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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