Strategic Management

1. McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 12: Corporate Culture and
Leadership: Keys to Good Strategy
Execution
Screen graphics created by:
Jana F. Kuzmicki, Ph.D.
Troy University

2. 12-2
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.

3. 12-3
Chapter Roadmap
 Instilling a Corporate Culture that Promotes
Good Strategy Execution
 Identifying the Key Features of a Company’s Corporate
Culture
 Strong versus Weak Cultures
 Unhealthy Cultures
 High-Performance Cultures
 Adaptive Cultures
 Culture: Ally or Obstacle to Strategy Execution?
 Changing a Problem Culture
 Grounding the Culture in Core Values and Ethics
 Establishing 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

4. INSTILLING A STRATEGY-
SUPPORTIVE CORPORATE
CULTURE
12-4

5. 12-5
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

6. 12-6
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 Features
of Corporate Culture

7. 12-7
 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 Corporate
Culture Come From?

8. 12-8
 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
How Is a Company’s Culture Perpetuated?

9. 12-9
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

10. 12-10
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

11. Types of Corporate Cultures
Strong vs. Weak Cultures
Unhealthy Cultures
High-Performance Cultures
Adaptive Cultures
12-11

12. 12-12
 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”
Characteristics of
Strong Culture Companies

13. 12-13
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 espoused
values, beliefs, and business philosophy
 Practicing what is preached!
 Genuine concern for well-being of
 Customers
 Employees
 Shareholders
Values
Customers
Employees
Shareholders

14. 12-14
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

15. 12-15
 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

16. 12-16
 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 of
High-Performance Cultures

17. 12-17
 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
Hallmarks of Adaptive Cultures

18. 12-18
 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 attitudes
and behaviors impede
good strategy execution is a
huge obstacle to be overcome
Culture: Ally or Obstacle
to Strategy Execution?

19. 12-19
 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 behaviors
that facilitate strategy execution promotes
strong employee commitment to the company’s
 Vision
 Performance targets
 Strategy
Why Culture Matters: Benefits
of a Tight Culture-Strategy Fit

20. 12-20
 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
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!

21. 12-21
 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?
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!

22. 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
12-22

23. Figure 12.1: Changing a Problem Culture
12-23

24. 12-24
 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
 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

25. 12-25
 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 new
positions carefully, hiring only those
who 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

26. 12-26
 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 procedures
in ways to drive cultural change
Substantive Culture-
Changing Actions (continued)

27. 12-27
 Lead by example – Walk the talk
 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
Symbolic Culture-Changing Actions

28. 12-28
 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
Grounding the Culture in
Core Values and Ethics

29. Figure 12.2: The Two Culture-Building Roles of
a Company’s Core Values and Ethical Standards
12-29

30. 12-30
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

31. 12-31
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 ceremonies
to recognize individuals and
groups who display the values
 Institute ethics enforcement procedures

32. Figure 12.3: The Benefits of Cultural Norms Strongly
Grounded in Core Values and Ethical Principles
12-32

33. 12-33
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

34. Leading the
Strategy-Execution Process
12-34

35. 12-35
Leading the Strategy-Execution Process
 Top executives must be out
front personally
 Leading the process and
 Driving the pace of progress
 Entire management team
must 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

36. 12-36
Key Roles in Leading the
Strategy-Execution Process
 Be out in the field, seeing
how 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

37. 12-37
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

38. 12-38
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 corrective
actions hinges on
 Thorough analysis of the situation
 Exercise of good business judgment in deciding
on specific actions
 Good implementation of the corrective actions