Implementing and Executing Strategy: Culture and Leadership

1. Implementing and Executing Strategy: Culture and Leadership

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 “Quote” 2

3. Chapter Outline • Building a Strategy-Supportive Corporate Culture • Where Does Corporate Culture Come From? • Culture and Strategy Execution • Types of Cultures • Creating a Fit Between Strategy and Culture • Establishing Ethical Standards • Building a Spirit of High Performance • Exerting Strategic Leadership • Staying on Top of How Well Things are Going • Establishing a Strategy-Supportive Culture • Keeping Internal Organization Innovative • Exercising Ethics Leadership • Making Corrective Adjustments

4. BUILD A STRATEGY-SUPPORTIVE CORPORATE CULTURE 4

5. What Makes Up a Company’s Culture? • Beliefs about how business ought to be conducted • Values and principles of management • Work climate and atmosphere • Patterns of “how we do things around here” • Oft-told stories illustrating company’s values • Taboos and political don’ts • Traditions • Ethical standards

6. Features of the CorporateCulture at Wal-Mart • Dedication to customer satisfaction • Zealous pursuit of low costs • Belief in treating employees as partners • Sam Walton’s legendary frugality • Ritualistic Saturday morning meetings • Executive commitment to • Visit stores • Talk to customers • Solicit employees’ suggestions

7. Features of the CorporateCulture 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 • Concept of boundaryless organization exists • Reliance upon “workout sessions” to identify, debate, and resolve “burning issues” • Commitment to Six Sigma Quality • Globalization of the company

8. Features of the CorporateCulture at Nordstrom’s • Company motto • “Respond to Unreasonable Customer Requests” • Out-of-the-ordinary customer requests viewed as opportunities for “heroic” acts • Promotions based on outstanding service • Salaries based entirely on commission • Weeds out those not meeting or living up to standards/expectations/shared values and rewards those who do

9. Where Does CorporateCulture Come From? • Founder or early leader • Influential individual or work group • Policies, vision, or strategies • Traditions, supervisory practices, employee attitudes • Organizational politics • Relationships with stakeholders • Internal sociological forces

10. How Is a Company’s Culture Perpetuated? • Selecting new employees based on how well their personalities “fit” in • Systematic indoctrination of new employees • Senior employees’ reinforcement of core values • Story-telling of company legends • Ceremonies honoring employees who display cultural ideals • Visibly rewarding those who follow cultural norms

11. Forces and FactorsCausing Culture to Evolve • Internal crises • Revolutionary technologies • New challenges • Arrival of new leaders • Turnover of key employees • Diversification into new businesses • Expansion into different geographic areas • Rapid growth adding new employees • Merger with or acquisition of another company • Globalization

12. Culture and Strategy Execution:Ally or Obstacle? • Culture can contribute to -- or hinder -- successful strategy execution • Requirements for successful strategy execution may -- or may not -- be compatible with culture • Aclose match between culture and strategy promotes effective strategy execution

13. Why Culture Matters: Benefitsof a Good Culture-Strategy Fit • Strategy-supportive cultures • Shape mood and temperament of the work force, positively affecting organizational energy, work habits, and operating practices • Provide standards, values, informal rules and peer pressures that nurture and motivate people to do their jobs in ways that promote good strategy execution • Strengthen employeeidentification with the company, its performance targets, and strategy

14. Can Do! Why Culture Matters: Benefits of aGood Culture-Strategy Fit (continued) • Strategy-supportive cultures • Stimulate people to take on the challenge of realizing the company’s vision, do their jobs competently and with enthusiasm, and collaborate with others to execute the strategy • Optimal condition:A work environment that • Promotes can do attitudes • Accepts change • Breeds needed capabilities

15. Strategic Management Principle Anything so fundamental as implementing a new or different strategy involves aligning the organization’s culture with the requirements for competent strategy execution!

16. Strong vs.Weak Cultures Unhealthy Cultures Adaptive Cultures Types of Corporate Cultures

17. Characteristics ofStrong Culture Companies • Conduct business according to a clear, widely-understood philosophy • Management spends considerable time communicating and reinforcing values • Values are widely shared and deeply rooted • Typically have a values statement • Careful screening/selection of new employees to be sure they will “fit in” • Visible rewards for those following norms; penalties for those who don’t

18. Values Customers Employees Shareholders How Does a Culture Come to Be Strong? • Leader who establishes values consistent with • Customer needs • Competitive conditions • Strategic requirements • A deep, abiding commitment to espoused values and business philosophy • Practicing what is preached! • Genuine concern for well-being of • Customers • Employees • Shareholders

19. Strategic Management Principle Strong cultures promote good strategy execution where there’s strategy-culture fit and hurt execution where there’s little fit!

20. Characteristics ofWeak Culture Companies • Many subcultures • Few values and norms widely shared • Few strong traditions • Little cohesion among the departments • Weak employee allegiance to company’s vision and strategy • No strong sense of company identity

21. Avoid risks! Characteristics of Unhealthy or LowPerformance Cultures • Politicized internal environment • Issues resolved on basis of turf • Hostility to change • Experimentation and efforts to alter status quo discouraged • Avoid risks and don’t screw up • Promotion of managers more concerned about process and details than results • Aversion to look outside for superior practices • Must-be-invented here syndrome

22. Hallmarks of Adaptive Cultures • Introduction of new strategies to achieve superior performance • Strategic agility and fast response to new conditions • Risk-taking, experimentation, and innovation to satisfy stakeholders • Proactive approaches to implement workable solutions • Entrepreneurship encouraged and rewarded • Top managers exhibit genuine concern for customers, employees, shareholders, suppliers

23. Types of Culture-Changing Actions • Revising policies and procedures to help drive cultural change • Altering incentive compensation to reward desired cultural behavior • Visibly praising and recognizing people who display new cultural traits • Hiring new managers and employees who have desired cultural traits and can serve as role models • Replacing key executives strongly associated with old culture • Communicating to all employees the basis for cultural change and its benefits

24. Symbolic Culture-Changing Actions • Emphasize frugality • Eliminate executive perks • Require executives to spend time talking with customers • Alter practices identified as cultural hindrances • Visible awards to honor heroes • Ceremonial events to praise people and teams who “get with the program”

25. Substantive Culture-Changing Actions • Benchmarking and best practices • Set world-class performance targets • Bring in new blood, replacing traditional managers • Shake up the organizational structure • Change reward structure • Increase commitment to employee training • Reallocate budget, downsizing and upsizing

26. Our ethics program consists of . . . Establishing Ethical Standards and Values • A culture based on ethical principles is vital to long-term strategic success • Ethics programs make ethical conduct a way of life • Value statements serve as a cornerstone for culture-building • A code of ethics serves as a cornerstone for developing a corporate conscience • Approaches to establishing ethical standards • Word-of-mouth indoctrination and tradition • Written documents

27. Instilling Values and Ethics in the Culture • Incorporate values statement and ethics code in employee training programs • Screen out applicants who do not exhibit compatible character traits • Communicate the values and ethics code to all employees • Management involvement and oversight • Strong endorsement by CEO • Word-of-mouth indoctrination

28. Building a Spirit of HighPerformance into the Culture • Emphasize achievement and excellence • Promote a results-oriented culture • Pursue practices to inspire people to excel • Desired outcome • Produce extraordinary results with ordinary people

29. Approaches to Building aSpirit of High Performance • Treat employees with dignity and respect • Train each employee thoroughly • Encourage employees to use initiative • Set clear performance standards • Use rewards and punishment to enforce high-performance standards • Hold managers responsible for employee development • Grant employees autonomy to contribute • Make champions out of people who excel

30. People Management Practices ThatPromote a Spirit of High Performance • Belief in the worth of the individual • Strong commitment to • Job security • Promotion from within • Managerial practices that encourage employees to exercise individual initiative and creativity • Pride in doing the “itty-bitty, teeny-tiny things” right

31. STRATEGIC LEADERSHIP 33

32. Leadership Roles of theStrategy 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.Exercise ethics leadership 5.Take corrective actions to improve overall strategic performance

33. Role #1: Stay on Topof What’s Happening • Develop a broad network of formal and 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

34. Role #2: Foster aStrategy - Supportive Culture • Successful leaders spend time • Convincing organization members chosen strategy is right and competent strategy execution is top priority • Nurturing values • Building and nurturing a culture promoting good strategy execution Jack Welch CEO of General Electric

35. Leader’s Role in MatchingCulture and Strategy • Implement a “stakeholders-are-king” philosophy • Challenge status quo with very “basic” questions • Create events where all managers must listen to • Angry customers • Dissatisfied strategic allies • Alienated employees • Disenchanted stockholders • Energize employees to make new strategy happen • Initiate substantive actions to reinforce desired cultural traits • Reward people exhibiting desired cultural norms

36. Role #3: Keep InternalOrganization Responsive • Promote openness to fresh ideas • Pursue attractive new opportunities • Support people who are willing to champion • Innovative ideas and products • Better services • New technologies • Promote continuous adaptation to changing conditions • Build new competencies and capabilities

37. Leader’s Role in Empowering Champions • Encourage people to be creative and imaginative • Tolerate mavericks with creative ideas • Promote lots of tries and be willing to accept failures (most ideas don’t pan out) • Use all kinds of organizational forms to support experimentation (venture teams, task forces, “skunk works” and individual champions) • See that rewards for successful champions are large and visible

38. Leader’s Role inDeveloping New Capabilities • Responding to changes requires top management intervention to establish new • Organizational capabilities • Resource strengths and competencies • Senior managers must lead the effort because • Competencies reside in combined efforts, requiring integration • Clout is needed to enforce necessary networking and cooperation

39. Our ethics code is . . . Role #4: Exercising Ethics Leadership • Display unequivocal commitment to ethical and moral conduct • Insist upon strong code of ethics • Encourage compliance and establish tough consequences for unethical behavior • Make it a duty for employees to • Observe ethical codes • Report ethical violations

40. Manager’s Role inExercising Ethics Leadership • Set an excellent ethical example • Provide training to employees about what is ethical and what isn’t • Reiterate unequivocal support of ethics code • Remove people from key positions if found guilty of a violation • Reprimand people lax in monitoring ethical compliance

41. Key Approaches toEnforcing Ethical Behavior • 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 company’s code of ethics

42. Actions Demonstrating CorporateCitizenship and Social Responsibility • Having “family friendly” employment practices • Operating a safe workplace • Taking special pains to protect the environment • Taking an active role in community affairs • Interacting with community officials to minimize impact of • Layoffs or • Hiring large numbers of new employees • Being a generous supporter of charitable causes and projects that benefit society

43. Role #6: Lead the Process ofMaking Corrective Adjustments • Requires both • Reactive adjustments • Proactive adjustments • Involves • Reshaping long-term direction, objectives, and strategy to unfolding events • Promoting initiatives to align internal activities and behavior with strategy