Strategic Management

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CHAPTER 12CHAPTER 12

CORPORATE CULTURE

AND LEADERSHIP: KEYS

TO GOOD STRATEGY

EXECUTION

CORPORATE CULTURE

AND LEADERSHIP: KEYS

TO GOOD STRATEGY

EXECUTION

CORE CONCEPT

♦ Corporate culture refers to the shared values,

ingrained attitudes, core beliefs and company

traditions that determine norms of behavior, accepted work practices, and styles of

operating.

12–2

KEY FEATURES OF A FIRM’S CORPORATE CULTURE

Strength of peer pressure to

conform and

observe norms

Actions and behaviors

encouraged

and rewarded

Traditions and stories and “how

we do things

around here”

How the firm treats its

stakeholders

Features of a Corporate Culture

Values, principles, and ethical

standards

in actual use

Management practices and

organizational

polices

Atmosphere and spirit embodied

in the firm’s work

climate

How managers and employees interact

and relate to one

another

12–3

TRANSFORMING CORE VALUES AND ETHICAL STANDARDS INTO CULTURAL NORMS

� Recruit and hire applicants with values and

ethics compatible to those of the firm.

� Incorporate the values statement and the code

of ethics into orientation and training programs.

� Have senior executives frequently reiterate and stress the firm’s values and ethical principles.

� Use values statements and codes of ethics as

benchmarks for the firm’s polices and practices.

12–4

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TRANSFORMING CORE VALUES AND ETHICAL STANDARDS INTO CULTURAL NORMS (CONT’D)

� Use core values and ethical principles when

evaluating each person’s job performance.

� Encourage all employees to help enforce the

observance of core values and ethical standards.

� Periodically have ceremonial occasions to

recognize individuals and groups who display

the firm’s values and ethical principles.

� Institute strict ethics enforcement procedures.

12–5

PERPETUATING THE CULTURE

Screening and selecting new

employees

Systematic indoctrination of

new members

Vocal support by senior managers

Rewarding those who display

cultural norms

Ceremonies honoring

employees

Telling and retelling of the

firm’s legends

Perpetuating the Culture

Perpetuating the Culture

12–6

FORCES THAT CAUSE A FIRM’S CULTURE TO EVOLVE

New challenges in the marketplace

Merger or acquisition of another firm

Shifting internal conditions

Causes of Cultural Change

Diversification into new businesses

New or revolutionary technologies

Rapid grow th of the firm

12–7

♦ Strong-Culture Firm

● Has deeply rooted widely-shared values, behavioral norms, and operating approaches.

● Insists that its values and principles be reflected in the

decisions and actions taken by all company personnel.

♦ Weak-Culture Firm

● Lacks values and principles that are consistently preached or widely shared.

● Has few or no traditions, beliefs, values, common

bonds, or behavioral norms.

COMPANY CULTURES CAN BE STRONGLY OR WEAKLY EMBEDDED

12–8

3

DEVELOPMENT OF A STRONG CULTURE

Commitment

by the firm to

ethical behavior

Founder or

strong leader

with strong values

Strong Culture

Closely aligning corporate culture with the requirements

for proficient strategy execution merits the full attention

of senior executives.

12–9

WHY CORPORATE CULTURES MATTER TO THE STRATEGY EXECUTION PROCESS

� A culture well matched to the requirements of the strategy execution effort focuses the attention of employees on what is most important to this effort.

� Culture-induced peer pressure induces personnel to do things in a manner that aids good strategy execution.

� A culture consistent with the requirements for good

strategy execution can energize employees, deepen their commitment to execute the strategy, and enhance worker productivity.

12–10

HEALTHY CULTURES THAT AID GOOD STRATEGY EXECUTION

Good Strategy Execution

Adaptive Cultures

High-Performance Cultures

Commitment to achieving stretch

objectives and

accountability

Willingness to accept change and take on

challenges

Performance

12–11

UNHEALTHY CULTURES THAT IMPEDE GOOD STRATEGY EXECUTION

Change-resistant cultures

Incompatible Subcultures

Politicized cultures

Unhealthy

Cultures

Insular, inw ardly focused cultures

Unethical and greed- driven cultures

Poor Strategy Execution

Poor Performance

12–12

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FIGURE 12.2 Changing a Problem Culture

12–13

MAKING A COMPELLING CASE FOR CULTURE CHANGE

� Selling the Change

● Explain why and how certain behavioral norms and work practices are obstacles to good execution of strategic initiatives.

● Explain how new behaviors and work practices will be produce better results.

● Cite reasons why the current strategy has to be modified, if the need for cultural change is due to a change in strategy.

12–14

SUBSTANTIVE CULTURE-CHANGING ACTIONS

� Replace key executives who are stonewalling needed organizational and cultural changes.

� Promote individuals who advocate for cultural shifts and can serve as a role model for the cultural behavior.

� Appoint outsiders with the desired cultural attributes to high-profile positions.

� Screening candidates for positions carefully, hiring only those who appear to fit in with the new culture.

� Mandate that all personnel attend culture-training.

� Design compensation incentives that boost the pay of teams and individuals.

12–15

HOW LONG DOES IT TAKE TO CHANGE A PROBLEM CULTURE?

� Changing a problem culture is never a short-term exercise.

� A sustained and persistent effort to reinforce the culture at every opportunity through word and deed is required.

� It takes time for a new culture to emerge and prevail; it takes even longer for it to become deeply embedded.

� Fixing a problem culture and instilling a new set of attitudes and behaviors can take two to five years.

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LEADING THE STRATEGY EXECUTION PROCESS

� Leading Strategy Execution Requires:

● Staying on top of what is happening and closely monitoring progress.

● Putting constructive pressure on the organization to execute the strategy well and achieve operating excellence.

● Initiating corrective actions to improve strategy execution and achieve the targeted performance results.

12–17

STAYING ON TOP OF HOW THINGS ARE GOING

� Management by Walking Around (MBWA)

● Is used by leaders to stay informed about how well the strategy execution process is progressing.

● Involves spending time with people at company facilities, asking questions, listening to their opinions and concerns, and gathering firsthand information about how well aspects of the strategy execution process are going.

12–18

MOBILIZING THE EFFORT FOR EXCELLENCE IN STRATEGY

EXECUTION

� Treat employees as valued partners.

� Foster an esprit de corps that

energizes members.

� Use empowerment to create a fully

engaged workforce.

� Make champions out of the people who spearhead new ideas and/or

turn in winning performances.

12–19

MOBILIZING THE EFFORT FOR EXCELLENCE IN STRATEGY

EXECUTION (CONT’D)

� Set stretch objectives that require personnel to

give their best in achieving performance targets.

� Use benchmarking, reengineering, TQM, and

Six Sigma to focus attention on continuous improvement.

� Use motivational techniques and compensation

incentives to inspire, nurture a results-oriented

work climate, and enforce high standards.

� Celebrate individual, group, company successes.

12–20

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A FINAL WORD ON LEADING THE PROCESS OF CRAFTING AND EXECUTING STRATEGY

� It is difficult to separate leading the process of executing strategy from leading the strategy process.

� Crafting, implementing, and executing strategy is a continuous process that requires much adjusting and fine-tuning of the strategy to fit changing circumstances.

� The tests of strategic leadership are whether the firm

has a good strategy and business model, whether its strategy is competently executed, and whether the firm is achieving its performance targets.

� If these three conditions exist, then the firm has good strategic leadership and is a well-managed enterprise.

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