This document provides an overview of building a corporate culture that supports strategy execution. It discusses the importance of aligning an organization's culture with its strategy for successful execution. Key points include: - A company's culture can either help or hinder strategy execution depending on how well it is aligned. - Types of cultures include strong vs. weak, unhealthy, and adaptive cultures. - Leaders must work to create a strong fit between strategy and culture by changing aspects of culture that do not support strategy. - Grounding culture in core values and ethics helps build a sustainable culture aligned with strategic goals.

1. 13-1
Corporate Culture
Corporate Culture
and Leadership
and Leadership
13
13
Chapter
Screen graphics created by:
Jana F. Kuzmicki, Ph.D.
Troy State University-Florida and Western Region

2. “
“An organization’s capacity
An organization’s capacity
to execute its strategy depends
to execute its strategy depends
on its “hard” infrastructure – its
on its “hard” infrastructure – its
organization structure and
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

3. 13-3
Chapter Roadmap
Chapter 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

4. BUILD A STRATEGY-
BUILD A STRATEGY-
SUPPORTIVE CORPORATE
SUPPORTIVE CORPORATE
CULTURE
CULTURE
McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.

5. 13-5
The Defining Characteristics
The Defining Characteristics
of a Company’s Culture
of 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

6. 13-6
Features of the Corporate
Features of the Corporate
Culture at Wal-Mart
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. 13-7
Features of the Corporate
Features of the Corporate
Culture at Nordstrom’s
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. 13-8
Features of the Corporate
Features of the Corporate
Culture at General Electric
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. 13-9
Features of the Corporate
Features of the Corporate
Culture at Microsoft
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. 13-10
What to Look for in
What to Look for in
Identifying Corporate Culture
Identifying Corporate Culture
A 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

11. 13-11
Where Does Corporate
Where Does Corporate
Culture 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

12. 13-12
How Is a Company’s
How Is a Company’s
Culture 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 employees
who display cultural ideals
 Visibly rewarding those
who follow cultural norms

13. 13-13
Forces and Factors
Forces and Factors
Causing Culture to Evolve
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

14. 13-14
Culture: Ally or Obstacle
Culture: Ally or Obstacle
to 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

15. 13-15
Why Culture Matters: Benefits
Why Culture Matters: Benefits
of a Tight Culture-Strategy Fit
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 company’s
 Vision
 Performance targets
 Strategy

16. 13-16
Optimal Outcome of a
Optimal Outcome of a
Tight Culture-Strategy Fit
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
Closely aligning corporate culture with
the requirements for proficient strategy execution
the requirements for proficient strategy execution
merits the full attention of senior executives!
merits the full attention of senior executives!

17. 13-17
The Perils of
The Perils of
Strategy-Culture Conflict
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
When a company’s culture is out of sync with what
is needed for strategic success, the culture has to
is needed for strategic success, the culture has to
be changed as rapidly as can be managed!
be changed as rapidly as can be managed!

18. 13-18
Types of Corporate Cultures
Types of Corporate Cultures
Strong vs. Weak Cultures
Unhealthy Cultures
Adaptive Cultures

19. 13-19
Characteristics of
Characteristics of
Strong Culture Companies
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”

20. 13-20
How Does a Culture
How Does a Culture
Come 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 espoused
values, beliefs, and business philosophy
 Practicing what is preached!
 Genuine concern for well-being of
 Customers
 Employees
 Shareholders
Values
Customers
Employees
Shareholders

21. 13-21
Characteristics of
Characteristics of
Weak Culture Companies
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

22. 13-22
Characteristics of
Characteristics of
Unhealthy Cultures
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 – company
personnel discount need to look outside for
 Best practices
 New or better managerial approaches
 Innovative ideas

23. 13-23
Hallmarks of
Hallmarks of
Adaptive Cultures
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

24. 13-24
Dominant Traits
Dominant Traits
of Adaptive Cultures
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

25. 13-25
Creating a Strong Fit
Creating a Strong Fit
Between Strategy and Culture
Between Strategy and Culture
Responsibility of Strategy Maker
Responsibility of Strategy Maker –
–
Select a strategy compatible with the
Select a strategy compatible with the
sacred or unchangeable parts of organization’s
sacred or unchangeable parts of organization’s
prevailing corporate culture
prevailing corporate culture
Responsibility of Strategy Implementer
Responsibility of Strategy Implementer –
–
Once strategy is chosen, change
Once strategy is chosen, change
whatever facets of the corporate
whatever facets of the corporate
culture hinder effective execution
culture hinder effective execution

26. 13-26
Fig. 13.1: Changing
Fig. 13.1: Changing
a Problem Culture
a Problem Culture

27. 13-27
Menu of Culture-
Menu of Culture-
Changing Actions
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

28. 13-28
Menu of Culture-
Menu of Culture-
Changing Actions
Changing Actions (continued)
(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

29. 13-29
Symbolic Culture-
Symbolic Culture-
Changing Actions
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

30. 13-30
Substantive Culture-
Substantive Culture-
Changing Actions
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

31. 13-31
Grounding the Culture in
Grounding the Culture in
Core Values and Ethics
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. 13-32

33. 13-33
Fig. 13.2: The Two Culture-Building Roles of a
Fig. 13.2: The Two Culture-Building Roles of a
Company’s Core Values and Ethical Standards
Company’s Core Values and Ethical Standards

34. 13-34
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 Culture
Principles Positively Impact the Corporate Culture

35. 13-35
Approaches to Establishing
Approaches to Establishing
Ethical Standards
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

36. 13-36
Instilling Values and
Instilling Values and
Ethics in the Culture
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

37. 13-37
Structuring the Ethics Compliance
Structuring the Ethics Compliance
and Enforcement Process
and Enforcement Process
 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

38. 13-38
Structuring the Ethics Compliance
Structuring the Ethics Compliance
and Enforcement Process
and Enforcement 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

39. 13-39
Key Approaches to
Key Approaches to
Enforcing Ethical Behavior
Enforcing Ethical Behavior
 Have mandatory ethics trainings for employees
 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
 Openly encourage employees to report possible infractions via
 Anonymous calls to a hotline or
 Posting to a special company Web site

40. 13-40
Establishing a Strategy-Culture Fit in
Establishing a Strategy-Culture Fit in
Multinational and Global Companies
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

41. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.
STRATEGIC LEADERSHIP
STRATEGIC LEADERSHIP

42. 13-42
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
Numerous Roles
Numerous Roles
of Strategic Leaders
of Strategic Leaders

43. 13-43
Leadership Activities of the
Leadership Activities of the
Strategy Implementer
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

44. 13-44
Role #1: Stay on Top
Role #1: Stay on Top
of What’s Happening
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

45. 13-45
Role #2: Put Constructive Pressure on
Role #2: Put Constructive Pressure on
Company to Achieve Good Results
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

46. 13-46
Approaches to Instilling a
Approaches to Instilling a
Spirit of High Achievement
Spirit of High Achievement
 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

47. 13-47
Role #3: Keep Organization
Role #3: Keep Organization
Focused on Operating Excellence
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

48. 13-48
Role #4: Promote Stronger Core
Role #4: Promote Stronger Core
Competences and Capabilities
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
 Stronger competencies and capabilities
can lead to a competitive edge over rivals

49. 13-49
Role #5: Exercise
Role #5: Exercise
Ethics Leadership
Ethics Leadership
 Set an excellent example in
 Displaying ethical behaviors and
 Demonstrating character and personal
integrity in actions and decisions
 Make it a duty for employees to
 Observe ethical codes
 Report ethical violations
 Encourage compliance and establish tough
consequences for unethical behavior
Our ethics
code is . . .

50. 13-50
Roles of a Manager in
Roles of a Manager in
Enforcing Ethical Behavior
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

51. 13-51
Actions Demonstrating Commitment
Actions Demonstrating Commitment
to a Strategy of Social Responsibility
to a Strategy of Social Responsibility
 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

52. 13-52
Role #6: Lead the Process of
Role #6: Lead the Process of
Making Corrective Adjustments
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