Module 11 - Implementing Strategy; Culture and Leadership

Module 11

Implementing Strategy:

Culture and Leadership

Module Outline

• Building a Strategy-Supportive Corporate Culture

– What is Corporate Culture?

– Creating Fit Between Strategy and Culture

– Establishing Ethical Standards and Values

• Exerting Strategic Leadership

– Managing by Walking Around (MBWA)

– Fostering a Strategy-Supportive Culture

– Keeping Internal Organization Innovative

– Dealing with Company Politics

– Enforcing Ethical Behavior

– Making Corrective Adjustments

What Makes Up a Company’s Culture?

• Beliefs about how business ought to be conducted

• Values and business principles of management

• “How we do things around here”

• Official policies

• Traditions

• Approaches to stockholder relationships

• Company politics

• Peer pressures… Taboos and political don’ts

• Off-told stories illustrating company’s values

• Ethical standards

Where Does Corporate Culture Come

From?

• Founder or nearly leader who articulated

beliefs, principles, values, practices

• Influential individuals, work group, or division

• Values or vision statement rigidly adhered to

• Over time, these values, principles, practices

are shard widely by all employees

• A company’s culture is a product of internal

social forces

Bedrock of Wal-Mart’s Culture

• Dedicated to customer satisfaction

• Zealous pursuit of low costs

• Belief in treating employees as partners

• Sam Walton’s legendary frugality

• Ritualistic Saturday morning meetings

• Commitment of executives to visit stores, talk

to customers, and solicit and act on

employee suggestions

Culture at Nordstrom’s

• Company motto

“Respond to Unreasonable Customer Requests”

• Motto strongly ingrained in employee

behavior

• Out-of-the-ordinary customer requests

viewed as opportunities for “heroic” acts

• Promotions based on outstanding service

• Salaries based entirely on commission

• Culture weeds out those not meeting

standards and rewards those who do

Multiple Cultures Within a Company

• Values, beliefs, practices vary by

– Department

– Geographic location

– Division

– Business unit

• Company subcultures can clash or not mesh

well

Why Culture Matters?

• A company’s culture can contribute – or

hinder – successful strategy execution

• Beliefs and practices of a strategy may – or

may not – be compatible with firm’s culture

• Close match between culture and strategy

adds significantly to effectiveness of strategy

execution

Why Culture Matters?

• A strong strategy-supportive culture

– Provides system of informal rules and peer

pressure

–Motivates people to do their best

– Provides structure, standards, and value system

– Promotes strong company identification

• Job of strategy implementer –

– Decide of culture is or is not strategy supportive

Characteristics of Strong Culture

Companies

• Clear and explicit philosophy about how

business will be conducted

• Lots of time spent communicating values and

benefits

• Existence of creed or values statement

• Values and norms widely shared and deeply

rooted

• Careful screening / selection of new

employees

Characteristics of Strong Culture

Companies

• Legendary stories told and retold

• Ceremonies honoring employees

exemplifying cultural norms

• Visible rewards for those following norms;

penalties for those who don’t

• Sincere commitment to operating company

according to tradition

Characteristics of Weak Culture

Companies

• Many subcultures

• Few strong traditions

• Few values and beliefs widely shared by all

employees

• No strong sense of company identity

Characteristics of Low Performance

Cultures

• Politicized internal environment

– Autonomous fiefdoms operated by influential managers who resist change

– Issues resolved on basis of turf or coalitions

• Hostility to change

– Experimentation discouraged

– Managers discouraged from exercising initiative to alter status quo

– Avoiding risks and not screwing up more important than innovativeness

– Entrenched, multi layered bureaucracies

Characteristics of Low Performance

Cultures

• Promoting managers who understand

structures, systems, and control better than

vision, strategies, and culture-building

– Inside-out thinking and strategies

• Aversion to looking outside firm for superior

practices

– Insular thinking

– Inward-looking solutions

– Must-be-invented here syndrome

Hallmarks of Adaptive Cultures

• Executives with strong commitment to

– Timeless business principles, and

– Organizational stockholders

• Managers and employees receptive to

– Risk-taking

– Experimentation and innovation

– Changing strategies

• Sense of confidence among all employees

– Do what’s needed to ensure long-term success

– Proactive in implementing workable solutions

Hallmarks of Adaptive Cultures

• Executives who are

– Willing to take prudent risks

– Quick to modify strategies and operating

practices

– Supportive of people proposing useful change

– Adept at changing the “right things in the right

ways”

– Genuinely concerned about well-being of all

stakeholders

Importance of a Strategy-Culture Fit

• Beliefs, goals, and practices underpinning a

strategy’s success may or may not be

compatible with company’s culture

– When they are not, culture may impede or even

defeat successful implementation

• Strong culture

– Promote good performance when fit exists, and

– Hurt performance when little fit exists

Creating a Strategy-Supportive Cultural

Fit

• Changing culture to fit a new strategy is a

tough executive challenge

– Especially when prevailing culture is entrenched

and unhealthy

Senior executives must personally lead

efforts to create a strategy-supportive

culture!

Creating a Strategy-Supportive Cultural

Fit

Step 1:

– Diagnose which facets of present culture are strategy-supportive and which are not

Step 2:

– Talk openly and candidly about aspects of culture needing change

Step 3:

– Follow talk with swift, visible action –Substantive or Symbolic

Substantive Culture-Changing Actions

• Benchmarking and best practices

• Set world-class performance targets

• Stake out new business positions

• Bring in new blood, replacing traditional

managers

• Make major reorganizational moves

• Change reward structure

• Increase commitment to employee training

• Reallocate budget, downsizing and upsizing

Symbolic Culture-Changing Actions

• Eliminate executive perks and emphasis

frugality

• Require executives to spend time talking with

customers and understanding their wants

• Alter practices identified as cultural

hindrance

• Visible awards to honor heroes

• Ceremonial events to praise people and

teams who “get with the program”

Establishing Ethical Standards and

Values

• A strong culture based on ethical principles

has positive impact on long-term strategic

success

• Corporate ethics and value programs make

ethical conduct a way of life

• Approaches to establishing ethical standards

– Word-of-mouth indoctrination and power of

tradition

– Written documents

Topics Generally Covered in Value

Statements and Codes of EthicsTopics in Value Statements

• Customer importance

• Commitment to quality

• Commitment to innovation

• Respect for individual employee

• Importance of honesty

• Duty to stockholders

• Duty to suppliers

• Corporate citizenship

• Protecting the environment

Topics in Codes of Ethics

• Honesty observing the Law

• Conflict of interest

• Fairness of selling / marketing

• Using inside information

• Supplier relations and purchasing

• Corrupt practices

• Acquiring information

• Political activities

• Use of company assets

• Proprietary information

• Pricing, contracting, and billing

How to Implement Values and a Code

of Ethics

• Incorporate values statement and ethics code into

employee training programs

• Screen out job applicants not exhibiting desired

values and ethical traits

• Communicate values and ethics code to all

employees

• Endorsement of values and ethics code by CEO

• Insist all managers be personally involved in

instilling value and ethics

• Promote word-of-mouth indoctrination by peers in

work situations

Building a Spirit of High Performance

into the Culture

• Companies with a spirit of high performance

– Emphasizes achievement and excellent

– Have a result-oriented culture

– Pursue policies and practices inspiring people to

do their best

• Desired outcome –

– Produce extraordinary results with ordinary

people

Building a Spirit of High Performance

into the Culture

• Emphasize an intense people orientation

– Belief in worth of the individual

– Treat employees with dignity and respect

– Willingness to train each employee

– Strong commitment to job security and

promotion from within

– Encourage employees to use initiative and

creativity

– Set clear performance standards

Building a Spirit of High Performance

into the Culture

• Emphasize an intense people orientation

– Utilize rewards and punishment to enforce high

performance standards

– Hold managers responsible for employee

development

– Grant employees autonomy to excel and

contribute

– Make champions out of people turning in winning

performances

Exercising Strategic Leadership

• 6 Roles of the Strategy Implementer

1. Stay on top of what’s happening

2. Promote a culture “energizing” organization to

accomplish strategy

3. Keep firm responsive to changing conditions

4. Build consensus and deal with politics of

strategy formulation and implementation

5. Enforce ethical standards and behavior

6. Take corrective actions to improve overall

strategic performance

Strategic Management Principle

Strong leadership is virtually essential in

achieving effective strategy execution!