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All rights reserved. “The biggest levers you’ve got to change a company are strategy, structure, and culture. If I could pick two, I’d pick strategy and culture.” : “The biggest levers you’ve got to change a company are strategy, structure, and culture. If I could pick two, I’d pick strategy and culture.” Wayne Leonard, CEO Entergy Corp. “An organization’s capacity to execute its strategy dependson its “hard” infrastructure – its organization structure and systems – and on its “soft” infrastructure – its culture and norms.” : “An organization’s capacity to execute its strategy dependson its “hard” infrastructure – its organization structure and systems – and on its “soft” infrastructure – its culture and norms.” Amar Bhide Chapter 13 Roadmap : Chapter 13 Roadmap Instilling a Corporate Culture that Promotes Good Strategy Execution Identifying the Key Features of a Company’s Corporate Culture Strong versus Weak Cultures Unhealthy Cultures High-Performance Cultures Adaptive Cultures Culture: Ally or Obstacle to Strategy Execution? Changing a Problem 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 Putting Constructive Pressure on the Organization to Achieve Good Results and Operating Excellence Leading the Development of Better Competencies and Capabilities Displaying Ethical Integrity and Leading Social Responsibility Initiatives Leading the Process of Making Corrective Adjustments Slide 5: INSTILLING A STRATEGY-SUPPORTIVE CORPORATE CULTURE Defining Characteristics of Corporate Culture : Defining Characteristics of Corporate Culture Core values, beliefs, and business principles Ethical standards Operating practices and behaviors defining“how we do things around here” Approach to people management “Chemistry” and “personality” permeatingwork environment Oft-told stories illustrating Company’s values Business practices Traditions Features of the CorporateCulture 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 Features of the CorporateCulture at Wal-Mart Features of the CorporateCulture at General Electric : Hard-driving, results-oriented atmosphere prevails All businesses are held to a standardof being #1 or #2 in their industries aswell as achieving good business results Extensive 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 Features of the CorporateCulture at General Electric Features of the CorporateCulture at Occidental Petroleum : Entrepreneurship of employees Empowered employees are encouraged to Be innovative Excel in their fields of specialization Respond quickly to strategic opportunities Creatively apply state-of-the-art technology in a manner to promote operating excellence Features of the CorporateCulture at Occidental Petroleum Features of the CorporateCulture at Nordstrom’s : Deliver exceptional customer service to customers Company motto “Respond to UnreasonableCustomer Requests” Out-of-the-ordinary customer requestsviewed as opportunities for “heroic” acts Promotions based on outstanding service Salaries based entirely on commission Features of the CorporateCulture at Nordstrom’s Identifying the Key Featuresof Corporate Culture : A company’s culture is manifested in . . . Values, business principles, and ethical standards preached and practiced by management Approaches to people management and problem solving Official policies and procedures Spirit and character permeating work environment Interactions and relationships among managers and employees Peer pressures that exist to display core values Its revered traditions and oft-repeated stories Its relationships with external stakeholders Identifying the Key Featuresof Corporate Culture Where Does CorporateCulture Come From? : Founder or early leader Influential individual or work group Policies, vision, or strategies Operating approaches Company’s approach to people management Traditions, supervisory practices, employee attitudes Organizational politics Relationships with stakeholders Where Does CorporateCulture Come From? Role of Stories at Microsoft : Role of Stories at Microsoft Oft-told stories focus on . . . 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 responsiblefor a popular new software program Tradition of competing aggressively 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 employeeswho display cultural ideals Visibly rewarding thosewho follow cultural norms How Is a Company’s Culture Perpetuated? Forces Causing Culture to Evolve : Forces Causing Culture to Evolve New challenges in marketplace Revolutionary technologies Shifting internal conditions Internal crisis Turnover of top executives A new CEO who opts to change things Diversification into new businesses Expansion into foreign countries Rapid growth that involves adding many new employees Merger with or acquisition of another company Company Subcultures: Problems Posed by New Acquisitions and Multinational Operations : Company Subcultures: Problems Posed by New Acquisitions and Multinational Operations Values, beliefs, and practices within a company can vary by Department Geographic location Business unit Subcultures can clash if They embrace conflicting business philosophies Key executives use different approaches to people management Differences between a company’s culture and recent acquisitions have not been ironed out Existence of subcultures does not preclude important areas of commonality and compatibility being established in different countries Types of Corporate Cultures : Types of Corporate Cultures Characteristics ofStrong 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 newemployees to be sure they will “fit in” Characteristics ofStrong Culture Companies How Does a Culture Come to Be Strong? : How Does a Culture Come to Be Strong? Leader who establishes values and behaviors consistent with Customer needs Competitive conditions Strategic requirements A deep, abiding commitment to espousedvalues, beliefs, and business philosophy Practicing what is preached! Genuine concern for well-being of Customers Employees Shareholders Characteristics of Weak Culture Companies : 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 tocompany’s vision and strategy 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 toalter status quo discouraged “Not-invented-here” mindset – company personnel discount need to look outside for Best practices New or better managerial approaches Innovative ideas Disregard for high ethical standards and overzealous pursuit of wealth by key executives Characteristics of Unhealthy Cultures Characteristics ofHigh-Performance Cultures : Standout cultural traits include A can-do spirit Pride in doing things right No-excuses accountability A results-oriented work climate in which people go the extra mile to achieve performance targets Strong sense of involvement by all employees Emphasis on individual initiative and creativity Performance expectations are clearly identified for all organizational members Strong bias for being proactive, not reactive Respect for the contributions of all employees Characteristics ofHigh-Performance Cultures 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 toimplement workable solutions Hallmarks of Adaptive Cultures Dominant Traits of Adaptive Cultures : Any changes in operating practices and behaviors Must not compromise core values and long-standing business principles Must be “legitimate” in the sense of not having an inappropriate or unfair impact on the best interests of key stakeholders Customers Employees Shareholders Suppliers Communities Dominant Traits of Adaptive Cultures Culture: Ally or Obstacleto 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 where attitudesand behaviors impedegood strategy execution is ahuge obstacle to be overcome Culture: Ally or Obstacleto Strategy Execution? Why Culture Matters: Benefitsof 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 co-workers to conform to culturally acceptable norms A culture imbedded with values and behaviorsthat facilitate strategy execution promotesstrong employee commitment to the company’s Vision Performance targets Strategy Why Culture Matters: Benefitsof a Tight Culture-Strategy Fit 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 forstrategy-supportive behaviors Enlists enthusiasm and dedicatedeffort to achieve company objectives Closely aligning corporate culture with the requirements for proficient strategy execution merits the full attention of senior executives! Optimal Outcome of a Tight Culture-Strategy Fit The Perils of Strategy-Culture Conflict : Conflicts between culturally-approvedbehaviors and behaviors needed for goodstrategy execution send mixed signals Should employees by loyal to the culture and company traditions and resist actions and behaviors promotingbetter 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! The Perils of Strategy-Culture Conflict Creating a Strong FitBetween Strategy and Culture : Creating a Strong FitBetween Strategy and Culture Slide 30: Fig. 13.1: Changing a Problem Culture 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 employeesmust listen to angry key stakeholders Cite why and how certain behavioral norms and work practices in current culture pose obstacles to good execution of new strategic initiatives Explain how new behaviors and work practices to be introduced will be more advantageous and produce better results Menu of Culture-Changing Actions Substantive Culture-Changing Actions : Replace key executives strongly associated with old culture Promote individuals who have desired cultural traits and can serve as role models Appoint outsiders who have desiredcultural attributes to high-profile positions Screen all candidates for new positions carefully, hiring only those who fit in with the new culture Mandate all company personnel attend culture-training programs to learn more about new work practices, operating approaches, and behaviors Substantive Culture-Changing Actions Substantive Culture-Changing Actions (continued) : Push hard to implement new-style work practices and operating procedures Design compensation incentives to reward teams and individuals who display the desired cultural behaviors Grant generous pay raises to individuals who lead the way in adopting desired work practices, displaying new-style behaviors, and achieving pace-setting results Revise policies and proceduresin ways to drive cultural change Substantive Culture-Changing Actions (continued) Symbolic Culture-Changing Actions : Lead by example – Walk the talk Emphasize frugality Eliminate executive perks Require executives to spend time talking with customers Ceremonial events to praise people andteams who “get with the program” Alter practices identified as cultural hindrances Visible awards to honor heroes Symbolic Culture-Changing Actions Grounding the Culture inCore Values and Ethics : A culture based on ethical principles isvital to long-term strategic success Ethics programs help make ethical conduct a way of life Executives must provide genuine supportof personnel displaying ethical standardsin conducting the company’s business Value statements serve as acornerstone for culture-building Grounding the Culture inCore Values and Ethics Approaches to Establishing Ethical Standards : Formal values statement and a code of ethics Word-of-mouth indoctrination and tradition Annual reports and Websites Making stakeholders aware of a commitmentto ethical business conduct is attributable to Greater management understanding of rolethese statements play in culture building Renewed focus on ethical standardsstemming from recent corporate scandals Growing numbers of consumers whoprefer to patronize ethical companies Approaches to Establishing Ethical Standards Test Your Knowledge : Test Your Knowledge Which of the following topics would least likely be a topic or element of a company’s statement of its core values? A. A dedication to superior customer service, top-notch quality, product innovation, and/or technological leadership B. An expectation that company personnel will display creativity, exercise initiative, and accept responsibility C. Prohibiting giving or accepting bribes, kickbacks, or gifts D. A commitment to exhibiting such qualities as integrity, fairness, trustworthiness, pride of workmanship, Golden Rule behavior, and respect for co-workers E. A commitment to making the company a great place to work Test Your Knowledge : Test Your Knowledge Which of the following topics would least likely be contained in a company’s code of ethics? A. Expecting all employees to not divulge trade secrets or proprietary information to outsiders B. Expecting all company personnel to display honesty and integrity in their actions and avoid conflicts of interest C. Not dealing with suppliers that employ child labor or engage in other unsavory practices D. Committing to create a work environment characterized by teamwork and employee empowerment E. Mandating full compliance with all laws and regulations Slide 40: Fig. 13.2: The Two Culture-Building Roles of aCompany’s Core Values and Ethical Standards Techniques to Transform Core Values and Ethical Standards into Cultural Norms : Techniques to Transform Core Values and Ethical Standards into Cultural Norms Screen out applicants who do not exhibit compatible character traits Incorporate values statement and ethics code in employee training programs Strong endorsement by senior executives of the importance of core values and ethical principles at company events and in internal communications Use values statements and codes of ethics as benchmarks to judge appropriateness of company policies and operating practices Make the display of core values and ethical principles a big factor in evaluating employee performance Techniques to Transform Core Values and Ethical Standards into Cultural Norms (continued) : Techniques to Transform Core Values and Ethical Standards into Cultural Norms (continued) Make sure managers at all levels are diligent in stressing the importance of ethical conduct and observance of core values Encourage everyone to use their influence in helping enforce observance of core values and ethical standards Hold periodic ceremonies to recognize individuals and groups who display the values Institute ethicsenforcement procedures Slide 43: Fig. 13.3: The Benefits of Cultural Norms StronglyGrounded in Core Values and Ethical Principles Establishing a Strategy-Culture Fit in Multinational and Global Companies : 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 operatingprinciples and practices Create a cultural climate where the norm is to Adopt best practices Use common work procedures Pursue operating excellence Give local managers Flexibility to modify people managementapproaches or operating styles Discretion to use different motivational and compensation incentives to induce personnel to practice desired behaviors For Discussion: Your Opinion : For Discussion: Your Opinion Identify one cultural trait that you would like to see at the company you decide to go to work for when you graduate? Why is this cultural trait important to you? Slide 46: STRATEGIC LEADERSHIP Numerous Roles of Strategic Leaders : Numerous Roles of Strategic Leaders Leadership Activities of ChiefStrategy Implementer : 1. Stay on top of what’s happening 2. Put constructive pressure oncompany to achieve good results 3. Lead development of stronger corecompetencies and competitive capabilities 4. Exercise ethics leadership and lead social responsibility initiatives 5. Take corrective actions to improve overall strategic performance Leadership Activities of ChiefStrategy Implementer Role #1: Stay on Top of What’s Happening : Develop a broad network of formaland 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 Role #1: Stay on Top of What’s Happening Role #2: Put Constructive Pressure onCompany 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 Role #2: Put Constructive Pressure onCompany to Achieve Good Results Approaches to Instilling aSpirit of High Achievement : 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 Use tools of benchmarking, best practices, business process reengineering, TQM, and Six Sigma quality to focus attention on continuous improvement Use full range of motivational techniquesand compensation incentives to Inspire employees Nurture a results-oriented climate Enforce high-performance standards Celebrate individual, group, company successes Approaches to Instilling aSpirit of High Achievement Role #3: Promote Stronger CoreCompetencies and Capabilities : Top management intervention isrequired to establish better or new Resource strengths and competencies Competitive capabilities Senior managers must lead the effort because Competencies reside in combinedefforts of different work groups and departments, thus requiring cross-functional collaboration Stronger competencies and capabilitiescan lead to a competitive edge over rivals Role #3: Promote Stronger CoreCompetencies and Capabilities Role #4: Display Ethics Leadership and Lead Social Responsibility Initiatives : Role #4: Display Ethics Leadership and Lead Social Responsibility Initiatives Set an excellent example in Displaying ethical behaviors Demonstrating character andpersonal integrity in actions and decisions Declare support of company’s ethics codeand expect all employees to conductthemselves in an ethical fashion Encourage compliance and establish toughconsequences for unethical behavior Roles of a Manager inEnforcing Ethical Behavior : Set an excellent ethical example Provide training to employeesabout what is ethical and what isn’t Declare unequivocal support of ethics code Act as final arbiter on hard calls Remove people from key positionsif found guilty of a violation Reprimand people lax in monitoring ethical compliance Roles of a Manager inEnforcing Ethical Behavior Structuring an Ethics Complianceand Enforcement Process : Structuring an Ethics Complianceand Enforcement Process 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 atroubling ethics-related situation Conduct an annual ethics auditto measure extent of Ethical behavior and Identify problem areas Key Approaches toEnforcing Ethical Behavior : Have mandatory ethics trainings for employees Openly encourage employees toreport possible infractions via Anonymous calls to a hotline or Posting to a special company Web site 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 the ethics code Make sure ethical violations carry appropriate punishment, including dismissal for egregious violations Key Approaches toEnforcing Ethical Behavior Test Your Knowledge : Test Your Knowledge Assuming that a company’s senior executives are really serious about enforcing high standards of ethical behavior, then they probably need to consider doing all but which one of the following? A. Appointing a committee of high-profile employees to serve on a committee or task force that is charged with (a) being champions of high ethical standards, (b) finding ways to ingrain high ethical standards as a cultural norm, and (3) heading up the company’s ethics enforcement process B. Having mandatory ethics training programs for employees C. Conducting an annual audit of each manager’s efforts to uphold ethical standards and requiring formal reports on the actions taken by managers to remedy deficient conduct D. Requiring all employees to sign a statement annually certifying that they have complied with the company’s code of ethics and making sure that ethical violations carry appropriate punishment, including dismissal if the violation is sufficiently egregious E. Openly encouraging company personnel to report possible infractions via anonymous calls to a hotline or e-mails sent to a designated address For Discussion: Your Opinion : For Discussion: Your Opinion What would your reaction be if your employer required you to sign a statement annually certifying that you have complied with the company’s code of ethics? Actions Demonstrating Commitmentto a Strategy of Social Responsibility : Actions Demonstrating Commitmentto a Strategy of Social Responsibility Craft a strategy that positively improves well-being of employees, environment, communities, and society Use social and environmental metrics to evaluate company performance Tie social and environmental performance to executive compensation Take special pains to protect environment Take an active role in community affairs Generously support charitable causesand projects benefiting society Support workforce diversity and committo overall well-being of employees Role #5: Lead the Process ofMaking Corrective Adjustments : Role #5: Lead the Process ofMaking 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 You do not have the permission to view this presentation. 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