Chapter 12: Corporate Culture and

Leadership: Keys to Good Strategy

Execution

Screen graphics created by:

Jana F. Kuzmicki, Ph.D.
Troy University
McGrawHill/Irwin

Copyright2010byTheMcGrawHillCompanies,Inc.Allrightsreserved.

Chapter Learning Objectives

1. Be able to identify the key features of a

companys corporate culture.

2. Understand how and why a companys 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.
12-2

Chapter Roadmap
Instilling a Corporate Culture that Promotes Good

Strategy Execution
Identifying the Key Features of a Companys 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

12-3

INSTILLING A STRATEGYSUPPORTIVE CORPORATE

CULTURE

12-4

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
Companys values
Business practices
Traditions
12-5

Identifying the Key Features

of Corporate Culture
A companys 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
12-6

Where Does Corporate

Culture Come From?
Founder or early leader
Influential individual or work group
Policies, vision, or strategies
Operating approaches
Companys approach to people management
Traditions, supervisory practices,
employee attitudes

Organizational politics
Relationships with stakeholders
12-7

How Is a Companys Culture Perpetuated?

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

12-8

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
12-9

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 companys 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
12-10

Types of Corporate Cultures

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

Characteristics of
Strong Culture Companies
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

12-12

How Does a Culture Come to Be Strong?

Leader who establishes values and behaviors

consistent with
Customer needs
Competitive conditions
Strategic requirements

Values
Customers
Employees
Shareholders

A deep, abiding commitment to espoused

values, beliefs, and business philosophy

Practicing what is preached!

Genuine concern for well-being of

Customers
Employees
Shareholders
12-13

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 companys

vision and strategy

12-14

Characteristics of Unhealthy Cultures

Highly politicized internal environment
Issues resolved on basis of political clout
Hostility to change
Avoid risks and dont 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
12-15

Characteristics of
High-Performance Cultures
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
12-16

Hallmarks of Adaptive Cultures

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
12-17

Culture: Ally or Obstacle

to Strategy Execution?
A companys 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
12-18

Why Culture Matters: Benefits

of a Tight Culture-Strategy Fit
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 companys
Vision
Performance targets
Strategy
12-19

Optimal Outcome of a
Tight Culture-Strategy Fit
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
Closely aligning corporate culture with the
requirements for proficient strategy execution
merits the full attention of senior executives!
12-20

The Perils of Strategy-Culture Conflict

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?
When a companys culture is out of sync with what is
needed for strategic success, the culture has to be
changed as rapidly as can be managed!
12-21

Creating a Strong Fit

Between Strategy and Culture
Responsibility of Strategy Maker
Select a strategy compatible with the
sacred or unchangeable parts of
organizations prevailing corporate culture
Responsibility of Strategy Implementer
Once strategy is chosen, change
whatever facets of the corporate
culture hinder effective execution
12-22

Figure 12.1: Changing a Problem Culture

12-23

Menu of Culture-Changing Actions

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
12-24

Substantive Culture-Changing Actions

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
12-25

Substantive CultureChanging Actions (continued)

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

12-26

Symbolic Culture-Changing Actions

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
12-27

Grounding the Culture in

Core Values and Ethics
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 companys business
Value statements serve as a cornerstone for

culture-building
12-28

Figure 12.2: The Two Culture-Building Roles of

a Companys Core Values and Ethical Standards

12-29

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
12-30

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
12-31

Figure 12.3: The Benefits of Cultural Norms Strongly

Grounded in Core Values and Ethical Principles

12-32

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
12-33

Leading the
Strategy-Execution Process

12-34

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
12-35

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
12-36

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
12-37

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
12-38