13

Chapter Title
16/e PPT
Corporate
Culture and
Leadership
Screen graphics created by:
Jana F. Kuzmicki, Ph.D.
Troy University-Florida Region
McGraw-Hill/Irwin Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved.
13-2
The biggest levers youve got
to change a company are
strategy, structure, and
culture. If I could pick two, Id
pick strategy and culture.
Wayne Leonard, CEO Entergy Corp.
13-3
An organizations capacity
to execute its strategy depends
on its hard infrastructure its
organization structure and systems
and on its soft infrastructure
its culture and norms.
Amar Bhide
13-4
Chapter 13 Roadmap
Instilling a Corporate Culture that Promotes Good Strategy
Execution
Identifying the Key Features of a Companys Corporate Culture
Strong versus Weak Cultures
Unhealthy Cultures
High-Performance Cultures
Adaptive Cultures
Culture: Ally or Obstacle to Strategy Execution?
Changing a Problem Culture
Grounding the Culture in Core Values and Ethics
Establishing a Strategy-Culture Fit in Multinational Companies
Leading the Strategy Execution Process
Staying on Top of How Well Things Are Going
Putting Constructive Pressure on the Organization to Achieve Good Results
and Operating Excellence
Leading the Development of Better Competencies and Capabilities
Displaying Ethical Integrity and Leading Social Responsibility Initiatives
Leading the Process of Making Corrective Adjustments
13-5
INSTILLING A STRATEGY-
SUPPORTIVE CORPORATE
CULTURE
13-6
Defining Characteristics
of Corporate Culture
Core values, beliefs, and business principles
Ethical standards
Operating practices and behaviors defining
how we do things around here
Approach to people management
Chemistry and personality permeating
work environment
Oft-told stories illustrating
Companys values
Business practices
Traditions
13-7
Dedication to customer satisfaction
Zealous pursuit of low costs
Frugal operating practices
Strong work ethic
Ritualistic Saturday morning meetings
Executive commitment to
Visit stores
Listen to customers
Solicit employees suggestions
Features of the Corporate
Culture at Wal-Mart
13-8
Hard-driving, results-oriented atmosphere prevails
All businesses are held to a standard
of being #1 or #2 in their industries as
well as achieving good business results
Extensive cross-business sharing of ideas, best
practices, and learning
Reliance on workout sessions to identify, debate,
and resolve burning issues
Commitment to Six Sigma Quality
Globalization of the company
Features of the Corporate
Culture at General Electric
13-9
Entrepreneurship of employees
Empowered employees are encouraged to
Be innovative
Excel in their fields of specialization
Respond quickly to strategic opportunities
Creatively apply state-of-the-art technology in a manner
to promote operating excellence
Features of the Corporate
Culture at Occidental Petroleum
13-10
Deliver exceptional customer service to customers
Company motto
Respond to Unreasonable
Customer Requests
Out-of-the-ordinary customer requests
viewed as opportunities for heroic acts
Promotions based on outstanding service
Salaries based entirely on commission
Features of the Corporate
Culture at Nordstroms
13-11
A companys culture is manifested in . . .
Values, business principles, and ethical standards preached
and practiced by management
Approaches to people management and problem solving
Official policies and procedures
Spirit and character permeating work environment
Interactions and relationships among managers and
employees
Peer pressures that exist to display core values
Its revered traditions and oft-repeated stories
Its relationships with external stakeholders
Identifying the Key Features
of Corporate Culture
13-12
Founder or early leader
Influential individual or work group
Policies, vision, or strategies
Operating approaches
Companys approach to people management
Traditions, supervisory practices, employee attitudes
Organizational politics
Relationships with stakeholders
Where Does Corporate
Culture Come From?
13-13
Role of Stories at Microsoft
Oft-told stories focus on . . .
Long work hours of programmers
Emotional peaks and valleys in encountering and
overcoming coding problems
Exhilaration of completing a complex program on
schedule
Satisfaction of working on cutting-edge projects
Rewards of being part of a team responsible
for a popular new software program
Tradition of competing aggressively
13-14
Selecting new employees who will fit in
Systematic indoctrination of new employees
Senior management efforts to reinforce core
values, beliefs, principles, key operating practices
Story-telling of company legends
Ceremonies honoring employees
who display cultural ideals
Visibly rewarding those
who follow cultural norms
How Is a Companys Culture Perpetuated?
13-15
Forces Causing Culture to Evolve
New challenges in marketplace
Revolutionary technologies
Shifting internal conditions
Internal crisis
Turnover of top executives
A new CEO who opts to change things
Diversification into new businesses
Expansion into foreign countries
Rapid growth that involves adding many new
employees
Merger with or acquisition of another company
13-16
Company Subcultures: Problems Posed by
New Acquisitions and Multinational Operations
Values, beliefs, and practices within a company can vary by
Department
Geographic location
Business unit
Subcultures can clash if
They embrace conflicting business philosophies
Key executives use different approaches to people
management
Differences between a companys culture and recent
acquisitions have not been ironed out
Existence of subcultures does not preclude important areas
of commonality and compatibility being established in
different countries
13-17
Types of Corporate Cultures
Strong vs. Weak Cultures
Unhealthy Cultures
High-Performance Cultures
Adaptive Cultures
13-18
Conduct business according to a clear, widely-
understood philosophy
Considerable time spent by management
communicating and reinforcing values
Values are widely shared and deeply rooted
Have a well-defined corporate character,
reinforced by a creed or values statement
Careful screening/selection of new
employees to be sure they will fit in
Characteristics of
Strong Culture Companies
13-19
How Does a Culture Come to Be Strong?
Leader who establishes values and behaviors
consistent with
Customer needs
Competitive conditions
Strategic requirements
A deep, abiding commitment to espoused
values, beliefs, and business philosophy
Practicing what is preached!
Genuine concern for well-being of
Customers
Employees
Shareholders
Values
Customers
Employees
Shareholders
13-20
Characteristics of Weak Culture Companies
Lack of a widely-shared core set of values
Few behavioral norms evident in operating
practices
Few strong traditions
No strong sense of company identity
Little cohesion among departments
Weak employee allegiance to
companys vision and strategy
13-21
Highly politicized internal environment
Issues resolved on basis of political clout
Hostility to change
Avoid risks and dont screw up
Experimentation and efforts to
alter status quo discouraged
Not-invented-here mindset company
personnel discount need to look outside for
Best practices
New or better managerial approaches
Innovative ideas
Disregard for high ethical standards and
overzealous pursuit of wealth by key executives
Characteristics of Unhealthy Cultures
13-22
Standout cultural traits include
A can-do spirit
Pride in doing things right
No-excuses accountability
A results-oriented work climate in which people go the extra
mile to achieve performance targets
Strong sense of involvement by all employees
Emphasis on individual initiative and creativity
Performance expectations are clearly identified for all
organizational members
Strong bias for being proactive, not reactive
Respect for the contributions of all employees
Characteristics of
High-Performance Cultures
13-23
Willingness to accept change and embrace challenge
of introducing new strategies
Risk-taking, experimentation, and innovation to satisfy
stakeholders
Entrepreneurship is encouraged
and rewarded
Funds provided for new products
New ideas openly evaluated
Genuine interest in well-being
of all key constituencies
Proactive approaches to
implement workable solutions
Hallmarks of Adaptive Cultures
13-24
Any changes in operating practices and behaviors
Must not compromise core values and long-standing business
principles
Must be legitimate in the sense of not having an inappropriate or
unfair impact on the best interests of key stakeholders
Customers
Employees
Shareholders
Suppliers
Communities
Dominant Traits of Adaptive Cultures
13-25
A companys culture can contribute to or hinder
successful strategy execution
A culture that promotes attitudes and behaviors
that are well-suited to first-rate strategy
execution is a valuable ally in the strategy
execution process
A culture where attitudes
and behaviors impede
good strategy execution is a
huge obstacle to be overcome
Culture: Ally or Obstacle
to Strategy Execution?
13-26
A culture that encourages actions and behaviors
supportive of good strategy execution
Provides employees with clear guidance regarding what
behaviors and results constitute good job performance
Creates significant peer pressure among co-workers to
conform to culturally acceptable norms
A culture imbedded with values and behaviors
that facilitate strategy execution promotes
strong employee commitment to the companys
Vision
Performance targets
Strategy
Why Culture Matters: Benefits
of a Tight Culture-Strategy Fit
13-27
A good job of culture-building by managers
Promotes can-do attitudes
Encourages acceptance of change
Instills strong peer pressure for
strategy-supportive behaviors
Enlists enthusiasm and dedicated
effort to achieve company objectives
Closely aligning corporate culture with the
requirements for proficient strategy execution
merits the full attention of senior executives!
Optimal Outcome of a
Tight Culture-Strategy Fit
13-28
Conflicts between culturally-approved
behaviors and behaviors needed for good
strategy execution send mixed signals
Should employees by loyal to the culture and company
traditions and resist actions and behaviors promoting
better strategy execution?
Or should they support the strategy by engaging in
behaviors that run counter to the culture?
When a companys culture is out of sync with
what is needed for strategic success, the culture
has to be changed as rapidly as can be managed!
The Perils of Strategy-Culture Conflict
13-29
Creating a Strong Fit
Between Strategy and Culture
Responsibility of Strategy Maker
Select a strategy compatible with the
sacred or unchangeable parts of
organizations prevailing corporate culture
Responsibility of Strategy Implementer
Once strategy is chosen, change
whatever facets of the corporate
culture hinder effective execution
13-30
Fig. 13.1: Changing a Problem Culture
13-31
Make a compelling case why a new cultural
atmosphere is in best interests of both company and
employees
Challenge status quo
Create events where employees
must listen to angry key stakeholders
Cite why and how certain behavioral norms and work
practices in current culture pose obstacles to good
execution of new strategic initiatives
Explain how new behaviors and work practices to be
introduced will be more advantageous and produce
better results
Menu of Culture-Changing Actions
13-32
Replace key executives strongly associated with
old culture
Promote individuals who have desired cultural traits
and can serve as role models
Appoint outsiders who have desired
cultural attributes to high-profile positions
Screen all candidates for new positions carefully,
hiring only those who fit in with the new culture
Mandate all company personnel attend culture-
training programs to learn more about new work
practices, operating approaches, and behaviors
Substantive Culture-Changing Actions
13-33
Push hard to implement new-style work practices
and operating procedures
Design compensation incentives to reward teams
and individuals who display the desired cultural
behaviors
Grant generous pay raises to individuals who lead
the way in adopting desired work practices,
displaying new-style behaviors, and achieving
pace-setting results
Revise policies and procedures
in ways to drive cultural change
Substantive Culture-
Changing Actions (continued)
13-34
Lead by example Walk the talk
Emphasize frugality
Eliminate executive perks
Require executives to spend
time talking with customers
Ceremonial events to praise people and
teams who get with the program
Alter practices identified as cultural hindrances
Visible awards to honor heroes
Symbolic Culture-Changing Actions
13-35
A culture based on ethical principles is
vital to long-term strategic success
Ethics programs help make
ethical conduct a way of life
Executives must provide genuine support
of personnel displaying ethical standards
in conducting the companys business
Value statements serve as a
cornerstone for culture-building
Our ethics
program
consists of . . .
Grounding the Culture in
Core Values and Ethics
13-36
Formal values statement and a code of ethics
Word-of-mouth indoctrination and tradition
Annual reports and Websites
Making stakeholders aware of a commitment
to ethical business conduct is attributable to
Greater management understanding of role
these statements play in culture building
Renewed focus on ethical standards
stemming from recent corporate scandals
Growing numbers of consumers who
prefer to patronize ethical companies
Approaches to Establishing
Ethical Standards
13-37
13-38
Test Your Knowledge
Which of the following topics would least likely be a topic or
element of a companys statement of its core values?
A. A dedication to superior customer service, top-notch quality,
product innovation, and/or technological leadership
B. An expectation that company personnel will display creativity,
exercise initiative, and accept responsibility
C. Prohibiting giving or accepting bribes, kickbacks, or gifts
D. A commitment to exhibiting such qualities as integrity,
fairness, trustworthiness, pride of workmanship, Golden Rule
behavior, and respect for co-workers
E. A commitment to making the company a great place to work
13-39
Test Your Knowledge
Which of the following topics would least likely be contained in
a companys code of ethics?
A. Expecting all employees to not divulge trade secrets or
proprietary information to outsiders
B. Expecting all company personnel to display honesty and
integrity in their actions and avoid conflicts of interest
C. Not dealing with suppliers that employ child labor or engage in
other unsavory practices
D. Committing to create a work environment characterized by
teamwork and employee empowerment
E. Mandating full compliance with all laws and regulations
13-40
Fig. 13.2: The Two Culture-Building Roles of a
Companys Core Values and Ethical Standards
13-41
Techniques to Transform Core Values and
Ethical Standards into Cultural Norms
Screen out applicants who do not exhibit compatible
character traits
Incorporate values statement and ethics code in
employee training programs
Strong endorsement by senior executives of the
importance of core values and ethical principles at
company events and in internal communications
Use values statements and codes of ethics as
benchmarks to judge appropriateness of company
policies and operating practices
Make the display of core values and ethical principles a
big factor in evaluating employee performance
13-42
Techniques to Transform Core Values and Ethical
Standards into Cultural Norms (continued)
Make sure managers at all levels are diligent in
stressing the importance of ethical conduct and
observance of core values
Encourage everyone to use their influence in
helping enforce observance of core values and
ethical standards
Hold periodic ceremonies to recognize individuals
and groups who display the values
Institute ethics
enforcement procedures
13-43
Fig. 13.3: The Benefits of Cultural Norms Strongly
Grounded in Core Values and Ethical Principles
13-44
Establishing a Strategy-Culture Fit in
Multinational and Global Companies
Institute training programs to
Communicate the meaning of core values and
Explain the case for common operating
principles and practices
Create a cultural climate where the norm is to
Adopt best practices
Use common work procedures
Pursue operating excellence
Give local managers
Flexibility to modify people management
approaches or operating styles
Discretion to use different motivational and compensation
incentives to induce personnel to practice desired behaviors
13-45
For Discussion: Your Opinion
Identify one cultural trait that you would like to see at
the company you decide to go to work for when you
graduate? Why is this cultural trait important to you?
13-46
STRATEGIC LEADERSHIP
13-47
Visionary
Chief
Entrepreneur
& Strategist
Capabilities
Builder
Resource Acquirer &
Allocator
Culture
Builder
Chief
Administrator
& Strategy
Implementer
Process
Integrator
Coach
Crisis
Solver
Taskmaster
Spokesperson
Negotiator
Motivator
Arbitrator
Consensus
Builder
Policymaker
Policy
Enforcer
Mentor
Head
Cheerleader
Numerous Roles of Strategic Leaders
13-48
1. Stay on top of whats happening
2. Put constructive pressure on
company to achieve good results
3. Lead development of stronger core
competencies and competitive capabilities
4. Exercise ethics leadership and lead social
responsibility initiatives
5. Take corrective actions to improve overall strategic
performance
Leadership Activities of Chief
Strategy Implementer
13-49
Develop a broad network of formal
and informal sources of information
Talk with many people at all levels
Be an avid practitioner of MBWA
Observe situation firsthand
Monitor operating results regularly
Get feedback from customers
Watch competitive reactions of rivals
Role #1: Stay on Top of Whats Happening
13-50
Successful leaders spend time
Mobilizing organizational energy behind
Good strategy execution and
Operating excellence
Nurturing a results-oriented work climate
Promoting certain enabling cultural drivers
Strong sense of involvement on part of company personnel
Emphasis on individual initiative and creativity
Respect for contributions of individuals and groups
Pride in doing things right
Role #2: Put Constructive Pressure on
Company to Achieve Good Results
13-51
Treat employees with dignity and respect
Make champions out of people who excel
Encourage employees to use initiative
Set stretch objectives and expectations that employees are
to give their best
Use tools of benchmarking, best practices, business process
reengineering, TQM, and Six Sigma quality to focus
attention on continuous improvement
Use full range of motivational techniques
and compensation incentives to
Inspire employees
Nurture a results-oriented climate
Enforce high-performance standards
Celebrate individual, group, company successes
Approaches to Instilling a
Spirit of High Achievement
13-52
Top management intervention is
required to establish better or new
Resource strengths and competencies
Competitive capabilities
Senior managers must lead the effort because
Competencies reside in combined
efforts of different work groups and
departments, thus requiring
cross-functional collaboration
Stronger competencies and capabilities
can lead to a competitive edge over rivals
Role #3: Promote Stronger Core
Competencies and Capabilities
13-53
Role #4: Display Ethics Leadership and
Lead Social Responsibility Initiatives
Set an excellent example in
Displaying ethical behaviors
Demonstrating character and
personal integrity in actions and decisions
Declare support of companys ethics code
and expect all employees to conduct
themselves in an ethical fashion
Encourage compliance and establish tough
consequences for unethical behavior
Our ethics
code is . . .
13-54
Set an excellent ethical example
Provide training to employees
about what is ethical and what isnt
Declare unequivocal support of ethics code
Act as final arbiter on hard calls
Remove people from key positions
if found guilty of a violation
Reprimand people lax in monitoring ethical compliance
Roles of a Manager in
Enforcing Ethical Behavior
13-55
Structuring an Ethics Compliance
and Enforcement Process
Form an ethics committee to give guidance on
ethics matters
Appoint an ethics officer to head compliance effort
Establish an ethics hotline/Web site employees can
use to
Anonymously report a possible violation
Get confidential advice on a
troubling ethics-related situation
Conduct an annual ethics audit
to measure extent of
Ethical behavior and
Identify problem areas
13-56
Have mandatory ethics trainings for employees
Openly encourage employees to
report possible infractions via
Anonymous calls to a hotline or
Posting to a special company Web site
Conduct an annual audit to assess
Each managers efforts to uphold ethical standards
Actions taken by managers to remedy deficient conduct
Require all employees to sign a statement annually
certifying they have complied with the ethics code
Make sure ethical violations carry appropriate
punishment, including dismissal for egregious violations
Key Approaches to
Enforcing Ethical Behavior
13-57
Test Your Knowledge
Assuming that a companys senior executives are really serious
about enforcing high standards of ethical behavior, then they
probably need to consider doing all but which one of the following?
A. Appointing a committee of high-profile employees to serve on a committee or
task force that is charged with (a) being champions of high ethical standards,
(b) finding ways to ingrain high ethical standards as a cultural norm, and (3)
heading up the companys ethics enforcement process
B. Having mandatory ethics training programs for employees
C. Conducting an annual audit of each managers efforts to uphold ethical
standards and requiring formal reports on the actions taken by managers to
remedy deficient conduct
D. Requiring all employees to sign a statement annually certifying that they
have complied with the companys code of ethics and making sure that
ethical violations carry appropriate punishment, including dismissal if the
violation is sufficiently egregious
E. Openly encouraging company personnel to report possible infractions via
anonymous calls to a hotline or e-mails sent to a designated address
13-58
For Discussion: Your Opinion
What would your reaction be if your employer
required you to sign a statement annually certifying
that you have complied with the companys code of
ethics?
13-59
Actions Demonstrating Commitment
to a Strategy of Social Responsibility
Craft a strategy that positively improves well-being of
employees, environment, communities, and society
Use social and environmental metrics to evaluate
company performance
Tie social and environmental performance to executive
compensation
Take special pains to protect environment
Take an active role in community affairs
Generously support charitable causes
and projects benefiting society
Support workforce diversity and commit
to overall well-being of employees
13-60
Role #5: Lead the Process of
Making Corrective Adjustments
Requires deciding
When adjustments are needed
What adjustments to make
Involves
Adjusting long-term direction, objectives, and strategy on
an as-needed basis in response to unfolding events and
changing circumstances
Promoting fresh initiatives to bring internal activities and
behavior into better alignment with strategy
Making changes to pick up the pace when results fall
short of performance targets