C12

CHAPTER 12
CORPORATE CULTURE
AND LEADERSHIP:
KEYS TO GOOD STRATEGY EXECUTION
(c) 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution
in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
THIS CHAPTER WILL HELP YOU UNDERSTAND:
LO 1 The key features of a companys corporate
culture and the role of a companys core
LO 2 How and why a companys culture can aid
the drive for proficient strategy execution.
LO 3 The kinds of actions management can take
to change a problem corporate culture.
LO 4 What constitutes effective managerial
leadership in achieving superior strategy
execution.
in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 122
INSTILLING A CORPORATE CULTURE
CONDUCIVE TO GOOD STRATEGY EXECUTION
Corporate Culture
Is the meshing of shared values, beliefs, business
principles, and traditions that imbues a firms
operating style, behavioral norms, ingrained attitudes,
and work atmosphere.
Is important because it influences the firms actions
and approaches to conducting business.
123
CORE CONCEPT
Corporate culture refers to the shared

values, ingrained attitudes, core beliefs
and company traditions that determine
norms of behavior, accepted work
practices, and styles of operating.
124
ILLUSTRATION The Culture That Drives Innovation
CAPSULE 12.1
at W. L. Gore & Associates
Why is the team-based culture of W. L.
Gore and Associates so important to its
success?
How important to its culture and success is
that it is a privately-held firm?
Is there a relationship between development
of unique cultures and the subsequent
growth and success of niche businesses
(e.g., Apple and W. L. Gore)?
IDENTIFYING THE KEY FEATURES OF A
COMPANYS CORPORATE CULTURE
Values, principles, Management Atmosphere and How managers and

and ethical practices and spirit embodied employees interact
standards organizational in the firms work and relate to one
in actual use polices climate another
Features of a Corporate Culture
Strength of peer Actions and Traditions and

How the firm
pressure to behaviors stories and how
treats its
conform and encouraged we do things
stakeholders
observe norms and rewarded around here
126
STRATEGIC MANAGEMENT PRINCIPLE
A companys culture is grounded in and

shaped by its core values and ethical
standards.
127
FIGURE 12.1 The Two Culture-Building Roles of a Companys Core Values
and Ethical Standards
128
EMBEDDING CULTURAL NORMS IN THE
ORGANIZATION AND PERPETUATING THE
CULTURE
1. Screen applicants and hire those who will mesh well with the
culture.
2. Incorporate discussions of the firms culture and behavioral
norms into orientation programs for new employees and
training courses for managers and employees.
3. Have senior executives frequently reiterate the importance
and role of company values and ethical principles at company
events and in internal communications to employees.
4. Expect managers at all levels to be cultural role models and
exhibit the advocated cultural norms in their own behavior.
129
EMBEDDING CULTURAL NORMS IN THE
ORGANIZATION AND PERPETUATING THE
CULTURE
5. Make the display of cultural norms a factor in evaluating each
persons job performance, granting compensation increases,
and deciding who to promote.
6. Stress that line managers all the way down to first-level
supervisors give ongoing attention to explaining the desired
cultural traits and behaviors in their areas and clarifying why
they are important.
7. Encourage company personnel to exert strong peer pressure
on co-workers to conform to expected cultural norms.
8. Hold periodic ceremonies to honor people who excel in
displaying the company values and ethical principles.
1210
A companys values statement and code

of ethics communicate expectations of
how employees should conduct
themselves in the workplace.
To deeply ingrain the stated core values
and high ethical standards, firms must
turn them into strictly enforced cultural
norms.
1211
FORCES THAT CAUSE A FIRMS CULTURE
TO EVOLVE
New or revolutionary
technologies
New challenges in Diversification into

the marketplace new businesses
Causes of
Cultural
Change
Shifting internal Rapid growth
conditions of the firm
Merger or acquisition
of another firm
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STRONG VERSUS WEAK CULTURES
Strong-Culture Firm Weak-Culture Firm

Has deeply rooted Lacks values and
widely-shared values, principles that are
behavioral norms, and consistently preached
operating approaches. or widely shared.
Insists that its values and Has few or no
principles be reflected in traditions, beliefs,
the decisions and actions values, common
taken by all company bonds, or behavioral
personnel. norms.
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CORE CONCEPT
In a strong-culture company, deeply

rooted values and norms of behavior are
widely shared and regulate how it
conducts its business.
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DEVELOPMENT OF A STRONG CULTURE
Founder or Commitment
strong leader Strong by the firm to
with strong Culture ethical
values behavior
Closely aligning corporate culture with the

requirements for proficient strategy execution
merits the full attention of senior executives.
1215
A strong culture that encourages actions,

behaviors, and work practices that are in
sync with the chosen strategy and
conducive to good strategy execution is a
valuable ally in the strategy execution
process.
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WHY CORPORATE CULTURES MATTER
TO THE STRATEGY EXECUTION PROCESS
A culture that is well matched to the chosen strategy

and the requirements of the strategy execution effort
focuses the attention of employees on what is most
important to this effort..
Culture-induced peer pressure further induces
personnel to do things in a manner that aids the cause
of good strategy execution.
A culture that is consistent with the requirements for
good strategy execution can energize employees,
deepen their commitment to execute the strategy
flawlessly, and enhance worker productivity.
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It is in managements best interest to

dedicate considerable effort to
establishing a corporate culture that
encourages behaviors and work
practices conducive to good strategy
execution.
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HEALTHY CULTURES THAT AID
GOOD STRATEGY EXECUTION
Performance
Good Strategy
Execution
High-Performance Adaptive
Cultures Cultures
Commitment to
Willingness to accept
achieving stretch
change and take on
objectives and
challenges
accountability
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As a companys strategy evolves, an

adaptive culture is a definite ally in the
strategy-implementing, strategy-
executing process as compared to
cultures that are resistant to change.
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UNHEALTHY CULTURES THAT IMPEDE
GOOD STRATEGY EXECUTION
Incompatible
Subcultures
Change-resistant Insular, inwardly

cultures focused cultures
Unhealthy
Cultures
Politicized Unethical and greed-
cultures driven cultures
Poor Strategy
Execution
Poor Performance
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CHANGING A PROBLEM CULTURE:
THE ROLE OF LEADERSHIP
A strong, out of sync, or unhealthy culture must

be changed in order to execute strategy
successfully.
Competent leadership at the top is necessary
for culture-change efforts to succeed.
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FIGURE 12.2 Changing a Problem Culture
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MAKING A COMPELLING CASE
FOR CULTURE CHANGE
Selling the Change

Explain why and how certain behavioral norms and
work practices are obstacles to good execution of
strategic initiatives.
Explain how new behaviors and work practices will be
produce better results.
Cite reasons why the current strategy has to be
modified, if the need for cultural change is due to a
change in strategy.
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SUBSTANTIVE CULTURE-CHANGING ACTIONS
Replace key executives who are stonewalling needed

organizational and cultural changes.
Promote individuals who advocate for cultural shifts and
can serve as a role model for the cultural behavior.
Appoint outsiders with the desired cultural attributes to
high-profile positions.
Screening all candidates for positions carefully, hiring
only those who appear to fit in with the new culture.
Mandate that all personnel attend culture-training.
Design compensation incentives that boost the pay of
teams and individuals.
Revise policies and procedures to drive cultural change
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SYMBOLIC CULTURE-CHANGING ACTIONS
Changing the culture

of an organization
Top executive Ceremonial

Physical symbols
and upper events to honor
that represent
management exemplary
the new culture
behaviors employees
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HOW LONG DOES IT TAKE TO CHANGE
A PROBLEM CULTURE?
Changing a problem culture is never a short-term

exercise.
A sustained and persistent effort to reinforce the culture
at every opportunity through word and deed is required.
It takes time for a new culture to emerge and prevail; it
takes even longer for it to become deeply embedded.
Fixing a problem culture and instilling a new set of
attitudes and behaviors can take two to five years.
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LEADING THE STRATEGY EXECUTION PROCESS
Leading Strategy Execution Requires:

Staying on top of what is happening and
closely monitoring progress.
Putting constructive pressure on the
organization to execute the strategy well and
achieve operating excellence.
Initiating corrective actions to improve
strategy execution and achieve the targeted
performance results.
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ILLUSTRATION
CAPSULE 12.2
Culture Transformation at
America Latina Logistica (ALL)
What steps did CEO Alexandre Behring
take to begin ALLs cultural transformation
into a performance-oriented organization?
What symbolic steps did top managers
take to demonstrate their commitment to
the new culture and to reinforce personnel
and process changes they implemented?
What actions are likely to cause the most
pronounced cultural change in an
organization?
CORE CONCEPT
Management by walking around (MBWA)

is one of the techniques that effective
leaders use to stay informed about how
well the strategy execution process is
progressing.
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STAYING ON TOP OF HOW THINGS ARE GOING
Management by Walking Around (MBWA)

Is used by leaders to stay informed about how well
the strategy execution process is progressing.
Involves spending time with people at company
facilities, asking questions, listening to their opinions
and concerns, and gathering firsthand information
about how well aspects of the strategy execution
process are going.
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MOBILIZING THE EFFORT FOR EXCELLENCE
IN STRATEGY EXECUTION
Treat employees as valued partners.
Foster an esprit de corps that energizes members.
Use empowerment to create a fully engaged workforce.
Set stretch objectives that require personnel to give their
best in achieving performance targets.
Use benchmarking, reengineering, TQM, and Six Sigma
tools to focus attention on continuous improvement.
Use motivational techniques and compensation incentives
to inspire, nurture a results-oriented work climate, and
enforce high standards.
Celebrate individual, group, and company successes.
1232
LEADING THE PROCESS OF MAKING
CORRECTIVE ADJUSTMENTS
Making corrective actions

successfully requires:
Good business Good

A thorough
judgment in implementation
analysis of the
deciding what of the corrective
situation
actions to take actions
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A FINAL WORD ON LEADING THE PROCESS
OF CRAFTING AND EXECUTING STRATEGY
It is difficult to separate leading the process of executing

strategy from leading the strategy process.
Crafting, implementing, and executing strategy is a
continuous process that requires much adjusting and
fine-tuning of the strategy to fit changing circumstances.
The tests of strategic leadership are whether the firm
has a good strategy and business model, whether its
strategy is competently executed, and whether the firm
is achieving its performance targets.
If these three conditions exist, then the firm has good
strategic leadership and is a well-managed enterprise.
1234

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CHAPTER 12

Corporate culture refers to the shared

Values, principles, Management Atmosphere and How managers and

Features of a Corporate Culture

Strength of peer Actions and Traditions and

A companys culture is grounded in and

A companys values statement and code

New challenges in Diversification into

Strong-Culture Firm Weak-Culture Firm

In a strong-culture company, deeply

Closely aligning corporate culture with the

A strong culture that encourages actions,

A culture that is well matched to the chosen strategy

It is in managements best interest to

As a companys strategy evolves, an

Change-resistant Insular, inwardly

A strong, out of sync, or unhealthy culture must

Selling the Change

Replace key executives who are stonewalling needed

Changing the culture

Top executive Ceremonial

Changing a problem culture is never a short-term

Leading Strategy Execution Requires:

Management by walking around (MBWA)

Management by Walking Around (MBWA)

Making corrective actions

Good business Good

It is difficult to separate leading the process of executing

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