Module 11

Implementing Strategy: Culture and Leadership

Module Outline
Building a Strategy-Supportive Corporate Culture
What is Corporate Culture? Creating Fit Between Strategy and Culture Establishing Ethical Standards and Values

Exerting Strategic Leadership

Managing by Walking Around (MBWA) Fostering a Strategy-Supportive Culture Keeping Internal Organization Innovative Dealing with Company Politics Enforcing Ethical Behavior Making Corrective Adjustments

What Makes Up a Companys Culture?

Beliefs about how business ought to be conducted Values and business principles of management How we do things around here Official policies Traditions Approaches to stockholder relationships Company politics Peer pressures Taboos and political donts Off-told stories illustrating companys values Ethical standards

Where Does Corporate Culture Come From?

Founder or nearly leader who articulated beliefs, principles, values, practices Influential individuals, work group, or division Values or vision statement rigidly adhered to Over time, these values, principles, practices are shard widely by all employees A companys culture is a product of internal social forces

Bedrock of Wal-Marts Culture

Dedicated to customer satisfaction Zealous pursuit of low costs Belief in treating employees as partners Sam Waltons legendary frugality Ritualistic Saturday morning meetings Commitment of executives to visit stores, talk to customers, and solicit and act on employee suggestions

Culture at Nordstroms
Company motto
Respond to Unreasonable Customer Requests

Motto strongly ingrained in employee behavior Out-of-the-ordinary customer requests viewed as opportunities for heroic acts Promotions based on outstanding service Salaries based entirely on commission Culture weeds out those not meeting standards and rewards those who do

Multiple Cultures Within a Company

Values, beliefs, practices vary by
Department Geographic location Division Business unit

Company subcultures can clash or not mesh well

Why Culture Matters?

A companys culture can contribute or hinder successful strategy execution Beliefs and practices of a strategy may or may not be compatible with firms culture Close match between culture and strategy adds significantly to effectiveness of strategy execution

Why Culture Matters?

A strong strategy-supportive culture
Provides system of informal rules and peer pressure Motivates people to do their best Provides structure, standards, and value system Promotes strong company identification

Job of strategy implementer

Decide of culture is or is not strategy supportive

Characteristics of Strong Culture Companies

Clear and explicit philosophy about how business will be conducted Lots of time spent communicating values and benefits Existence of creed or values statement Values and norms widely shared and deeply rooted Careful screening / selection of new employees

Characteristics of Strong Culture Companies

Legendary stories told and retold Ceremonies honoring employees exemplifying cultural norms Visible rewards for those following norms; penalties for those who dont Sincere commitment to operating company according to tradition

Characteristics of Weak Culture Companies

Many subcultures Few strong traditions Few values and beliefs widely shared by all employees No strong sense of company identity

Characteristics of Low Performance Cultures

Politicized internal environment
Autonomous fiefdoms operated by influential managers who resist change Issues resolved on basis of turf or coalitions

Hostility to change
Experimentation discouraged Managers discouraged from exercising initiative to alter status quo Avoiding risks and not screwing up more important than innovativeness Entrenched, multi layered bureaucracies

Characteristics of Low Performance Cultures

Promoting managers who understand structures, systems, and control better than vision, strategies, and culture-building
Inside-out thinking and strategies

Aversion to looking outside firm for superior practices

Insular thinking Inward-looking solutions Must-be-invented here syndrome

Hallmarks of Adaptive Cultures

Executives with strong commitment to
Timeless business principles, and Organizational stockholders

Managers and employees receptive to

Risk-taking Experimentation and innovation Changing strategies

Sense of confidence among all employees

Do whats needed to ensure long-term success Proactive in implementing workable solutions

Hallmarks of Adaptive Cultures

Executives who are
Willing to take prudent risks Quick to modify strategies and operating practices Supportive of people proposing useful change Adept at changing the right things in the right ways Genuinely concerned about well-being of all stakeholders

Importance of a Strategy-Culture Fit

Beliefs, goals, and practices underpinning a strategys success may or may not be compatible with companys culture
When they are not, culture may impede or even defeat successful implementation

Strong culture
Promote good performance when fit exists, and Hurt performance when little fit exists

Creating a Strategy-Supportive Cultural Fit

Changing culture to fit a new strategy is a tough executive challenge
Especially when prevailing culture is entrenched and unhealthy

Senior executives must personally lead efforts to create a strategy-supportive culture!

Creating a Strategy-Supportive Cultural Fit

Step 1:
Diagnose which facets of present culture are strategy-supportive and which are not

Step 2:
Talk openly and candidly about aspects of culture needing change

Step 3:
Follow talk with swift, visible action Substantive or Symbolic

Substantive Culture-Changing Actions

Benchmarking and best practices Set world-class performance targets Stake out new business positions Bring in new blood, replacing traditional managers Make major reorganizational moves Change reward structure Increase commitment to employee training Reallocate budget, downsizing and upsizing

Symbolic Culture-Changing Actions

Eliminate executive perks and emphasis frugality Require executives to spend time talking with customers and understanding their wants Alter practices identified as cultural hindrance Visible awards to honor heroes Ceremonial events to praise people and teams who get with the program

Establishing Ethical Standards and Values

A strong culture based on ethical principles has positive impact on long-term strategic success Corporate ethics and value programs make ethical conduct a way of life Approaches to establishing ethical standards
Word-of-mouth indoctrination and power of tradition Written documents

Topics Generally Covered in Value Statements and Codes of Ethics

Topics in Value Statements Customer importance Commitment to quality Commitment to innovation Respect for individual employee Importance of honesty Duty to stockholders Duty to suppliers Corporate citizenship Protecting the environment Topics in Codes of Ethics Honesty observing the Law Conflict of interest Fairness of selling / marketing Using inside information Supplier relations and purchasing Corrupt practices Acquiring information Political activities Use of company assets Proprietary information Pricing, contracting, and billing

How to Implement Values and a Code of Ethics

Incorporate values statement and ethics code into employee training programs Screen out job applicants not exhibiting desired values and ethical traits Communicate values and ethics code to all employees Endorsement of values and ethics code by CEO Insist all managers be personally involved in instilling value and ethics Promote word-of-mouth indoctrination by peers in work situations

Building a Spirit of High Performance into the Culture

Companies with a spirit of high performance
Emphasizes achievement and excellent Have a result-oriented culture Pursue policies and practices inspiring people to do their best

Desired outcome
Produce extraordinary results with ordinary people

Building a Spirit of High Performance into the Culture

Emphasize an intense people orientation
Belief in worth of the individual Treat employees with dignity and respect Willingness to train each employee Strong commitment to job security and promotion from within Encourage employees to use initiative and creativity Set clear performance standards

Building a Spirit of High Performance into the Culture

Emphasize an intense people orientation
Utilize rewards and punishment to enforce high performance standards Hold managers responsible for employee development Grant employees autonomy to excel and contribute Make champions out of people turning in winning performances

Exercising Strategic Leadership

6 Roles of the Strategy Implementer
1. Stay on top of whats happening 2. Promote a culture energizing organization to accomplish strategy 3. Keep firm responsive to changing conditions 4. Build consensus and deal with politics of strategy formulation and implementation 5. Enforce ethical standards and behavior 6. Take corrective actions to improve overall strategic performance

Strategic Management Principle

Strong leadership is virtually essential in achieving effective strategy execution!