Culture & Strategy

Chris Kariyawasam
BBA (hons), MBA, MCIM, SLIM, CPM (Asia Pacific)
Session Objective
◼ Introduce students to Oragananization Culture and its impact on
Strategy.

◼ Teaching methods :

◼ Read about the organisation culture of Fonterra

◼ https://keithwoodford.wordpress.com/2013/12/27/changing-the-culture-at-fonterra/
Culture of Fonterra

◼ https://www.fonterra.com/content/dam/fonterra-public-
website/pdf/policies/The_Way_We_Work_(Code_of_Business_Conduct)_December_2016.pdf

◼ Fonterra way we work

https://www.fonterra.com/au/en/careers/graduate-careers/cultural-diversity.html

◼ Great place to work

https://nz.indeed.com/cmp/Fonterra/reviews?ftopic=culture
 Learning outcomes
1. Understanding ‘culture’ and popular theories

2. Identify organizations that have experienced strategic drift and the

symptoms of strategic drift.

3. Analyze how history influences the strategic position of organizations.

4. Analyse the influence of an organisation’s culture on its strategy using

the cultural web.

5. Recognise the importance of strategists questioning the taken–for–

granted aspects of a culture.

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 Organizational culture
Organizational culture is the taken-for-granted
assumptions and behaviour that make sense of people’s
organizational context.

“Collective mental programming”

“The way we do things in this organisation”

https://youtu.be/P13Nco1DtLk
Amazon's distinctive organizational culture fosters a performance-driven environment that
fires up employees to innovate in pursuit of an outstanding, continuously-improving
customer experience. Its brand identity is based on delivering that same disruptively
innovative customer experience.

https://www.youtube.com/watch?v=Dyr0E3gDFH0
How to deal with cultural differences in Mergers and Acquisitions
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Taken for granted assumptions
◼ Organizational assumptions are usually “known,” but are not
discussed, nor are they written or easily found.

◼ They are comprised of unconscious thoughts, beliefs,

perceptions, and feelings (Schein, 2004).

◼ Since assumptions are not discussed or dealt with openly,

assumptions cannot easily be addressed or changed.

◼ Culture Culture is the set of values, beliefs, and assumptions.

Values are those things that a culture considers very important.
 The 7S Framework
Environment
for Strategy Implementation

Structure
Fit Systems
Strategy

https://www.youtube.com/watch?v=jzSSPlDt8Sg&t=1
00s Vision
Why culture, strategy and structure must align

Skills Culture

https://www.youtube.com/watch?v=SMY9Nu2_aYM
Staff
How leaders align organisation with strategy
MINTZBERG, H. and QUINN, J. B (2018) The strategy process : Concepts and Contexts. New Jersey : Prentice-Hall,
Inc., p.136.
Important Videos & Reading link
◼ https://www.youtube.com/watch?v=MfL_0ko4T3o&t=690s
Organisation Culture

◼ https://www.youtube.com/watch?v=xChi9_5W-Y8
Influences on formation of organization Culture

◼ https://www.youtube.com/watch?v=kRIc0W48qYY&t=84s
Handy’s Model of Culture

◼ https://www.aperianglobal.com/guide-to-defining-company-culture/
Artifacts, espoused values, assumptions

https://youtu.be/0kkPmppKm_4
Org culture & Performance
◼ https://www.youtube.com/watch?v=aSbBxwxZilY&t=463s
Edgar Schein's Culture Model
https://www.managementstudyguide.com/edgar-schein-model.htm
Schein Model
◼ Organizational culture represents the shared assumptions that a group
holds. It influences employees' perceptions and behavior at work. ...
Espoused values represent the explicitly stated values and norms that
are preferred by an organization.

Espoused values are the aspirations of a company. They directly influence

how a company operates and how employees function. However, these
values don’t always translate perfectly into practice.
What is Corporate Culture
◼ Every company has its own unique corporate culture —the
shared values, ingrained attitudes, and company traditions that
determine norms of behavior, accepted work practices, and
styles of operating.

◼ The character of a company’s culture is a product of the core

values and beliefs that executives espouse, the standards of
what is ethically acceptable and what is not.

◼ In a very real sense, the culture is the company’s automatic,

self-replicating “operating system” that defines “how we do
things around here.” Read Fonterra Article link

◼ It can be thought of as the company’s psyche or organizational

DNA.
What is Corporate Culture
◼ A company’s culture is important because it influences the
organization’s actions and approaches to conducting business.
As such, it plays an important role in strategy execution and
may have an appreciable effect on business performance.

◼ The culture of General Electric (GE) under CEO Jeff Immelt

entails a commitment to creativity and bold innovation that
wires the company for growth.

◼ It drives a willingness to accept the risk of embracing new

ventures with the potential to grow GE revenues
https://www.youtube.com/watch?v=agnYCajk1Jc&t=120s
Corporate Culture - ACCA Strategic Business Leader
Example: Unilever Corporate Culture
◼ Unilever’s organizational culture of performance is supported
through leadership and HR practices for optimal integrity of the
consumer goods business.
◼ The progress of this company is linked to its organizational
culture and the kinds of activities and policies leaders have
implemented over time.
◼ Organizational culture, leadership and the human resources of a
firm are all interrelated.
◼ The company is successful because of the overall effectiveness
of its leaders in supporting improvements in the organizational
culture.
◼ Unilever’s organizational culture supports high performance of
human resources. The effects of this corporate culture are
reflected on the company’s stable performance in the consumer
goods industry.
Unilever Corporate Culture…
Unilever’s Organizational Culture & Its Characteristics
◼ Unilever has an organizational culture of performance, which
emphasizes the significance of employee output.

◼ This corporate culture also points to the importance of criteria

or measures used to determine required output and adequacy
of output.

◼ Unilever’s organizational culture of performance has the

following characteristics:
◼ Focus on performance – individual performance and organizational
performance
◼ Focus on quality – quality of output in all areas
◼ Efficiency – efficient work through technology and other tools
Identifying Characteristics of Culture
◼ A company’s corporate culture is mirrored in the character or
“personality” of its work environment—the features that
describe how the company goes about its business and the
workplace behaviors that are held in high esteem.

◼ The values, business principles, and ethical standards that

management preaches. E.g. Code of Business Principles of
Fonterra

◼ The company’s approach to people management and the official

policies, procedures, and operating practices that provide
guidelines for the behavior of company personnel.

◼ The atmosphere and spirit that pervades the work climate—

whether the workplace is competitive or cooperative, innovative
or laid back. E.g. P&G
 The Internal Environment:
Corporate Culture

◼ Corporate culture should match the needs of the

external environment

◼ The importance of corporate culture has been growing in

a highly competitive business environment

◼ Culture is a pattern of shared values

◼ “how things are done”

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“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.”

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 Environment and Culture
◼ The external environment influences culture E.g. culture
change at P&G

◼ The internal environment should embody the

requirements for success

◼ Manager’s must pay attention to culture

◼ Recognize the ways culture can help or hurt your
department / organisation

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Adaptive vs. Unadaptive Corporate
Culture

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Shaping Corporate Culture for
Innovative Response
✓ How people are treated increases a company’s
value. Do you reward risk taking and
encourage trial and error or punish risk taking
behaviour?

✓ Culture attracts, motivates and retains talent

✓ Corporate culture enables learning and

innovation

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Strong-Culture Companies
The features of a strong-culture company:
◼ Is the dominating presence of certain deeply rooted values and
behavioral norms that “regulate” the conduct of company
personnel as they go about the company’s business.

◼ Strong cultures enable a company to operate like a well-oiled

machine, smoothly operating without a lot of intervention from
management.

◼ Senior managers in strong-culture companies embody the

cultural norms in their own actions and expect the same of
others within the company.
A Strong Culture depends on
◼ Strong cultures emerge only after a period of deliberate and
rather intensive culture building that generally takes years
(sometimes decades).
◼ Two factors contribute to the development of strong
cultures:
(1) a founder or strong leader who established core values,
principles, and practices that are viewed as having contributed
to the success of the company, and
◼ (2) a sincere, long-standing company commitment to operating
the business according to these established traditions and
values.
◼ Continuity of leadership, low workforce turnover, geographic
concentration, and considerable organizational success all
contribute to the emergence and sustainability of a strong
culture.
Weak Culture Companies
◼ In direct contrast to strong-culture companies, weak-culture
companies lack widely shared and strongly held values and
principles.
◼ As a consequence, weak cultures provide little or no assistance
in executing strategy 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.
◼ Without a work climate that channels organizational energy in
the direction of good strategy execution, managers are left with
the options of either using compensation incentives and other
motivational devices to mobilize employee commitment,
supervising and monitoring employee actions more closely, or
trying to establish cultural roots that will in time start to nurture
the strategy execution process.
Hofstede’s Model

◼ 116,000 respondents from 70 countries

◼ Four dimensions
◼ Power Distance

◼ Uncertainty Avoidance

◼ Individualism

◼ Masculinity

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Achievement vs Ascriptions

◼ Achievement culture: A culture in which people

are accorded status based on how well they perform
their functions. Very popular today in a results driven
Company

◼ Ascription culture: A culture in which status is

attributed based on who or what a person is.

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Combining Culture and Performance

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 Strategic drift

Strategic drift is the tendency for strategies to develop

incrementally on the basis of historical and cultural
influences but fail to keep pace with the changing
environment. E.g. P&G case study

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 Strategic drift

Figure 5.2 Strategic drift e.g P&G

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 Incremental change to avoid
strategic drift
◼ Gradual change in alignment with environmental change.

◼ Building on successful strategies used in the past (built

around core competences)

◼ Making changes based on experimentation around a

theme (incremental change built on a successful formula)
This approach is called Logical Incrementalism

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 The tendency towards strategic drift

Strategies fail to keep pace with environmental change

because :

◼ Steady as you go – reluctance to accept that change requires

moving away from strategies that have been successful.

◼ Building on the familiar – uncertainty of change is met with a

tendency to stick to the familiar.

◼ Core rigidities – capabilities that are taken for granted and

deeply ingrained in routines are difficult to change even when they
are no longer suitable.
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 The tendency towards strategic drift
contd …

◼ Relationships become shackles – organisations

become reluctant to disturb relationships with customers,
suppliers or the workforce even if they need to change.

◼ Lagged performance effects – the financial

performance of the organisation may hold up initially (e.g.
due to loyal customers or cost cutting) masking the need
for change.

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 A period of flux

As performance declines and the organisation loses track of

the environment then a period of Flux occurs typified by:

◼ Strategies that change, but in no clear direction

◼ Top management conflict and managerial changes

◼ Internal disagreement on the ‘right’ strategies

◼ Declining performance and morale

◼ Customers becoming alienated

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 Transformational change or death

As performance continues to deteriorate the outcome is likely

to be :

◼ The organisation dies (e.g. goes bankrupt or into

receivership).

◼ The organisation is taken over (and perhaps radically

changed by new owners).

◼ The organisation implements transformational change –

multiple, rapid and fundamental changes.

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Why history is important

◼ Recognising that organisational experience becomes

deeply embedded in behaviour.

◼ Avoiding recency bias – learning from the past.

◼ Asking ‘what if’ questions based on past experience.

◼ History as legitimisation – past success can be used as

evidence to support specific strategies.

◼ Innovation based on historic capabilities which can be

adapted and transferred.

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 Culture in four layers

Figure 5.5 Culture in four layers

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The paradigm

The paradigm is the set of assumptions held in

common and taken for granted in an organisation.

The paradigm:

◼ is built on collective experience

◼ informs what people in the organisation do (if not

each event has to be reinvented)

◼ influences how organisations respond to change.

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The cultural web
The cultural web shows the behavioural, physical and
symbolic manifestations of a culture that inform and are
informed by the taken-for-granted assumptions, or
paradigm, of an organisation

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 The cultural web of an organisation

Figure 5.7 The cultural web of an organisation 37

Culture Web Videos

https://www.youtube.com/watch?v=AMEPQ0lHaNQ

https://www.youtube.com/watch?v=T_s7h0Ll-RQ

Culture web & Strategic drift

https://www.youtube.com/watch?v=pOw6zCQVgfw

Exam question

https://www.youtube.com/watch?v=E0AVEZ7acyY

Can leaders change culture?

https://www.youtube.com/watch?v=HqLrU47iAdM
ICBT - CMU MBA - SM - Shanta R
Yapa 39
When cultures collide!

◼ Reading/learning cross border cultures can be quite

interesting.
◼ There are many writers. Ex. Richard Lewis
◼ 43 nationals described!

◼ Normal Vs abnormal
◼ Legal Vs illegal
◼ Ethical vs unethical
◼ National characteristics ( patriotic, punctual…)

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Summary (1)
◼ The history and culture of an organisation may
contribute to its strategic capabilities, but may also
give rise to strategic drift as its strategy develops
incrementally on the basis of such influences and
fails to keep pace with a changing environment.

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Summary (2)
◼ Cultural and institutional influences both inform and
constrain the strategic development of organisations.

◼ Organisational culture is the basic assumptions and beliefs

that are shared by members of an organisation, that
operate unconsciously and define in a basic taken-for-
granted fashion an organisation’s view of itself and its
environment.

◼ An understanding of the culture of an organisation and its

relationship to organisational strategy can be gained by
using the cultural web.

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Four Types of
Corporate Culture

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