Strategy Implementation Session 7 – Informal Organization

1. Image not licensed for web distribution. Link here. Strategy ImplementationSession 7 – Informal Organization

2. Agenda • Culture Intro • Yahoo! • Break • Culture & Implementation • Home Depot

3. Where are we?

4. Culture and Strategy • Why culture & strategy? • What is culture? • How do firms manage culture? • How does culture relate to performance? • Image not licensed for web distribution. • Link here.

5. The next level of implementation involves elements that bring together and integrate the disparate people, processes, and goals/plans at a company. Planning People Partnerships Projects Processes

6. Moving from the building blocks to integrating elements of strategy. Informal Organization People Planning Partnerships Projects Processes Class 5 - Culture

8. Where would you place culture & strategy? VisionYour dominant directionWhat you want people to remember Mission StatementKey elements underlying your visionWhere you want people to focus ObjectivesNear-term goals (1-3-5 years)What you want people to do

9. Do the following quotes refer to strategy or culture? • _______ evolves from inside the organization – not from its future environment… • _______ is a deeply ingrained and continuing pattern of management behavior that gives direction to the organization... • _______ emerges out of the cumulative effect of many informed actions and decisions taken daily and over years by many employees… • Three implications of the close correspondence of culture and emergent strategy:* • Strategy and culture may substitute for one another…but culture • substitutes for plans more easily than vice versa. • Either can act as a starting point for an organization… • strategy = shared agreement on means • culture = shared agreement on ends • Both help impose coherence, order and meaning in an organization… • but this coherence can be a liability when firms need to change. * From Karl Weick’s “The significance of corporate culture” in Organizational Culture, (eds., Frost et al.)

10. What is culture? How would you describe the culture of your organization? How are these apparent to newcomers, visitors, customers, suppliers? How is corporate culture sustained over time? Can they be changed by management? How?

11. Examples of culture in corporate settings. • Artifacts & Behavior • Office space • Greeting rituals • Forms of address • Personal space • Dress • Contracts • Beliefs and values • Criteria for success • Nature of management • Matching job & person

12. Some basic assumptions lie under most cultural differences. • Relationship w/nature • Human activity • Nature of truth • Human nature • Nature of relationships • Space • Language • Time Managing across Cultures, Schneider & Barsoux, p.35

13. Where does corporate culture come from? • Imprinting: Role of founder & era of founding • Leaders • Administrative heritage • Stage of development • Nature of product Image not licensed for web. Link here.

14. The spheres of culture that influence organizational culture • Professional • Functional • Industry • Regional • National Class 5 - Culture

15. Diagnosing Culture (Yahoo!)

16. Yahoo Preparation Questions • Branding is usually associated with customers – why does Yahoo! launch an internal branding process? • How does internal branding tie together different elements of the informal organization? • Would you call the campaign a success? What would you tackle next?

17. Break

18. Yahoo: My Take

19. Culture and Social Behavior Culture: set of implicit and explicit rules that direct social behavior Role of firms & government in society is also cultural

20. How does national culture influence corporate culture? “The U.S. is extremely open to everything - except non-American ways of doing business.” (Pierre Bismuth, Schlumberger Limited) Rhone-Poulenc picked an American to run the country operation. Would other firms have done the same? "the South Korean industrial and trading companies that have built themselves into global powerhouses have done so with crews of cookie-cutter lifetime insiders...not just at home, but also in far-flung markets abroad." (WSJ, 1996) "Cohesiveness of corporation is more important to Japanese." (Kaouru Kobayashi, Sannon Institute of Management, Tokyo) Class 5 - Culture

21. Corporate and national cultures interact in positive and negative ways. • Convergence between national and corporate culture can be a source of competitive advantage. • French luxury goods • German automobiles • Nordic design firms • But divergence is a potential source of disadvantage… • EuroDisney • Others? • Corporate cultures typically reflect the national culture of the corporate home. • But multinationals increasingly need corporate culture to integrate workers across diverse national cultures • Great variation between corporate managers in different countries. • Even when practices are consistent, values remain quite different. Class 5 - Culture

22. Dimensions of culture: The DeSanctis cone model surface symbols language norms (practices) values/ assumptions deep environment

23. Focus: are the surface and deep elements of culture aligned? • symbols - dress, material goods, space, abstract representations (signs) • language - labels, jargon, formalization, appropriateness • norms (practices) - meetings, scheduling, reporting practices • values - longstanding priorities; deep metaphor (e.g., family, team, theater) Class 5 - Culture

24. Weak versus strong culture symbols language norms (practices) values/ assumptions Tightly Integrated Contradictory or weakly linked Class 5 - Culture

25. Managing organizational culture in the distributed enterprise • Autonomy (diverse cultures) • Cloning (identical cultures) • Mix & rotate • Develop a “global mindset” * Class 5 - Culture

26. The Cultural Audit • Start with an organizational culture. Write 3-4 key words describing each of the following: symbols, language, norms and values. • Repeat the process for a subsidiary, BU, or facility. • Identify commonalties and differences. • To what extent are values similar or different across these locations? • Locate places of misalignment and develop a plan to build a more consistent (but not insular) corporate culture. Class 5 - Culture

28. Think about how your firm (past & future) developed its culture. • How did your company develop its culture? • How is it maintained? • Has the culture been changed over time? How? Class 5 - Culture

29. The enculturation process • Selection • Indoctrination • Live in • ”Go native” • Selection (e.g., school, degree, national culture) • Train, model; & develop the climate and cone model components • Nurture and maintain over time • See if newcomers adopt and reinforce the culture

30. How does this compare to Tushman & O’Reilly’s approach? • Culture Diagnosis Step 1: Identify critical strategic challenges Step 2: Link the strategy to the critical tasks necessary to implement Step 3: Identify the norms and values that will help accomplish critical tasks Step 4: Diagnose the norms that characterize the current culture Step 5: Identify gaps between the norms needed and existing Step 6: Select actions to reduce the gaps Focus: Link between strategy & culture! Class 5 - Culture

31. How can firms develop culture?* • Firms with strong cultures share… • a rigorous selection system • intensive socialization • Build individual commitment through • Choice: choices and decisions build commitment • Visibility: publicize activities and accomplishments • Irrevocability: emphasize long-term commitments • Be aware of symbolic leadership • Credibility and consistency through the mundane choices of management • Language and symbolism • a comprehensive rewards and recognition system • What do employees value? • What intrinsic rewards does the company offer? • Tight links to outcomes *Tushman & O’Reilly Chapter 6

32. Home Depot • What levers did Nardelli use to change the culture at Home Depot? What challenges did he face?

33. The Influence of Corporate Culture on Firm Performance Jesper Sorensen, ASQ, 2002, 47. • Strong corporate cultures improve firm performance by facilitating internal behavioral consistency. But strong corporate culture may inhibit org learning when internal or external org conditions change. • Examined a sample of large, publicly traded firms in 18 markets. Used control variables to account for firm size and financial position, industry volatility, etc. • Performance measures: operating cash flow and ROI • Results: In stable environments, firms with strong cultures exhibit superior and more reliable performance • Firms with strong cultures can weather short periods of volatility without significant performance decrements; however, they don’t exceed performance of weak culture firms. Class 5 - Culture

34. Bottom line: corporate culture improves performance by encouraging behavior consistent with the strategy. Climate = attractive place to work Culture Performance Consistent Behavior Class 5 - Culture

35. Culture and Strategy: Issues • C& S Are overlapping aspects of the organization… and partial substitutes. • Culture plays a very important role of creating a shared orientation in decentralized, diverse organizations. • Social control: very powerful to encourage difficult to observe behaviors such as innovation or execution • Culture is driven by deep assumptions about the environment and people… • But it is evident through the practices, languages, and symbols in an organization. • Problems arise from inconsistency between the deep values & assumptions and actual actions, language & symbols. • Some inconsistency between parts of the organization is inevitable, and can be good. • Firms often turn to culture to change firms. • Culture (and strategic beliefs) are “tenacious beliefs” & resistant to change. Culture can represent internalized lessons from past successes. • Elements of a strong culture: selection, socialization, and comprehensive rewards and recognition

36. Culture: Common Missteps • Ignoring culture as ‘soft stuff’ that’s not important to implementation. • Tackling strategic change without paying attention to the role of informal culture. • Thinking cultural change has happened when surface elements of language and symbols have been changed, but not deeper actions and attitudes. • Forgetting how important leaders actions are for supporting and developing culture. • Ignoring elements of the enculturation process.

37. Next Up: Formal Structure • What were the distinctive features of Shell’s organizational structure prior to 1995? • How well suited was Shell’s structure to the competitive conditions and key success factors in the world oil, gas and chemicals industry? • To what extent did the 1995–6 reorganization remedy the deficiencies of Shell’s structure and systems? • How far did the further organizational changes of 1997–2000 resolve the remaining problems of Shell’s 1995–6 reorganization? • What additional changes to Shell’s organizational structure and management systems would you recommend to the current chairman of the Committee of Managing Directors, Mark Moody-Stuart?