Chapter

13
Corporate Culture and Leadership
Screen graphics created by: Jana F. Kuzmicki, Ph.D. Troy State University-Florida and Western Region
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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

Chapter Roadmap
Building a Corporate Culture that Promotes Good Strategy Execution

What to Look for in Identifying a Companys Culture Culture: Ally or Obstacle to Strategy Execution? Types of Cultures Creating a Strong Fit Between Strategy and Culture Grounding the Culture in Core Values and Ethics Establishing a Strategy-Culture Fit in Multinational Companies Staying on Top of How Well Things Are Going Pushing Company to Achieve Good Results Keeping Internal Organization Focused on Operating Excellence Exercising Ethics Leadership Making Corrective Adjustments

Leading the Strategy Execution Process

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BUILD A STRATEGYSUPPORTIVE CORPORATE CULTURE

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2005 The McGraw-Hill Companies, Inc. All rights reserve

 Its core values, beliefs, and business principles

The Defining Characteristics of a Companys Culture

Patterns of how we do things around hereits style of Oft-told stories illustrating companys values Its approach to people management Ethical standards Internal politics Traditions
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operating and ingrained behaviors of company personnel

 Dedication to customer satisfaction Zealous pursuit of low costs Frugal operating practices Strong work ethic

Features of the Corporate Culture at Wal-Mart

Ritualistic Saturday morning meetings Executive commitment to

Visit

stores employees suggestions

Listen to customers Solicit

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 Deliver exceptional customer service to customers

Features of the Corporate Culture at Nordstroms

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
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Features of the Corporate Culture at General Electric 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

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
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 Long work hours of programmers Emotional peaks and valleys in

Features of the Corporate Culture at Microsoft

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
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A companys culture is manifested in . . .

Values, beliefs, and business principles
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What to Look for in Identifying Corporate Culture

management preaches and practices Official policies and procedures Its revered traditions and oft-repeated stories Attitudes and behaviors of employees Peer pressures that exist to display core values Its politics Approaches to people management and problem solving Its relationships with external stakeholders Chemistry and personality permeating work environment

Where Does Corporate Culture Come From?

Founder or early leader Influential individual or work group Policies, vision, or strategies Traditions, supervisory practices,

employee attitudes
The peer pressures that exist Organizational politics Relationships with stakeholders Companys approach to people management
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How Is a Companys Culture Perpetuated?

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 who follow cultural norms

Visibly rewarding those

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Forces and Factors Causing Culture to Evolve

New challenges in marketplace Revolutionary technologies Shifting internal conditions

Internal crisis Turnover of top executives

Arrival of a new CEO Diversification into new businesses Expansion into foreign countries Rapid growth involving adding new employees Merger with or acquisition of another company
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Culture: Ally or Obstacle to Strategy Execution?

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 that embraces attitudes and

behaviors which impede good strategy execution is a huge obstacle to be overcome

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Why Culture Matters: Benefits of a Tight Culture-Strategy Fit 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 coworkers 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

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Optimal Outcome of a Tight Culture-Strategy Fit

A good job of culture-building by managers
Promotes can-do attitudes Encourages acceptance of change Instills strong peer pressure

for strategy-supportive behaviors to achieve company

Enlists enthusiasm and dedicated effort

objectives

Closely aligning corporate culture with the requirements for proficient strategy execution merits the full attention of senior executives!
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The Perils of Strategy-Culture Conflict

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!
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Types of Corporate Cultures

Strong vs. Weak Cultures Unhealthy Cultures

Adaptive Cultures
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 Conduct business according to a clear, widely-understood

Characteristics of Strong Culture Companies

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

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How Does a Culture Come to Be Strong?

Leader who establishes values and behaviors

consistent with
Customer needs Competitive conditions Strategic requirements

Values Customers Employees Shareholders

A deep, abiding commitment to espoused

values, beliefs, and business philosophy

Practicing what Customers Employees Shareholders
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is preached!

Genuine concern for well-being of

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

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Characteristics of Unhealthy Cultures

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

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Hallmarks of Adaptive Cultures

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

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Dominant Traits of Adaptive Cultures

Any changes in operating practices and behaviors
Must

not compromise core values and long-standing business principles satisfy legitimate interests of key stakeholders

Must

Customers Employees Shareholders Suppliers Communities

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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
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Fig. 13.1: Changing a Problem Culture

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Menu of CultureChanging Actions

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

Continuously repeat messages of why

cultural change is good for stakeholders

Visibly praise and reward people

who display new cultural norms

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Menu of CultureChanging Actions (continued)

Alter incentive compensation to

reward desired cultural behavior

Hire new managers and employees who have

desired cultural traits and can serve as role models

Replace key executives strongly

associated with old culture

Revise policies and procedures

to help drive cultural change

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Symbolic CultureChanging Actions

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
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Substantive CultureChanging Actions

Engineer quick successes to highlight

benefits of proposed cultural changes

Bring in new blood, replacing

traditional managers
Change dysfunctional policies Change reward structure Reallocate budget, downsizing and upsizing Reinforce culture through both word and deed Enlist support of cultural norms from frontline supervisors and

employee opinion leaders

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Grounding the Culture in Core Values and Ethics

A culture based on ethical principles is

vital to long-term strategic success

Ethics programs help make

Our ethics program consists of . . .

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

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Fig. 13.2: The Two Culture-Building Roles of a Companys Core Values and Ethical Standards

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Fig. 13.3: How a Companys Core Values and Ethical Principles Positively Impact the Corporate Culture

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 Word-of-mouth indoctrination and tradition Annual reports and Websites

Approaches to Establishing Ethical Standards

Orientation courses for new employees Training courses for managers and employees 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
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Instilling Values and Ethics in the Culture

Incorporate values statement and ethics

code in employee training programs Screen out applicants who do not exhibit compatible character traits Frequent communications of the values and ethics code to all employees Management involvement and oversight Strong endorsement by CEO Ceremonies and awards for individuals and groups who display the values Institute ethics enforcement procedures
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 Develop procedures for

Enforcing ethical

Structuring the Ethics Compliance and Enforcement Process

standards and Handling potential violations

Scrutinize attitudes, character, and work history of prospective

employees Educate employees about what is ethical and what is not Encourage employees to raise issues with ethical dimensions Explain how company values and the ethics code apply at all levels of a company Insist that company values and ethical standards become a way of life
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Structuring the Ethics Compliance and Enforcement Process (continued)

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

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Key Approaches to Enforcing Ethical Behavior

Have mandatory ethics trainings for employees 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 companys code of ethics

Openly encourage employees to report possible infractions via

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Anonymous calls to a hotline or Posting to a special company Web site

Establishing a Strategy-Culture Fit in Multinational and Global Companies

Institute training programs to
Communicate the meaning of core values Explain the case for common operating

and

principles and practices

Draw on full range of motivational and

compensation incentives to induce personnel to adopt and practice desired behaviors

Allow some leeway for certain core values and principles to be

interpreted and applied somewhat differently, if necessary, to accommodate local customs and traditions
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STRATEGIC LEADERSHIP

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2005 The McGraw-Hill Companies, Inc. All rights reserve

Numerous Roles of Strategic Leaders

Visionary Chief Entrepreneur & Strategist Resource Acquirer & Allocator Crisis Solver Motivator Policy Enforcer
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Culture Builder

Taskmaster Process Integrator

Mentor Coach

Negotiator Capabilities Builder

Head Cheerleader Arbitrator Chief Administrator & Strategy Implementer

Spokesperson Consensus Builder Policymaker

1. Stay on top of whats happening

Leadership Activities of the Strategy Implementer

2. Put constructive pressure on company to achieve good results 3. Keep company focused on operating excellence 4. Lead development of stronger core competencies and competitive capabilities 5. Exercise ethics leadership 6. Take corrective actions to improve overall strategic performance
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Carly Fiorina Hewlett-Packard

Role #1: Stay on Top of Whats Happening

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
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Role Pressure

#2: Put Constructive on Company to Achieve Good Results

energy behind

Successful leaders spend time

Mobilizing organizational

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
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 Treat employees with dignity and respect Make champions out of people who excel

Approaches to Instilling a Spirit of High Achievement

Encourage employees to use initiative Set stretch objectives and expectations that employees are to give

their best Grant employees autonomy to contribute 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

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 Promote openness to improving

Role #3: Keep Organization Focused on Operating Excellence

how things are done Support mavericks with creative ideas to improve ways of operating Ensure rewards for successful champions are large and visible Use all kinds of ad hoc organizational forms to support experimentation Use tools of benchmarking, best practices, reengineering, TQM, and Six Sigma to focus attention on continuous improvement
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Role #4: Promote Stronger Core Competences and Capabilities

Top management intervention is

required to establish better or new

Resource strengths and competences Competitive capabilities

Senior managers must lead the effort because

Competences reside in

combined efforts of different work groups and departments, thus requiring cross-functional collaboration can lead to a competitive edge over rivals

Stronger competencies and capabilities

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Role #5: Exercise Ethics Leadership

Set an excellent example in
Displaying ethical

behaviors and
Our ethics code is . . .

Demonstrating character

and personal integrity in actions and decisions

Make it a duty for employees to

Observe ethical Report

codes

ethical violations

Encourage compliance and establish tough

consequences for unethical behavior

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Roles of a Manager in Enforcing Ethical Behavior

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
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compliance

Actions Demonstrating Commitment to a Strategy of Social Craft a strategy that Responsibility 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
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Role #6: 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 asneeded basis in response to unfolding events and changing circumstances activities and behavior short of into better alignment with strategy

Promoting fresh initiatives to bring internal

Making changes to pick up the pace when results fall

performance targets
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