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Chapter 9
Corporate Culture
and Leadership
1
9-1
“An organization’s capacity
to execute its strategy depends
on its “hard” infrastructure--its
organization structure and systems-and on its “soft” infrastructure--its
culture and norms.”
Amar Bhide
Chapter Outline
 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 Innovative
 Exercising Ethics Leadership
 Making Corrective Adjustments
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BUILD A STRATEGYSUPPORTIVE CORPORATE
CULTURE
McGraw-Hill/Irwin
© 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.
4
What Makes Up a
Company’s Culture?
 Core values and business principles of
executives
 Ethical standards
 Patterns of “how we do things around here”
 Oft-told stories illustrating company’s values
 Approach to people
management
 Internal politics
 Traditions
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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
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9-6
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
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Features of the Corporate
Culture at General Electric
 Hard-driving, results-oriented
atmosphere prevails
 All businesses are held to a standard
of being #1 or #2 in their industries as
well as achieving good business results
 Cross-business sharing of ideas, best practices,
and learning
 Reliance on “workout sessions” to identify,
debate, and resolve “burning issues”
 Commitment to Six Sigma Quality
 Globalization of the company
8
9-8
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
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Where Does Corporate
Culture Come From?
 Founder or early leader
 Influential individual or work group
 Policies, vision, or strategies
 Traditions, supervisory practices,
employee attitudes
 Organizational politics
 Relationships with stakeholders
 Internal sociological forces
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How Is a Company’s
Culture Perpetuated?
 Selecting new employees who will “fit” in
 Systematic indoctrination of new employees
 Senior employees’ reinforcement of core
values
 Story-telling of company legends
 Ceremonies honoring employees
who display cultural ideals
 Visibly rewarding those who
follow cultural norms
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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
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Culture: Ally or Obstacle
to Strategy Execution?
 Culture can contribute to -- or hinder --
successful strategy execution
 Requirements for successful
strategy execution may -or may not -- be compatible with culture
 A close match between culture
and strategy promotes effective
strategy execution
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Why Culture Matters: Benefits
of a Tight Culture-Strategy Fit
 A culture that encourages actions supportive of good
strategy execution
 Not only provides employees with clear guidance
regarding what behaviors and results constitute good
job performance
 But also produces significant peer pressure from
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
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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 strategysupportive 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!
15
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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!
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Types of Corporate Cultures
Strong vs. Weak Cultures
Unhealthy Cultures
Adaptive Cultures
17
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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”
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How Does a Culture
Come to Be Strong?
 Leader who establishes values consistent with
Values
 Customer needs
Customers
 Competitive conditions
Employees
 Strategic requirements
Shareholders
 A deep, abiding commitment to espoused
values and business philosophy
 Practicing what is preached!
 Genuine concern for well-being of
 Customers
 Employees
 Shareholders
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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
20
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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 -- employees
discount need to look outside company for
 Best practices
 New managerial approaches
 Innovative ideas
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Hallmarks of Adaptive Cultures
 Willingness to accept change and embrace

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22
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
9 - 22
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





23
Customers
Employees
Shareholders
Suppliers
Communities
9 - 23
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
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Changing a Problem Culture
25
Step 1
Identify facets of present
culture that are strategy-supportive
and those that are not
Step 2
Clearly define desired new
behaviors and specify key
features of “new” culture
Step 3
Talk openly about problems of
present culture and how new
behaviors will improve performance
Step 4
Follow with visible, aggressive
actions to modify culture—includes
substantive and symbolic actions
9 - 25
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
26
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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
27
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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
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Substantive Culture-Changing Actions
 Engineer quick successes to highlight






29
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
9 - 29
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
Our ethics
program
consists of . . .
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
30
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31
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Fig. 9.1: The Two Culture-Building Roles of a
Company’s Core Values and Ethical Standards
32
9 - 32
Fig. 9.2: How the Practice of Stated Core Values and
Ethical Principles Positively Impact the Corporate Culture
33
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Approaches to Establishing
Ethical Standards



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
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
34
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Instilling Values and
Ethics in the Culture
 Incorporate values statement and ethics code in






35
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
9 - 35
Key Approaches to
Enforcing Ethical Behavior
 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
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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
37
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STRATEGIC
LEADERSHIP
McGraw-Hill/Irwin
© 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
38
Numerous Roles
of Strategic Leaders
Culture
Builder
Visionary
Chief
Entrepreneur
& Strategist
Resource Acquirer
& Allocator
Crisis
Solver
Motivator
Policy
Enforcer
39
Mentor
Taskmaster
Negotiator
Process
Integrator
Capabilities
Builder
Spokesperson
Consensus
Builder
Policymaker
Coach
Head
Cheerleader
Arbitrator
Chief
Administrator
& Strategy
Implementer
9 - 39
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
Carly Fiorina
4. Lead development of stronger core Hewlett-Packard
competencies and competitive capabilities
5. Exercise ethics leadership
6. Take corrective actions to improve overall
strategic performance
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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
Michael Dell
Dell Computer
 Watch competitive reactions of rivals
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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
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Approaches to Instilling a
Spirit of High Performance
 Treat employees with dignity and respect
 Make champions out of people who excel
 Encourage employees to use initiative
 Set stretch objectives and expectations that
employees are to give their best
 Grant employees autonomy to contribute
 Use full range of motivational techniques
and compensation incentives to
 Inspire employees
 Nurture a results-oriented climate
 Enforce high-performance standards
 Celebrate individual, group, company successes
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Role #3: Keep Organization Focused
on Operating Excellence
 Promote openness to improving

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44
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
9 - 44
Role #4: Develop Stronger Core
Competencies and Capabilities
 Top management intervention is
required to establish new
 Organizational capabilities
 Resource strengths and competencies
 Senior managers must lead the effort because
 Competencies reside in combined
efforts, requiring integration
 Stronger competencies and capabilities
can lead to a competitive edge over rivals
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Role #5: Exercise Ethics Leadership
 Display unequivocal commitment to ethical
and moral conduct
 Insist upon ethical behavior
 Encourage compliance and establish tough
consequences for unethical behavior
 Make it a duty for employees to
Our ethics
code is . . .
 Observe ethical codes
 Report ethical violations
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Roles of a Manager in
Enforcing Ethical Behavior
 Set an excellent ethical example
 Provide training to employees
about what is ethical and what isn’t
 Declare unequivocal support of ethics code
 Act as final arbiter on hard calls
 Remove people from key positions if found
guilty of a violation
 Reprimand people lax in monitoring ethical
compliance
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Actions Demonstrating Corporate
Citizenship and Social Responsibility
 Having “family friendly” employment practices
 Operating a safe workplace
 Taking special pains to protect environment
 Taking an active role in community affairs
 Interacting with community officials to minimize
impact of
 Layoffs or
 Hiring large numbers of new employees
 Being a generous supporter of charitable
causes and projects benefiting society
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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
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