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Corporate CultureCorporate Culture
and Leadershipand Leadership
1313
Chapter
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Chapter RoadmapChapter Roadmap
Building a Corporate Culture that Promotes Good StrategyExecution What to Look for in Identifying a Companys Culture
Culture !lly or "#stacle to Strategy Execution$
%ypes of Cultures
Creating a Strong &it Bet'een Strategy and Culture
Grounding the Culture in Core (alues and Ethics
Esta#lishing a Strategy)Culture &it in *ultinational Companies
Leading the Strategy Execution Process
Staying on %op of +o' Well %hings !re Going Pushing Company to !chie,e Good -esults
.eeping Internal "rgani/ation &ocused on "perating Excellence
Exercising Ethics Leadership
*aking Correcti,e !d0ustments
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The Defning CharacteristicsThe Defning Characteristicso a Companys Cultureo a Companys Culture
Its core values, beliefs, and business principles
Patterns of how we do things around hereits style ofoperating and ingrained behaviors of copany personnel
!ft-told stories illustrating copany"s values
Its approach to people anageent
#thical standards
Internal politics
$raditions
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Features o the CorporateFeatures o the CorporateCulture at Wal-MartCulture at Wal-Mart
&edication to custoer satisfaction
'ealous pursuit of low costs
(rugal operating practices
)trong wor* ethic
+itualistic )aturday orning eetings
#ecutive coitent to
isit stores
.isten to custoers
)olicit eployees" suggestions
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Features o the CorporateFeatures o the CorporateCulture at NordstromsCulture at Nordstroms
&eliver eceptional custoer service to custoers
0opany otto
+espond to nreasonable
0ustoer +euests
!ut-of-the-ordinary custoer reuests
viewed as opportunities for heroic acts
Prootions based on outstanding service
)alaries based entirely on coission
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Features o the CorporateFeatures o the CorporateCulture at MicrosotCulture at Microsot
.ong wor* hours of prograers
#otional pea*s and valleys in
encountering and overcoing coding probles
#hilaration of copleting a cople progra onschedule
)atisfaction of wor*ing on cutting-edge pro4ects
+ewards of being part of a tea responsiblefor a popular new software progra
$radition of copeting aggressively
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What to Loo or inWhat to Loo or in!dentiying Corporate Culture!dentiying Corporate Culture
6 companys cultureis manifestedin 7 7 7 alues, beliefs, and business principles
anageent preaches and practices
!fficial policies and procedures
Its revered traditions and oft-repeated stories
6ttitudes and behaviors of eployees
Peer pressures that eist to display core values
Its politics
6pproaches to people anageent and proble solving
Its relationships with eternal sta*eholders
0heistry and personality pereating wor* environent
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Where Does CorporateWhere Does CorporateCulture Come From"Culture Come From"
(ounder or early leader
Influential individual or wor* group
Policies, vision, or strategies
$raditions, supervisory practices,eployee attitudes
$he peer pressures that eist
!rgani9ational politics +elationships with sta*eholders
0opany"s approach to people anageent
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#o$ !s a Companys#o$ !s a CompanysCulture %erpetuated"Culture %erpetuated"
)electing new eployees who will fit in
)ysteatic indoctrination of new eployees
)enior anageent efforts to reinforce core values,
beliefs, principles, *ey operating practices
)tory-telling of copany legends
0ereonies honoring eployees
who display cultural ideals
isibly rewarding thosewho follow cultural nors
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Forces and FactorsForces and FactorsCausing Culture to &'ol'eCausing Culture to &'ol'e
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Culture( )lly or *+stacleCulture( )lly or *+stacleto ,trategy &ecution"to ,trategy &ecution"
6 copany"s culture can contribute to> or hinder>successful strategy eecution
6 culturethat prootesattitudes and
behaviors that are well-suited to
first-rate strategy execution is a
valuable ally in the strategy
eecution process
6 culture that ebraces attitudes and
behaviors which ipede good
strategy eecution is a huge obstacle
to be overcoe
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Why Culture Matters( .eneftsWhy Culture Matters( .eneftso a Tight Culture-,trategy Fito a Tight Culture-,trategy Fit
6 culture that encourages actions and behaviorssupportiveofgood strategy execution Provides eployees with clear guidance regarding what
behaviors and results constitute good 4ob perforance
0reates significant peer pressure aong cowor*ers toconfor to culturally acceptable nors
6 culture ibedded with valuesand behaviors
thatfacilitate strategy executionprootes
strong eployee coitent to the copany"s ision
Perforance targets
)trategy
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*ptimal *utcome o a*ptimal *utcome o aTight Culture-,trategy FitTight Culture-,trategy Fit
6good jobof culture-buildingby anagers Prootes can-do attitudes
#ncourages acceptance of change
Instills strong peer pressure for strategy-supportive
behaviors
#nlists enthusias and dedicated effort to achieve
copany ob4ectives
Closely aligning corporate culture 'ithClosely aligning corporate culture 'ith
the re1uirements for proficient strategy executionthe re1uirements for proficient strategy execution
merits the full attention of senior executi,es2merits the full attention of senior executi,es2
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The %erils oThe %erils o,trategy-Culture Con/ict,trategy-Culture Con/ict
0onflicts between culturally-approvedbehaviors and behaviors needed for good
strategy eecution send ied signals
Shouldeployees by loyal to the culture and copany
traditions and resist actions and behaviors prootingbetter strategy eecution?
Orshould they support the strategy by engaging in
behaviors that run counter to the culture?
When a companys culture is out of sync 'ith 'hatWhen a companys culture is out of sync 'ith 'hat
is needed for strategic success3 the culture has tois needed for strategic success3 the culture has to
#e changed as rapidly as can #e managed2#e changed as rapidly as can #e managed2
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Types o CorporateTypes o CorporateCulturesCultures
Strong vs. Weak Cultures
4nhealthy Cultures
!dapti,e Cultures
Ch i i
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Characteristics oCharacteristics o,trong Culture Companies,trong Culture Companies
0onduct business according to a clear, widely-understoodphilosophy
0onsiderable tie spent by anageent counicating
and reinforcing values alues are widely shared and deeply rooted
@ave a well-defined corporate character,
reinforced by a creed or values stateent 0areful screeningAselection of new
eployees to be sure they will fit in
Ch i i
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Characteristics oCharacteristics oWea Culture CompaniesWea Culture Companies
.ac* of a widely-shared core set of values
(ew behavioral nors evident in operating practices
(ew strong traditions
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Characteristics oCharacteristics o0nhealthy Cultures0nhealthy Cultures
@ighly politici9ed internal environent Issues resolved on basis of political clout
@ostility to change
6void ris*s and don"t screw up
#perientation and efforts to
alter status uo discouraged
copany
personnel discount need to loo* outside for Cest practices
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#allmars o#allmars o)dapti'e Cultures)dapti'e Cultures
Billingness to accept change and ebrace challenge ofintroducing new strategies
+is*-ta*ing, eperientation, and innovation to satisfy
sta*eholders
#ntrepreneurship is encouragedand rewarded
(unds provided for new products
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Dominant TraitsDominant Traitso )dapti'e Cultureso )dapti'e Cultures
Any changesin operating practices and behaviors
Must notcoproise core values and long-standing
business principles
Must satisfylegitiate interests of *ey sta*eholders
Customers
Employees
Shareholders
Suppliers
Communities
C ti ,t FitC ti ,t Fit
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Creating a ,trong FitCreating a ,trong Fit.et$een ,trategy and Culture.et$een ,trategy and Culture
Responsibility of Strategy MakerResponsibility of Strategy Maker>>
)elect a strategy copatible with the)elect a strategy copatible with the
sacred or unchangeable parts of organi9ation"ssacred or unchangeable parts of organi9ation"s
prevailing corporate cultureprevailing corporate culture
Responsibility of Strategy ImplementerResponsibility of Strategy Implementer>>
!nce strategy is chosen, change!nce strategy is chosen, changewhatever facets of the corporatewhatever facets of the corporate
culture hinder effective eecutionculture hinder effective eecution
Menu o CultureMenu o Culture
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Menu o Culture-Menu o Culture-Changing )ctionsChanging )ctions
=a*e a copelling case why a new cultural atosphereis in best interests of both copany and eployees
0hallenge status uo
0reate events where eployeesust listen to angry *ey sta*eholders
0ontinuously repeat essages of why
cultural change is good for sta*eholders
isibly praise and reward people
who display new cultural nors
M C ltMenu o Culture
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Menu o Culture-Menu o Culture-Changing )ctionsChanging )ctions (continued)(continued)
6lter incentive copensation toreward desired cultural behavior
@ire new anagers and eployees who have
desired cultural traits and can serve as role odels
+eplace *ey eecutives strongly
associated with old culture
+evise policies and procedures
to help drive cultural change
,ym+olic Culture,ym+olic Culture
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,ym+olic Culture-,ym+olic Culture-Changing )ctionsChanging )ctions
#phasi9e frugality
#liinate eecutive per*s
+euire eecutives to spend
tie tal*ing with custoers
0ereonial events to praise people and
teas who get with the progra
6lter practices identified as cultural hindrances
isible awards to honor heroes
,u+stanti'e Culture,u+stanti'e Culture
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,u+stanti'e Culture-,u+stanti'e Culture-Changing )ctionsChanging )ctions
#ngineer uic* successes to highlightbenefits of proposed cultural changes
Cring in new blood, replacing
traditional anagers
0hange dysfunctional policies
0hange reward structure
+eallocate budget, downsi9ing and upsi9ing
+einforce culture through both word and deed
#nlist support of cultural nors fro frontline
supervisors and eployee opinion leaders
1rounding the Culture in1rounding the Culture in
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1rounding the Culture in1rounding the Culture inCore 2alues and &thicsCore 2alues and &thics
6 culture based on ethical principles isvital to long-ter strategic success
#thics progras help a*e
ethical conduct a way of life
#ecutives ust provide genuine support
of personnel displaying ethical standards
in conducting the copany"s business
alue stateents serve as a
cornerstone for culture-building
Our ethics
program
consists of . . .
)pproaches to &sta+lishing)pproaches to &sta+lishing
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)pproaches to &sta+lishing)pproaches to &sta+lishing&thical ,tandards&thical ,tandards
Bord-of-outh indoctrination and tradition 6nnual reports and Bebsites
!rientation courses for new eployees
$raining courses for anagers and eployees
=a*ing sta*eholders aware of a coitentto ethical business conduct is attributable toDreater anageent understanding of role
these stateents play in culture building
+enewed focus on ethical standardssteing fro recent corporate scandals
Drowing nubers of consuers whoprefer to patroni9e ethical copanies
!nstilling 2alues and!nstilling 2alues and
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!nstilling 2alues and!nstilling 2alues and&thics in the Culture&thics in the Culture
Incorporate values stateent and ethicscode in eployee training progras
)creen out applicants who do not
ehibit copatible character traits
(reuent counications of thevalues and ethics code to all eployees
=anageent involveent and oversight
)trong endorseent by 0#! 0ereonies and awards for individuals
and groups who display the values
Institute ethics enforceent procedures
,tructuring the &thics,tructuring the &thics
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ggCompliance and &norcementCompliance and &norcement
%rocess%rocess
&evelop procedures for #nforcing ethical standards and
@andling potential violations
)crutini9e attitudes, character, and wor* history of
prospective eployees #ducate eployees about what is ethical and what is not
#ncourage eployees to raiseissues with ethical diensions
#plain how copany values and the ethicscode apply at all levels of a copany
Insist that copany values and ethicalstandards becoe a way of life
,tructuring the &thics,tructuring the &thics
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ggCompliance and &norcementCompliance and &norcement
%rocess%rocess (continued)(continued)
(or an ethics coittee to give guidance on ethicsatters
6ppoint an ethics officer to head copliance effort
#stablish an ethics hotlineABeb site eployees can use to
6nonyously report a possible violation
Det confidential advice on a
troubling ethics-related situation
0onduct an annual ethics auditto easure etent of
#thical behavior and
Identify proble areas
3ey )pproaches to3ey )pproaches to
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3ey )pproaches to3ey )pproaches to&norcing &thical .eha'ior&norcing &thical .eha'ior
@ave andatory ethics trainings for eployees
0onduct an annual audit to assess
Each managers efforts to
uphold ethical standards
!ctions taken #y managersto remedy deficient conduct
+euire all eployees to sign a stateent annually certifying
they have coplied with copany"s code of ethics
!penly encourage eployees to report possible infractions via
!nonymous calls to a hotline or
Posting to a special company We# site
&sta+lishing a ,trategy Culture Fit in&sta+lishing a ,trategy-Culture Fit in
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&sta+lishing a ,trategy-Culture Fit in&sta+lishing a ,trategy-Culture Fit in
Multinational and 1lo+al CompaniesMultinational and 1lo+al Companies
Institute training progras to 0ounicate the eaning of core values and
#plain the case for coon operating
principles and practices
&raw on full range of otivational and
copensation incentives to induce personnel
to adopt and practice desired behaviors
6llow soe leeway for certain core values and principles
to be interpreted and applied soewhat differently, if
necessary, to accoodate local custos and traditions
Leadership )cti'ities o theLeadership )cti'ities o the
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Leadership )cti'ities o theLeadership )cti'ities o the,trategy !mplementer,trategy !mplementer
56 )tay on top of what"s happening76 Put constructive pressure on
copany to achieve good results
86 Eeep copany focusedon operating ecellence
96 .ead developent of stronger core
copetencies and copetitive capabilities
:6 #ercise ethics leadership
;6 $a*e corrective actions to iprove overall strategic
perforance
Carly Fiorina
Hewlett-Packard
Role 45( ,tay on TopRole 45( ,tay on Top
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Role 45( ,tay on TopRole 45( ,tay on Topo Whats #appeningo Whats #appening
&evelop a broad networ* of foral and inforal sourcesof inforation
$al* with any people at all levels
Ce an avid practitioner of =CB6
!bserve situation firsthand
=onitor operating results regularly
Det feedbac* fro custoers
Batch copetitive reactions of rivals
Role 46( %ut Constructi'e %ressureRole 46( %ut Constructi'e %ressure
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on Company to )chie'e 1ood Resultson Company to )chie'e 1ood Results
)uccessful leaders spend tie=obili9ing organi9ational energy behind
Good strategy execution and
"perating excellence
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Role 47( 3eep *rgani8ationRole 47( 3eep *rgani8ation
Focused on *perating &cellenceFocused on *perating &cellence
Proote openness to iprovinghow things are done
)upport averic*s with creative
ideas to iprove ways of operating
#nsure rewards for successful chapionsare large and visible
se all *inds of ad hoc organi9ational fors
to support eperientation
se tools of benchar*ing, best practices, reengineering,
$F=, and )i )iga to focus attention on continuous
iproveent
Role 49( %romote ,tronger CoreRole 49( %romote ,tronger Core
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Role 49( %romote ,tronger CoreRole 49( %romote ,tronger CoreCompetences and Capa+ilitiesCompetences and Capa+ilities
$op anageent intervention isreuired to establish better or new
+esource strengths and copetences
0opetitive capabilities
)enior anagers ust lead the effort because
0opetences reside in cobined
efforts of different wor* groups and
departents, thus reuiringcross-functional collaboration
)tronger copetencies and capabilities
can lead to a copetitive edge over rivals
Role 4:( &erciseRole 4:( &ercise
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Role 4:( &erciseo e : e c se&thics Leadership&thics Leadership
)et an ecellent eaple in&isplaying ethical behaviors and
&eonstrating character and personal
integrity in actions and decisions =a*e it a duty for eployees to
!bserve ethical codes
+eport ethical violations
#ncourage copliance and establish tough
conseuences for unethical behavior
Our ethics
code is . . .
Role 4;( Lead the %rocess oRole 4;( Lead the %rocess o
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Role 4;( Lead the %rocess oMaing Correcti'e )d