Chapter|Six

6 Corporate
Culture and
Leadership –
Keys to Effective
Strategy
Execution
BUILDING A STRATEGY-SUPPORTIVE CORPORATE
CULTURE
Every company has a unique organizational culture. Each has its own
business philosophy and principles, its own ways of approaching problems and
making decision, its own work climate, its own embedded partners of “how we do
things around here,” its own lore (stories told over and over to illustrate company
values and what they mean to stakeholders), its own taboos and political don’ts –
in other words, its own ingrained beliefs, behavior and thought patterns, business
practices, and personality that define its corporate culture.

Where Does Corporate Culture Come From?

The taproot of corporate culture is the organization’s beliefs and philosophy

about how its affairs ought to be conducted – the reasons why it does things the
way it does.

The Role of Stories – Frequently, a significant part of a company’s culture

emerges from the stories that get told over and over again to illustrate to
newcomers the importance of certain values and beliefs and ways of operating

Perpetuating the Culture – Once established, company cultures can be

perpetuated by screening and selecting new group members according to how well
their values and personalities fit in (as well as on the basis of talents and
credentials), by systematic indoctrination of new members in the culture’s
fundamentals, by the efforts of senior group members to reiterate core values in
daily conversations and pronouncements, by the telling and retelling of company
legends, by regular ceremonies honoring members who display cultural ideals, and

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by visibly rewarding those who follow cultural norms and penalizing those who
don’t.

Forces That Can Cause Culture to Evolve – However, even stable cultures
aren’t static – just like strategy and organization structure, they evolve, if only
slightly. Internal crises, revolutionary technologies (like the Internet), and new
challenges breed new ways of doing things and cultural evolution.

Company Subcultures: The Problems Posed by New Acquisition and

Multinational Operations – Global and multinational companies tend to be at
least partly multicultural because cross-country organization units have different
operating histories and traditions, as well as members who have different values
and beliefs and who speak different languages.

Culture: Ally or Obstacle to Strategy Execution?

The beliefs, vision, objectives, and business approaches and practices
underpinning a company’s strategy may be compatible with its culture or they may
not.

How Culture Can Promote Better Strategy Execution

 A work environment where the culture matches the conditions for good
strategy execution provides a system of informal rules and peer pressure
regarding how to conduct business internally and how to go about doing
one’s job.
 A strong strategy-supportive culture nurtures and motivates people to do
their jobs in ways conductive to effective strategy execution; it provides
structure, standards, an a value system in which to operate; and it promotes
strong employee identification with the company’s vision, performance
targets, and strategy.

The Perils of Strategy-Culture Conflict – 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 – this, of course, presumes that it is one or more aspects
of the culture that are out of whack rather than the strategy.

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Strong versus Weak Cultures
Company cultures vary widely in the degree to which they are embedded in
company practices and behavioral norms. Some are strong and go directly to a
company’s heart and soul; others are weak, with shallow roots that support little in
the way of a definable corporate character.

Strong-Culture Companies

Three factors contribute to the development of strong cultures:

(1) a founder or strong leader who establishes values, principles, and practices that
are consistent and sensible in light of customer needs, competitive conditions, and
strategic requirements;
(2) a sincere, long-standing company commitment to operating the business
according to these established traditions, thereby creating an internal environment
that supports decision making and strategies based on cultural norms;
(3) a genuine concern for the well-being of the organization’s three biggest
constituencies – customers, employees, and shareholders. Continuity of leadership,
small group size, stable group membership, geographic concentrations, and
considerable organizational success all contribute to the emergence and
sustainability of a strong culture.

Weak-Culture Companies

The lack of definable corporate character tends to result in many employees

viewing the company as a place to work and their job as a way to make a living. As
a consequence, weak cultures provide little or no strategy implementing assistance
because there are no traditions, beliefs, values, common bonds, or behavioral
norms that management can use as levers to mobilize commitment to executing the
chosen strategy.

Unhealthy Cultures

 One unhealthy trait is a politicized internal environment that allows

influential managers to operate autonomous “fiefdoms” and resist needed
change.
 A second unhealthy cultural trait, one that can plague companies suddenly
confronted with fast-changing business conditions, is hostility to change to
people who champion new ways of doing things.

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  A third unhealthy characteristics is promoting managers who are good at
staying within their budgets, exerting close supervisory control over their
units, and handling administrative detail as opposed managers who
understand vision, strategies, and culture building and who are good leaders,
motivators, and decision makers.
 A fourth characteristic of unhealthy cultures is an aversion to looking
outside the company for superior practices and approaches.

Adaptive Cultures

In adaptive cultures, members share a feeling of confidence that the

organization can deal with whatever threats and opportunities come down the pike;
they are receptive to risk taking, experimentation, innovation, and changing
strategies and practices whenever necessary to satisfy the legitimate interests of
stakeholders- customers, employees, shareowners, suppliers, and the community
where the company’s operates.

Creating a Strong Fit between Strategy and Culture

It is the strategy maker’s responsibility to select a strategy compatible with the
“sacred” or unchangeable parts of prevailing corporate culture. It is the strategy
implementer’s task, once strategy is chosen, to change whatever facets of the
corporate culture hinder effective execution.

Changing a Problem Culture – Changing a company’s culture to align it with

strategy is among the toughest management tasks – easier to talk about than do.
Changing problem cultures is very difficult because of the heavy anchor of deeply
held values and habits – people cling emotionally to the old and familiar.

Symbolic Culture-Changing Actions – Managerial actions to tighten the culture-

strategy fit need to be both symbolic and substantive. Symbolic actions are
valuable for the signals they send about the kinds of behavior and performance
strategy-implementers wish to encourage.

Substantive Culture-Changing Actions – While being out front personally and

symbolically leading the push for new behaviors and communicating the reasons
for new approaches is crucial, strategy implementers have to convince all those
concerned that the culture-changing effort is more than cosmetic.

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Building Ethics into the Culture
A strong corporate culture founded on ethical business principles and moral
values is a vital driving force behind continued strategic success. Many executives
are convinced that a company must care about how it does business; otherwise a
company’s reputation, and ultimately its performance, is put at risk. Corporate
ethics and values programs are not window dressing; they are typically undertaken
to create an environment of strongly held values and convictions and to make
ethical conduct a way of life.

Once values and ethical standards have been formally set forth, they must be
institutionalized and ingrained in the company’s policies, practices, and actual
conduct. Implementing the values and code of ethics entails several actions:

 Incorporation of the statement of values and the code of ethics into

employee training and educational program.
 Explicit attention to values and ethics in recruiting and hiring to screen out
applicants who do not exhibit compatible character traits.
 Communication of the values and ethics code to all employees and
explaining compliance procedures.
 Management involvement and oversight, from the CEO down to firstline
supervisors.
 Strong endorsements by the CEO.
 Word-of-mouth indoctrination.

Structuring the Ethics Enforcement Process – Procedures for enforcing ethical

standards and handling potential violations have to be developed. The compliance
effort must permeate the company, extending into every organizational unit. The
attitudes, character, and work history of prospective employees must be
scrutinized.

Building a Spirit of High Performance into the Culture

An ability to instill strong individual commitment to strategic success and to

create an atmosphere in which there is constructive pressure to perform is one of
the most valuable strategy-implementing/strategy-executing skills. When an
organization performs consistently at or near peak capability, the outcome is not
only improved strategic success but also an organizational culture permeated with
a spirit of high performance. Such a spirit should not be confused with whether
employees are happy or satisfied or whether they got along well together, although

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the latter are certainly desirable conditions. An organization with a spirit of high
performance emphasizes achievement and excellence. Its culture is results-
oriented, and it used people-management practices that inspire workers to do their
best.

EXERTING STRATEGIC LEADERSHIP

The litany of good strategic management is simple enough: craft a sound strategic
plan, implement it, execute to the fullest, and adjust as needed, win! But it’s easier
said than done. Exerting take-charge leadership, being a “spark plug” ramrodding
things through and getting things done by coaching others to do them are difficult
tasks.

For the most part, major change efforts have to be top-down and vision-driven.
Leading change has to start with diagnosing the situation and then deciding which
of several ways to handle it. Managers have five leadership roles to play in pushing
for good strategy execution:

1. Staying on the top of what is happening, closely monitoring progress,

ferreting out issues, and learning what obstacles lie in the path of good
execution.
2. Promoting a culture and esprit de corps that mobilizes and energizes
organizational members to execute strategy in a competent fashion and
perform at a high level.
3. Keeping the organization responsive to changing conditions, alert for new
opportunities, bubbling with innovative ideas, and ahead of rivals in
developing competitively valuable competencies and capabilities.
4. Exercising ethics leadership and insisting that the company conduct its
affairs like a model corporate citizen.
5. Pushing corrective actions to improve strategy execution and overall
strategic performance.

Staying on Top of How Well Things Are Going

To stay on top of how well the strategy execution process is going, a manger
needs to develop a board network of contacts and sources of information, both
formal and informal.

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 One way strategy leaders stay on top of things is by making regular visits to
the field and talking many different people at many different levels. The technique
of managing by walking around (MBWA) is practiced in a variety of styles.

Leading the Effort to Establish a Strategy-Supportive Culture

Managers with responsibility for crafting and executing strategy have to be
out from in establishing a strategy-supportive organizational climate and culture.
When major strategic changes are being implemented, a manager’s time is best
spent personally leading the changes for whatever cultural adjustments are needed.

 Creating events where everyone in management is forced to listen to angry

customers, dissatisfied strategic allies, alienated employees, or maybe
disenchanted stockholders – a tactic that raises awareness levels and helps
lay the basis for realistically assessing which traits of the culture support
strategy and which do not.
 Making a compelling case for why the company’s new directions and a
different cultural atmosphere are in the organization’s best interests and why
individuals and groups should commit themselves to making it happen
despite the obstacles. Skeptics have to be convinced that all is not well with
the status quo. And the messages of strategic and cultural change have to be
repeated at every opportunity to continue to drive the points home.
 Initiating substantive and forceful actions to flush out the undesirable
cultural traits and replace them with the desired new ones.
 Recognizing and generously rewarding those who exhibit new cultural
norms and who lead successful change efforts – this help cultivate expansion
of the coalition for change.

Leading Culture Change Efforts in Multinational and Global Companies – In

multinational and global companies, where some cross-border diversity in the
corporate culture is normal, the leadership requirements of culture-changing efforts
are even more complex.

Keeping the Internal Organization Responsive and Innovative

Generating fresh ideas, identifying new opportunities, and developing innovative
products and services are not solely managerial tasks. They are organizationwide
tasks, particularly in large corporations.

Empowering Champions – One useful leadership approach is to take special

pains to foster, nourish, and support people who are willing to champion new

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technologies, new operating practices, better services, new products, and new
products applications and are eager for a chance to try turning their ideas into
better ways of operating, new product families, new businesses, and even new
industries.
To promote an organizational climate where champion innovators can
blossom and thrive, strategy managers need to do several things:

 Individuals and groups have to be encouraged to be creative, hold informal

brains-storming sessions, let their imaginations fly in all directions, and
come up with proposals.
 People with maverick ideas or out-of-the-ordinary proposals have to be
tolerated and given room to operate. Above all, would-be champions who
advocate radical or different ideas must not be looked on as disruptive or
troublesome.
 Managers have to induce and promote lots of “tries” and be willing to
tolerate mistakes and failures. Most ideas don’t pan out, but the
organization learns from a good attempt even when it fails.
 Strategy managers should be willing to use all kinds of ad hoc
organizational forms to support ideas and experimentation – venture teams,
task forces, “performance shootouts” among different groups working on
competing approaches, informal “bootlegged” projects composed of
volunteers, and so on.
 Strategy managers have to see that the rewards for successful champions are
large and visible and that people who champion an unsuccessful idea are not
punished or sidelined but rather encouraged to try again.

Leading the Process of Developing New Capabilities – often, effectively

responding to changing customer preferences and competitive conditions requires
top management intervention. Senior management usually has to lead the effort
because core competencies and competitive capabilities typically reside in the
combined efforts of different work groups, departments, and collaborative allies.
Effective company managers try to anticipate changes in customer-market
requirements and proactively build new competencies and capabilities that offer
competitive rivals. Senior managers are in the best position to see the need and
potential of new capabilities and to play lead role in the capability-market
repetitive edge over rivals.

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Exercising Ethics Leadership and Insisting on Good Corporate
Citizenship

For an organization to display consistently high ethical standards, the CEO and
those around the CEO must be openly and unequivocally committed to ethical and
moral conduct.
While ethically conscious companies have provisions for disciplining
violators, the main purpose of enforcement is to encourage compliance rather than
administer punishment.
If a company is really serious about enforcing ethical behavior, it probably
needs to do two things:
 Conduct an annual audit of each manager’s effort to uphold ethical standards
and formal reports on the actions taken by managers to remedy deficient
conduct.
 Require all employees to sign a statement annually certifying that they have
complied with the company’s code of ethics.

Corporate Citizenship and Social Responsibility: Another Dimension of Model

Ethical Behavior – Strong enforcement of a corporate code of ethics by itself is not
sufficient to make a company a good corporate citizen.

What separates companies that make a sincere effort to carry their weight in
being good corporate citizens from companies that are content to do only what is
legally required of them are strategy leaders who believe strongly in good
corporate citizenship.

Leading the Process of Making Corrective Adjustments

The leadership challenge here is twofold: deciding when to make adjustments and
deciding what adjustments to make. Both decisions are a normal and necessary part
of a strategy manager’s job since no strategic plan and no scheme for
implementing and executing strategy can foresee all the events and problems that
will arise.
The process of making corrective adjustments varies according to the
situation. In a crisis, the typical leadership approach is to have key subordinates
gather information, identify and evaluate options (crunching whatever numbers
may be appropriate) and perhaps prepare a preliminary set of recommended actions
for considerations.

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