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Corporate CultureCorporate Cultureand Leadershipand Leadership
1313Chapter
Screen graphics created by:Jana F. Kuzmicki, Ph.D.
Troy State University-Florida and Western Region
““An organization’s capacity An organization’s capacity to execute its strategy to execute its strategy
dependsdependson its “hard” infrastructure – on its “hard” infrastructure – its organization structure and its organization structure and
systems – and on its “soft” systems – and on its “soft” infrastructure – its culture and infrastructure – its culture and
norms.”norms.”Amar Bhide
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Chapter RoadmapChapter Roadmap Building a Corporate Culture that Promotes Good Strategy Execution
What to Look for in Identifying a Company’s 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
Leading the Strategy Execution Process 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
BUILD A STRATEGY-BUILD A STRATEGY-SUPPORTIVE SUPPORTIVE
CORPORATE CULTURECORPORATE CULTURE
McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.
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The Defining The Defining Characteristics Characteristics
of a Company’s Cultureof a Company’s Culture Its core values, beliefs, and business principles
Patterns of “how we do things around here”—its style of operating and ingrained behaviors of company personnel
Oft-told stories illustrating company’s values
Its approach to people management
Ethical standards
Internal politics
Traditions
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Features of the Features of the CorporateCorporate
Culture at Wal-MartCulture at Wal-Mart 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
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Features of the Features of the CorporateCorporate
Culture at Nordstrom’sCulture at Nordstrom’s Deliver exceptional customer service to customers
Company motto
“Respond to UnreasonableCustomer Requests”
Out-of-the-ordinary customer requestsviewed as opportunities for “heroic” acts
Promotions based on outstanding service
Salaries based entirely on commission
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Features of the Features of the CorporateCorporate
Culture at General Culture at General ElectricElectric Hard-driving, results-oriented atmosphere prevails
All businesses are held to a standardof being #1 or #2 in their industries aswell 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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Features of the Features of the CorporateCorporate
Culture at MicrosoftCulture at Microsoft Long work hours of programmers
Emotional peaks and valleys inencountering 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 responsiblefor a popular new software program
Tradition of competing aggressively
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What to Look for inWhat to Look for inIdentifying Corporate Identifying Corporate
CultureCultureA company’s culture is manifested in . . . Values, beliefs, and business principles
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
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Where Does CorporateWhere Does CorporateCulture Come From?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 Company’s approach to people management
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How Is a Company’sHow Is a Company’sCulture Perpetuated?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 employeeswho display cultural ideals
Visibly rewarding thosewho follow cultural norms
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Forces and FactorsForces and FactorsCausing Culture to EvolveCausing 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 ObstacleCulture: Ally or Obstacleto Strategy Execution?to Strategy Execution?
A company’s 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: Why Culture Matters: BenefitsBenefits
of a Tight Culture-Strategy of a Tight Culture-Strategy FitFit 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 promotesstrong employee commitment to the company’s Vision Performance targets Strategy
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Optimal Outcome of a Optimal Outcome of a Tight Culture-Strategy FitTight 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 Enlists enthusiasm and dedicated effort to achieve company
objectives
Closely aligning corporate culture withClosely aligning corporate culture withthe requirements for proficient strategy executionthe requirements for proficient strategy execution
merits the full attention of senior executives!merits the full attention of senior executives!
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The Perils of The Perils of Strategy-Culture ConflictStrategy-Culture Conflict
Conflicts between culturally-approvedbehaviors and behaviors needed for goodstrategy execution send mixed signals Should employees by loyal to the culture and company traditions
and resist actions and behaviors promotingbetter strategy execution?
Or should they support the strategy by engaging in behaviors that run counter to the culture?
When a company’s culture is out of sync with whatWhen a company’s culture is out of sync with whatis needed for strategic success, the culture has tois needed for strategic success, the culture has to
be changed as rapidly as can be managed!be changed as rapidly as can be managed!
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Types of Corporate Types of Corporate CulturesCultures
Strong vs. Weak Cultures
Unhealthy Cultures
Adaptive Cultures
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Characteristics ofCharacteristics ofStrong Culture Strong Culture
CompaniesCompanies 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 newemployees to be sure they will “fit in”
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How Does a CultureHow Does a CultureCome to Be Strong? Come to Be Strong?
Leader who establishes values and behaviors consistent with Customer needs Competitive conditions Strategic requirements
A deep, abiding commitment to espousedvalues, beliefs, and business philosophy Practicing what is preached!
Genuine concern for well-being of Customers Employees Shareholders
ValuesCustomers
EmployeesShareholders
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Characteristics ofCharacteristics ofWeak Culture CompaniesWeak 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 tocompany’s vision and strategy
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Characteristics ofCharacteristics ofUnhealthy CulturesUnhealthy Cultures
Highly politicized internal environment Issues resolved on basis of political clout
Hostility to change Avoid risks and don’t 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 ofHallmarks ofAdaptive CulturesAdaptive 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 TraitsDominant Traitsof Adaptive Culturesof Adaptive Cultures
Any changes in operating practices and behaviors
Must not compromise core values and long-standing business principles
Must satisfy legitimate interests of key stakeholders
Customers
Employees
Shareholders
Suppliers
Communities
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Creating a Strong FitCreating a Strong FitBetween Strategy and Between Strategy and
CultureCultureResponsibility of Strategy MakerResponsibility of Strategy Maker – –Select a strategy compatible with theSelect a strategy compatible with the
sacred or unchangeable parts of organization’s sacred or unchangeable parts of organization’s prevailing corporate cultureprevailing corporate culture
Responsibility of Strategy ImplementerResponsibility of Strategy Implementer – –Once strategy is chosen, changeOnce strategy is chosen, changewhatever facets of the corporatewhatever facets of the corporate
culture hinder effective executionculture hinder effective execution
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Fig. 13.1: ChangingFig. 13.1: Changinga Problem Culturea Problem Culture
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Menu of Culture-Menu of Culture-Changing ActionsChanging 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 employeesmust listen to angry key stakeholders
Continuously repeat messages of whycultural change is good for stakeholders
Visibly praise and reward peoplewho display new cultural norms
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Menu of Culture-Menu of Culture-Changing ActionsChanging Actions (continued)(continued)
Alter incentive compensation toreward desired cultural behavior
Hire new managers and employees who havedesired cultural traits and can serve as role models
Replace key executives stronglyassociated with old culture
Revise policies and proceduresto help drive cultural change
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Symbolic Culture-Symbolic Culture-Changing ActionsChanging Actions
Emphasize frugality
Eliminate executive perks
Require executives to spend time talking with customers
Ceremonial events to praise people andteams who “get with the program”
Alter practices identified as cultural hindrances
Visible awards to honor heroes
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Substantive Culture-Substantive Culture-Changing ActionsChanging Actions
Engineer quick successes to highlightbenefits of proposed cultural changes
Bring in new blood, replacingtraditional 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 inGrounding the Culture inCore Values and EthicsCore Values and Ethics
A culture based on ethical principles isvital to long-term strategic success
Ethics programs help make ethical conduct a way of life
Executives must provide genuine supportof personnel displaying ethical standardsin conducting the company’s business
Value statements serve as acornerstone for culture-building
Our ethicsprogram
consists of . . .
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Fig. 13.2: The Two Culture-Building Fig. 13.2: The Two Culture-Building Roles of a Company’s Core Values and Roles of a Company’s Core Values and
Ethical StandardsEthical Standards
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Fig. 13.3: How a Company’s Core Values and Ethical Fig. 13.3: How a Company’s Core Values and Ethical Principles Positively Impact the Corporate CulturePrinciples Positively Impact the Corporate Culture
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Approaches to Approaches to Establishing Establishing
Ethical StandardsEthical Standards Word-of-mouth indoctrination and tradition Annual reports and Websites 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 andInstilling Values andEthics in the CultureEthics in the Culture
Incorporate values statement and ethicscode in employee training programs
Screen out applicants who do notexhibit compatible character traits
Frequent communications of thevalues 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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Structuring the Ethics Structuring the Ethics Compliance and Enforcement Compliance and Enforcement
ProcessProcess Develop procedures for
Enforcing ethical 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 Structuring the Ethics Compliance and Enforcement Compliance and Enforcement
Process Process (continued)(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 toKey Approaches toEnforcing Ethical BehaviorEnforcing Ethical Behavior
Have mandatory ethics trainings for employees Conduct an annual audit to assess
Each manager’s efforts touphold ethical standards
Actions taken by managersto remedy deficient conduct
Require all employees to sign a statement annually certifying they have complied with company’s code of ethics
Openly encourage employees to report possible infractions via Anonymous calls to a hotline or Posting to a special company Web site
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Establishing a Strategy-Culture Establishing a Strategy-Culture Fit in Multinational and Global Fit in Multinational and Global
CompaniesCompanies Institute training programs to
Communicate the meaning of core values and Explain the case for common operating
principles and practices Draw on full range of motivational and
compensation incentives to induce personnelto 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
McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.
STRATEGIC STRATEGIC LEADERSHIPLEADERSHIP
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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
PolicymakerPolicy
Enforcer
Mentor
Head Cheerleader
Numerous RolesNumerous Rolesof Strategic Leadersof Strategic Leaders
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Leadership Activities of Leadership Activities of thethe
Strategy ImplementerStrategy Implementer1. Stay on top of what’s happening
2. Put constructive pressure oncompany to achieve good results
3. Keep company focusedon operating excellence
4. Lead development of stronger corecompetencies and competitive capabilities
5. Exercise ethics leadership
6. Take corrective actions to improve overall strategic performance
Carly FiorinaHewlett-Packard
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Role #1: Stay on TopRole #1: Stay on Topof What’s Happeningof What’s 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 #2: Put Constructive Role #2: Put Constructive Pressure on Company to Achieve Pressure on Company to Achieve
Good Results Good Results 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
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Approaches to Instilling aApproaches to Instilling aSpirit of High Spirit of High AchievementAchievement
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 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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Role #3: Keep OrganizationRole #3: Keep OrganizationFocused on Operating Focused on Operating
ExcellenceExcellence Promote openness to improving
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 Role #4: Promote Stronger Core Competences and Core Competences and
CapabilitiesCapabilities 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
Stronger competencies and capabilitiescan lead to a competitive edge over rivals
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Role #5: ExerciseRole #5: ExerciseEthics LeadershipEthics Leadership
Set an excellent example in Displaying ethical behaviors and
Demonstrating character and personalintegrity in actions and decisions
Make it a duty for employees to Observe ethical codes
Report ethical violations
Encourage compliance and establish toughconsequences for unethical behavior
Our ethicscode is . . .
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Roles of a Manager inRoles of a Manager inEnforcing Ethical BehaviorEnforcing Ethical Behavior
Set an excellent ethical example
Provide training to employeesabout what is ethical and what isn’t
Declare unequivocal support of ethics code
Act as final arbiter on hard calls
Remove people from key positionsif found guilty of a violation
Reprimand people lax in monitoring ethical compliance
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Actions Demonstrating Actions Demonstrating CommitmentCommitment
to a Strategy of Social to a Strategy of Social ResponsibilityResponsibility 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
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Role #6: Lead the Process Role #6: Lead the Process ofof
Making Corrective Making Corrective Adjustments 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