. By then, Lawrence Lasser had been the CEO of Putnam for almost 17 years. The culture of the company was built around hierarchy, individual achievement, and aggressive, sales-driven growth . Lasser’s daily small actions did affect the culture of the company and gradually the weak culture led to the difficulties faced by the firm in 2003. One of the most representative examples is the investment philosophy under Lasser’s leadership. Lasser focused on the short-term financial returns and immediate requisition of new customers. Employees were encouraged to do whatever they could to beat the benchmark, and to sell any new fund regardless of whether it is a well-designed investment. The reward system and the weekly performance reviews generated tremendous amount of pressure on employees. Under this kind of fundamental strategy and culture, employees were tent to take higher risks to pursue short-term returns no matter whether it is ethical or in line with compliance. In addition, the “market timing” was not clearly defined by the SEC. As a result, Putnam Investment saw a rapid growth in the 1990’s, but soon the growth was reversed and the unfair trading practices were investigated.
Change of organizational culture can occur when a clear crisis presents. When Haldeman took charge of Putnam Investment, he faced crucial decisions in how the firm would work with regulators, employees, and clients . In the short-term, he had to handle the internal and external damages caused by the urgent crisis; in the long-term, he must consider the sustainable competitive capabilities of the firm in the market. His process of rebuilding the culture is Theory O type, which is based on organizational capability. This approach is geared toward building up the corporate culture: employee behaviors, attitudes,