1. Corporate Culture and Leadership
Chapter 9
Corporate Culture and Leadership

2. “An organization’s 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

3. Chapter Outline
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 Innovative
Exercising Ethics Leadership
Making Corrective Adjustments

4. BUILD A STRATEGY-SUPPORTIVE CORPORATE CULTURE
McGraw-Hill/Irwin
© 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. 4

5. What Makes Up a Company’s Culture?
Core values and business principles of executives
Ethical standards
Patterns of “how we do things around here”
Oft-told stories illustrating company’s values
Approach to people management
Internal politics
Traditions

6. Features of the Corporate Culture 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

7. Features of the Corporate Culture at Nordstrom’s
Deliver exceptional customer service to customers
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

8. 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

9. Features of the Corporate Culture at Microsoft
Long work hours of programmers
Emotional peaks and valleys in 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

10. Where Does Corporate Culture Come From?
Founder or early leader
Influential individual or work group
Policies, vision, or strategies
Traditions, supervisory practices, employee attitudes
Organizational politics
Relationships with stakeholders
Internal sociological forces

11. How Is a Company’s Culture Perpetuated?
Selecting new employees who will “fit” in
Systematic indoctrination of new employees
Senior employees’ reinforcement of core values
Story-telling of company legends
Ceremonies honoring employees who display cultural ideals
Visibly rewarding those who follow cultural norms

12. 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

13. Culture: Ally or Obstacle to Strategy Execution?
Culture can contribute to -- or hinder -- successful strategy execution
Requirements for successful strategy execution may -- or may not -- be compatible with culture
A close match between culture and strategy promotes effective strategy execution

14. Why Culture Matters: Benefits of a Tight Culture-Strategy Fit
A culture that encourages actions supportive of good strategy execution
Not only provides employees with clear guidance regarding what behaviors and results constitute good job performance
But also produces significant peer pressure from coworkers to conform to culturally acceptable norms
A culture imbedded with values and behaviors that facilitate strategy execution promotes strong employee commitment to the company’s
Vision
Performance targets
Strategy

15. 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
Enlists enthusiasm and dedicated effort to achieve company objectives
Closely aligning corporate culture with the requirements for proficient strategy execution merits the full attention of senior executives!

16. 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 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!

17. Types of Corporate Cultures
Strong vs. Weak Cultures
Unhealthy Cultures
Adaptive Cultures

18. Characteristics of Strong Culture Companies
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 new employees to be sure they will “fit in”

19. How Does a Culture Come to Be Strong?
Leader who establishes values consistent with
Customer needs
Competitive conditions
Strategic requirements
A deep, abiding commitment to espoused values and business philosophy
Practicing what is preached!
Genuine concern for well-being of
Customers
Employees
Shareholders
Values
Customers
Employees
Shareholders

20. 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 company’s vision and strategy

21. Characteristics of Unhealthy 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 -- employees discount need to look outside company for
Best practices
New managerial approaches
Innovative ideas

22. 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

23. Dominant Traits of 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

24. Creating a Strong Fit Between Strategy and Culture
Responsibility of Strategy Maker -- Select a strategy compatible with the sacred or unchangeable parts of organization’s prevailing corporate culture
Responsibility of Strategy Implementer -- Once strategy is chosen, change whatever facets of the corporate culture hinder effective execution

25. Changing a Problem Culture
Step 1
Identify facets of present culture that are strategy-supportive and those that are not
Step 2
Clearly define desired new behaviors and specify key features of “new” culture
Step 3
Talk openly about problems of present culture and how new behaviors will improve performance
Step 4
Follow with visible, aggressive actions to modify culture—includes substantive and symbolic actions

26. Menu of Culture-Changing 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

27. Menu of Culture-Changing 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

28. Symbolic Culture-Changing 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

29. Substantive Culture-Changing 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

30. 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 ethical conduct a way of life
Executives must provide genuine support of personnel displaying ethical standards in conducting the company’s business
Value statements serve as a cornerstone for culture-building
Our ethics
program
consists of . . .

32. Fig. 9.1: The Two Culture-Building Roles of a Company’s Core Values and Ethical Standards

33. Fig. 9.2: How the Practice of Stated Core Values and Ethical Principles Positively Impact the Corporate Culture

34. Approaches to Establishing Ethical 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

35. 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

36. Key Approaches to Enforcing Ethical Behavior
Conduct an annual audit to assess
Each manager’s 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 company’s code of ethics

37. 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
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

38. STRATEGIC LEADERSHIP McGraw-Hill/Irwin
© 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 38

39. Numerous Roles of Strategic Leaders
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
Policymaker
Policy Enforcer
Mentor
Head Cheerleader

40. Leadership Activities of the Strategy Implementer
1. Stay on top of what’s happening
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
Carly Fiorina
Hewlett-Packard

41. Role #1: Stay on Top of 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
Michael Dell
Dell Computer

42. Role #2: Put Constructive Pressure on Company to Achieve 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

43. Approaches to Instilling a Spirit of High Performance
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

44. Role #3: Keep Organization Focused on Operating Excellence
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

45. Role #4: Develop Stronger Core Competencies and Capabilities
Top management intervention is required to establish new
Organizational capabilities
Resource strengths and competencies
Senior managers must lead the effort because
Competencies reside in combined efforts, requiring integration
Stronger competencies and capabilities can lead to a competitive edge over rivals

46. Role #5: Exercise Ethics Leadership
Display unequivocal commitment to ethical and moral conduct
Insist upon ethical behavior
Encourage compliance and establish tough consequences for unethical behavior
Make it a duty for employees to
Observe ethical codes
Report ethical violations
Our ethics
code is . . .

47. Roles of a Manager in Enforcing Ethical Behavior
Set an excellent ethical example
Provide training to employees about what is ethical and what isn’t
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 compliance

48. Actions Demonstrating Corporate Citizenship and Social Responsibility
Having “family friendly” employment practices
Operating a safe workplace
Taking special pains to protect environment
Taking an active role in community affairs
Interacting with community officials to minimize impact of
Layoffs or
Hiring large numbers of new employees
Being a generous supporter of charitable causes and projects benefiting society

49. 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 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