1. Corporate Culture and Leadership
Chapter 13
Corporate Culture and Leadership

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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. 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!

14. 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!

15. Types of Corporate Cultures
Strong vs. Weak Cultures
Unhealthy Cultures
Adaptive Cultures

16. 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”

17. 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

18. 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
Best practices
New or better managerial approaches
Innovative ideas

19. 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

20. 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

21. 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

22. 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

23. 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

24. 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

25. 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

26. 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 company’s business
Value statements serve as a cornerstone for culture-building
Our ethics
program
consists of . . .

27. 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

28. 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

29. 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

30. 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

31. 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

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
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

33. 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 competencies and competitive capabilities
5. Exercise ethics leadership
6. Take corrective actions to improve overall strategic performance
Carly Fiorina
Hewlett-Packard

34. 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

35. 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

36. 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

37. 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

38. Role #5: Exercise Ethics Leadership
Set an excellent example in
Displaying ethical behaviors and
Demonstrating character and personal integrity in actions and decisions
Make it a duty for employees to
Observe ethical codes
Report ethical violations
Encourage compliance and establish tough consequences for unethical behavior
Our ethics
code is . . .

39. 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