MODULE 11 IMPLEMENTING STRATEGY: CULTURE AND LEADERSHIP

MODULE OUTLINE Building a strategy-supportive corporate culture? Creating fit between strategy & culture Establishing ethical standards & values Exerting strategic leadership Managing by walking around(MBWA) Fostering a strategy-supportive culture Keeping internal organization innovative Dealing with company politics Enforcing Ethical behavior Making corrective adjustments

WHAT MAKES UP A COMPANY ’ S CULTURE? Beliefs about how business ought to be conducted values & business principles of management “ How we do things around here” Traditions Approaches to stakeholder relationships Company politics Peer pressures … Taboos & political don’ts off-told stories illustrating company’s values Ethical standards.

WHERE DOES CORPORATE CULTURE COME FROM? Founder or early leader who articulated beliefs, principles, values, practices influential individual, work group, or division values or vision statement rigidly adhered to over time, these values, principles, practices are shared widely by all employees Founder or early leader who articulated beliefs, principles, values, practices influential individual, work group, or division values or vision statement rigidly adhered to over time, these values, principles, practices are shared widely by all employees A company’s culture is a product of internal social forces

BEDROCK OF WAL-MART ’ S CULTIURE Dedication to customer satisfaction Zealous pursuit of low costs Belief in treating employees partners Sam Walton’s legendary frugality Ritualistic Saturday morning meetings Commitment of executives to visit Stores, talk to customers, and solicit & act on employee suggestions

CULTURE AT NORDSTROM’S Company motto “ Respond to Unreasonable Customer Requests” Motto strongly ingrained in employee behavior out-of-ordinary customer requests viewed as opportunities for “ heroic “ acts Promotions based entirely on commission Culture weeds out those not meeting standards & rewards out those meeting standards & rewards those who do

MULTIPLE CULTURES WITHIN A COMPANY Values,beliefs,practices vary by Department Geographic location Division Business unit Company subcultures can clash or not mesh well

A company’s can contribute- or hinder- successful strategy execution beliefs & practices of a strategy may or may not- be compatible with firm’s culture Close match between culture & strategy adds significantly to effectiveness of strategy execution WHY CULTURE MATTERS

A strong strategy-supportive culture Provides system of informal/rules & peer pressure Motivates people to do their best provides structure, standards, & value system Promotes strong company identification job of strategy implementer- Decide if culture is or is not strategy supportive WHY CULTURE MATTERS

CHARACTERISTICS OF STRONG CULTURE COMPANIES Clear & explicit philosophy about how business will be conducted Lots of time spent communicating values & beliefs Existence of creed or values statement values & norms widely shared & deeply rooted Careful screening/selection of new employees

CHARACTERSTICS OF STRONG CULTURE COMPANIES CHARACTERSTICS OF STRONG CULTURE COMPANIES Legendary stories told & retold Ceremonies honoring employees exemplifying cultural norms Visible rewards for those following norms; penalties for those who don’t Sincere commitment to operating company according to tradition

CHARACTERISTICS OF WEAK CULTURE COMPANIES Many subcultures Few strong traditions Few values values & beliefs widely shared by all employees No strong sense of company identify

CHARACTERISTICS OF LOW PERFORMANCE CULTURES Politicized internal environment Autonomous fiefdoms operated by influential managers who resist change Issues resolved on basis of turf or coalitions Hostility to change Experimentation discouraged Managers discouraged from exercising initiative to alter status quo Avoiding risks & not screwing up more important than innovativeness Entrenched, multi-layered bureaucracies

CHARACTERISTICS OF LOW CHARACTERISTICS OF LOW PERFORMANCE CULTURES promoting managers who understand structures, & control better than vision, strategies, & culture- building Inside-out thinking & strategies Aversion to looking outsides firm for superior practices Insular thinking Inward-looking solutions Must-be-invented here syndrome

HALLMARKS OF ADAPTIVE CULTURES Executives with strong commitment to Timeless business principles and Organizational stockholders Managers & employees receptive to Risk-taking Experimentation & innovation Changing strategies Sense of confidence among all employees Do what’s needed to ensure long-term success Proactive in implementing workable solutions

HALLMARKS OF ADAPTIVE CULTURES Executives who are Willing to take prudent risks Quick to modify strategies & operating practices Supportive of people proposing useful change Adept at changing the “ right things in the right ways” Genuinely concerned about well-being of all stakeholders

IMPORTANCE OF A STRATEGY – CULTURE FIT Beliefs,goals, & practices underpinning a strategy’s success may or may not be compatible with company’s culture When they are not, culture may impede or even defeat successful implementation Strong cultures Promote good performance when fit exists and Hurt performance when little fit exists

CREATING A STRATEGY- SUPPORTIVE CULTURAL FIT Changing culture to fit a new strategy is a touch executive challenge Changing culture to fit a new strategy is a touch executive challenge Especially when prevailing culture is entrenched & unhealthy Senior executives must personally Lead efforts to create a Strategy – supportive culture!

CREATING A STRATEGY – SUPPORTIVE CULTURAL FIT Diagnose which facets of present culture are strategy-supportive & which are not Talk openly & candidly about aspects of culture needing change Follow talk with swift, visible action Substantive or Symbolic

SUBSTANTIVE CULTURE- CHANGING ACTIONS Benchmarking & best practices Set world-class performance targets Stake out new blood, replacing traditional managers Make major reorganization moves Change reward structure Increase commitments to employee training Reallocate budget, downsizing & upsizing

SYMBOLIC CULTURE- CHANGING ACTIONS Eliminate executive perks & emphasize frugality Require executives to spend time talking with customers & understanding their wants Alter practices identified as cultural hindrances Visible awards to honor heroes Ceremonial events to praise people & teams who “ get with the program”

ESTABLISHING ETHICAL STANDARDS AND VALUES A strong culture based on ethical principles has positive impact on long-term strategic success A strong culture based on ethical principles has positive impact on long-term strategic success Corporate ethics & value programs make ethical conduct a way of life Approaches to establishing ethical standards Word-of-mouth indoctrination & power of tradition Written documents

Topics Generally Covered in Value Statements & Codes of Ethics Topics in Values Statement  Customer importance  Commitment to quality  Commitment to innovation  Request for individual employee  Importance of Honesty  Duty to Stockholder  Duty to suppliers  Corporate citizenship  Protecting the Environment Topics in Values Statement  Honesty observing the law  Conflicts of interest  Famines in selling/marketing  Supplier Relations & Purchasing  Corrupt Practices  Acquiring information  Political Activities  Use of company assets  Propriety information  Pricing, Contracting,& Billing

HOW TO IMPLEMENT VALUES & A CODE OF ETHICS Incorporate values statement & ethics code into employee training programs Screen out job applicants not exhibiting desired values & ethical traits Communicate of values & ethics code by CEO insist all managers be personally involved in instilling values & ethics Promote word-of-mouth indoctrination by peers in work situations

BUILDING A SPIRIT OF HIGH PERFORMANCE INTO THE CULTURE Companies with a spirit of high performance Emphasize achievement & excellence Have a results- oriented culture Pursue policies & practices inspiring People to do their best Desired outcome- Produce extraordinary results with ordinary people

BUILDING A SPIRIT OF HIGH PERFORMANCE INTO THE CULTURE Emphasize an intense people orientation Belief in or the of the individual Treat employees with dignity & respect Willingness to train each employee Strong commitment to job security & promotion from within Encourage employees to use initiative & creativity Set clear performance standards

BUILDING A SPIRIT OF HIGH PERFORMANCE INTO THE CULTURE Emphasize an intense people orientation Utilize rewards & punishment to enforce High performance standards Hold managers responsible for employee development Grant employees autonomy to excel & contribute Make champions out of people turning in winning performances

EXERCISING STRATEGIC LEADERSHIP Stay on top of what’s happening Promote culture “ energizing “ organization to accomplish strategy Keep firm responsive to changing conditions Build consensus & deal with politics of strategy formulation & implementation Enforce ethical standards & behavior Take corrective actions to improve overall strategic performance Six Roles the strategy Implementer

STARTEGIC MANAGEMENT PRINCIPLE Strong leadership is Virtually essential in Achieving effective Strategy execution!

WARNING BY WALKING AROUND MBWA Develop a broad network & sources of information, both formal & informal Formal channels Talk with key subordinates Read written reports Glean statistics from latest operating results Get feedback from customers Watch competitive reactions of rivals Informal channels rely heavily on MBWA Visit the “ field “ regularly, talking with many people at all levels

FOSTERING A STRATEGY SUPPORTIVE CLIMATE & CULTURE Successful leaders recognize they must convince people Chosen strategy is right Implementing it to the best firm’s ability is “ top priority” Only top management has The power to bring about Major cultural change

LEADER ’ S ROLE : POSTERING A STRATEGY – SUPPORTIVE CULTURE Philosophy of stakeholders- are-king Openness to new ideas Challenging status quo Energizing employees to make new strategy happen Repeating new messages again & again Rewarding people exhibiting new cultural norms ‘ Creating events where all managers must listen to angry customers, dissatisfied stockholders, & alienated employees

LEADER ’ S ROLE: KEEPING INTERNAL ORGANIZATION RESPONSIVE Simulate dependable supply of fresh ideas Support people who are Willing to champion new ideas, better services, new product, & innovative technologies Eager for a chance to turn innovations into new divisions, businesses, & industries Promote continuous adaptation to changing conditions

LEADER ’ S ROLE: PROMOTING CHAMPIONS Encourage people to suggestions Tolerate “ mavericks “ with creative ideas, giving them room to operate Promote lots of “ tries”, being willing to tolerate failures See that rewards for successful champions are large & visible Encourage people who champion an unsuccessful idea to try again Use all kinds of as hoc organizational forms to support experimentation

Politics & strategy Politics considerations strategy- making Agreeing on long-term direction Determining which strategic Objectives have top priority Building consensus for which strategy alternatives to employ

POLITICS & STRATEGY Political considerations in implementing strategy Whether & how to reorganize Who should report to whom Who has how much authority Choosing people to fill key positions Which units should get biggest budget increases

POLITICS & STRATEGY Key individual form coalitions, each pressing benefits & potential of their Own ideas and Vested interests Company politics present strategy Leaders with challenge of building Consensus for the strategy and How to implement it!

THE STRATEGY LEADER & INTERNAL POLITIC Political role focuses on Stimulating options Nurturing support for strong Proposals & killing weak ones Guiding formation of coalitions on certain issues Achieving consensus & commitment

Let weakly supported ideas die via inaction Establish additional hurdles for strongly supported ideas viewed as unacceptable but are best not openly opposed Keep low political profile on unacceptable ideas by getting subordinate managers to say “ no” Let most negative decisions come from group consensus leader merely accepts Ensure all major power bases in firm have representation in or access to top management inject new views in considering major changes POLITICAL TACTICS OF SUCCESSFUL EXECUTIVES

LEADER ’ S ROLE IN ENFORCING ETHICAL BEHAVIOR Communicating importance of ethical behavior involves Insisting upon strong code of ethics Installing tough consequences for unethical behavior Taking actions to ensure compliance Making it a DUTY for employees to Report ethical violations and observe ethical codes

LEDER ’ S ROLE IN ENFORCING ETHICAL BEHAVIOR Ethics leadership is exhibited by Setting an excellent ethical example Providing training to all employees about what is ethical & what is not Referring explicitly to ethics codes, taking strong stand on ethical issues Removing people from key positions when found guilty of a violation Reprimanding those lax in monitoring ethical compliance

KEY COMPONENTS OF AN ETHIC PROGRAM Oversight committee of board of directors Committee of senior managers to direct training, implementation, & compliance effort Annual audit of managers’ efforts to uphold ethical standards Formal reports on managers’ actions to remedy deficient conduct Require people to sign documents certifying compliance with ethical standards

LEADER PROCESS OF MAKING CORRECTIVE ADJUSTMENTS Adjustments and “ mid-course” corrections to strategic plan and/or implementation are a necessary part of strategic management Principle Approaches to Making Corrective Adjustments Reacting and responding to new conditions Proactive adjustments