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
• Creating conductive work environment
• Illustrated in the form of:
– Company’s values
– Business practices
– Traditions
 Corporate Culture at Wal-Mart

• Dedication to customer satisfaction

• Achieving low costs
• Proper operating practices
• Strong work ethic
• Ritualistic Saturday morning meetings
• Executive commitment to
– Visit stores
– Listen to customers
– Solicit employees’ suggestions
 Corporate Culture at Nordstrom’s
• Deliver exceptional customer service to customers

• Company motto
– “Respond to Unreasonable Customer Requests”

• Immediately addressing ordinary customer

requests
• Promotions based on outstanding customer
service .
• Compensation based entirely on commission
 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
• 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
 Corporate Culture at Microsoft

• 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
 Identifying Corporate Culture

A company’s culture is manifested in . . .

• Values, beliefs, and business principles management
preaches and practices
• Official policies and procedures
• Revered traditions and oft-repeated stories
• Attitudes and behaviors of employees
• Peer pressures that exist to display core values
• Organizational politics
• Approaches to people management and problem
solving
• Relationships with external stakeholders
 Sources of Corporate Culture
• Founder or early leader
• Influential individual or work group
• Policies, vision, or strategies
• Traditions, supervisory practices,
employee attitudes
• Peer pressures that exist
• Organizational politics
• Relationships with stakeholders
• Company’s approach to people management
 Sustaining corporate culture

• Selecting new employees who will “fit” in

• Systematic training 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
 Forces and Factors Causing Culture to Evolve

• New challenges in marketplace

• Revolutionary technologies
• Shifting internal conditions
– Internal crisis
– Turnover of top executives
• Arrival of a new CEO
• Diversification into new businesses
• Expansion into foreign countries
• Rapid growth involving adding new employees
• Merger with or acquisition of another company
 Culture: Impact on Strategy Execution

• A company’s culture can contribute to –

or hinder – successful strategy execution

• A culture promoting attitudes and behaviors

well-suited to first-rate strategy execution is a
valuable strength in the strategy execution
process

• A culture embracing attitudes and behaviors

that impede good strategy execution is a huge
obstacle to be overcome
 Benefits of a Tight Culture-Strategy Fit
• A culture encouraging 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 coworkers to
conform to culturally acceptable norms
• A culture imbedded with values and behaviors
that facilitate strategy execution promotes
strong employee commitment to a company’s
– Vision
– Performance targets
– Strategy
 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

requirements for proficient strategy execution
merits the full attention of senior executives!
Types of Corporate Cultures
 Characteristics of Strong 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 new
employees to be sure they “fit in”
 Creating a strong culture

• Leader who establishes values and behaviors

consistent with
– Customer needs
– Competitive conditions
– Strategic requirements
• A deep, abiding commitment to espoused
values, beliefs, and business philosophy
– Practicing what is preached!
• Genuine concern for well-being of
– Customers
– Employees
– Shareholders
 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 to company’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 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
 Hallmarks of Adaptive Cultures
• Willingness to accept change and embrace challenge of
introducing new strategies
• Risk-taking, experimentation, and innovation to satisfy
stakeholders
• Internal 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
 Dominant Traits of Adaptive Cultures

• Any changes in operating practices and behaviors

– Must not compromise core values and long-standing
business principles
– Must satisfy legitimate interests of key stakeholders
• Customers
• Employees
• Shareholders
• Suppliers
• Communities
Creating a Strong Fit Between Strategy & 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!
Fig. 8.4: Changing a Problem Culture
FROM THE BOOK
 Culture-Changing Actions

• Make a compelling case why a new culture is in

best interests of both company and employees
– Challenge status quo
– Create events where employees
must listen to angry key stakeholders

• Continuously repeat messages of why

cultural change is good for stakeholders
• Visibly praise and reward people
who display new cultural norms
 Culture-Changing Actions (continued)
• Alter incentive compensation to reward desired
cultural behavior

• Hire new managers and employees who have

desired cultural traits and can serve as role
models

• Replace key executives strongly associated with

old culture
• Revise policies and procedures to help drive cultural
change
 Symbolic Culture-Changing Actions

• Emphasize frugality
• Eliminate 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
 Substantive Culture-Changing Actions

• Engineer quick successes to highlight benefits of

proposed cultural changes
• Bring in new blood, replacing traditional managers
• Change dysfunctional policies
• Change reward structure
• Reallocate budget, downsizing and upsizing
• Reinforce culture through both word and deed
• Enlist support of cultural norms from frontline
supervisors and employee opinion leaders
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
• Executives must provide genuine support
of personnel displaying ethical standards
in conducting the company’s business
• Core values and ethical principles serve as a
cornerstone for culture-building
Fig. 8.5: The Two Culture-Building Roles of a
Company’s Core Values and Ethical Standards
FROM THE BOOK
Fig. 8.6: How a Company’s Core Values and Ethical
Principles Positively Impact the Corporate Culture
FROM THE BOOK
 Approaches to Establishing
Ethical Standards
• Word-of-mouth indoctrination and tradition
• Annual reports and Web sites
• Orientation courses for new employees
• Training courses for managers and employees
• 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
 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
• Frequent communications of the
values and ethics code to all employees
• Management involvement and oversight
• Strong endorsement by CEO
• Ceremonies and awards for individuals
and groups who display the values
• Institute ethics enforcement procedures
Structuring the Ethics Compliance & Enforcement Process

• Develop procedures for

– Enforcing ethical standards and
– Handling potential violations
• Scrutinize attitudes, character, and work history of
prospective employees
• Educate employees about ethical behaviors
• Encourage employees to raise
issues with ethical dimensions
• Explain how company values and ethics
code apply at all levels of a company
• Insist company values and ethical
standards become a way of life
 Structuring the Ethics Compliance & Enforcement
Process (continued)

• Form an ethics committee to provide guidance

• 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 annual ethics audit to measure extent of
– Ethical behavior and
– Identify problem areas
 Key Approaches to Enforcing Ethical Behavior
• Have mandatory ethics trainings for employees
• 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 firm’s code of ethics
• Openly encourage employees to report possible infractions via
– Anonymous calls to a hotline or
– Posting to a special company Web site
 Establishing a Strategy-Culture Fit in Multinational
and Global Companies
• Institute training programs to
– Communicate meaning of core values and
– Explain case for common operating principles and
practices
• Draw on full range of motivational and
compensation incentives to induce personnel
to adopt and practice desired behaviors
• Allow some leeway for certain core values and
principles to be interpreted and applied somewhat
differently, if necessary, to accommodate local
customs and traditions