1 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill IMPLEMENTING STRATEGY: CULTURE AND LEADERSHIP

“An organisation’s capacity to execute its strategy depends on its “hard” infrastructure, structure and systems and on its “soft” infrastructure - its culture and norms.” Amar Bhide

3 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill What Makes Up a Corporate Culture? Beliefs about how business ought to be conducted Values and principles of management Patterns of “how we do things around here” Oft-told stories illustrating company’s values Taboos and political don’ts Traditions Ethical standards

4 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Features of a large retailer cuture Dedication to customer satisfaction Zealous pursuit of low costs Belief in treating employees as partners Sam Walton’s legendary frugality Ritualistic Saturday morning meetings Executive commitment to Visit stores Talk to customers Solicit employees’ suggestions

5 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Where Does Corporate Culture Come From? Founder or early leader Influential individual or work group Policies, vision, or strategies Traditions, supervisory practices, employee attitudes Organisational politics Relationships with stakeholders Internal sociological forces

6 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill How Is Culture Sustained? Continuity of leadership Select new employees based on personality “fit” Systematic indoctrination of new employees Senior employees’ reinforcement of core values Story-telling of company legends Ceremonies honoring employees who display cultural ideals Visibly rewarding those who follow cultural norms

7 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill The Power of Culture Culture can contribute to or hinder successful strategy execution Requirements for successful strategy execution may or may not be compatible with culture A close match between culture and strategy promotes effective strategy execution

8 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Benefits of a Good Culture - Strategy Fit Strategy-supportive cultures Shape the mood and temperament of the work force positively affecting organisational energy, work habits, and operating practices Provide standards, values, informal rules and peer pressures that nurture and motivate people to do their jobs in ways that promote good strategy execution Strengthen employee identification with the company, its performance targets, and strategy

9 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Benefits of a Good Culture-Strategy Fit (cont.) Strategy-supportive cultures Stimulate people to take on the challenge of realising the company’s vision, do their jobs competently and with enthusiasm, and collaborate with others to execute the strategy Optimal condition: A work environment that Promotes can do attitudes Accepts change Breeds needed capabilities Can Do!

10 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Strategic Management Principle Anything so fundamental as implementing a new or different strategy involves aligning the organisation’s culture with the requirements for competent strategy execution.

11 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Types of Corporate Cultures Strong vs. Weak Cultures Low-Performance Cultures Adaptive Cultures

12 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Characteristics of Strong Culture Companies Conduct business according to a clear, widely-understood philosophy Management spends considerable time spent communicating and reinforcing values Values widely shared and deeply rooted Often have a values statement Careful screening/selection of new employees to be sure they will “fit in” Visible rewards for those following norms; penalties for those who don’t

13 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill How is a Strong Culture Built? Leader who establishes values consistent with: Customer needs Competitive conditions Strategic requirements A deep, abiding commitment to espoused values and business philosophy Practicing what is preached!! Genuine concern for well-being of: Customers Employees Shareholders

14 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Strategic Management Principle Strong cultures promote good strategy execution where there’s fit and hurt execution where there’s little fit.

15 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Characteristics of Weak Culture Companies Many subcultures Few values and norms widely shared Few strong traditions Little cohesion among the departments Weak employee allegiance to company’s vision and strategy No strong sense of company identity

16 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Characteristics of Low Performance Cultures Politicised internal environment Issues resolved on basis of turf Hostility to change Experimentation and efforts to alter status quo discouraged Avoid risks and don’t screw up Promote managers who are more concerned about process than about results Aversion to look outside for superior practices Must-be-invented here syndrome

17 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Hallmarks of Adaptive Cultures Introduction of new strategies to achieve superior performance Strategic agility and fast response to new conditions Risk-taking, experimentation, and innovation to satisfy stakeholders Proactive approaches to implement workable solutions Entrepreneurship encouraged and rewarded Top managers exhibit genuine concern for customers, employees, shareholders, suppliers

18 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Creating a Strategy - Supportive Cultural Fit STEP 1 Diagnose which facets of present culture are strategy-supportive and which are not STEP 2 Talk openly about those aspects of present culture that need to be changed STEP 3 Follow with swift, visible actions - some substantive and some symbolic

19 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Symbolic Culture-Changing Actions Emphasise frugality Eliminate executive perks Require executives to spend time talking with customers Alter practices identified as cultural hindrances Visible awards to honor heroes Ceremonial events to praise people and teams who “get with the program”

20 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Substantive Culture-Changing Actions Benchmarking and best practices Set world-class performance targets Bring in new blood, replacing traditional managers Shake up the organisational structure Change reward structure Increase commitment to employee training Reallocate budget, downsizing and upsizing

21 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Topics Covered in Value Statements Customer importance Commitment to quality Commitment to innovation Respect for individual employee Importance of honesty Duty to stockholders Duty to suppliers Corporate citizenship Protecting the environment

22 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Instilling Values in the Culture Incorporate values statement in employee training programs Screen out applicants who do not exhibit compatible character traits Communicate the vales to all employees Management involvement, participation and oversight Strong endorsement by CEO Word-of-mouth indoctrination

23 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Building a Spirit of High Performance Into the Culture Emphasise achievement and excellence Promote a results-oriented culture Pursue practices to inspire people to excel Desired outcome: Produce extraordinary results with ordinary people

24 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Approaches to Building a Spirit of High Performance Treat employees with dignity and respect Train each employee thoroughly Encourage employees to use initiative Set clear performance standards Use rewards and punishment to enforce high performance standards Hold managers responsible for employee development Grant employees autonomy to contribute Make champions out of people who excel

25 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Six Roles of the Strategy Implementer 1. Stay on top of what’s happening 2. Promote a culture energising organisation to accomplish strategy 3. Keep firm responsive to changing conditions 4. Build consensus and deal with politics of crafting and implementing strategy 5. Enforce ethical standards 6. Take corrective actions to improve overall strategic performance

26 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Role #1: Stay on Top of What’s Happening 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

27 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Role #2: Foster a Strategy - Supportive Culture Successful leaders Spend time convincing organisation members that the chosen strategy is right and that competent strategy execution is top priority Nurturing values Building and nurturing a culture that promotes good strategy execution

28 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Leader’s Role in Matching Culture and Strategy Create events where all managers must listen to Angry customers Dissatisfied stockholders Alienated employees Energise employees to make new strategy happen Repeat desired cultural values again and again Reward people exhibiting desired cultural norms

29 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Role #3: Keep Internal Organisation Responsive Promote openness to fresh ideas Pursue attractive new opportunities Support people who are willing to champion Innovative ideas and products Better services New technologies Promote continuous adaptation to changing conditions Build new competencies and capabilities

30 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Leader’s Role in Empowering Champions Encourage people to be creative and imaginative Tolerate mavericks with creative ideas Promote lots of tries and be willing to accept failures Use all kinds of organisational means to support experimentation (teams, task forces, “skunkworks” and individual champions) See that rewards for successful champions are large and visible

31 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Leader’s Role in Developing New Capabilities Responding to changes requires top management intervention to establish new: Organizational capabilities Resource strengths and competencies Senior managers must lead the effort because Competencies reside in combined efforts, requiring integration Clout is needed to enforce necessary networking and cooperation

32 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Role #4: Dealing with Politics Politics in strategy-making Winning agreement on long-term direction, objectives, and strategy Politics in implementing strategy Choosing people to fill key positions Delegation of authority Whether and how to reorganise Who reports to whom Deciding which units get biggest budget increases and which get downsized

33 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill The Political Role of the Strategy Leader Stimulate options Nurture support for strong proposals and kill weak ones Guide formation of coalitions on certain issues Achieve consensus and commitment

34 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Political Tactics of Successful Executives Let weakly supported ideas die via inaction Establish hurdles for strongly supported ideas that shouldn’t be opposed Keep low profile on unacceptable ideas by getting subordinates to say no Let most negative decisions come from group consensus Lead the strategy but don’t dictate it Stay alert to symbolic impact of one’s actions Ensure all major power bases have access to top managers Inject new views when considering major changes Minimize political exposure on highly controversial issues

35 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Role #6: Lead the Process of Making Corrective Adjustments Requires both Reactive adjustments Proactive adjustments Involves Reshaping long-term direction, objectives, and strategy to unfolding events Promoting initiatives to align internal activities and behaviour with strategy