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13
Corporate
Chapter
Title
Culture and
Leadership
16/e PPT
McGraw-Hill/Irwin
Screen graphics created by:
Jana F. Kuzmicki, Ph.D.
Troy University-Florida Region
Copyright © 2008 by The McGraw-Hill Companies, Inc. 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.”
Wayne Leonard, CEO Entergy Corp.
13-2
“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
13-3
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
13-4
INSTILLING A STRATEGYSUPPORTIVE CORPORATE
CULTURE
13-5
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” permeating
work environment
 Oft-told stories illustrating
Company’s values
 Business practices
 Traditions

13-6
Features of the Corporate
Culture at Wal-Mart
 Dedication
 Zealous
to customer satisfaction
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
13-7
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
 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
13-8
Features of the Corporate
Culture at Occidental Petroleum
 Entrepreneurship
 Empowered
of employees
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
13-9
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
 Salaries
based on outstanding service
based entirely on commission
13-10
Identifying the Key Features
of 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
13-11
Where Does Corporate
Culture Come From?
 Founder
or early leader
 Influential
 Policies,
individual or work group
vision, or strategies
 Operating
approaches
 Company’s

approach to people management
Traditions, supervisory practices, employee attitudes
 Organizational
 Relationships
politics
with stakeholders
13-12
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 responsible
for a popular new software program
 Tradition
of competing aggressively
13-13
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
13-14
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

13-15
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
13-16
Types of Corporate Cultures
Strong vs. Weak Cultures
Unhealthy Cultures
High-Performance Cultures
Adaptive Cultures
13-17
Characteristics of
Strong Culture Companies
 Conduct
business according to a clear, widelyunderstood 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”
13-18
How Does a Culture Come to Be Strong?
 Leader
who establishes values and behaviors
consistent with
Values

Customer needs
 Competitive conditions
 Strategic requirements
Customers
Employees
Shareholders
 A deep,
abiding commitment to espoused
values, beliefs, and business philosophy

Practicing what is preached!
 Genuine
concern for well-being of

Customers
 Employees
 Shareholders
13-19
Characteristics of Weak Culture Companies
 Lack
of a widely-shared core set of values
 Few
behavioral norms evident in operating
practices
 Few
 No
strong traditions
strong sense of company identity
 Little
cohesion among departments
 Weak
employee allegiance to
company’s vision and strategy
13-20
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


Best practices
New or better managerial approaches
 Innovative ideas
 Disregard
for high ethical standards and
overzealous pursuit of wealth by key executives
13-21
Characteristics of
High-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

13-22
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

13-23
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
13-24
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
where attitudes
and behaviors impede
good strategy execution is a
huge obstacle to be overcome
13-25
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 co-workers 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
13-26
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!
13-27
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!
13-28
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
13-29
Fig. 13.1: Changing a Problem Culture
13-30
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

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
13-31
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 desired
cultural 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 culturetraining programs to learn more about new work
practices, operating approaches, and behaviors
13-32
Substantive CultureChanging 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 procedures
in ways to drive cultural change
13-33
Symbolic Culture-Changing Actions
 Lead
by example – Walk the talk
 Emphasize
 Eliminate
frugality
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
13-34
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
ethical conduct a way of life
Our ethics
program
consists of . . .
 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
13-35
Approaches to Establishing
Ethical Standards
 Formal
values statement and a code of ethics
 Word-of-mouth
 Annual
indoctrination and tradition
reports and Websites
 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
13-36
13-37
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
13-38
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
13-39
Fig. 13.2: The Two Culture-Building Roles of a
Company’s Core Values and Ethical Standards
13-40
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

13-41
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
ethics
enforcement procedures
13-42
Fig. 13.3: The Benefits of Cultural Norms Strongly
Grounded in Core Values and Ethical Principles
13-43
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

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 management
approaches or operating styles

Discretion to use different motivational and compensation
incentives to induce personnel to practice desired behaviors
13-44
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?
13-45
STRATEGIC LEADERSHIP
13-46
Numerous Roles of Strategic Leaders
Culture
Builder
Visionary
Chief
Entrepreneur
& Strategist
Resource Acquirer &
Allocator
Crisis
Solver
Motivator
Policy
Enforcer
Mentor
Taskmaster
Negotiator
Process
Integrator
Capabilities
Builder
Spokesperson
Consensus
Builder
Policymaker
Coach
Head
Cheerleader
Arbitrator
Chief
Administrator
& Strategy
Implementer
13-47
Leadership Activities of Chief
Strategy Implementer
1. Stay on top of what’s happening
2. Put constructive pressure on
company to achieve good results
3. Lead development of stronger core
competencies and competitive capabilities
4. Exercise ethics leadership and lead social
responsibility initiatives
5. Take corrective actions to improve overall strategic
performance
13-48
Role #1: Stay on Top of What’s Happening
 Develop
a broad network of formal
and informal sources of information
 Talk
 Be

with many people at all levels
an avid practitioner of MBWA
Observe situation firsthand
 Monitor
 Get
operating results regularly
feedback from customers
 Watch
competitive reactions of rivals
13-49
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
13-50
Approaches to Instilling a
Spirit 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 techniques
and compensation incentives to
Inspire employees
 Nurture a results-oriented climate
 Enforce high-performance standards

 Celebrate
individual, group, company successes
13-51
Role #3: Promote Stronger Core
Competencies and Capabilities
 Top
management intervention is
required to establish better or new

Resource strengths and competencies

Competitive capabilities
 Senior
managers must lead the effort because

Competencies 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
13-52
Role #4: Display Ethics Leadership and
Lead Social Responsibility Initiatives
 Set
an excellent example in

Displaying ethical behaviors

Demonstrating character and
personal integrity in actions and decisions
Our ethics
code is . . .
 Declare
support of company’s ethics code
and expect all employees to conduct
themselves in an ethical fashion
 Encourage
compliance and establish tough
consequences for unethical behavior
13-53
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
 Act
unequivocal support of ethics code
as final arbiter on hard calls

Remove people from key positions
if found guilty of a violation

Reprimand people lax in monitoring ethical compliance
13-54
Structuring an Ethics Compliance
and 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 a
troubling ethics-related situation
 Conduct
an annual ethics audit
to measure extent of

Ethical behavior and
 Identify problem areas
13-55
Key Approaches to
Enforcing Ethical Behavior
Have mandatory ethics trainings for employees
 Openly encourage employees to
report 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

13-56
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
13-57
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?
13-58
Actions Demonstrating Commitment
to 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 causes
and projects benefiting society
 Support workforce diversity and commit
to overall well-being of employees

13-59
Role #5: 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
13-60