Chapter
13
Corporate Culture
and Leadership
13-1
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
13-2
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
13-3
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
13-4
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
13-5
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
13-6
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
13-7
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
13-8
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
13-9
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
13-10
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
13-11
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
13-12
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!
13-13
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!
13-14
Types of Corporate
Cultures
Strong vs. Weak Cultures
Unhealthy Cultures
Adaptive Cultures
13-15
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”
13-16
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
13-17
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
Bestpractices
New or better managerial approaches
Innovative ideas
13-18
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
13-19
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
13-20
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
13-21
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
13-22
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
13-23
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
13-24
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
13-25
Grounding the Culture in
Core Values and Ethics
A culture based on ethical principles is
vital to long-term strategic success Our ethics
program
consists of . . .
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
13-26
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
13-27
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
13-28
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
13-29
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
13-30
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
13-31
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
13-32
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 Carly Fiorina
Hewlett-Packard
competencies and competitive capabilities
5. Exercise ethics leadership
6. Take corrective actions to improve overall strategic
performance
13-33
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
13-34
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
13-35
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
13-36
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
13-37
Role #5: Exercise
Ethics Leadership
Set an excellent example in
Displaying ethical behaviors and
Demonstrating character and personal
integrity in actions and decisions Our ethics
code is . . .
Make it a duty for employees to
Observe ethical codes
Report ethical violations
Encourage compliance and establish tough
consequences for unethical behavior
13-38
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
13-39
