module 11 - implementing strategy; culture and leadership
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Strategic ManagementTRANSCRIPT
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Module 11
Implementing Strategy:
Culture and Leadership
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Module Outline
• Building a Strategy-Supportive Corporate Culture
– What is Corporate Culture?
– Creating Fit Between Strategy and Culture
– Establishing Ethical Standards and Values
• Exerting Strategic Leadership
– Managing by Walking Around (MBWA)
– Fostering a Strategy-Supportive Culture
– Keeping Internal Organization Innovative
– Dealing with Company Politics
– Enforcing Ethical Behavior
– Making Corrective Adjustments
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What Makes Up a Company’s Culture?
• Beliefs about how business ought to be conducted
• Values and business principles of management
• “How we do things around here”
• Official policies
• Traditions
• Approaches to stockholder relationships
• Company politics
• Peer pressures… Taboos and political don’ts
• Off-told stories illustrating company’s values
• Ethical standards
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Where Does Corporate Culture Come
From?
• Founder or nearly leader who articulated
beliefs, principles, values, practices
• Influential individuals, work group, or division
• Values or vision statement rigidly adhered to
• Over time, these values, principles, practices
are shard widely by all employees
• A company’s culture is a product of internal
social forces
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Bedrock of Wal-Mart’s Culture
• Dedicated to customer satisfaction
• Zealous pursuit of low costs
• Belief in treating employees as partners
• Sam Walton’s legendary frugality
• Ritualistic Saturday morning meetings
• Commitment of executives to visit stores, talk
to customers, and solicit and act on
employee suggestions
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Culture at Nordstrom’s
• Company motto
“Respond to Unreasonable Customer Requests”
• Motto strongly ingrained in employee
behavior
• Out-of-the-ordinary customer requests
viewed as opportunities for “heroic” acts
• Promotions based on outstanding service
• Salaries based entirely on commission
• Culture weeds out those not meeting
standards and rewards those who do
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Multiple Cultures Within a Company
• Values, beliefs, practices vary by
– Department
– Geographic location
– Division
– Business unit
• Company subcultures can clash or not mesh
well
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Why Culture Matters?
• A company’s culture can contribute – or
hinder – successful strategy execution
• Beliefs and practices of a strategy may – or
may not – be compatible with firm’s culture
• Close match between culture and strategy
adds significantly to effectiveness of strategy
execution
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Why Culture Matters?
• A strong strategy-supportive culture
– Provides system of informal rules and peer
pressure
–Motivates people to do their best
– Provides structure, standards, and value system
– Promotes strong company identification
• Job of strategy implementer –
– Decide of culture is or is not strategy supportive
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Characteristics of Strong Culture
Companies
• Clear and explicit philosophy about how
business will be conducted
• Lots of time spent communicating values and
benefits
• Existence of creed or values statement
• Values and norms widely shared and deeply
rooted
• Careful screening / selection of new
employees
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Characteristics of Strong Culture
Companies
• Legendary stories told and retold
• Ceremonies honoring employees
exemplifying cultural norms
• Visible rewards for those following norms;
penalties for those who don’t
• Sincere commitment to operating company
according to tradition
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Characteristics of Weak Culture
Companies
• Many subcultures
• Few strong traditions
• Few values and beliefs widely shared by all
employees
• No strong sense of company identity
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Characteristics of Low Performance
Cultures
• Politicized internal environment
– Autonomous fiefdoms operated by influential managers who resist change
– Issues resolved on basis of turf or coalitions
• Hostility to change
– Experimentation discouraged
– Managers discouraged from exercising initiative to alter status quo
– Avoiding risks and not screwing up more important than innovativeness
– Entrenched, multi layered bureaucracies
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Characteristics of Low Performance
Cultures
• Promoting managers who understand
structures, systems, and control better than
vision, strategies, and culture-building
– Inside-out thinking and strategies
• Aversion to looking outside firm for superior
practices
– Insular thinking
– Inward-looking solutions
– Must-be-invented here syndrome
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Hallmarks of Adaptive Cultures
• Executives with strong commitment to
– Timeless business principles, and
– Organizational stockholders
• Managers and employees receptive to
– Risk-taking
– Experimentation and innovation
– Changing strategies
• Sense of confidence among all employees
– Do what’s needed to ensure long-term success
– Proactive in implementing workable solutions
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Hallmarks of Adaptive Cultures
• Executives who are
– Willing to take prudent risks
– Quick to modify strategies and operating
practices
– Supportive of people proposing useful change
– Adept at changing the “right things in the right
ways”
– Genuinely concerned about well-being of all
stakeholders
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Importance of a Strategy-Culture Fit
• Beliefs, goals, and practices underpinning a
strategy’s success may or may not be
compatible with company’s culture
– When they are not, culture may impede or even
defeat successful implementation
• Strong culture
– Promote good performance when fit exists, and
– Hurt performance when little fit exists
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Creating a Strategy-Supportive Cultural
Fit
• Changing culture to fit a new strategy is a
tough executive challenge
– Especially when prevailing culture is entrenched
and unhealthy
Senior executives must personally lead
efforts to create a strategy-supportive
culture!
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Creating a Strategy-Supportive Cultural
Fit
Step 1:
– Diagnose which facets of present culture are strategy-supportive and which are not
Step 2:
– Talk openly and candidly about aspects of culture needing change
Step 3:
– Follow talk with swift, visible action –Substantive or Symbolic
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Substantive Culture-Changing Actions
• Benchmarking and best practices
• Set world-class performance targets
• Stake out new business positions
• Bring in new blood, replacing traditional
managers
• Make major reorganizational moves
• Change reward structure
• Increase commitment to employee training
• Reallocate budget, downsizing and upsizing
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Symbolic Culture-Changing Actions
• Eliminate executive perks and emphasis
frugality
• Require executives to spend time talking with
customers and understanding their wants
• Alter practices identified as cultural
hindrance
• Visible awards to honor heroes
• Ceremonial events to praise people and
teams who “get with the program”
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Establishing Ethical Standards and
Values
• A strong culture based on ethical principles
has positive impact on long-term strategic
success
• Corporate ethics and value programs make
ethical conduct a way of life
• Approaches to establishing ethical standards
– Word-of-mouth indoctrination and power of
tradition
– Written documents
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Topics Generally Covered in Value
Statements and Codes of EthicsTopics in Value Statements
• Customer importance
• Commitment to quality
• Commitment to innovation
• Respect for individual employee
• Importance of honesty
• Duty to stockholders
• Duty to suppliers
• Corporate citizenship
• Protecting the environment
Topics in Codes of Ethics
• Honesty observing the Law
• Conflict of interest
• Fairness of selling / marketing
• Using inside information
• Supplier relations and purchasing
• Corrupt practices
• Acquiring information
• Political activities
• Use of company assets
• Proprietary information
• Pricing, contracting, and billing
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How to Implement Values and a Code
of Ethics
• Incorporate values statement and ethics code into
employee training programs
• Screen out job applicants not exhibiting desired
values and ethical traits
• Communicate values and ethics code to all
employees
• Endorsement of values and ethics code by CEO
• Insist all managers be personally involved in
instilling value and ethics
• Promote word-of-mouth indoctrination by peers in
work situations
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Building a Spirit of High Performance
into the Culture
• Companies with a spirit of high performance
– Emphasizes achievement and excellent
– Have a result-oriented culture
– Pursue policies and practices inspiring people to
do their best
• Desired outcome –
– Produce extraordinary results with ordinary
people
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Building a Spirit of High Performance
into the Culture
• Emphasize an intense people orientation
– Belief in worth of the individual
– Treat employees with dignity and respect
– Willingness to train each employee
– Strong commitment to job security and
promotion from within
– Encourage employees to use initiative and
creativity
– Set clear performance standards
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Building a Spirit of High Performance
into the Culture
• Emphasize an intense people orientation
– Utilize rewards and punishment to enforce high
performance standards
– Hold managers responsible for employee
development
– Grant employees autonomy to excel and
contribute
– Make champions out of people turning in winning
performances
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Exercising Strategic Leadership
• 6 Roles of the Strategy 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. Build consensus and deal with politics of
strategy formulation and implementation
5. Enforce ethical standards and behavior
6. Take corrective actions to improve overall
strategic performance
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Strategic Management Principle
Strong leadership is virtually essential in
achieving effective strategy execution!