SM Lecture Four : Strategic Purpose, Culture and Strategy

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SM Lecture Four : Strategic Purpose, Culture and Strategy

  1. 1. Strategic Management BUSM 3200 These Lecture Slides summarize the key points covered in the respective chapters in your recommended text; these slides do NOT substitute, at all, the required reading of the assigned chapter from the text. These slides also may contain additional supplementary material extracted from other texts and sources outside your text book.BUSM 3200- Strategic Management (Jan 2013) GDS 4-1
  2. 2. This lecture carries two chapters from the book Chapter 4: Strategic Purpose  Covers issues on purpose of the organization: values, vision, mission, and objectives  Corporate governance  Corporate responsibility and ethical issues  Stakeholder analysis Chapter 5: Culture and Strategy  How the internal dimensions of culture will impact on the efficacy of strategy implementationBUSM 3200- Strategic Management (Jan 2013) GDS 4-2
  3. 3. Chapter 4 : STRATEGIC PURPOSE BUSM 3200- Strategic Management (Jan 2013) GDS 3
  4. 4. Learning outcomes Consider appropriate ways to express the strategic purpose of an organisation in terms of statements of purpose, values, vision, mission or objectives. Identify the components of the governance chain of an organisation. Understand differences in governance structures and the advantages and disadvantages of these. Identify differences in the corporate responsibility stances taken by organisations and how ethical issues relate to strategic purpose. Undertake stakeholder analysis as a means of identifying the influence of different stakeholder groups in terms of their power and interest.BUSM 3200- Strategic Management (Jan 2013) GDS 4-4
  5. 5. Influences on strategic purpose Figure 4.1 Influences on strategic purposeBUSM 3200- Strategic Management (Jan 2013) GDS 4-5
  6. 6. How the direction and objectives are influenced in SM The figure earlier shows that strategic planning an management is a complex process It is not a matter of one person driving the plan; rather it is a network of people and constituents who impact the strategies of the firm There is a key topic on corporate governance- how professionally the firm should be managed (this has became a key issue following the incidences of corporate frauds in the US and beyond) Another key topic you need to know well is that of “ethics” – this has been set in previous exams.BUSM 3200- Strategic Management (Jan 2013) GDS 4-6
  7. 7. Who are the stakeholders? Stakeholders are those individuals or groups who depend on an organisation to fulfil their own goals and on whom, in turn, the organisation depends. - There are both internal and external stakeholder and they could exert significant impact on the way that strategic decisions are made. - The manager need to factor in the likely impact of strategic decisions on the needs and expectations of stakeholders - This is where we get ‘political lobbying’ 4-7BUSM 3200- Strategic
  8. 8. The Strategic Vision, Mission, Values and Objectives provide the direction for strategic planningCopyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 2–8 4-8
  9. 9. Mission statements A mission statement aims to provide employees and stakeholders with clarity about the overriding purpose of the organisation A mission statement should answer the questions: ‘What business are we in?’ ‘How do we make a difference?’ ‘Why do we do this?’BUSM 3200- Strategic Management (Jan 2013) GDS 4-9
  10. 10. The Ideal Mission Statement ♦ Identifies the firm’s product or services. ♦ Specifies the buyer needs it seeks to satisfy. ♦ Identifies the customer groups or markets it is endeavoring to serve. ♦ Specifies its approach to pleasing customers. ♦ Sets the firm apart from its rivals. ♦ Clarifies the firm’s business to stakeholders.Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 2–10 4-10
  11. 11. Vision statements A vision statement is concerned with the desired future state of the organisation; an aspiration that will enthuse, gain commitment and stretch performance. A vision statement should answer the question : ‘What do we want to achieve?’BUSM 3200- Strategic Management (Jan 2013) GDS 4-11
  12. 12. Purpose of the Strategic Vision ♦ Developing a Strategic Vision: ● Delineates management’s future aspirations for the business to its stakeholders. ● Provides direction—“where we are going.” ● Sets out the compelling rationale (strategic soundness) for the firm’s direction. ● Uses distinctive and specific language to set the firm apart from its rivals.Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 2–12 4-12
  13. 13. Vision Statement for UBS We are determined to be the best global financial services company. We focus on wealth and asset management, and on investment banking and securities businesses. We continually earn recognition and trust from clients, shareholders, and staff through our ability to anticipate, learn and shape our future. We share a common ambition to succeed by delivering quality in what we do. Our purpose is to help our clients make financial decisions with confidence. We use our resources to develop effective solutions and services for our clients. We foster a distinctive, meritocratic culture of ambition, performance and learning as this attracts, retains and develops the best talent for our company. By growing both our client and our talent franchises, we add sustainable value for our shareholders. Effective Elements Shortcomings • Focused • Not forward-looking • Feasible • Bland or uninspiring • Desirable • Hard to communicateCopyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 2–13 4-13
  14. 14. Statement of corporate values A statement of corporate values should communicate the underlying and enduring core ‘principles’ that guide an organisation’s strategy and define the way that the organisation should operate. Such core values should remain intact whatever the circumstances and constraints faced by the organisation.BUSM 3200- Strategic Management (Jan 2013) GDS 4-14
  15. 15. Linking Vision and Mission with Core Values ♦ Core Values ● Are the beliefs, traits, and behavioral norms that employees are expected to display in conducting the firm’s business and in pursuing its strategic vision and mission. ● Become an integral part of the firm’s culture and what makes it tick when strongly espoused and supported by top management. ● Matched with the firm’s vision, mission, and strategy contribute to the firm’s business success.Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 2–15 4-15
  16. 16. Objectives Objectives are statements of specific outcomes that are to be achieved. Objectives are frequently expressed in: financial terms (e.g. desired profit levels) market terms (e.g. desired market share) and increasingly social terms (e.g. corporate social responsibility targets)BUSM 3200- Strategic Management (Jan 2013) GDS 4-16
  17. 17. SETTING OBJECTIVES ♦ The Purposes of Setting Objectives: ● To convert the vision and mission into specific, measurable, timely performance targets. ● To focus efforts and align actions throughout the organization. ● To serve as yardsticks for tracking a firm’s performance and progress. ● To provide motivation and inspire employees to greater levels of effort.Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 2–17 4-17
  18. 18. Issues in setting objectives Do objectives need to be specific and quantified targets? The need to identify core objectives that are crucial for survival. The need for a hierarchy of objectives that cascade down the organisation and define specific objectives at each level. Objective and control: objectives become the basis for establishing controls at the end of the planning cycle.BUSM 3200- Strategic Management (Jan 2013) GDS 4-18
  19. 19. Hierarchy of Objectives Hierarchy of objectives: the objectives set at a higher level will cascade to objectives to be set at divisional and business function levels Corporate level objective: ROCE SBU level objective: ROCE and Sales/Market Share Functional Objective: example Productivity or Quality TargetsBUSM 3200- Strategic Management (Jan 2013) GDS 4-19
  20. 20. THE TWO ESSENTIAL KINDS OF OBJECTIVES TO SET♦ Financial Objectives ♦ Strategic Objectives ● Communicate top ● Are related to a firm’s management’s targets for marketing standing and financial performance. competitive vitality. ● Are focused internally on ● Are focused externally the firm’s operations and on competition vis-à- activities. vis the firm’s rivals.Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 2–20 4-20
  21. 21. SETTING FINANCIAL OBJECTIVES Examples of Financial Objectives♦ An x percent increase in annual revenues♦ Annual increases in after-tax profits of x percent♦ Annual increases in earnings per share of x percent♦ Annual dividend increases of x percent♦ Profit margins of x percent♦ An x percent return on capital employed (ROCE) or return on shareholders‘ equity investment (ROE)♦ Increased shareholder value—in the form of an upward-trending stock price♦ Bond and credit ratings of x♦ Internal cash flows of x dollars to fund new capital investmentCopyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 2–21 4-21
  22. 22. SETTING STRATEGIC OBJECTIVES Examples of Strategic Objectives♦ Winning an x percent market share♦ Achieving lower overall costs than rivals♦ Overtaking key competitors on product performance or quality or customer service♦ Deriving x percent of revenues from the sale of new products introduced within the next five years♦ Having broader or deeper technological capabilities than rivals♦ Having a wider product line than rivals♦ Having a better-known or more powerful brand name than rivals♦ Having stronger national or global sales and distribution capabilities than rivals♦ Consistently getting new or improved products and services to market ahead of rivalsCopyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 2–22 4-22
  23. 23. Corporate governance Corporate governance is concerned with the structures and systems of control by which managers are held accountable to those who have a legitimate stake in an organisation.BUSM 3200- Strategic Management (Jan 2013) GDS 4-23
  24. 24. Achieving Effective Corporate Governance ♦ A strong, independent board of directors: ● Is well informed about the firm’s performance. ● Guides and judges the CEO and other executives. ● Can curb management actions the board believes are inappropriate or unduly risky. ● Can certify to shareholders that the CEO is doing what the board expects. ● Provides insight and advice to top management. ● Is actively involved in debating the pros and cons of key strategic decisions and actions.Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 2–24 4-24
  25. 25. The growing importance of governance: Reasons 1. The separation of ownership and management control – defining different roles in governance. 2. Corporate failures and scandals (e.g. Enron) – focussing attention on governance issues. 3. Increased accountability to wider stakeholder interests and the need for corporate social responsibility (e.g. green issues).BUSM 3200- Strategic Management (Jan 2013) GDS 4-25
  26. 26. The governance chain The chain shows the roles and relationships between different groups involved in the governance of the organization Figure 4.2 The chain of corporate governance: typical reporting structures Source: Adapted from David Pitt-Watson, Hermes Fund ManagementBUSM 3200- Strategic Management (Jan 2013) GDS 4-26
  27. 27. The principal-agent model Governance can be seen in terms of the principal-agent model Principals pay agents to act on their behalf (e.g. beneficiaries/trustees pay investment managers to manage funds, Boards of Directors pay executives to run a company). Agents may act in their own self interest.BUSM 3200- Strategic Management (Jan 2013) GDS 4-27
  28. 28. Issues in governance (1) The key challenge is to align the interests of agents with those of the principals. Misalignment of incentives and control – e.g. beneficiaries may require long term growth but executives may be seeking short term profit. Responsibility to whom – should executives pursue solely shareholder aims or serve a wider constituency of stakeholders? Key issue in debate on who the managers are really accountable to. There are too many stakeholders to please!BUSM 3200- Strategic Management (Jan 2013) GDS 4-28
  29. 29. Issues in governance (2) Who are the shareholders – should boards respond to the demands of institutional investment managers or the needs of the ultimate beneficiaries? The role of institutional investors – should they actively intervene in strategy? Establishing the specific role of the board – in particular the role of non-executive directors. Scrutiny and control – statutory requirements and voluntary codes to regulate boards.BUSM 3200- Strategic Management (Jan 2013) GDS 4-29
  30. 30. Different governance systems Table 4.1 Benefits and disadvantages of governance systemsBUSM 3200- Strategic Management (Jan 2013) GDS 4-30
  31. 31. The role of boards (pg 133) Operate ‘independently’ of the management – the role of non-executives is crucial. Be competent to scrutinise the activities of managers. Have time to do their job properly. Behave appropriately given expectations for trust, role fluidity, collective responsibility, and performance.BUSM 3200- Strategic Management (Jan 2013) GDS 4-31
  32. 32. Corporate social responsibility Corporate social responsibility (CSR) is the commitment by organisations to ‘behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society at large’.1 1 World Business Council for Sustainable Development.BUSM 3200- Strategic Management (Jan 2013) GDS 4-32
  33. 33. Corporate social responsibility stances Table 4.2 Corporate social responsibility stancesBUSM 3200- Strategic Management (Jan 2013) GDS 4-33
  34. 34. Questions of corporate social responsibility – internal aspects (1) Table 4.3 Some questions of corporate social responsibilityBUSM 3200- Strategic Management (Jan 2013) GDS 4-34
  35. 35. Questions of corporate social responsibility – external aspects (2) Table 4.3 Some questions of corporate social responsibility (Continued) 35BUSM 3200- Strategic Management (Jan 2013) GDS
  36. 36. The ethics of individuals and managers Ethical issues have to be faced at the individual level :  The responsibility of an individual who believes that the strategy of the organisation is unethical – resign, ignore it or take action.  ‘Whistle-blowing’ - divulging information to the authorities or media about an organisation if wrong doing is suspected.BUSM 3200- Strategic Management (Jan 2013) GDS 4-36
  37. 37. Texas instruments’ guidelines Is the action legal? . . . If no, stop immediately. Does it comply with our values? . . . If it does not, stop. If you do it would you feel bad? . . . Ask your own conscience if you can live with it. How would this look in the newspaper? . . . Ask if this goes public tomorrow would you do it today? If you know it’s wrong . . . don’t do it. If you are not sure . . . ask; and keep asking until you get an answer.BUSM 3200- Strategic Management (Jan 2013) GDS 4-37
  38. 38. Stakeholders of a large organisation Figure 4.3 Stakeholders of a large organization Source: Adapted from R.E. Freeman, Strategic Management: A Stakeholder Approach, Pitman, 1984. Copyright 1984 by R. Edward Freeman.BUSM 3200- Strategic Management (Jan 2013) GDS 4-38
  39. 39. Stakeholder conflicts of expectations Table 4.4 Some common conflicts of expectationsBUSM 3200- Strategic Management (Jan 2013) GDS 4-39
  40. 40. Stakeholder mapping Stakeholder mapping identifies stakeholder expectations and power and helps in understanding political priorities. (remember we mentioned earlier on that strategic decision making is often a ‘political process’. Go back to Chapter One Appendix and review the Strategy Lenses. This will be related to the view that ‘Strategy is a Discourse’ –see Table C.ii)BUSM 3200- Strategic Management (Jan 2013) GDS 4-40
  41. 41. Stakeholder mapping: the power/interest matrix Employees Inside each cell we will indicate which Suppliers stakeholder group will be placed in terms Financial Community of their interest and power (see Customers figure 4.3) Figure 4.4 Stakeholder mapping: the power/interest matrix Source: Adapted from A. Mendelow, Proceedings of the Second International Conference on Information Systems, Cambridge, MA, 1986BUSM 3200- Strategic Management (Jan 2013) GDS 4-41
  42. 42. Stakeholder mapping issues (pg 143) Determining purpose and strategy – whose expectations need to be prioritised? Do the actual levels of interest and power reflect the corporate governance framework? Who are the key blockers and facilitators of strategy? Is it desirable to try to reposition certain stakeholders? Can the level of interest or power of key stakeholders be maintained? Will stakeholder positions shift according to the issue/strategy being considered.BUSM 3200- Strategic Management (Jan 2013) GDS 4-42
  43. 43. Power Power is the ability of individuals or groups to persuade, induce or coerce others into following certain courses of action. (you have covered the topic of power when you studied OB. How do you think power impacts the internal process of strategic decision making?)BUSM 3200- Strategic Management (Jan 2013) GDS 4-43
  44. 44. Sources of power Table 4.5 Sources and indicators of powerBUSM 3200- Strategic Management (Jan 2013) GDS 4-44
  45. 45. Indicators of power Table 4.5 Sources and indicators of power (Continued)BUSM 3200- Strategic Management (Jan 2013) GDS 4-45
  46. 46. Key debate Read page 147 Three different views on the purpose of a business: 1. Professor Milton Friedman and profit maximization 2. Professor Charles Handy stakeholder view 3. New capitalists’ argument : “Society and share owners are becoming one and the same.”BUSM 3200- Strategic Management (Jan 2013) GDS 4-46
  47. 47. Summary (1) An important managerial task is to decide how the organisation should express its strategic purpose through statements of mission, vision, values or objectives. The purpose of an organisation will be influenced by the expectations of its stakeholders. The influence of some key stakeholders is represented formally within the governance structure of an organisation. This can be represented in terms of a governance chain, showing the links between ultimate beneficiaries and the managers of an organisation.BUSM 3200- Strategic Management (Jan 2013) GDS 4-47
  48. 48. Summary (2) There are two generic governance structures systems: the shareholder model and the stakeholder model though there are variations of these internationally. Organisations adopt different stances on corporate social responsibility depending on how they perceive their role in society. Individual managers may face ethical dilemmas relating to the purpose of their organisation or actions it takes. Different stakeholders exercise different influence on organisational purpose and strategy, dependent on the extent of their power and interest. Managers can assess the influence of different stakeholder groups through stakeholder analysis.BUSM 3200- Strategic Management (Jan 2013) GDS 4-48
  49. 49. Chapter 5 : CULTURE AND STRATEGY BUSM 3200- Strategic Management (Jan 2013) GDS 49 4-49
  50. 50. Learning outcomes Identify organizations that have experienced strategic drift and the symptoms of strategic drift. Analyze how history influences the strategic position of organizations. Analyse the influence of an organisation‘s culture on its strategy using the cultural web. Recognise the importance of strategists questioning the taken–for–granted aspects of a culture.BUSM 3200- Strategic Management (Jan 2013) GDS 4-50
  51. 51. Culture and strategy – key issues Figure 5.1 The influence of history and cultureBUSM 3200- Strategic Management (Jan 2013) GDS 4-51
  52. 52. Strategic drift Strategic drift is the tendency for strategies to develop incrementally on the basis of historical and cultural influences but fail to keep pace with a changing environment. More will be covered in Chapter 11 later.BUSM 3200- Strategic Management (Jan 2013) GDS 4-52
  53. 53. Strategic drift Figure 5.2 Strategic driftBUSM 3200- Strategic Management (Jan 2013) GDS 4-53
  54. 54. Phase 1: Incremental change strategic drift During this phase there is a tendency for strategies to develop on the basis of what the organization has done in the past- especially if they have been successful. Strategy remains relatively unchanged. Three reasons: 1. Gradual change in alignment with environmental change. 2. Building on successful strategies used in the past (built around core competences) 3. Making changes based on experimentation around a theme (incremental change built on a successful formula).This approach is called Logical IncrementalismBUSM 3200- Strategic Management (Jan 2013) GDS 4-54
  55. 55. Phase 2: The tendency towards strategic drift Strategies fail to keep pace with environmental change because : 1. Steady as you go – reluctance to accept that change requires moving away from strategies that have been successful. 2. Building on the familiar – uncertainty of change is met with a tendency to stick to the familiar. 3. Core rigidities – capabilities that are taken for granted and deeply ingrained in routines are difficult to change even when they are no longer suitable.BUSM 3200- Strategic Management (Jan 2013) GDS 4-55
  56. 56. The tendency towards strategic drift (2) 4. Relationships become shackles – organisations become reluctant to disturb relationships with customers, suppliers or the workforce even if they need to change. 5. Lagged performance effects – the financial performance of the organisation may hold up initially (e.g. due to loyal customers or cost cutting) masking the need for change.BUSM 3200- Strategic Management (Jan 2013) GDS 4-56
  57. 57. Phase 3: A period of flux As performance declines and the organisation loses track of the environment then a period of Flux occurs typified by: 1. Strategies that change, but in no clear direction. 2. Top management conflict and managerial changes. 3. Internal disagreement on the ‗right‘ strategies. 4. Declining performance and morale. 5. Customers becoming alienated.BUSM 3200- Strategic Management (Jan 2013) GDS 4-57
  58. 58. Phase 4: Transformational change or death As performance continues to deteriorate the outcome is likely to be :  The organisation dies (e.g. goes bankrupt or into receivership).  The organisation is taken over (and perhaps radically changed by new owners). The organisation implements transformational change – multiple, rapid and fundamental changes.BUSM 3200- Strategic Management (Jan 2013) GDS 4-58
  59. 59. Why history is important? Recognizing that organizational experience becomes deeply embedded in behavior. Taking cognizance of the history of the company has 4 main benefits: 1. Avoiding recency bias – learning from the past. 2. Asking ‗what if‘ questions based on past experience. 3. History as legitimisation – past success can be used as evidence to support specific strategies. 4. Innovation based on historic capabilities which can be adapted and transferred.BUSM 3200- Strategic Management (Jan 2013) GDS 4-59
  60. 60. Path dependency Path dependency is where early events and decisions establish ‗policy paths‘ that have lasting effects on subsequent events and decisions. It is a way of thinking about how historical events and decisions, within and around the organization, have an effect on that organization – either positive or in negative waysBUSM 3200- Strategic Management (Jan 2013) GDS 4-60
  61. 61. Path dependency and lock-in Figure 5.3 Path dependency and lock-inBUSM 3200- Strategic Management (Jan 2013) GDS 4-61
  62. 62. The impact of path dependency Building strategy around the path- dependent capabilities that have been successful in the past. Path creation – changing strategies in a way that is built on the past and acceptable to key players. Management style may be rooted in and evolved from the early style adopted by the founder(s).BUSM 3200- Strategic Management (Jan 2013) GDS 4-62
  63. 63. Methods of historical analysis Chronological Cyclical analysis influence Anchor Historical points narratives Read page 167-8BUSM 3200- Strategic 63
  64. 64. Organisational culture Organisational culture is the taken-for- granted assumptions and behaviours that make sense of people‘s organisational contextBUSM 3200- Strategic Management (Jan 2013) GDS 4-64
  65. 65. Key Features of a Firm’s Corporate Culture Values, principles, Management Atmosphere and How managers and and ethical practices and spirit embodied employees interact standards organizational in the firm‘s work and relate to one in actual use polices climate another Features of a Corporate Culture Strength of peer Actions and Traditions and How the firm pressure to behaviors stories and ―how treats its conform and encouraged we do things stakeholders observe norms and rewarded around here‖Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 12–65 4-65
  66. 66. Cultural frames of reference Figure 5.4 Cultural frames of referenceBUSM 3200- Strategic Management (Jan 2013) GDS 4-66
  67. 67. National and regional cultures Work of Hofstede (you will remember him if you studied International Business or Global Marketing – cultural dimensions) Also read up Illustration 5.3 : differences in management between Chinese and Western managersBUSM 3200- Strategic Management (Jan 2013) GDS 4-67
  68. 68. The organisational field An organisational field is a community of organisations that interact more frequently with one another than with those outside the field and that have developed a shared meaning system.BUSM 3200- Strategic Management (Jan 2013) GDS 4-68
  69. 69. Recipes A recipe is a set of assumptions, norms and routines held in common within an organisational field about the appropriate purposes and strategies of field members. In effect it is ‘shared wisdom’.BUSM 3200- Strategic Management (Jan 2013) GDS 4-69
  70. 70. Legitimacy Legitimacy is concerned with meeting the expectations within an organisational field in terms of assumptions, behaviours and strategies. Strategies can be shaped by the need for legitimacy in several ways:  Regulation  Normative expectations  The recipeBUSM 3200- Strategic Management (Jan 2013) GDS 4-70
  71. 71. Organizational Culture in four layers Figure 5.5 Culture in four layersBUSM 3200- Strategic Management (Jan 2013) GDS 4-71
  72. 72. The paradigm The paradigm is the set of assumptions held in common and taken for granted in an organisation. The paradigm:  is built on collective experience  informs what people in the organisation do  influences how organisations respond to change.BUSM 3200- Strategic Management (Jan 2013) GDS 4-72
  73. 73. Values A key aspect of culture relates to the values that the organization upholds In chapter 4 , we considered issues of ethical standards Ethics is often impacted by the organization culture and the values it subscribes to.BUSM 3200- Strategic Management (Jan 2013) GDS 4-73
  74. 74. The Two Culture-Building Roles of a Company‘s Core Values and Ethical StandardsCopyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 12–74 4-74
  75. 75. Transforming Core Values and Ethical Standards into Cultural Norms ♦ Recruit and hire applicants with values and ethics compatible to those of the firm. ♦ Incorporate the values statement and the code of ethics into orientation and training programs. ♦ Have senior executives frequently reiterate and stress the firm’s values and ethical principles. ♦ Use values statements and codes of ethics as benchmarks for the firm’s polices and practices.Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 12–75 4-75
  76. 76. Transforming Core Values and Ethical Standards into Cultural Norms (cont’d) ♦ Use core values and ethical principles when evaluating each person’s job performance. ♦ Encourage all employees to help enforce the observance of core values and ethical standards. ♦ Periodically have ceremonial occasions to recognize individuals and groups who display the firm’s values and ethical principles. ♦ Institute strict ethics enforcement procedures.Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 12–76 4-76
  77. 77. Culture‘s influence on strategy development Figure 5.6 Culture’s influence on strategy development Source: Adapted from P. Gringer and J.-C. Spender, Turnaround: Managerial Recipes for Strategic Success, Associated Business Press, 1979, p. 203BUSM 3200- Strategic Management (Jan 2013) GDS 4-77
  78. 78. The cultural web The cultural web shows the behavioural, physical and symbolic manifestations of a culture that inform and are informed by the taken-for-granted assumptions, or paradigm, of an organisationBUSM 3200- Strategic Management (Jan 2013) GDS 4-78
  79. 79. The cultural web of an organisation (1) Figure 5.7 The cultural web of an organizationBUSM 3200- Strategic Management (Jan 2013) GDS 4-79
  80. 80. The cultural web of an organisation (2) – stories What core beliefs do the stories reflect? What stories are commonly told e.g. to newcomers How do these stories reflect core assumptions and beliefs? What norms do the mavericks deviate from? Stories Tend to be about heroes, villains mavericks, successes and Paradigm disasters.BUSM 3200- Strategic Management (Jan 2013) GDS 4-80
  81. 81. The cultural web of an organisation (3) – symbols Symbols are objects, events, acts or people that convey, maintain or create meaning over and above their functional purpose. What objects, people or events do people in the organization particularly identify with? What are these related to in the history of the organization? Symbols What aspects of strategy are highlighted in publicity? ParadigmBUSM 3200- Strategic Management (Jan 2013) GDS 4-81
  82. 82. The cultural web of an organisation (4) – power structures Where does power reside? Who makes things happen? Indicators include:  status  claim on resources Paradigm Power  symbols of power structuresBUSM 3200- Strategic Management (Jan 2013) GDS 4-82
  83. 83. The cultural web of an organisation (5) – organisation structure How formal/informal are the structures? Do structures encourage collaboration or competition? What types of power structure do they support? Paradigm Organization StructureBUSM 3200- Strategic Management (Jan 2013) GDS 4-83
  84. 84. The cultural web of an organisation (6) – control systems What is most closely monitored/controlled? Is emphasis on reward or punishment? Are controls rooted in history or current strategies? Are there many/few controls? Paradigm Control systemsBUSM 3200- Strategic Management (Jan 2013) GDS 4-84
  85. 85. The cultural web of an organisation (7) – routines and rituals Which routines are emphasized? Which are embedded in history? What behavior do routines encourage? What are the key rituals? What assumptions and core beliefs do they reflect? What do training programmed Rituals/ routines emphasize? How easy are routines/rituals to change? ParadigmBUSM 3200- Strategic Management (Jan 2013) GDS 4-85
  86. 86. Illustration 5.5: cultural web of a law firm (page 179)BUSM 3200- Strategic Management (Jan 2013) GDS 4-86
  87. 87. Figure 5.8 : The cultural web- some useful questionsBUSM 3200- Strategic Management (Jan 2013) GDS 4-87
  88. 88. Impact of culture on strategic management Read page 181 Strategic capabilities (Chap 3) – culture of the organization is considered a capability (or constraint) Strategy development- culture affects the manner in which future strategy is crafted Managing strategic change- would culture facilitate or hinder desired change? Leadership and management styleBUSM 3200- Strategic Management (Jan 2013) GDS 4-88
  89. 89. Company Cultures Can Be Strongly or Weakly Embedded ♦ Strong-Culture Firm ♦ Weak-Culture Firm ● Has deeply rooted ● Lacks values and widely-shared values, principles that are behavioral norms, and consistently preached operating approaches. or widely shared. ● Insists that its values ● Has few or no and principles be traditions, beliefs, reflected in the decisions values, common and actions taken by all bonds, or behavioral company personnel. norms.Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 12–89 4-89
  90. 90. Why Corporate Cultures Matter to the Strategy Execution Process ♦ A culture well matched to the requirements of the strategy execution effort focuses the attention of employees on what is most important to this effort. ♦ Culture-induced peer pressure induces personnel to do things in a manner that aids good strategy execution. ♦ A culture consistent with the requirements for good strategy execution can energize employees, deepen their commitment to execute the strategy, and enhance worker productivity.Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 12–90 4-90
  91. 91. Healthy Cultures That Aid Good Strategy Execution Performance Good Strategy Execution High-Performance Adaptive Cultures Cultures Commitment to Willingness to accept achieving stretch change and take on objectives and challenges accountabilityCopyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 12–91 4-91
  92. 92. Unhealthy Cultures That Impede Good Strategy Execution Change-resistant Insular, inwardly cultures focused cultures Unhealthy Cultures Politicized Unethical and greed- cultures driven cultures Incompatible SubculturesCopyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 12–92 4-92
  93. 93. Summary (1) The history and culture of an organisation may contribute to its strategic capabilities, but may also give rise to strategic drift as its strategy develops incrementally on the basis of such influences and fails to keep pace with a changing environment. Historical, path-dependent processes play a significant part in the success or failure of an organisation and need to be understood by managers. There are historical analyses that can be conducted to help uncover these influences.BUSM 3200- Strategic Management (Jan 2013) GDS 4-93
  94. 94. Summary (2) Cultural and institutional influences both inform and constrain the strategic development of organisations. Organisational culture is the basic assumptions and beliefs that are shared by members of an organisation, that operate unconsciously and define in a basic taken-for-granted fashion an organisation‘s view of itself and its environment. An understanding of the culture of an organisation and its relationship to organisational strategy can be gained by using the cultural web.BUSM 3200- Strategic Management (Jan 2013) GDS 4-94
  95. 95. PRACTICE ESSAY QUESTIONS IMPORTANT NOTE: →  These questions are provided for your reference only – they are only INDICATIVE of the standard of questions you might expect in the final exam.  DO NOT use these questions to “spot”  The RMIT examiner will post advise on the exam on the Learning Hub closer to the exam; you are required to pay attention to that advise  The questions here show the range of topics that could be tested from this lecture; they are NOT exhaustive  To score a high grade it is important to LINK the theory to applications and examples. Where from?  You have been assigned specific cases to read from the text. Each case study will show you the kinds of strategic decisions the case company needs to make. You can draw from these examples.  You have selected a case company for your project; you may use examples from there.  You are supposed to read widely from the business press about local, regional and international companies strategies. You can use examples from there as well.BUSM 3200- Strategic Management (Jan 2013) GDS 6-95
  96. 96. Sample Essay Question Describe the concept of corporate social responsibility and the four corporate stances on social responsibility. Explain the rationale under each stance and the leadership and stakeholder relationship required for each of these four stances.BUSM 3200- Strategic Management (Jan 2013) GDS 4-96
  97. 97. Sample essay question: Discuss the benefits a firm may gain by formulating and implementing strategic management with an ethical approach. Use examples from the cases studied in this course or other examples from your reading of this subject to illustrate your answer.BUSM 3200- Strategic Management (Jan 2013) GDS 1-97
  98. 98. Sample Essay Question Stakeholder mapping is a useful technique for stakeholder management. Describe the process of stakeholder mapping and explain how its outcomes can help in understanding the political priorities in managing its relationships with stakeholders.BUSM 3200- Strategic Management (Jan 2013) GDS 4-98
  99. 99. Sample Essay Question Describe the concept of organizational culture. Why organizational culture can be considered an organization’s strategic capability (hint: describe what criteria a resource or competence needs to meet to become a strategic capability)? Provide an example to justify your argumentBUSM 3200- Strategic Management (Jan 2013) GDS 4-99
  100. 100. Sample Essay Question Describe the concepts of organizational culture and the cultural web. Explain how these concepts can influence the process of strategic management. Give examples to support your argument.BUSM 3200- Strategic Management (Jan 2013) GDS 4-100

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