1. 1 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill IMPLEMENTING STRATEGY: CULTURE AND LEADERSHIP CHAPTER 11 Screen graphics created by: Jana F. Kuzmicki, PhD, Indiana University Southeast

2. 2 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Chapter Outline l Building a Strategy- Supportive Corporate Culture 4 Where Does Corporate Culture Come From? 4 Power of Culture 4 Types of Cultures 4 Creating a Fit Between Strategy and Culture 4 Establishing Ethical Standards and Values 4 Building a Spirit of High Performance l Exerting Strategic Leadership 4 MBWA 4 Fostering a Strategy- Supportive Culture 4 Keeping Internal Organization Innovative 4 Dealing With Company Politics 4 Enforcing Ethical Behavior 4 Making Corrective Adjustments

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

4. 4 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Where Does Corporate Culture Come From? l Founder or early leader l Influential individual or work group l Policies, vision, or strategies l Traditions, supervisory practices, employee attitudes l Organizational politics l Relationships with stakeholders l Internal sociological forces

5. 5 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill How Is Culture Sustained? l Continuity of leadership l Select new employees based on how well their personalities “fit” l Systematic indoctrination of new employees l Senior employees’ reinforcement of core values l Story-telling of company legends l Ceremonies honoring employees who display cultural ideals l Visibly rewarding those who follow cultural norms

6. 6 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill The Power of Culture l Culture can contribute to -- or hinder -- successful strategy execution l Requirements for successful strategy execution may -- or may not -- be compatible with culture l A close match between culture and strategy promotes effective strategy execution

7. 7 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Why Culture Matters: The Benefits of a Good Culture-Strategy Fit l Strategy-supportive cultures 4 Shape the mood and temperament of the work force--positively affecting organizational energy, work habits, and operating practices 4 Provide standards, values, informal rules and peer pressures that nurture and motivate people to do their jobs in ways that promote good strategy execution 4 Strengthen employee identification with the company, its performance targets, and strategy

8. 8 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Why Culture Matters: The Benefits of a Good Culture-Strategy Fit (cont.) l Strategy-supportive cultures 4 Stimulate people to take on the challenge of realizing the company’s vision, do their jobs competently and with enthusiasm, and collaborate with others to execute the strategy 4 Optimal condition: A work environment that 4 Promotes can do attitudes 4 Accepts change 4 Breeds needed capabilities Can Do!

9. 9 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Types of Corporate Cultures Strong vs. Weak Cultures Low-Performance Cultures Adaptive Cultures

10. 10 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Characteristics of Strong Culture Companies l Conduct business according to a clear, widely- understood philosophy l Management spends considerable time spent communicating and reinforcing values l Values widely shared and deeply rooted l Often have a values statement l Careful screening/selection of new employees to be sure they will “fit in” l Visible rewards for those following norms; penalties for those who don’t

11. 11 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill How Does a Culture Come to Be Strong? l Leader who establishes values consistent with 4 Customer needs 4 Competitive conditions 4 Strategic requirements l A deep, abiding commitment to espoused values and business philosophy 4 Practicing what is preached!! l Genuine concern for well-being of 4 Customers 4 Employees 4 Shareholders Values Customers Employees Shareholders

12. 12 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Hallmarks of Adaptive Cultures l Introduction of new strategies to achieve superior performance l Strategic agility and fast response to new conditions l Risk-taking, experimentation, and innovation to satisfy stakeholders l Proactive approaches to implement workable solutions l Entrepreneurship encouraged and rewarded l Top managers exhibit genuine concern for customers, employees, shareholders, suppliers

13. 13 © 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

14. 14 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Symbolic Culture-Changing Actions l Emphasize frugality l Eliminate executive perks l Require executives to spend time talking with customers l Alter practices identified as cultural hindrances l Visible awards to honor heroes l Ceremonial events to praise people and teams who “get with the program”

15. 15 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Substantive Culture-Changing Actions l Benchmarking and best practices l Set world-class performance targets l Bring in new blood, replacing traditional managers l Shake up the organizational structure l Change reward structure l Increase commitment to employee training l Reallocate budget, downsizing and upsizing

16. 16 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Establishing Ethical Values l A culture based on ethical principles is vital to long-term strategic success l Ethics programs make ethical conduct a way of life l Approaches to establishing ethical standards 4 Word-of-mouth indoctrination and tradition 4 Written codes of ethics Our ethics program consists of...

17. 17 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Topics Covered in Value Statements and Codes of Ethics Topics in Value Statements l Customer importance l Commitment to quality l Commitment to innovation l Respect for individual employee l Importance of honesty l Duty to stockholders l Duty to suppliers l Corporate citizenship l Protecting the environment Topics in Codes of Ethics l Honesty observing the law l Conflicts of interest l Fairness in marketing practices l Using inside information l Supplier relations l Corrupt practices l Acquiring information l Political activities l Use of company assets l Proprietary information l Pricing, contracting, & billing

18. 18 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Instilling Values and Ethics in the Culture l Incorporate values statement and ethics code in employee training programs l Screen out applicants who do not exhibit compatible character traits l Communicate the vales and ethics code to all employees l Management involvement and oversight l Strong endorsement by CEO l Word-of-mouth indoctrination

19. 19 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Building a Spirit of High Performance Into the Culture l Emphasize achievement and excellence l Promote a results-oriented culture l Pursue practices to inspire people to excel Desired outcome: 4 Produce extraordinary results with ordinary people

20. 20 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Approaches to Building a Spirit of High Performance l Treat employees with dignity and respect l Train each employee thoroughly l Encourage employees to use initiative l Set clear performance standards l Use rewards and punishment to enforce high performance standards l Hold managers responsible for employee development l Grant employees autonomy to contribute l Make champions out of people who excel

21. 21 © 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 energizing organization 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

22. 22 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Leader’s Role in Matching Culture and Strategy l Create events where all managers must listen to 4 Angry customers 4 Dissatisfied stockholders 4 Alienated employees l Energize employees to make new strategy happen l Repeat desired cultural values again and again l Reward people exhibiting desired cultural norms

23. 23 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Leader’s Role in Empowering Champions l Encourage people to be creative and imaginative l Tolerate mavericks with creative ideas l Promote lots of tries and be willing to accept failures -- every idea won’t pan out l Use all kinds of organizational means to support experimentation (teams, task forces, “skunkworks” and individual champions) l See that rewards for successful champions are large and visible

24. 24 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Leader’s Role in Developing New Capabilities l Responding to changes requires top management intervention to establish new 4 Organizational capabilities 4 Resource strengths and competencies l Senior managers must lead the effort because 4 Competencies reside in combined efforts, requiring integration 4 Clout is needed to enforce necessary networking and cooperation

25. 25 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Political Tactics of Successful Executives l Let weakly supported ideas die via inaction l Establish hurdles for strongly supported ideas that shouldn’t be opposed l Keep low profile on unacceptable ideas by getting subordinates to say no l Let most negative decisions come from group consensus l Lead the strategy but don’t dictate it l Stay alert to symbolic impact of one’s actions l Ensure all major power bases have access to top managers l Inject new views when considering major changes l Minimize political exposure on highly controversial issues

26. 26 © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill Leader’s Role in Enforcing Ethical Behavior l Set an excellent ethical example l Provide training to employees about what is ethical and what isn’t l Reiterate unequivocal support of ethics code l Remove people from key positions if found guilty of a violation l Reprimand people lax in monitoring ethical compliance