This chapter discusses how corporate culture and leadership are keys to good strategy execution. It identifies the key features of corporate culture, such as core values and operating practices. Strong cultures have clearly defined values that are widely shared, while weak cultures lack cohesion. The chapter also discusses unhealthy, high-performance, and adaptive cultures. An aligned culture can aid strategy execution, while a misaligned culture can hinder it. Leaders must change problem cultures and ground culture in core values. Effective leadership is also needed to lead the strategy execution process and make timely corrective adjustments.

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

2. 12-2
Chapter Learning Objectives
1. Be able to identify the key features of a
company’s corporate culture.
2. Understand how and why a company’s culture
can aid the drive for proficient strategy
execution and operating excellence.
3. Learn the kinds of actions management can take
to change a problem corporate culture.
4. Learn why corporate cultures tend to be
grounded in core values and ethical principles
and help establish a corporate conscience.
5. Understand what constitutes effective
managerial leadership in achieving superior
strategy execution and operating excellence.

3. 12-3
Chapter Roadmap
 Instilling a Corporate Culture that Promotes
Good Strategy Execution
 Identifying the Key Features of a Company’s Corporate
Culture
 Strong versus Weak Cultures
 Unhealthy Cultures
 High-Performance Cultures
 Adaptive Cultures
 Culture: Ally or Obstacle to Strategy Execution?
 Changing a Problem Culture
 Grounding the Culture in Core Values and Ethics
 Establishing a Strategy-Culture Fit in Multinational
Companies
 Leading the Strategy Execution Process
 Making Corrective Adjustments in Timely Fashion
 A Final Word on Managing the Process of
Crafting and Executing Strategy

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

5. 12-5
Defining Characteristics
of Corporate Culture
 Core values, beliefs, and business principles
 Ethical standards
 Operating practices and behaviors defining
“how we do things around here”
 Approach to people management
 “Chemistry” and “personality” permeating
work environment
 Oft-told stories illustrating
 Company’s values
 Business practices
 Traditions

6. 12-6
A company’s culture is manifested in . . .
 Values, business principles, and ethical standards
preached and practiced by management
 Approaches to people management
and problem solving
 Official policies and procedures
 Spirit and character permeating work environment
 Interactions and relationships among managers and
employees
 Peer pressures that exist to display core values
 Its revered traditions and oft-repeated stories
 Its relationships with external stakeholders
Identifying the Key Features
of Corporate Culture

7. 12-7
 Founder or early leader
 Influential individual or work group
 Policies, vision, or strategies
 Operating approaches
 Company’s approach to people
management
 Traditions, supervisory practices,
employee attitudes
 Organizational politics
 Relationships with stakeholders
Where Does Corporate
Culture Come From?

8. 12-8
 Selecting new employees who will “fit” in
 Systematic indoctrination of new employees
 Senior management efforts
to reinforce core values, beliefs,
principles, key operating practices
 Story-telling of company legends
 Ceremonies honoring employees
who display cultural ideals
 Visibly rewarding those
who follow cultural norms
How Is a Company’s Culture Perpetuated?

9. 12-9
Forces Causing Culture to Evolve
 New challenges in marketplace
 Revolutionary technologies
 Shifting internal conditions
 Internal crisis
 Turnover of top executives
 A new CEO who opts to change things
 Diversification into new businesses
 Expansion into foreign countries
 Rapid growth that involves adding many new
employees
 Merger with or acquisition of another company

10. 12-10
Company Subcultures: Problems Posed by New
Acquisitions and Multinational Operations
 Values, beliefs, and practices within a company can
vary by
 Department
 Geographic location
 Business unit
 Subcultures can clash if
 They embrace conflicting business philosophies
 Key executives use different approaches to people
management
 Differences between a company’s culture and recent
acquisitions have not been ironed out
 Existence of subcultures does not preclude
important areas of commonality and compatibility
being established in different countries

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

12. 12-12
 Conduct business according to a
clear, widely-understood philosophy
 Considerable time spent by management
communicating and reinforcing values
 Values are widely shared and deeply rooted
 Have a well-defined corporate character,
reinforced by a creed or values statement
 Careful screening/selection of new
employees to be sure they will “fit in”
Characteristics of
Strong Culture Companies

13. 12-13
How Does a Culture Come to Be Strong?
 Leader who establishes values and
behaviors consistent with
 Customer needs
 Competitive conditions
 Strategic requirements
 A deep, abiding commitment to espoused
values, beliefs, and business philosophy
 Practicing what is preached!
 Genuine concern for well-being of
 Customers
 Employees
 Shareholders
Values
Customers
Employees
Shareholders

14. 12-14
Characteristics of Weak Culture Companies
 Lack of a widely-shared core set of values
 Few behavioral norms
evident in operating practices
 Few strong traditions
 No strong sense of company identity
 Little cohesion among departments
 Weak employee allegiance to company’s
vision and strategy

15. 12-15
 Highly politicized internal environment
 Issues resolved on basis of political clout
 Hostility to change
 Avoid risks and don’t screw up
 Experimentation and efforts to
alter status quo discouraged
 “Not-invented-here” mindset – company
personnel discount need to look outside for
 Best practices
 New or better managerial approaches
 Innovative ideas
 Disregard for high ethical standards and
overzealous pursuit of wealth by key
executives
Characteristics of Unhealthy Cultures

16. 12-16
 Standout cultural traits include
 A can-do spirit
 Pride in doing things right
 No-excuses accountability
 A results-oriented work climate in which people go
the extra mile to achieve performance targets
 Strong sense of involvement by all employees
 Emphasis on individual initiative and creativity
 Performance expectations are clearly identified
for all organizational members
 Strong bias for being proactive, not reactive
 Respect for the contributions of all employees
Characteristics of
High-Performance Cultures

17. 12-17
 Willingness to accept change and embrace
challenge of introducing new strategies
 Risk-taking, experimentation, and
innovation to satisfy stakeholders
 Entrepreneurship is
encouraged and rewarded
 Funds provided for new products
 New ideas openly evaluated
 Genuine interest in well-being
of all key constituencies
 Proactive approaches to
implement workable solutions
Hallmarks of Adaptive Cultures

18. 12-18
 A company’s culture can contribute to – or
hinder – successful strategy execution
 A culture that promotes attitudes and
behaviors that are well-suited to first-rate
strategy execution is a valuable ally in the
strategy execution process
 A culture where attitudes
and behaviors impede
good strategy execution is a
huge obstacle to be overcome
Culture: Ally or Obstacle
to Strategy Execution?

19. 12-19
 A culture that encourages actions and behaviors
supportive of good strategy execution
 Provides employees with clear guidance regarding what behaviors
and results constitute good job performance
 Creates significant peer pressure among co-workers to conform to
culturally acceptable norms
 A deeply embedded culture tightly matched to the strategy
 Aids the cause of competent strategy execution by top management
to culturally approved behaviors, thus
 Making it far simpler for management to root out operating practices
that are a misfit
 A culture imbedded with values and behaviors
that facilitate strategy execution promotes
strong employee commitment to the company’s
 Vision
 Performance targets
 Strategy
Why Culture Matters: Benefits
of a Tight Culture-Strategy Fit

20. 12-20
 A good job of culture-building
by managers
 Promotes can-do attitudes
 Encourages acceptance of change
 Instills strong peer pressure for
strategy-supportive behaviors
 Enlists enthusiasm and dedicated
effort to achieve company objectives
Optimal Outcome of a
Tight Culture-Strategy Fit
Closely aligning corporate culture with the
requirements for proficient strategy execution
merits the full attention of senior executives!

21. 12-21
 Conflicts between culturally-approved
behaviors and behaviors needed for good
strategy execution send mixed signals
 Should employees by loyal to the culture and
company traditions and resist actions and
behaviors promoting better strategy execution?
 Or should they support the strategy
by engaging in behaviors that run
counter to the culture?
The Perils of Strategy-Culture Conflict
When a company’s culture is out of sync with what is
needed for strategic success, the culture has to be
changed as rapidly as can be managed!

22. Creating a Strong Fit
Between Strategy and Culture
Responsibility of Strategy Maker –
Select a strategy compatible with the
sacred or unchangeable parts of
organization’s prevailing corporate culture
Responsibility of Strategy Implementer –
Once strategy is chosen, change
whatever facets of the corporate
culture hinder effective execution
12-22

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

24. 12-24
 Make a compelling case why a new cultural
atmosphere is in best interests of both company
and employees
 Challenge status quo
 Create events where employees
must listen to angry key stakeholders
 Cite why and how certain behavioral norms and
work practices in current culture pose obstacles
to good execution of new strategic initiatives
 Explain how new behaviors and work practices
to be introduced will be more advantageous
and produce better results
Menu of Culture-Changing Actions

25. 12-25
 Replace key executives strongly associated
with old culture
 Promote individuals who have desired cultural
traits and can serve as role models
 Appoint outsiders who have desired cultural
attributes to high-profile positions
 Screen all candidates for new
positions carefully, hiring only those
who fit in with the new culture
 Mandate all company personnel attend culture-
training programs to learn more about new work
practices, operating approaches, and behaviors
Substantive Culture-Changing Actions

26. 12-26
 Push hard to implement new-style work
practices and operating procedures
 Design compensation incentives to reward
teams and individuals who display the
desired cultural behaviors
 Grant generous pay raises to individuals
who lead the way in adopting desired work
practices, displaying new-style behaviors,
and achieving pace-setting results
 Revise policies and procedures
in ways to drive cultural change
Substantive Culture-
Changing Actions (continued)

27. 12-27
 Lead by example – Walk the talk
 Emphasize frugality
 Eliminate executive perks
 Require executives to spend time talking
with customers
 Ceremonial events to praise people and
teams who “get with the program”
 Alter practices identified
as cultural hindrances
 Visible awards to honor heroes
Symbolic Culture-Changing Actions

28. 12-28
 A culture based on ethical principles is
vital to long-term strategic success
 Ethics programs help make
ethical conduct a way of life
 Executives must provide genuine support
of personnel displaying ethical standards
in conducting the company’s business
 Value statements serve as a cornerstone for
culture-building
Grounding the Culture in
Core Values and Ethics

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

30. 12-30
Techniques to Transform Core Values and
Ethical Standards into Cultural Norms
 Screen out applicants who do not exhibit
compatible character traits
 Incorporate values statement and ethics code in
employee training programs
 Strong endorsement by senior executives of the
importance of core values and ethical principles at
company events and in internal communications
 Use values statements and codes of ethics as
benchmarks to judge appropriateness of company
policies and operating practices
 Make the display of core values and ethical
principles a big factor in evaluating employee
performance

31. 12-31
Techniques to Transform Core Values and
Ethical Standards into Cultural Norms (continued)
 Make sure managers at all levels are diligent
in stressing the importance of ethical
conduct and observance of core values
 Encourage everyone to use their influence in
helping enforce observance of core values
and ethical standards
 Hold periodic ceremonies
to recognize individuals and
groups who display the values
 Institute ethics enforcement procedures

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

33. 12-33
Establishing a Strategy-Culture Fit in
Multinational and Global Companies
 Institute training programs to
 Communicate the meaning of core values and
 Explain the case for common operating
principles and practices
 Create a cultural climate where the norm is to
 Adopt best practices
 Use common work procedures
 Pursue operating excellence
 Give local managers
 Flexibility to modify people management
approaches or operating styles
 Discretion to use different motivational and
compensation incentives to induce personnel to
practice desired behaviors

34. Leading the
Strategy-Execution Process
12-34

35. 12-35
Leading the Strategy-Execution Process
 Top executives must be out
front personally
 Leading the process and
 Driving the pace of progress
 Entire management team
must work diligently to engage
all employees by
 Delegating authority to middle and lower-level
managers to move the implementation process
forward with all due speed
 Empowering all employees to exercise initiative,
get things done in a timely, efficient, and
effective manner

36. 12-36
Key Roles in Leading the
Strategy-Execution Process
 Be out in the field, seeing
how well operations are going
 Gather information firsthand
 Gauge the progress being made
 Be diligent and adept in spotting gridlock
 Ferret out problems and issues
 Learn the obstacles in the path of good
execution and clear the way for progress
 Exert constructive, unrelenting pressure on
organizational units to
 Demonstrate growing consistency in strategy
execution
 Achieve performance targets

37. 12-37
Making Corrective Adjustments
 Requires deciding
 When adjustments are needed
 What adjustments to make
 Involves
 Adjusting long-term direction, objectives, and
strategy on an as-needed basis in response to
unfolding events and changing circumstances
 Promoting fresh initiatives to bring internal
activities and behavior into better alignment with
strategy
 Making changes to pick up the pace when
results fall short of performance targets

38. 12-38
Process of Making Corrective Adjustments
 Varies according to the situation
 Crisis situation – Take remedial action quickly
 Non-crisis situation – Incrementally solidify
commitment to a specific course of action
 Deciding on specific corrective adjustments
is the same for both proactive and reactive
situations
 Success in initiating corrective
actions hinges on
 Thorough analysis of the situation
 Exercise of good business judgment in deciding
on specific actions
 Good implementation of the corrective actions