Chapter

13
Corporate Culture
and Leadership

13-1
 Chapter Roadmap
 Building a Corporate Culture that Promotes Good Strategy
Execution
 What to Look for in Identifying a Company’s Culture
 Culture: Ally or Obstacle to Strategy Execution?
 Types of Cultures
 Creating a Strong Fit Between Strategy and Culture
 Grounding the Culture in Core Values and Ethics
 Establishing a Strategy-Culture Fit in Multinational Companies
 Leading the Strategy Execution Process
 Staying on Top of How Well Things Are Going
 Pushing Company to Achieve Good Results
 Keeping Internal Organization Focused on Operating Excellence
 Exercising Ethics Leadership
 Making Corrective Adjustments
13-2
 The Defining Characteristics
of a Company’s Culture
 Its core values, beliefs, and business principles

 Patterns of “how we do things around here”—its style of

operating and ingrained behaviors of company personnel
 Oft-told stories illustrating company’s values

 Its approach to people management

 Ethical standards

 Internal politics

 Traditions
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 Features of the Corporate
Culture at Wal-Mart
 Dedication to customer satisfaction
 Zealous pursuit of low costs
 Frugal operating practices
 Strong work ethic
 Ritualistic Saturday morning meetings
 Executive commitment to
 Visit stores
 Listen to customers
 Solicit employees’ suggestions
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 Features of the Corporate
Culture at Nordstrom’s
 Deliver exceptional customer service to customers

 Company motto

 “Respond to Unreasonable
Customer Requests”

 Out-of-the-ordinary customer requests

viewed as opportunities for “heroic” acts
 Promotions based on outstanding service

 Salaries based entirely on commission

13-5
 Features of the Corporate
Culture at Microsoft
 Long work hours of programmers

 Emotional peaks and valleys in

encountering and overcoming coding problems
 Exhilaration of completing a complex program on
schedule
 Satisfaction of working on cutting-edge projects

 Rewards of being part of a team responsible

for a popular new software program
 Tradition of competing aggressively
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 What to Look for in
Identifying Corporate Culture
A company’s culture is manifested in . . .
 Values, beliefs, and business principles
management preaches and practices
 Official policies and procedures
 Its revered traditions and oft-repeated stories
 Attitudes and behaviors of employees
 Peer pressures that exist to display core values
 Its politics
 Approaches to people management and problem solving
 Its relationships with external stakeholders
 “Chemistry” and “personality” permeating work environment
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 Where Does Corporate
Culture Come From?
 Founder or early leader
 Influential individual or work group
 Policies, vision, or strategies
 Traditions, supervisory practices,
employee attitudes
 The peer pressures that exist
 Organizational politics
 Relationships with stakeholders
 Company’s approach to people management
13-8
 How Is a Company’s
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
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 Forces and Factors
Causing Culture to Evolve
 New challenges in marketplace
 Revolutionary technologies
 Shifting internal conditions
 Internal crisis
 Turnover of top executives
 Arrival of a new CEO
 Diversification into new businesses
 Expansion into foreign countries
 Rapid growth involving adding new employees
 Merger with or acquisition of another company
13-10
 Culture: Ally or Obstacle
to Strategy Execution?
 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 that embraces attitudes and
behaviors which impede good
strategy execution is a huge obstacle
to be overcome
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 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 coworkers to
conform to culturally acceptable norms
 A culture imbedded with values and behaviors
that facilitate strategy execution promotes
strong employee commitment to the company’s
 Vision
 Performance targets
 Strategy
13-12
 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!
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 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 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!
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 Types of Corporate
Cultures

Strong vs. Weak Cultures

Unhealthy Cultures

Adaptive Cultures

13-15
 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”
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 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
13-17
 Characteristics of
Unhealthy Cultures
 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
 Bestpractices
 New or better managerial approaches
 Innovative ideas
13-18
 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
13-19
 Dominant Traits
of Adaptive Cultures
 Any changes in operating practices and behaviors

 Must not compromise core values and long-standing

business principles
 Must satisfy legitimate interests of key stakeholders
 Customers

 Employees

 Shareholders

 Suppliers

 Communities
13-20
 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
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 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

 Continuously repeat messages of why

cultural change is good for stakeholders
 Visibly praise and reward people
who display new cultural norms
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 Menu of Culture-
Changing Actions (continued)
 Alter incentive compensation to
reward desired cultural behavior

 Hire new managers and employees who have

desired cultural traits and can serve as role models

 Replace key executives strongly

associated with old culture

 Revise policies and procedures

to help drive cultural change

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 Symbolic Culture-
Changing Actions
 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

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 Substantive Culture-
Changing Actions
 Engineer quick successes to highlight
benefits of proposed cultural changes
 Bring in new blood, replacing
traditional managers
 Change dysfunctional policies
 Change reward structure
 Reallocate budget, downsizing and upsizing
 Reinforce culture through both word and deed
 Enlist support of cultural norms from frontline
supervisors and employee opinion leaders
13-25
 Grounding the Culture in
Core Values and Ethics
 A culture based on ethical principles is
vital to long-term strategic success Our ethics
program
consists of . . .
 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
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 Approaches to Establishing
Ethical Standards
 Word-of-mouth indoctrination and tradition
 Annual reports and Websites
 Orientation courses for new employees
 Training courses for managers and employees
 Making stakeholders aware of a commitment
to ethical business conduct is attributable to
 Greater management understanding of role
these statements play in culture building
 Renewed focus on ethical standards
stemming from recent corporate scandals
 Growing numbers of consumers who
prefer to patronize ethical companies
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 Instilling Values and
Ethics in the Culture
 Incorporate values statement and ethics
code in employee training programs
 Screen out applicants who do not
exhibit compatible character traits
 Frequent communications of the
values and ethics code to all employees
 Management involvement and oversight
 Strong endorsement by CEO
 Ceremonies and awards for individuals
and groups who display the values
 Institute ethics enforcement procedures
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 Structuring the Ethics
Compliance and Enforcement
Process
 Develop procedures for
 Enforcing ethical standards and
 Handling potential violations
 Scrutinize attitudes, character, and work history of
prospective employees
 Educate employees about what is ethical and what is not
 Encourage employees to raise
issues with ethical dimensions
 Explain how company values and the ethics
code apply at all levels of a company
 Insist that company values and ethical
standards become a way of life
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 Structuring the Ethics
Compliance and Enforcement
Process (continued)
 Form an ethics committee to give guidance on ethics
matters
 Appoint an ethics officer to head compliance effort
 Establish an ethics hotline/Web site employees can use to
 Anonymously report a possible violation
 Get confidential advice on a
troubling ethics-related situation
 Conduct an annual ethics audit
to measure extent of
 Ethical behavior and
 Identify problem areas
13-30
 Key Approaches to
Enforcing Ethical Behavior
 Have mandatory ethics trainings for employees
 Conduct an annual audit to assess
 Each manager’s efforts to
uphold ethical standards
 Actions taken by managers
to remedy deficient conduct
 Require all employees to sign a statement annually certifying
they have complied with company’s code of ethics
 Openly encourage employees to report possible infractions via
 Anonymous calls to a hotline or
 Posting to a special company Web site
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 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
 Draw on full range of motivational and
compensation incentives to induce personnel
to adopt and practice desired behaviors
 Allow some leeway for certain core values and principles
to be interpreted and applied somewhat differently, if
necessary, to accommodate local customs and traditions
13-32
 Leadership Activities of the
Strategy Implementer
1. Stay on top of what’s happening
2. Put constructive pressure on
company to achieve good results
3. Keep company focused
on operating excellence
4. Lead development of stronger core Carly Fiorina
Hewlett-Packard
competencies and competitive capabilities
5. Exercise ethics leadership
6. Take corrective actions to improve overall strategic
performance
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 Role #1: Stay on Top
of What’s Happening
 Develop a broad network of formal and informal sources
of information
 Talk with many people at all levels

 Be an avid practitioner of MBWA

 Observe situation firsthand

 Monitor operating results regularly

 Get feedback from customers

 Watch competitive reactions of rivals

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 Role #2: Put Constructive Pressure
on Company to Achieve Good
Results
 Successful leaders spend time
 Mobilizing organizational energy behind
 Good strategy execution and
 Operating excellence
 Nurturing a results-oriented work climate
 Promoting certain enabling cultural drivers
 Strong sense of involvement on part of company
personnel
 Emphasis on individual initiative and creativity
 Respect for contributions of individuals and groups
 Pride in doing things right
13-35
 Role #3: Keep Organization
Focused on Operating Excellence
 Promote openness to improving
how things are done
 Support mavericks with creative
ideas to improve ways of operating
 Ensure rewards for successful champions
are large and visible
 Use all kinds of ad hoc organizational forms
to support experimentation
 Use tools of benchmarking, best practices, reengineering,
TQM, and Six Sigma to focus attention on continuous
improvement
13-36
 Role #4: Promote Stronger Core
Competences and Capabilities
 Top management intervention is
required to establish better or new
 Resource strengths and competences
 Competitive capabilities
 Senior managers must lead the effort because
 Competences reside in combined
efforts of different work groups and
departments, thus requiring
cross-functional collaboration
 Stronger competencies and capabilities
can lead to a competitive edge over rivals
13-37
 Role #5: Exercise
Ethics Leadership
 Set an excellent example in

 Displaying ethical behaviors and

 Demonstrating character and personal
integrity in actions and decisions Our ethics
code is . . .

 Make it a duty for employees to

 Observe ethical codes

 Report ethical violations
 Encourage compliance and establish tough
consequences for unethical behavior
13-38
 Role #6: Lead the Process of
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
13-39