STRATEGIC MANAGEMENT INSTRUCTIONS: 2-4 PAGES LONG; TYPED – DOUBLE SPACED, 12 PT MAX, 1” MARGINS MAX. PLEASE REMEMBER THAT GOOD GRAMMAR AND SPELLING ARE EXPECTED. ALSO, YOUR ANSWERS SHOULD BE WELL ORGANIZED AND CONTAINS SPECIFICS BASED ON THE CONCEPTS AND ANALYSES WE HAVE STUDIED. You are the new CEO of a single-entity business that provides financial services to the insurance industry. The previous CEO left the organization “under a cloud” – nothing was ever proved, and he received the “normal” severance package. Your early perception of the organization indicates there may have been some ethics problems in upper management. It appears no laws were broken, but it may be that some older employees did not receive expected and /or promised raises in pay. It is difficult to know this for sure because the company’s Performance Evaluation system has never been formalized. The apparent ethics problems at the top have left many employees with an uneasy feeling. It has also resulted in an attitude on the part of many that retribution will be swift if an employee reports an ethics-related problem to management. It has been noticed that absenteeism has increased over the past 9 months. Also, employee turnover appears to be on the rise. As CEO, what plans will you make and what actions will you take to overcome the apparent problems so a new strategic plan can be successfully implemented? This plan includes the introduction of a major new product. Also include the steps you should take to introduce the new strategic plan to the employees. 1 CHAPTER 12CHAPTER 12 CORPORATE CULTURE AND LEADERSHIP: KEYS TO GOOD STRATEGY EXECUTION CORPORATE CULTURE AND LEADERSHIP: KEYS TO GOOD STRATEGY EXECUTION CORE CONCEPT ♦ 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. 12–2 KEY FEATURES OF A FIRM’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 polices Atmosphere and spirit embodied in the firm’s work climate How managers and employees interact and relate to one another 12–3 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. 12–4 2 TRANSFORMING CORE VALUES AND.

1. STRATEGIC MANAGEMENT
INSTRUCTIONS: 2-4 PAGES LONG; TYPED – DOUBLE
SPACED, 12 PT MAX, 1” MARGINS MAX. PLEASE
REMEMBER THAT GOOD GRAMMAR AND SPELLING ARE
EXPECTED. ALSO, YOUR ANSWERS SHOULD BE WELL
ORGANIZED AND CONTAINS SPECIFICS BASED ON THE
CONCEPTS AND ANALYSES WE HAVE STUDIED.
You are the new CEO of a single-entity business that provides
financial services to the insurance industry. The previous CEO
left the organization “under a cloud” – nothing was ever proved,
and he received the “normal” severance package.
Your early perception of the organization indicates there may
have been some ethics problems in upper management. It
appears no laws were broken, but it may be that some older
employees did not receive expected and /or promised raises in
pay. It is difficult to know this for sure because the company’s
Performance Evaluation system has never been formalized.
The apparent ethics problems at the top have left many
employees with an uneasy feeling. It has also resulted in an
attitude on the part of many that retribution will be swift if an
employee reports an ethics-related problem to management. It
has been noticed that absenteeism has increased over the past 9
months. Also, employee turnover appears to be on the rise.
As CEO, what plans will you make and what actions will you
take to overcome the apparent problems so a new strategic plan
can be successfully implemented? This plan includes the
introduction of a major new product. Also include the steps you
should take to introduce the new strategic plan to the
employees.

2. 1
CHAPTER 12CHAPTER 12
CORPORATE CULTURE
AND LEADERSHIP: KEYS
TO GOOD STRATEGY
EXECUTION
CORPORATE CULTURE
AND LEADERSHIP: KEYS
TO GOOD STRATEGY
EXECUTION
CORE CONCEPT
♦ 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.
12–2
KEY FEATURES OF A FIRM’S
CORPORATE CULTURE

3. 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

4. Management
practices and
organizational
polices
Atmosphere and
spirit embodied
in the firm’s work
climate
How managers and
employees interact
and relate to one
another
12–3
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.

5. � Use values statements and codes of ethics as
benchmarks for the firm’s polices and practices.
12–4
2
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.
12–5
PERPETUATING THE CULTURE
Screening and

6. selecting new
employees
Systematic
indoctrination of
new members
Vocal support by
senior managers
Rewarding those
who display
cultural norms
Ceremonies
honoring
employees
Telling and
retelling of the
firm’s legends
Perpetuating
the Culture
Perpetuating
the Culture
12–6
FORCES THAT CAUSE A FIRM’S

7. CULTURE TO EVOLVE
New challenges in
the marketplace
Merger or acquisition
of another firm
Shifting internal
conditions
Causes of
Cultural
Change
Diversification into
new businesses
New or revolutionary
technologies
Rapid grow th
of the firm
12–7
♦ Strong-Culture Firm
● Has deeply rooted
widely-shared values,
behavioral norms, and
operating approaches.
● Insists that its values
and principles be
reflected in the

8. 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.
COMPANY CULTURES CAN BE
STRONGLY OR WEAKLY EMBEDDED
12–8
3
DEVELOPMENT OF
A STRONG CULTURE
Commitment
by the firm to
ethical

9. behavior
Founder or
strong leader
with strong
values
Strong
Culture
Closely aligning corporate culture with the requirements
for proficient strategy execution merits the full attention
of senior executives.
12–9
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.

10. 12–10
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
12–11
UNHEALTHY CULTURES THAT IMPEDE
GOOD STRATEGY EXECUTION
Change-resistant
cultures

11. Incompatible
Subcultures
Politicized
cultures
Unhealthy
Cultures
Insular, inw ardly
focused cultures
Unethical and greed-
driven cultures
Poor Strategy
Execution
Poor Performance
12–12
4
FIGURE 12.2 Changing a Problem Culture
12–13
MAKING A COMPELLING CASE
FOR CULTURE CHANGE
� Selling the Change

12. ● 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
be produce better results.
● Cite reasons why the current strategy has to be
modified, if the need for cultural change is due to a
change in strategy.
12–14
SUBSTANTIVE CULTURE-CHANGING
ACTIONS
� Replace key executives who are stonewalling needed
organizational and cultural changes.
� Promote individuals who advocate for cultural shifts and
can serve as a role model for the cultural behavior.
� Appoint outsiders with the desired cultural attributes to
high-profile positions.
� Screening 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.
12–15
HOW LONG DOES IT TAKE TO CHANGE

13. 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 two to five years.
12–16
5
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.

14. 12–17
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.
12–18
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.
� Make champions out of the people
who spearhead new ideas and/or

15. turn in winning performances.
12–19
MOBILIZING THE EFFORT FOR
EXCELLENCE IN STRATEGY
EXECUTION (CONT’D)
� Set stretch objectives that require personnel to
give their best in achieving performance targets.
� Use benchmarking, reengineering, TQM, and
Six Sigma 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, company successes.
12–20
6
A FINAL WORD ON LEADING
THE PROCESS OF CRAFTING
AND EXECUTING STRATEGY

16. � 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.
12–21