mcgraw-hill/irwin copyright © 2010 by the mcgraw-hill companies, inc. all rights reserved. chapter...
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McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 12: Corporate Culture and Chapter 12: Corporate Culture and
Leadership: Keys to Good Strategy Leadership: Keys to Good Strategy
ExecutionExecution
Screen graphics created by:Jana F. Kuzmicki, Ph.D.
Troy University
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Chapter Learning Objectives
1. Be able to identify the key features of a company’s corporate culture.
2. Understand how and why a company’s culture can aid the drive for proficient strategy execution and operating excellence.
3. Learn the kinds of actions management can take to change a problem corporate culture.
4. Learn why corporate cultures tend to be grounded in core values and ethical principles and help establish a corporate conscience.
5. Understand what constitutes effective managerial leadership in achieving superior strategy execution and operating excellence.
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Chapter Roadmap
Instilling a Corporate Culture that Promotes Good Strategy Execution Identifying the Key Features of a Company’s Corporate
CultureStrong versus Weak CulturesUnhealthy CulturesHigh-Performance CulturesAdaptive CulturesCulture: Ally or Obstacle to Strategy Execution?Changing a Problem CultureGrounding the Culture in Core Values and EthicsEstablishing a Strategy-Culture Fit in Multinational
Companies Leading the Strategy Execution Process
Making Corrective Adjustments in Timely Fashion A Final Word on Managing the Process of Crafting
and Executing Strategy
INSTILLING A STRATEGY-INSTILLING A STRATEGY-
SUPPORTIVE CORPORATE SUPPORTIVE CORPORATE
CULTURE CULTURE
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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
Company’s values Business practices Traditions
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A company’s 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 Featuresof Corporate Culture
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Founder or early leader
Influential individual or work group
Policies, vision, or strategies
Operating approaches
Company’s approach to people management Traditions, supervisory practices,
employee attitudes
Organizational politics
Relationships with stakeholders
Where Does CorporateCulture Come From?
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Selecting new employees who will “fit” in
Systematic indoctrination of new employees
Senior management effortsto 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
How Is a Company’s Culture Perpetuated?
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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
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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 company’s 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
Types of Corporate Cultures
Strong vs. Weak CulturesStrong vs. Weak Cultures
Unhealthy CulturesUnhealthy Cultures
High-Performance CulturesHigh-Performance Cultures
Adaptive CulturesAdaptive Cultures
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Conduct business according to aclear, 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”
Characteristics ofStrong Culture Companies
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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
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 of Weak Culture Companies
Lack of a widely-shared core set of values
Few behavioral normsevident in operating practices
Few strong traditions
No strong sense of company identity
Little cohesion among departments
Weak employee allegiance to company’s vision and strategy
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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
Disregard for high ethical standards and overzealous pursuit of wealth by key executives
Characteristics of Unhealthy Cultures
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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 ofHigh-Performance Cultures
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Willingness to accept change and embrace challenge of introducing new strategies
Risk-taking, experimentation, andinnovation to satisfy stakeholders
Entrepreneurship isencouraged 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
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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 where attitudesand behaviors impedegood strategy execution is ahuge obstacle to be overcome
Culture: Ally or Obstacleto Strategy Execution?
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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 deeply embedded culture tightly matched to the strategy Aids the cause of competent strategy execution by top management
to culturally approved behaviors, thus Making it far simpler for management to root out operating practices
that are a misfit
A culture imbedded with values and behaviorsthat facilitate strategy execution promotesstrong employee commitment to the company’s
Vision Performance targets Strategy
Why Culture Matters: Benefitsof a Tight Culture-Strategy Fit
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A good job of culture-buildingby managers
Promotes can-do attitudes
Encourages acceptance of change
Instills strong peer pressure forstrategy-supportive behaviors
Enlists enthusiasm and dedicatedeffort to achieve company objectives
Optimal Outcome of a Tight Culture-Strategy Fit
Closely aligning corporate culture with the requirements for proficient strategy execution merits the full attention of senior executives!
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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 promoting better strategy execution?
Or should they support the strategyby engaging in behaviors that runcounter to the culture?
The Perils of Strategy-Culture Conflict
When a company’s culture is out of sync with what is needed for strategic success, the culture has to be
changed as rapidly as can be managed!
Creating a Strong FitBetween Strategy and Culture
Responsibility of Strategy MakerResponsibility of Strategy Maker – –Select a strategy compatible with theSelect a strategy compatible with the
sacred or unchangeable parts of sacred or unchangeable parts of organization’s prevailing corporate cultureorganization’s prevailing 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 corporateculture hinder effective executionculture hinder effective execution
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Figure 12.1: Changing a Problem Culture
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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
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
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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 newpositions carefully, hiring only thosewho 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
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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 proceduresin ways to drive cultural change
Substantive Culture-Changing Actions (continued)
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Lead by example – Walk the talk
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 identifiedas cultural hindrances
Visible awards to honor heroes
Symbolic Culture-Changing Actions
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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 a cornerstone for culture-building
Grounding the Culture inCore Values and Ethics
Figure 12.2: The Two Culture-Building Roles of a Company’s Core Values and Ethical Standards
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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
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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 ceremoniesto recognize individuals andgroups who display the values
Institute ethics enforcement procedures
Figure 12.3: The Benefits of Cultural Norms StronglyGrounded in Core Values and Ethical Principles
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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
Leading the Leading the
Strategy-Execution ProcessStrategy-Execution Process
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Leading the Strategy-Execution Process
Top executives must be outfront personally Leading the process and Driving the pace of progress
Entire management teammust work diligently to engage all employees by Delegating authority to middle and lower-level
managers to move the implementation process forward with all due speed
Empowering all employees to exercise initiative, get things done in a timely, efficient, and effective manner
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Key Roles in Leading theStrategy-Execution Process
Be out in the field, seeinghow well operations are going
Gather information firsthand Gauge the progress being made Be diligent and adept in spotting gridlock Ferret out problems and issues Learn the obstacles in the path of good
execution and clear the way for progress Exert constructive, unrelenting pressure on
organizational units to Demonstrate growing consistency in strategy
execution Achieve performance targets
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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
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Process of Making Corrective Adjustments
Varies according to the situation Crisis situation – Take remedial action quickly Non-crisis situation – Incrementally solidify
commitment to a specific course of action Deciding on specific corrective adjustments
is the same for both proactive and reactive situations
Success in initiating correctiveactions hinges on Thorough analysis of the situation Exercise of good business judgment in deciding
on specific actions Good implementation of the corrective actions