Arthur A Thompson

Margaret A Peteraf
John E Gamble
A J Strickland III
Arun K Jain Copyright © 2012 The McGraw-Hill Companies, Inc. 18e
Chapter 12
CORPORATE CULTURE AND LEADERSHIP: Keys to Good
Strategy Execution
1. Be able to identify the key features of a firm’s
corporate culture and appreciate the role of a
firm’s core values and ethical standards in
building corporate culture.
2. Gain an understanding of how and why a firm’s
culture can aid the drive for proficient strategy
execution and operating excellence.
3. Learn the kinds of actions management can take
to change a problem corporate culture.
4. Understand what constitutes effective managerial
leadership in achieving superior strategy
execution.
12–3
 INSTILLING A CORPORATE CULTURE
THAT PROMOTES GOOD STRATEGY
EXECUTION

♦ Corporate Culture
● Is the meshing of shared values, beliefs,
business principles, and traditions that imbues
a firm’s operating style, behavioral norms,
ingrained attitudes, and work atmosphere.
● Is important because it influences the firm’s
actions and approaches to conducting
business.

12–4
Key Features of a Firm’s Corporate Culture

Values, principles, Management Atmosphere and How managers and

and ethical practices and spirit embodied employees interact
standards organizational in the firm’s work and relate to one
in actual use polices climate another

Features of a Corporate Culture

Strength of peer Actions and Traditions and

How the firm
pressure to behaviors stories and “how
treats its
conform and encouraged we do things
stakeholders
observe norms and rewarded around here”

12–5
12.1 The Two Culture-Building Roles of a Company’s Core Values
and Ethical Standards

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 Transforming Core Values and Ethical
Standards into Cultural Norms

♦ Recruit and hire applicants with values and

ethics compatible to those of the firm.
♦ Incorporate the values statement and the code
of ethics into orientation and training programs.
♦ Have senior executives frequently reiterate and
stress the firm’s values and ethical principles.
♦ Use values statements and codes of ethics as
benchmarks for the firm’s polices and practices.

12–7
 Transforming Core Values and Ethical
Standards into Cultural Norms (cont’d)

♦ Use core values and ethical principles when

evaluating each person’s job performance.
♦ Encourage all employees to help enforce the
observance of core values and ethical
standards.
♦ Periodically have ceremonial occasions to
recognize individuals and groups who display
the firm’s values and ethical principles.
♦ Institute strict ethics enforcement procedures.

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 Perpetuating the Culture

Systematic
indoctrination of
new members
Screening and Vocal support by
selecting new senior managers
employees

Perpetuating
the Culture

Telling and Rewarding those

retelling of the who display
firm’s legends cultural norms
Ceremonies
honoring
employees

12–9
 Forces That Cause a Firm’s
Culture to Evolve

New or revolutionary
technologies

New challenges in Diversification into

the marketplace new businesses
Causes of
Cultural
Change
Shifting internal Rapid growth
conditions of the firm

Merger or acquisition
of another firm

12–10
 Company Cultures Can Be Strongly
or Weakly Embedded

♦ Strong-Culture Firm ♦ Weak-Culture Firm

● Has deeply rooted
widely-shared values,
behavioral norms, and
operating approaches.
● Insists that its values
and principles be
reflected in the decisions
and actions taken by all
company personnel.
● Lacks values and
principles that are
consistently preached
or widely shared.
● Has few or no
traditions, beliefs,
values, common
bonds, or behavioral
norms.

12–11
 Development of a Strong Culture

Founder or Commitment
strong leader Strong by the firm to
with strong Culture ethical
values behavior

Closely aligning corporate culture with the requirements

for proficient strategy execution merits the full attention
of senior executives.

12–12
 Why Corporate Cultures Matter to
the Strategy Execution Process

♦ A culture well matched to the requirements of the

strategy execution effort focuses the attention of
employees on what is most important to this effort.
♦ Culture-induced peer pressure induces personnel to do
things in a manner that aids good strategy execution.
♦ A culture consistent with the requirements for good
strategy execution can energize employees, deepen
their commitment to execute the strategy, and enhance
worker productivity.

12–13
 Healthy Cultures That Aid
Good Strategy Execution

Performance

Good Strategy
Execution

High-Performance Adaptive
Cultures Cultures

Commitment to
Willingness to accept
achieving stretch
change and take on
objectives and
challenges
accountability

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 Unhealthy Cultures That Impede
Good Strategy Execution

Change-resistant Insular, inwardly

cultures focused cultures

Unhealthy
Cultures
Politicized Unethical and greed-
cultures driven cultures

Incompatible
Subcultures

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 Changing a Problem Culture:
The Role of Leadership

♦ A strong, out of sync, or unhealthy culture must

be changed in order to execute strategy
successfully.
♦ Competent leadership at the top is necessary
for culture-change efforts to succeed.

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12.2 Steps to Take in Changing a Problem Culture

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 Making a Compelling Case
for Culture Change

♦ Selling the Change

● Explain why and how certain behavioral norms and
work practices are obstacles to good execution of
strategic initiatives.
● Explain how new behaviors and work practices will
be produce better results.
● Cite reasons why the current strategy has to be
modified, if the need for cultural change is due to a
change in strategy.

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 Substantive Culture-Changing Actions

♦ Replace key executives who are stonewalling needed

organizational and cultural changes.
♦ Promote individuals who advocate for cultural shifts and
can serve as a role model for the cultural behavior.
♦ Appoint outsiders with the desired cultural attributes to
high-profile positions.
♦ Screening candidates for positions carefully, hiring only
those who appear to fit in with the new culture.
♦ Mandate that all personnel attend culture-training.
♦ Design compensation incentives that boost the pay of
teams and individuals.

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Symbolic Culture-Changing Actions

Changing the culture

of an organization

Top executive Ceremonial

Physical symbols
and upper events to honor
that represent
management exemplary
the new culture
behaviors employees

12–20
 How Long Does It Take to Change
a Problem Culture?

♦ Changing a problem culture is never a short-term

exercise.
♦ A sustained and persistent effort to reinforce the
culture at every opportunity through word and deed
is required.
♦ It takes time for a new culture to emerge and
prevail; it takes even longer for it to become deeply
embedded.
♦ Fixing a problem culture and instilling a new set of
attitudes and behaviors can take two to five years.

12–21
 LEADING THE STRATEGY EXECUTION
PROCESS

♦ Leading Strategy Execution requires:

● Staying on top of what is happening and
closely monitoring progress.
● Putting constructive pressure on the
organization to execute the strategy well
and achieve operating excellence.
● Initiating corrective actions to improve
strategy execution and achieve the
targeted performance results.

12–22
 Staying on Top of How Things Are Going

♦ Management by Walking Around (MBWA)

● Is used by leaders to stay informed about how well
the strategy execution process is progressing.
● Involves spending time with people at company
facilities, asking questions, listening to their opinions
and concerns, and gathering firsthand information
about how well aspects of the strategy execution
process are going.

12–23
 Pressuring Organizational Units to Execute
Strategy Well and Achieve Operating Excellence

♦ Treat employees as valued partners.

♦ Foster an esprit de corps that energizes members.
♦ Use empowerment to create a fully engaged workforce.
♦ Make champions out of the people who spearhead new
ideas and/or turn in winning performances.
♦ Set stretch objectives that require personnel to give their
best in achieving performance targets.

12–24
 Pressuring Organizational Units to Execute
Strategy Well and Achieve Operating Excellence

♦ Use benchmarking, reengineering, TQM, and Six Sigma

to focus attention on continuous improvement.
♦ Use motivational techniques and compensation
incentives to inspire, nurture a results-oriented work
climate, and enforce high standards.
♦ Celebrate individual, group, and company successes.

12–25
 Leading the Process of Making
Corrective Adjustments

Making corrective actions

successfully requires:

Good business Good

A thorough
judgment in implementation
analysis of the
deciding what of the corrective
situation
actions to take actions

12–26
 A FINAL WORD ON LEADING THE PROCESS
OF CRAFTING AND EXECUTING STRATEGY

♦ It is difficult to separate leading the process of executing

strategy from leading the strategy process.
♦ Crafting, implementing, and executing strategy is a continuous
process that requires much adjusting and fine-tuning of the
strategy to fit changing circumstances.
♦ The tests of strategic leadership are whether the firm has a
good strategy and business model, whether its strategy is
competently executed, and whether the firm is achieving its
performance targets.
♦ If these three conditions exist, then the firm has good strategic
leadership and is a well-managed enterprise.

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