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Learning outcomes
Strategy and Culture
Dr. Violina Ratcheva
What do we understand by organisational ‘culture’
Identify the symptoms of strategic drift
Cultural web as a tool for deconstructing the organisational paradigm
Case study of the impact of organisational culture upon the strategy process
What is Organisational Culture?
“Culture is how organisations ‘do things’.” “Culture is the organisation’s immune system.”
“In large, culture is a product of compensation.”
“Organisational culture is shaped by the main culture of the society we live in.”
“A strategy that is at odds with a company’s culture is doomed. Culture trumps strategy every time.”
Peter Drucker
Organisational Culture is Persistent
The case of BRL Hardy
Key facts:
Result of a merger of BRl
Company and Hardy
Company
Pre – merger: Different
strategies and organisational
culture
Motive for the merger –
BRL’s desire to expand
internationally and Hardy’s
financial difficulties
• Solution – Decentralised
Management
“An organisation is a living culture...that can adapt to the reality as fast as possible.”
Watkins, M. (2013) What is Organisational Culture? Harvard Business Review, May.
Why is Culture Important?
‘Effective culture can create between 20 ‐ 30% uplift in corporate performance’
 Individual and organisational behaviour and performance cannot be understood without a cultural understanding
 Concept of culture has been misunderstood and confused e.g. confusing surface manifestations with core culture
 Factors within the organisation influencing culture include: history and ownership, size, technology, leadership and mission and the cultural web
Heskett, J. (2011) The Culture Cycle: How to Shape the Unseen Force that Transforms Performance, FT Press.
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Why Do Sub‐optimal Cultures Develop?
Lack of guiding vision, goals and purpose
Bureaucratic, misaligned systems, polices and processes
Underutilised and demotivated talent Low trust
Why Successful Companies Fail? “The problem is not an inability to take action but an inability to take appropriate action.....Active Inertia... using the same pattern and ideas that have moulded actions in the past in an attempt to adapt to the changing environment.”
Professor Donald Sull
........Unwelcome by‐product of command‐
and‐control management style
Hamel, G. (2007) The Future of Management, Harvard Business School Press.
Sull, D. N. (2005) Why good companies go bad and how great managers remake them’, Harvard Business
School Press.
Strategic Drift
Strategic drift is the tendency for strategies to develop incrementally on the basis of historical and cultural influences but fail to keep pace with a changing environment.
Sull, D. N.( 2005) Why good companies go bad’ and how great managers remake them, Harvard Business School Press.
Strategic Drift
The Tendency Towards Strategic Drift Strategies fail to keep pace with environmental change because :
Steady as you go – reluctance to accept that change requires moving away from strategies that have been successful.
Building on the familiar – uncertainty of change is met with a tendency to stick to the familiar.
Core rigidities – capabilities that are taken for granted and deeply ingrained in routines are difficult to change even when they are no longer suitable.
Figure 5.2 Strategic drift
Johnson, G., Scholes, K., & Whittington, R., (2011), Exploring Strategy (9th Edition), FT: Prentice Hall
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The Tendency Towards Strategic Drift (cont.)
What Prevents Companies from Avoiding Strategic Drift?
 Relationships become shackles – organisations become reluctant to disturb relationships with customers, suppliers or the workforce even if they need to change.
 Lagged performance effects – the financial performance of the organisation may hold up initially (e.g. due to loyal customers or cost cutting) masking the need for change.
The Cultural Web
Incremental Change to Avoid
Strategic Drift
 Gradual change in alignment with environmental change.
 Building on successful strategies used in the past (built around core competences)
 Making changes based on experimentation around a theme (incremental change built on a successful formula)
 This approach is called Logical Incrementalism
Routines –
What are the normal ways
of doing things?
What are
procedures?
Stories
Symbols
What matters?
What do people talk about?
What is success
/failure?
What are the office symbols?
Office size?
Company car?
Different canteens?
Rituals – what does the org highlight?
‐Long service
‐Sales achievement?
‐Innovation?
‐Quality standards?
Power
The
Paradigm
Controls
Bureaucratic?
Well documented?
Oriented towards performance?
Formal/informal?
Who makes the decisions?
Who influences the decisions?
How?/When?
Structure
Who reports to whom?
‐formally
‐informally
Johnson, G., Scholes, K., & Whittington, R., (2011), Exploring Strategy (9th Edition), FT: Prentice Hall
Example – Cultural Web in the UK National Health Service
Stories
 the stories told by members of the organisation to each other, to outsiders, to new recruits
 embed the present in its organisational history
 flag up important events (successes, disasters) and personalities (heroes, villains, mavericks)
 devices for telling people what is important in the organisation
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Power structures
Can be based on seniority, but can also be based on other factors:
Engineers in a high tech firm
Relationships with the owners
Can be fragmented across stakeholder groups
Symbols
 Can include things like logos, offices that are ‘company symbols’
 Within the company, company cars and job titles can be powerful symbols of the current paradigm
 Also includes language used by different functions
Rituals and Routines
can be formal
training programmes
induction
appraisal and promotion mechanisms
or informal
drinks in the pub after work
coffee breaks
Organisational Structure
Evidence in the formal representations of hierarchy such as Organisation Charts and formal statements of departmental reporting structures
There can also be informal indicators like ‘tribal’ behaviour
Control Systems
Measurement and reward systems are often a key to this
 what does the company keep track of? individual or group bonuses
tightening of financial monitoring
is emphasis on reward or punishment?
are there many/few controls?
Patterns of Strategy Development
Strategy is concerned with major decisions about the future. However this is not to say that it constitutes only large, step changes in direction. “...once an organisation has adopted a particular strategy, it tends to develop from and within that strategy, rather than fundamentally changing direction.”
This view of strategy is sometimes called
punctuated equilibrium
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Patterns of Strategy Development
The Challenge of Culture Change
Studies of firms show that they will have periods of strategic development which can be described as:
 Continuity
established strategy remains the same
 Incremental change
a large number of gradual changes over time
 Flux
strategies change but in no clear direction
 Transformational change
infrequent and fundamental change in strategic direction Resources allocation & controls Strategic Drift
Pre 2000
Drift characterised by:
 Highly homogeneous organisational culture & paradigm  Questioning discouraged
 Major power blockages to change, e.g. resistant dominant leaders
 Little focus on its external environment … which was happening at Marks & Spencer?
Marks & Spencer – 1990s
Profit
Customers
Longevity
Dividend
Routines –
Formal procedures for all things
Store layout/design
Rituals –
Long service, not sales achievement
All from the centre ‐ no room for Innovation Quality important
Store design
Logo
High street fixture
The Boss
Profit
Longevity
Success
No surprises
Bureaucratic
British suppliers
Centralised buying
Identical procedures for all stores
Not performance oriented – goods allocated to stores
Formal/informal?
CEO ‐ Greenbury decisions?
Key senior managers
Based on extensive
experience in M&S
Report to Greenbury
Baker Street HQ
Formal
Centralised





Relatively low perceived need for change
Strategic planning – M&S centre as master planner
Heavily centralised
Bureaucracy
Sales figures & store visits used to judge how M&S was operating – lack of balanced scorecard – customer satisfaction?
 Store managers seek to increase sales by applying for greater footage
 Lack of accountability – difficult to identify underperforming stores
 Control costs – fewer sales assistants Resource Allocation & Controls
2002 onwards processes of:
Restructuring to flatter less hierarchical structure to facilitate ownership and accountability for resources
Increased decision making by managers throughout the organisation
Enhancement of existing competences in supply chain management
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Organisational Tools for Cultural Change
Homework ‐ Exercise 1
Read the case study ‘From small town pharmacy to a multinational corporation: Pierre Fabre, culture as a competitive advantage’ and consider the following questions:
 What are the distinctive elements of Pierre Fabre group corporate culture? How do these participate in building a sustainable competitive advantage?
 When might a strong corporate culture become a weakness for an organisation?
 Is it possible to change the strategy of a company with a strong culture? How? Denning, S. (2010) The Leader’s Guide to Radical Management, John Wiley and Sons.
Homework ‐ Exercise 2
Develop a Cultural Web for the organisation you work for or have a personal experience with:
What does it say about the organisation?
Is culture a problem or an advantage?
Does it need to change and how?
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