CHAPTER 12 Corporate Culture and Leadership: Keys to Good Strategy Execution LEARNING OBJECTIVES THIS CHAPTER WILL HELP YOU UNDERSTAND: The key features of a company’s corporate culture and the role of a company’s core values and ethical standards in building corporate culture How and why a company’s culture can aid the drive for proficient strategy execution The kinds of actions management can take to change a problem corporate culture What constitutes effective managerial leadership in achieving superior strategy execution © McGraw-Hill Education. INSTILLING A CORPORATE CULTURE CONDUCIVE TO GOOD STRATEGY EXECUTION Corporate culture: Is the meshing of shared values, beliefs, business principles, and traditions that imbues a firm’s operating style, behavioral norms, ingrained attitudes, and work atmosphere Is important because it influences the firm’s actions and approaches to conducting business © McGraw-Hill Education. Core Concept (1 of 3) Corporate culture refers to the shared values, ingrained attitudes, core beliefs and company traditions that determine norms of behavior, accepted work practices, and styles of operating. © McGraw-Hill Education. Strong Guiding Principles Drive the High-Performance Culture at Epic What actions does Epic take to foster the high-performance culture that is so important to its success? How do Epic’s 10 Commandments relate to its stated principles? Is there a relationship between development of unique cultures and the subsequent growth and success of focused or niche businesses? © McGraw-Hill Education. THE HIGH-PERFORMANCE CULTURE AT EPIC Epic’s 10 Commandments Do not go public. Do not be acquired. Software must work. Expectations = reality. Keep commitments. Focus on competency. Do not tolerate mediocrity. Have standards. Be fair to all. Have courage. What you put up with is what you stand for. Teach philosophy and culture. Be frugal. Do not take on debt for operations. Epic’s Principles Make our products a joy to use. Have fun with customers. Design in collaboration with users. Make it easy for users to do the right thing. Improve the patient’s health and healthcare experience. Generalize to benefit more. Follow processes. Find root causes. Fix processes. Dissent when you disagree; once decided, support. Do what is difficult for us if it makes things easier for our users. Escalate problems at the start, not when all hell breaks loose. © McGraw-Hill Education. IDENTIFYING THE KEY FEATURES OF A COMPANY’S CORPORATE CULTURE Strength of peer pressure to conform and observe norms Actions and behaviors encouraged and rewarded Traditions and stories and “how we do things around here” How the firm treats its stakeholders Features of a Corporate Culture Values, principles, and ethical standards in actual use Management practices and organizational policies Atmosphere and spirit embodied in the firm’s work climate How managers and employees interact and relate to one another Jump.

1. CHAPTER 12
Corporate Culture and Leadership: Keys to Good Strategy
Execution
LEARNING OBJECTIVES
THIS CHAPTER WILL HELP YOU UNDERSTAND:
The key features of a company’s corporate culture and the role
of a company’s core values and ethical standards in building
corporate culture
How and why a company’s culture can aid the drive for
proficient strategy execution
The kinds of actions management can take to change a problem
corporate culture
What constitutes effective managerial leadership in achieving
superior strategy execution
© McGraw-Hill Education.
INSTILLING A CORPORATE CULTURE CONDUCIVE TO
GOOD STRATEGY EXECUTION
Corporate culture:
Is the meshing of shared values, beliefs, business principles,
and traditions that imbues a firm’s operating style, behavioral
norms, ingrained attitudes, and work atmosphere
Is important because it influences the firm’s actions and
approaches to conducting business
© McGraw-Hill Education.

2. Core Concept (1 of 3)
Corporate culture refers to the shared values, ingrained
attitudes, core beliefs and company traditions that determine
norms of behavior, accepted work practices, and styles of
operating.
© McGraw-Hill Education.
Strong Guiding Principles Drive the High-Performance
Culture at Epic
What actions does Epic take to foster the high-performance
culture that is so important to its success?
How do Epic’s 10 Commandments relate to its stated
principles?
Is there a relationship between development of unique cultures
and the subsequent growth and success of focused or niche
businesses?
© McGraw-Hill Education.
THE HIGH-PERFORMANCE CULTURE AT EPIC
Epic’s 10 Commandments
Do not go public.
Do not be acquired.
Software must work.
Expectations = reality.
Keep commitments.
Focus on competency. Do not tolerate mediocrity.
Have standards. Be fair to all.
Have courage. What you put up with is what you stand for.
Teach philosophy and culture.
Be frugal. Do not take on debt for operations.

3. Epic’s Principles
Make our products a joy to use.
Have fun with customers.
Design in collaboration with users.
Make it easy for users to do the right thing.
Improve the patient’s health and healthcare experience.
Generalize to benefit more.
Follow processes. Find root causes. Fix processes.
Dissent when you disagree; once decided, support.
Do what is difficult for us if it makes things easier for our
users.
Escalate problems at the start, not when all hell breaks loose.
© McGraw-Hill Education.
IDENTIFYING THE KEY FEATURES OF A COMPANY’S
CORPORATE CULTURE
Strength of peer pressure to
conform and
observe norms
Actions and behaviors encouraged
and rewarded
Traditions and
stories and “how
we do things
around here”
How the firm
treats its
stakeholders
Features of a Corporate Culture
Values, principles, and ethical
standards
in actual use
Management practices and organizational

4. policies
Atmosphere and spirit embodied
in the firm’s work climate
How managers and employees interact and relate to one another
Jump to Appendix 1 long image description
© McGraw-Hill Education.
STRATEGIC MANAGEMENT PRINCIPLE (1 of 5)
A company’s culture is grounded in and shaped by its core
values and ethical standards.
© McGraw-Hill Education.
FIGURE 12.1 The Two Culture-Building Roles of a
Company’s Core Values and Ethical Standards
Jump to Appendix 2 long image description
© McGraw-Hill Education.
EMBEDDING CULTURAL NORMS IN THE ORGANIZATION
AND PERPETUATING THE CULTURE (1 of 2)
Screen applicants and hire those who will mesh well with the
culture
Incorporate discussions of the firm’s culture and its behavioral
norms into orientation programs for new employees and training
courses for managers and employees
Have senior executives frequently reiterate the importance and
role of the firm’s values and ethical principles at the firm’s
events and in internal communications to employees
Expect managers at all levels to be cultural role models and

5. exhibit advocated cultural norms in their own behavior
© McGraw-Hill Education.
EMBEDDING CULTURAL NORMS IN THE ORGANIZATION
AND PERPETUATING THE CULTURE (2 of 2)
Make the display of cultural norms a factor in evaluating each
person’s job performance, granting compensation increases, and
deciding who to promote
Stress that line managers all the way down to first-level
supervisors give ongoing attention to explaining the desired
cultural traits and behaviors in their areas and clarifying why
they are important
Encourage company personnel to exert strong peer pressure on
co-workers to conform to expected cultural norms
Hold periodic ceremonies to honor people who excel in
displaying the company values and ethical principles
© McGraw-Hill Education.
Strategic Management Principle (2 of 5)
A company’s values statement and code of ethics communicate
expectations of how employees should conduct themselves in
the workplace.
To deeply ingrain the stated core values and high ethical
standards, firms must turn them into strictly enforced cultural
norms.
© McGraw-Hill Education.
FORCES THAT CAUSE A FIRM’S CULTURE TO EVOLVE
New challenges in

6. the marketplace
Merger or acquisition
of another firm
Shifting internal
conditions
Causes of Cultural Change
Diversification into
new businesses
New or revolutionary technologies
Rapid growth
of the firm
Jump to Appendix 3 long image description
© McGraw-Hill Education.
STRONG VERSUS WEAK CULTURES
Strong-culture firm
Has deeply rooted widely-shared values, behavioral norms, and
operating approaches
Insists that its values and principles be reflected in the
decisions and actions taken by all company personnel
Weak-culture firm
Lacks values and principles that are consistently preached or
widely shared
Has few or no traditions, beliefs, values, common bonds, or
behavioral norms
© McGraw-Hill Education.
Core Concept (2 of 3)
In a strong-culture company, deeply rooted values and norms of
behavior are widely shared and regulate how it conducts its

7. business.
© McGraw-Hill Education.
DEVELOPMENT OF A STRONG CULTURE
Closely aligning corporate culture with the requirements for
proficient strategy execution merits the full attention of senior
executives.
Commitment
by the firm to ethical
behavior
Founder or
strong leader
with strong values
Strong
Culture
Jump to Appendix 4 long image description
© McGraw-Hill Education.
Strategic Management Principle (3 of 5)
A strong culture that encourages actions, behaviors, and work
practices that are in sync with the chosen strategy and
conducive to good strategy execution is a valuable ally in the
strategy execution process.
© McGraw-Hill Education.
WHY CORPORATE CULTURES MATTER TO THE
STRATEGY EXECUTION PROCESS
A culture that is well matched to the chosen strategy and the
requirements of the strategy execution effort focuses the
attention of employees on what is most important to this effort.
Culture-induced peer pressure further induces personnel to do

8. things in a manner that aids the cause of good strategy
execution.
A culture that is consistent with the requirements for good
strategy execution can energize employees, deepen their
commitment to execute the strategy flawlessly, and enhance
worker productivity.
© McGraw-Hill Education.
Strategic Management Principle (4 of 5)
It is in management’s best interest to dedicate considerable
effort to establishing a corporate culture that encourages
behaviors and work practices conducive to good strategy
execution.
© McGraw-Hill Education.
HEALTHY CULTURES THAT AID GOOD STRATEGY
EXECUTION
Good Strategy Execution
Adaptive
Cultures
High-Performance Cultures
Commitment to
achieving stretch
objectives and
accountability
Willingness to accept change and take on challenges
Performance
Jump to Appendix 5 long image description
© McGraw-Hill Education.

9. Strategic Management Principle (5 of 5)
As a company’s strategy evolves, an adaptive culture is a
definite ally in the strategy-implementing, strategy-executing
processes as compared to cultures that are resistant to change.
© McGraw-Hill Education.
UNHEALTHY CULTURES THAT IMPEDE GOOD STRATEGY
EXECUTION
Change-resistant cultures
Incompatible Subcultures
Politicized
cultures
Unhealthy Cultures
Insular, inwardly focused cultures
Unethical and greed-driven cultures
Poor Strategy Execution
Poor Performance
Jump to Appendix 6 long image description
© McGraw-Hill Education.
CHANGING A PROBLEM CULTURE: THE ROLE OF
LEADERSHIP
A strong, out of sync, or unhealthy culture must be changed in
order to execute strategy successfully.
Competent leadership at the top is necessary for culture-change
efforts to succeed.
© McGraw-Hill Education.

10. FIGURE 12.2 Changing a Problem Culture
Jump to Appendix 7 long image description
© McGraw-Hill Education.
MAKING A COMPELLING CASE FOR CULTURE CHANGE
Selling the change
Explain why and how certain behavioral norms and work
practices are obstacles to good execution of strategic initiatives
Explain how new behaviors and work practices will produce
better results
If the need for cultural change is due to a change in strategy,
cite reasons why the current strategy has to be modified
© McGraw-Hill Education.
SUBSTANTIVE CULTURE-CHANGING ACTIONS
Replace key executives who are resisting or obstructing needed
organizational and cultural changes
Promote individuals who support cultural shifts and can serve as
role models for the cultural behavior
Appoint outsiders with the desired cultural attributes to high-
profile positions
Screening all candidates for positions carefully, hiring only
those who appear to fit in with the new culture
Mandate that all personnel attend culture-training
Design compensation incentives that boost the pay of teams and
individuals who support culture change
Revise policies and procedures to drive cultural change

11. © McGraw-Hill Education.
SYMBOLIC CULTURE-CHANGING ACTIONS
Top executive
and upper management behaviors
Ceremonial
events to honor exemplary employees
Physical symbols that represent
the new culture
Changing the Culture
of an Organization
Jump to Appendix 8 long image description
© McGraw-Hill Education.
HOW LONG DOES IT TAKE TO CHANGE A PROBLEM
CULTURE?
Changing a problem culture is never a short-term exercise.
A sustained and persistent effort to reinforce the culture at
every opportunity through word and deed is required.
It takes time for a new culture to emerge and prevail; it takes
even longer for it to become deeply embedded.
Fixing a problem culture and instilling a new set of attitudes
and behaviors can take 2 to 5 years.
© McGraw-Hill Education.
Culture Transformation at America Latina Logistica (ALL)
What steps did CEO Alexandre Behring take to begin ALL’s
cultural transformation into a performance-oriented

12. organization?
What symbolic steps did top managers take to demonstrate their
commitment to the new culture and to reinforce the personnel
and process changes they implemented?
Which actions are likely to cause the most pronounced cultural
change in an organization?
© McGraw-Hill Education.
LEADING THE STRATEGY EXECUTION PROCESS
Leading strategy execution requires:
Staying on top of what is happening and closely monitoring
progress
Putting constructive pressure on the organization to execute the
strategy well and achieve operating excellence
Initiating corrective actions to improve strategy execution and
achieve the targeted performance results
© McGraw-Hill Education.
STAYING ON TOP OF HOW THINGS ARE GOING
Management by Walking Around (MBWA):
Is used by leaders to stay informed about how well the strategy
execution process is progressing
Involves spending time with people at company facilities,
asking questions, listening to their opinions and concerns, and
gathering firsthand information about how well aspects of the
strategy execution process are going
© McGraw-Hill Education.

13. Core Concept (3 of 3)
Management by walking around (MBWA) is one of the
techniques that effective leaders use to stay informed about how
well the strategy execution process is progressing.
© McGraw-Hill Education.
MOBILIZING THE EFFORT FOR EXCELLENCE IN
STRATEGY EXECUTION
Treat employees as valued partners
Foster an esprit de corps that energizes members
Use empowerment to create a fully engaged workforce
Set stretch objectives that require personnel to give their best in
achieving performance targets
Use benchmarking, reengineering, TQM, and Six Sigma tools to
focus attention on continuous improvement
Use motivational techniques and compensation incentives to
inspire, nurture a results-oriented work climate, and enforce
high standards
Celebrate individual, group, and company successes
© McGraw-Hill Education.
LEADING THE PROCESS OF MAKING CORRECTIVE
ADJUSTMENTS
A thorough analysis of the situation
Good business judgment in deciding what actions to take
Good implementation
of the corrective actions
Making Corrective Actions
Successfully Requires
Jump to Appendix 9 long image description

14. © McGraw-Hill Education.
A FINAL WORD ON LEADING THE PROCESS OF
CRAFTING AND EXECUTING STRATEGY
It is difficult to separate leading the process of executing
strategy from leading the strategy process.
Crafting, implementing, and executing strategy is a continuous
process that requires much adjusting and fine-tuning of the
strategy to fit changing circumstances.
The tests of strategic leadership are whether the firm has a good
strategy and business model, whether its strategy is competently
executed, and whether the firm is achieving its performance
targets.
If these three conditions exist, then the firm has good strategic
leadership and is a well-managed enterprise.
© McGraw-Hill Education.
Appendix 1 Identifying the Key Features of a Company’s
Corporate Culture
Eight key features of a company's corporate culture are:
Values, principles, and ethical standards in actual use
Management practices and organizational policies
Atmosphere and spirit embodied in the firm's work climate
How managers and employees interact and relate to one another
Strength of peer pressure to conform and observe norms
Actions and behaviors encouraged and rewarded
Traditions and stories and "how we do things around here"
How the firm treats its stakeholders
Return to slide
© McGraw-Hill Education.

15. Appendix 2 Figure 12.1 The Two Culture-Building Roles of a
Company’s Core Values and Ethical Standards
A company's stated core values and ethical principles (1) foster
a work climate where company personnel share common and
strongly held convictions about how the company's business is
to be conducted and (2) provide company personnel with
guidance about how to do their jobs —steering them toward
both doing things right and doing the right thing.
Return to slide
© McGraw-Hill Education.
Appendix 3 Forces That Cause a Firm’s Culture to Evolve
Causes of cultural change can be new or revolutionary
technologies, diversification into new businesses, rapid growth
of the firm, a merger or acquisition of another firm, shifting
internal conditions, and new challenges in the market place.
Return to slide
© McGraw-Hill Education.
Appendix 4 Development of a Strong Culture
A strong culture is developed by a founder or strong leader with
strong values, as well as commitment by the firm to ethical
behavior.
Return to slide
© McGraw-Hill Education.
Appendix 5 Healthy Cultures That Aid Good Strategy Execution
High-performance cultures have a commitment to achieving
stretch objectives and accountability.
Adaptive cultures have a willingness to accept change and take
on challenges.
Both contribute to good strategy execution and performance.

16. Return to slide
© McGraw-Hill Education.
Appendix 6 Unhealthy Cultures That Impede Good Strategy
Execution
Unhealthy cultures include politicized cultures; change-resistant
cultures; incompatible subcultures; insular, inwardly focused
cultures; unethical and greed-driven cultures. These types of
cultures lead to poor strategy execution and poor performance.
Return to slide
© McGraw-Hill Education.
Appendix 7 Figure 12.2 Changing a Problem Culture
Step 1: Identify facets of the present culture that are
dysfunctional and impede good strategy execution.
Step 2: Specify clearly what new actions, behaviors, and work
practices should characterize the new culture.
Step 3: Talk openly about problems with the current culture and
make a persuasive case for cultural reform.
Step 4 : Follow with visible, forceful actions, both substantive
and symbolic, to ingrain a new set of behaviors, practices, and
norms.
Return to slide
© McGraw-Hill Education.
Appendix 8 Symbolic Culture-Changing Actions
The culture of an organization can be changed by top executive
and upper management behaviors, by ceremonial events to
honor exemplary employees, and by physical symbols that
represent the new culture.
Return to slide
© McGraw-Hill Education.

17. Appendix 9 Leading the Process of Making Corrective
Adjustments
Making corrective actions successfully requires a thorough
analysis of the situation, good business judgment in deciding
what actions to take, and good implementation of the corrective
actions.
Return to slide
© McGraw-Hill Education.
Job Title Hourly Wage
Monthly
Salary
Annual
Income
Licensed Practical Nurse
(LPN) Job 1 Memorial
Hospital
$19.74 $3,158.40 $37,900.80
Licensed Practical Nurse
(LPN) Job 2 Broward
General
$24.96 $3,993.60 $47,923.20
Licensed Practical Nurse
(LPN) Job 3 Sunrise Rehab
Center

18. $21.00 $3,360.00 $40,320.00
Average Salary $21.90 $3,504.00 $42,048.00
Electricity Telephone Gasoline Groceries Entertainment Rent
Car Payment Car Insurance Cable Credit card Gifts
January $100.00 $55.00 $100.00 $115.00 $200.00 $900.00
$340.00 $110.00 $120.00 $100.00 $50.00 $2,190.00 $1,314.00
$2,190.00 $39,858.00
February $100.00 $55.00 $100.00 $115.00 $200.00 $900.00
$340.00 $110.00 $120.00 $100.00 $50.00 $2,190.00 $1,314.00
$4,380.00 $37,668.00
March $100.00 $55.00 $100.00 $115.00 $300.00 $900.00
$340.00 $110.00 $120.00 $60.00 $50.00 $2,250.00 $1,254.00
$6,630.00 $35,418.00
April $110.00 $55.00 $100.00 $115.00 $200.00 $900.00
$340.00 $110.00 $120.00 $60.00 $50.00 $2,160.00 $1,344.00
$8,790.00 $33,258.00
May $115.00 $50.00 $100.00 $140.00 $200.00 $900.00
$340.00 $110.00 $120.00 $60.00 $50.00 $2,185.00 $1,319.00
$10,975.00 $31,073.00
June $120.00 $50.00 $100.00 $150.00 $500.00 $900.00
$340.00 $110.00 $120.00 $60.00 $50.00 $2,500.00 $1,004.00
$13,475.00 $28,573.00
July $120.00 $50.00 $100.00 $150.00 $200.00 $900.00
$340.00 $110.00 $120.00 $60.00 $50.00 $2,200.00 $1,304.00
$15,675.00 $26,373.00
August $130.00 $50.00 $100.00 $150.00 $200.00 $900.00
$340.00 $110.00 $120.00 $60.00 $50.00 $2,210.00 $1,294.00
$17,885.00 $24,163.00
September $120.00 $50.00 $100.00 $150.00 $400.00 $900.00
$340.00 $110.00 $120.00 $60.00 $50.00 $2,400.00 $1,104.00
$20,285.00 $21,763.00
October $100.00 $50.00 $100.00 $200.00 $200.00 $900.00
$340.00 $110.00 $120.00 $60.00 $50.00 $2,230.00 $1,274.00
$22,515.00 $19,533.00

19. November $110.00 $50.00 $100.00 $200.00 $300.00 $900.00
$340.00 $125.00 $120.00 $100.00 $50.00 $2,395.00 $1,109.00
$24,910.00 $17,138.00
December $90.00 $50.00 $100.00 $200.00 $500.00 $900.00
$340.00 $125.00 $120.00 $100.00 $1,000.00 $3,525.00
($21.00) $28,435.00 $13,613.00
Subtotal $1,315.00 $620.00 $1,200.00 $1,800.00 $3,400.00
$10,800.00 $4,080.00 $1,350.00 $1,440.00 $880.00 $1,550.00
$28,435.00
Average Expense $109.58 $51.67 $100.00 $150.00 $283.33
$900.00 $340.00 $112.50 $120.00 $73.33 $129.17 $2,369.58
$1,134.42
Yearly
Expenses
Annual Income
After Yearly
Monthly Expenses Total
Monthly
Wages Left
After
Month
Living as an LPN
Nurse in Tamarc, FL
Excel Budget Example
CHAPTER 11 Managing Internal Operations: Actions That

20. Promote Good Strategy Execution
LEARNING OBJECTIVES
THIS CHAPTER WILL HELP YOU UNDERSTAND:
Why resource allocation should always be based on strategic
priorities
How well-designed policies and procedures can facilitate good
strategy execution
How best practices and process management tools drive
continuous improvement in the performance of value chain
activities and promote superior strategy execution
The role of information and operating systems in enabling
company personnel to carry out their strategic roles proficiently
How and why the use of well-designed incentives and rewards
can be management’s single most powerful tool for promoting
adept strategy execution
© McGraw-Hill Education.
PROMOTING GOOD STRATEGY EXECUTION
Allocating ample resources to execution-critical value chain
activities
Instituting policies and procedures that facilitate good strategy
execution
Employing process management tools to drive continuous
improvement in how value chain activities are performed
Installing information and operating systems that enable
company personnel to carry out their strategic roles proficiently
Using rewards and incentives to promote better strategy
execution and the achievement of strategic and financial targets
© McGraw-Hill Education.

21. ALLOCATING RESOURCES TO THE STRATEGY
EXECUTION EFFORT
Possible adverse resource allocation outcomes
Too little funding that slows progress and impedes the efforts of
organizational units to execute their pieces of the strategic plan
proficiently
Too much funding that wastes organizational resources and
reduces financial performance
© McGraw-Hill Education.
STRATEGIC MANAGEMENT PRINCIPLE (1 of 14)
The funding requirements of good strategy execution must drive
how capital allocations are made and the size of each unit’s
operating budget. Underfunding organizational units and
activities pivotal to the strategy impedes successful strategy
implementation.
© McGraw-Hill Education.
STRATEGY-DRIVEN BUDGETING: ALLOCATING
RESOURCES
Screen resource requests carefully
Approve only those that contribute to strategy execution
Provide the level of resources necessary for the success of
strategic initiatives
Shift resources to higher-priority activities where new execution
initiatives are needed
© McGraw-Hill Education.

22. Strategic Management Principle (2 of 14)
A company’s operating budget must be both strategy-driven (in
order to amply fund the performance of key value chain
activities) and lean (in order to operate as cost-effectively as
possible).
© McGraw-Hill Education.
INSTITUTING POLICIES AND PROCEDURES THAT
FACILITATE STRATEGY EXECUTION
Policies and operating procedures facilitate strategy execution
by:
Providing top-down guidance regarding how things need to be
done
Helping ensure consistency in how execution-critical activities
are performed
Promoting the creation of a work climate that facilitates good
strategy execution
© McGraw-Hill Education.
Strategic Management Principle (3 of 14)
A company’s policies and procedures provide a set of well-
honed routines for running the company and executing the
strategy.
© McGraw-Hill Education.
Strategic Management Principle (4 of 14)
Well-conceived policies and procedures aid strategy execution;
out-of-sync ones hinder effective execution.
There is wisdom in a middle-ground approach: Prescribe enough

23. policies to give organization members clear direction and to
place reasonable boundaries on their actions; then empower
them to act within these boundaries in pursuit of company
goals.
© McGraw-Hill Education.
FIGURE 11.1 How Policies and Procedures Facilitate
Good Strategy Execution
Jump to Appendix 1 long image description
© McGraw-Hill Education.
ADOPTING BEST PRACTICES AND EMPLOYING PROCESS
MANAGEMENT TOOLS
Managing for Continuous Improvement
Best
practices
Benchmarking
Process reengineering
Total quality management (TQM)
Six Sigma quality
programs
Jump to Appendix 2 long image description
© McGraw-Hill Education.
Core Concept (1 of 5)
A best practice is a method of performing an activity that
consistently delivers superior results compared to other

24. approaches.
© McGraw-Hill Education.
Strategic Management Principle (5 of 14)
Wide-scale use of best practices across a firm’s entire value
chain promotes operating excellence and good strategy
execution.
The more that organizational units use best practices in
performing their work, the closer a company comes to achieving
effective and efficient strategy execution.
© McGraw-Hill Education.
FIGURE 11.2 From Benchmarking and Best-Practice
Implementation to Operating Excellence in Strategy Execution
The more that organizational units use best practices in
performing their work, the closer a company moves toward
performing its value chain activities as effectively and
efficiently as possible.
This is what excellent strategy execution is all about.
Jump to Appendix 3 long image description
© McGraw-Hill Education.
BUSINESS PROCESS REENGINEERING, TOTAL QUALITY
MANAGEMENT, AND SIX SIGMA QUALITY PROGRAMS:
TOOLS FOR PROMOTING OPERATING EXCELLENCE
Business process reengineering:
Involves radically redesigning and streamlining work effort,
flows and processes to achieve dramatic improvements in
performance
Uses cross-functional teams, cutting-edge technology and

25. information systems to reset and refocus the organization’s
strategy
© McGraw-Hill Education.
CORE CONCEPT (2 of 5)
Business process reengineering involves radically redesigning
and streamlining how an activity is performed, with the intent
of achieving quantum improvements in performance.
© McGraw-Hill Education.
ACHIEVING CONTINUOUS IMPROVEMENT
Total Quality Management (TQM ):
Entails creating a total quality culture, involving managers and
employees at all levels, bent on continuously improving the
performance of every task and value chain activity.
Is a long-term race without a finish in which success comes
slowly in small steps forward (kaizen)
© McGraw-Hill Education.
CORE CONCEPT (3 of 5)
Total quality management (TQM) entails creating a total quality
culture, involving managers and employees at all levels, bent on
continuously improving the performance of every value chain
activity.
© McGraw-Hill Education.
A STATISTICAL APPROACH TO ACHIEVING
CONTINUOUS IMPROVEMENT

26. Six Sigma quality control programs:
Utilize statistical methods to improve quality by reducing
defects and variability in business processes
Six Sigma principles
All work is a process
All processes have variability
All processes create data that explain variability
© McGraw-Hill Education.
Core Concept (4 of 5)
Six Sigma programs utilize advanced statistical methods to
improve quality by reducing defects and variability in the
performance of business processes.
© McGraw-Hill Education.
SIX SIGMA AND NEW PROJECTS: DMADVDefineWhat are
our project goals and customer requirements?MeasureHow do
we measure and determine both our goals and the needs of our
customers?AnalyzeWhat existing process options do we have
for meeting customer needs?DesignShould we use an old or new
process to meet customer needs and specifications?VerifyHow
will we verify design performance and our ability to meet
customer needs?
© McGraw-Hill Education.
EXISTING PROCESSES AND SIX SIGMA:
DMAICDefineDefine what constitutes a defect or
variationMeasureCollect data to find out why, how, and how
often this defect occursAnalyzeDetermine when, why, and

27. where the defect is occurringImproveImplement best practice to
eliminate defect or variationControlImplement training,
monitoring and controls to sustain the improvement
© McGraw-Hill Education.
Charleston Area Medical Center’s Six Sigma Program
How does CAMC’s Six Sigma program support its attempt to
control costs and improve its competitive position?
Why is Six Sigma a necessity for achieving continuous
improvement and operating excellence?
How does the Six Sigma process change an organization’s
culture?
© McGraw-Hill Education.
Strategic Management Principle (6 of 14)
Ambidextrous organizations are adept at employing continuous
improvements in operating processes while allowing R&D to
operate under a set of rules that allows for exploration and the
development of breakthrough innovations.
© McGraw-Hill Education.
THE DIFFERENCE BETWEEN BUSINESS PROCESS
REENGINEERING AND CONTINUOUS IMPROVEMENT
Top-notch Strategy Execution and Operating Excellence
Continuous Improvement (TQM, Six Sigma)
Business Process Reengineering
Aims at one-time quantum improvement
Aims at ongoing incremental improvements
Jump to Appendix 4 long image description

28. © McGraw-Hill Education.
Strategic Management Principle (7 of 14)
Business process reengineering aims at one-time quantum
improvement, while continuous improvement programs like
TQM and Six Sigma aim at ongoing incremental improvements.
© McGraw-Hill Education.
CAPTURING THE BENEFITS OF INITIATIVES TO IMPROVE
OPERATIONS
Empowering all employees to improve quality
Emphasizing the necessity for improved performance
Committing to
total quality and continuous improvement
Fostering quality-supportive behaviors
Using online systems to speed the adoption of best practices
Action Steps to Realize the Value of
TQM and Six Sigma Initiatives
Jump to Appendix 5 long image description
© McGraw-Hill Education.
FOSTERING QUALITY-SUPPORTIVE BEHAVIORS
Screening job applicants rigorously and hiring only those with
attitudes and aptitudes that are right for quality-based
performance
Providing quality training for employees
Using teams and team-building exercises to reinforce and
nurture individual effort
Recognizing and rewarding individual and team efforts to

29. improve quality regularly and systematically
Stressing prevention (doing it right the first time), not
correction (instituting ways to undo or overcome mistakes)
© McGraw-Hill Education.
STRATEGIC MANAGEMENT PRINCIPLE (8 of 14)
The purpose of using benchmarking, best practices, business
process reengineering, TQM, and Six Sigma programs is to
improve the performance of strategy-critical activities and
thereby enhance strategy execution.
© McGraw-Hill Education.
INSTALLING INFORMATION AND OPERATING SYSTEMS
Benefits of information technologies
Enable better strategy execution through data-based decisions
Strengthen organizational capabilities
Allow for real-time tracking of implementation initiatives and
daily operations
Provide monitoring of empowered employee performance
(electronic scorecards)
Build closer relationships with customers
© McGraw-Hill Education.
INSTITUTING ADEQUATE INFORMATION SYSTEMS
PERFORMANCE TRACKING AND CONTROLS
Employee
data
Financial
performance data
Customer
data

30. Operations
data
Supplier/partner/
collaborative ally data
Key Strategic Performance Indicators
Tracked by Information Systems
Jump to Appendix 6 long image description
© McGraw-Hill Education.
Strategic Management Principle (9 of 14)
Having state-of-the-art operating systems, information systems,
and real-time data is integral to superior strategy execution and
operating excellence.
© McGraw-Hill Education.
USING REWARDS AND INCENTIVES TO PROMOTE
BETTER STRATEGY EXECUTION
Techniques for winning sustained, energetic commitment of
employees to the strategy execution process
Providing incentives and engaging in motivational practices that
facilitate good strategy execution
Striking the right balance between rewards and punishment for
individual performance
Linking employee rewards to strategically relevant
organizational performance outcomes
Jump to Appendix 7 long image description
© McGraw-Hill Education.
Strategic Management Principle (10 of 14)

31. A properly designed reward structure is management’s most
powerful tool for mobilizing organizational commitment to
successful strategy execution and aligning efforts throughout
the organization with strategic priorities.
© McGraw-Hill Education.
Core Concept (5 of 5)
Financial rewards provide high-powered incentives when
rewards are tied to specific outcome objectives.
© McGraw-Hill Education.
NONMONETARY APPROACHES TO ENHANCING
MOTIVATION
Provide attractive perks and fringe benefits
Give awards and other forms of public recognition
Rely on promotion from within whenever possible
Invite and act on ideas and suggestions
Create a work atmosphere of caring and mutual respect
State the strategic vision in inspirational terms
Share the firm’s critical information with employees
Provide a comfortable working environment
© McGraw-Hill Education.
STRIKING THE RIGHT BALANCE BETWEEN REWARDS
AND PUNISHMENT
The firm’s motivational approaches and reward structure
Punishment
Rewards
Commitment-generating
incentives and rewards
Adverse employment

32. consequences
Performance
Jump to Appendix 8 long image description
© McGraw-Hill Education.
HOW THE BEST COMPANIES TO WORK FOR MOTIVATE
AND REWARD EMPLOYEES
The times they are changing: Why are companies finding it
increasingly necessary to motivate and reward workers to
achieve higher levels of performance?
As businesses continue to globalize, how will companies have
to adapt their reward and incentive systems?
© McGraw-Hill Education.
Strategic Management Principle (11 of 14)
Incentives must be based on accomplishing the right results, not
on dutifully performing assigned tasks.
© McGraw-Hill Education.
LINKING REWARDS TO STRATEGICALLY RELEVANT
PERFORMANCE OUTCOMES
Focus on and reward results, not effort
Create a results-oriented work environment that focuses on what
to achieve, not what to do
Set strategically-relevant, specific, and measurable stretch
performance goals that are difficult but achievable
Link the performance goals of each individual in an
organizational unit to the unit’s goals

33. Reward and recognize as success superior performance in
accomplishing the goals
© McGraw-Hill Education.
STRATEGIC MANAGEMENT PRINCIPLE (12 of 14)
The key to creating a reward system that promotes good strategy
execution is to make measures of good business performance
and good strategy execution the dominating basis for designing
incentives, evaluating individual and group efforts, and handing
out rewards.
© McGraw-Hill Education.
Strategic Management Principle (13 of 14)
The first principle in designing an effective incentive
compensation system is to tie rewards to performance outcomes
that are directly linked to good strategy execution and to the
achievement of financial and strategic objectives.
© McGraw-Hill Education.
GUIDELINES FOR DESIGNING EFFECTIVE INCENTIVE
COMPENSATION SYSTEMS
Make financial incentives a major, not minor, piece of the total
compensation package
Have incentives that extend to all managers and all workers, not
just top management
Administer the reward system with scrupulous objectivity and
fairness
Ensure that the performance targets set for each individual or
team involve outcomes that the individual or team can
personally affect
Keep the time between achieving performance target and

34. receiving the reward as short as possible
Avoid rewarding effort rather than results
© McGraw-Hill Education.
Nucor Corporation: Tying Incentives Directly to Strategy
Execution
Tying incentives directly to strategy execution works when
management has chosen the right strategy; what happens when
the choice of strategy turns out to be seriously wrong?
What happens to employee morale and loyalty when a low-cost
leadership firm achieves higher productivity at both its lower
and higher wage locations and then needs to expand its
production output? (productivity ≠ profitability).
© McGraw-Hill Education.
Strategic Management Principle (14 of 14)
The unwavering standard for judging whether individuals,
teams, and organizational units have done a good job must be
whether they meet or beat performance targets that reflect good
strategy execution.
© McGraw-Hill Education.
Appendix 1 Figure 11.1 How Policies and Procedures Facilitate
Good Strategy Execution
Well-conceived policies and procedures:
Provide top-down guidance about how certain things need to be
done (such as by channeling individual and group efforts along
a strategy-supportive path, by aligning the actions and behavior
of company personnel with the requirements for good strategy

35. execution, and by placing limits on independent action and help
overcome resistance to change)
Help enforce consistency in how strategy-critical activities are
performed (such as by improving the quality and reliability of
strategy execution and by helping coordinate the strategy
execution efforts of individuals and groups throughout the
organization)
Promote the creation of a work climate that facilitates good
strategy execution
Return to slide
© McGraw-Hill Education.
Appendix 2 Adopting Best Practices and Employing Process
Management Tools
Benchmarking, process reengineering, Six Sigma quality
programs, total quality management (TQM) and best practices
are all ways for managing for continuous improvement.
Return to slide
© McGraw-Hill Education.
Appendix 3 Figure 11.2 From Benchmarking and Best-Practice
Implementation to Operating Excellence in Strategy Execution
The four steps necessary to go from benchmarking and best-
practice implementation to operating excellence are:
Engage in benchmarking to identify the best practice for
performing an activity
Adapt the best practice to fit the company's situation; then
implement it (and further improve it over time)
Continue to benchmark company performance of the activity
against best-in-industry or best-in-world performers
Move closer to operating excellence in performing the activity
The more that organizational units use best practices in
performing their work, the closer a company moves toward
performing its value chain activities as effectively and

36. efficiently as possible.
This is what excellent strategy execution is all about.
Return to slide
© McGraw-Hill Education.
Appendix 4 The Difference Between Business Process
Reengineering and Continuous Improvement
Both business process reengineering (which aims at one-time
quantum improvement) and continuous improvement (for
example, TQM and Six Sigma, which aim at ongoing
incremental improvements) can lead to top-notch strategy
execution and operating excellence.
Return to slide
© McGraw-Hill Education.
Appendix 5 Capturing the Benefits of Initiatives to Improve
Operations
Five action steps that can be taken to realize the value of TQM
and Six Sigma Initiatives are:
Committing to total quality and continuous improvement
Fostering quality-supportive behaviors
Empowering all employees to improve quality
Using online systems to speed the adoption of best practices
Emphasizing the necessity for improved performance
Return to slide
© McGraw-Hill Education.
Appendix 6 Instituting Adequate Information Systems
Performance Tracking, and Controls
Key strategic performance indicators tracked by information
systems are: customer data, operations data, employee data,
supplier/partner/collaborative ally data, and financial

37. performance data.
Return to slide
© McGraw-Hill Education.
Appendix 7 Using Rewards and Incentives to Promote Better
Strategy Execution
Three techniques for winning sustained, energetic commitment
of employees to the strategy execution process are:
Providing incentives and engaging in motivational practices that
facilitate good strategy execution
Striking the right balance between rewards and punishment for
individual performance
Linking employee rewards to strategically relevant
organizational performance outcomes
Return to slide
© McGraw-Hill Education.
Appendix 8 Striking the Right Balance Between Rewards and
Punishment
Two motivational approaches a firm can take toward affecting
employee performance are rewards (consisting of commitment-
generating incentives and rewards) or punishment (which
consists of adverse employment consequences).
Return to slide
© McGraw-Hill Education.