IMPLEMENTING STRATEGY CULTURE AND LEADERSHIP 1 IrwinMc GrawHill

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IMPLEMENTING STRATEGY: CULTURE AND LEADERSHIP 1 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc.

IMPLEMENTING STRATEGY: CULTURE AND LEADERSHIP 1 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

“An organisation’s capacity to execute its strategy depends on its “hard” infrastructure, structure and

“An organisation’s capacity to execute its strategy depends on its “hard” infrastructure, structure and systems and on its “soft” infrastructure - its culture and norms. ” Amar Bhide

What Makes Up a Corporate Culture? Beliefs about how business ought to be conducted

What Makes Up a Corporate Culture? Beliefs about how business ought to be conducted Values and principles of management Patterns of “how we do things around here” Oft-told stories illustrating company’s values Taboos and political don’ts Traditions Ethical standards 3 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Features of a large retailer cuture Dedication to customer satisfaction Zealous pursuit of low

Features of a large retailer cuture Dedication to customer satisfaction Zealous pursuit of low costs Belief in treating employees as partners Sam Walton’s legendary frugality Ritualistic Saturday morning meetings Executive commitment to Visit stores Talk to customers Solicit employees’ suggestions 4 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Where Does Corporate Culture Come From? Founder or early leader Influential individual or work

Where Does Corporate Culture Come From? Founder or early leader Influential individual or work group Policies, vision, or strategies Traditions, supervisory practices, employee attitudes Organisational politics Relationships with stakeholders Internal sociological forces 5 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

How Is Culture Sustained? Continuity of leadership Select new employees based on personality “fit”

How Is Culture Sustained? Continuity of leadership Select new employees based on personality “fit” Systematic indoctrination of new employees Senior employees’ reinforcement of core values Story-telling of company legends Ceremonies honoring employees who display cultural ideals Visibly rewarding those who follow cultural norms 6 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

The Power of Culture can contribute to or hinder successful strategy execution Requirements for

The Power of Culture can contribute to or hinder successful strategy execution Requirements for successful strategy execution may or may not be compatible with culture A close match between culture and strategy promotes effective strategy execution 7 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Benefits of a Good Culture - Strategy Fit Strategy-supportive cultures Shape the mood and

Benefits of a Good Culture - Strategy Fit Strategy-supportive cultures Shape the mood and temperament of the work force positively affecting organisational energy, work habits, and operating practices Provide standards, values, informal rules and peer pressures that nurture and motivate people to do their jobs in ways that promote good strategy execution Strengthen employee identification with the company, its performance targets, and strategy 8 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Benefits of a Good Culture-Strategy Fit (cont. ) Strategy-supportive cultures Stimulate people to take

Benefits of a Good Culture-Strategy Fit (cont. ) Strategy-supportive cultures Stimulate people to take on the challenge of realising the company’s vision, do their jobs competently and with enthusiasm, and collaborate with others to execute the strategy Optimal condition: A work environment that Can. Do! Promotes can do attitudes Accepts change Breeds needed capabilities 9 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Strategic Management Principle Anything so fundamental as implementing a new or different strategy involves

Strategic Management Principle Anything so fundamental as implementing a new or different strategy involves aligning the organisation’s culture with the requirements for competent strategy execution. 10 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Types of Corporate Cultures Strong vs. Weak Cultures Low-Performance Cultures Adaptive Cultures 11 Irwin/Mc.

Types of Corporate Cultures Strong vs. Weak Cultures Low-Performance Cultures Adaptive Cultures 11 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Characteristics of Strong Culture Companies Conduct business according to a clear, widely-understood philosophy Management

Characteristics of Strong Culture Companies Conduct business according to a clear, widely-understood philosophy Management spends considerable time spent communicating and reinforcing values Values widely shared and deeply rooted Often have a values statement Careful screening/selection of new employees to be sure they will “fit in” Visible rewards for those following norms; penalties for those who don’t 12 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

How is a Strong Culture Built? Leader who establishes values consistent with: Customer needs

How is a Strong Culture Built? Leader who establishes values consistent with: Customer needs Competitive conditions Strategic requirements A deep, abiding commitment to espoused values and business philosophy Practicing what is preached!! Genuine concern for well-being of: Customers Employees Shareholders 13 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Strategic Management Principle Strong cultures promote good strategy execution where there’s fit and hurt

Strategic Management Principle Strong cultures promote good strategy execution where there’s fit and hurt execution where there’s little fit. 14 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Characteristics of Weak Culture Companies Many subcultures Few values and norms widely shared Few

Characteristics of Weak Culture Companies Many subcultures Few values and norms widely shared Few strong traditions Little cohesion among the departments Weak employee allegiance to company’s vision and strategy No strong sense of company identity 15 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Characteristics of Low Performance Cultures Politicised internal environment Issues resolved on basis of turf

Characteristics of Low Performance Cultures Politicised internal environment Issues resolved on basis of turf Hostility to change Experimentation and efforts to alter status quo discouraged Avoid risks and don’t screw up Promote managers who are more concerned about process than about results Aversion to look outside for superior practices Must-be-invented here syndrome 16 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Hallmarks of Adaptive Cultures Introduction of new strategies to achieve superior performance Strategic agility

Hallmarks of Adaptive Cultures Introduction of new strategies to achieve superior performance Strategic agility and fast response to new conditions Risk-taking, experimentation, and innovation to satisfy stakeholders Proactive approaches to implement workable solutions Entrepreneurship encouraged and rewarded Top managers exhibit genuine concern for customers, employees, shareholders, suppliers 17 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Creating a Strategy - Supportive Cultural Fit STEP 1 Diagnose which facets of present

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 about those aspects of present culture that need to be changed STEP 3 Follow with swift, visible actions - some substantive and some symbolic 18 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Symbolic Culture-Changing Actions Emphasise frugality Eliminate executive perks Require executives to spend time talking

Symbolic Culture-Changing Actions Emphasise frugality Eliminate executive perks Require executives to spend time talking with customers Alter practices identified as cultural hindrances Visible awards to honor heroes Ceremonial events to praise people and teams who “get with the program” 19 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Substantive Culture-Changing Actions Benchmarking and best practices Set world-class performance targets Bring in new

Substantive Culture-Changing Actions Benchmarking and best practices Set world-class performance targets Bring in new blood, replacing traditional managers Shake up the organisational structure Change reward structure Increase commitment to employee training Reallocate budget, downsizing and upsizing 20 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Topics Covered in Value Statements Customer importance Commitment to quality Commitment to innovation Respect

Topics Covered 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 21 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Instilling Values in the Culture Incorporate values statement in employee training programs Screen out

Instilling Values in the Culture Incorporate values statement in employee training programs Screen out applicants who do not exhibit compatible character traits Communicate the vales to all employees Management involvement, participation and oversight Strong endorsement by CEO Word-of-mouth indoctrination 22 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Building a Spirit of High Performance Into the Culture Emphasise achievement and excellence Promote

Building a Spirit of High Performance Into the Culture Emphasise achievement and excellence Promote a results-oriented culture Pursue practices to inspire people to excel Desired outcome: Produce extraordinary results with ordinary people 23 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Approaches to Building a Spirit of High Performance Treat employees with dignity and respect

Approaches to Building a Spirit of High Performance Treat employees with dignity and respect Train each employee thoroughly Encourage employees to use initiative Set clear performance standards Use rewards and punishment to enforce high performance standards Hold managers responsible for employee development Grant employees autonomy to contribute Make champions out of people who excel 24 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Six Roles of the Strategy Implementer 1. Stay on top of what’s happening 2.

Six Roles of the Strategy Implementer 1. Stay on top of what’s happening 2. Promote a culture energising organisation to accomplish strategy 3. Keep firm responsive to changing conditions 4. Build consensus and deal with politics of crafting and implementing strategy 5. Enforce ethical standards 6. Take corrective actions to improve overall strategic performance 25 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Role #1: Stay on Top of What’s Happening Talk with many people at all

Role #1: Stay on Top of What’s Happening Talk with many people at all levels Be an avid practitioner of MBWA Observe situation firsthand Monitor operating results regularly Get feedback from customers Watch competitive reactions of rivals 26 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Role #2: Foster a Strategy - Supportive Culture Successful leaders Spend time convincing organisation

Role #2: Foster a Strategy - Supportive Culture Successful leaders Spend time convincing organisation members that the chosen strategy is right and that competent strategy execution is top priority Nurturing values Building and nurturing a culture that promotes good strategy execution 27 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Leader’s Role in Matching Culture and Strategy Create events where all managers must listen

Leader’s Role in Matching Culture and Strategy Create events where all managers must listen to Angry customers Dissatisfied stockholders Alienated employees Energise employees to make new strategy happen Repeat desired cultural values again and again Reward people exhibiting desired cultural norms 28 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Role #3: Keep Internal Organisation Responsive Promote openness to fresh ideas Pursue attractive new

Role #3: Keep Internal Organisation Responsive Promote openness to fresh ideas Pursue attractive new opportunities Support people who are willing to champion Innovative ideas and products Better services New technologies Promote continuous adaptation to changing conditions Build new competencies and capabilities 29 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Leader’s Role in Empowering Champions Encourage people to be creative and imaginative Tolerate mavericks

Leader’s Role in Empowering Champions Encourage people to be creative and imaginative Tolerate mavericks with creative ideas Promote lots of tries and be willing to accept failures Use all kinds of organisational means to support experimentation (teams, task forces, “skunkworks” and individual champions) See that rewards for successful champions are large and visible 30 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Leader’s Role in Developing New Capabilities Responding to changes requires top management intervention to

Leader’s Role in Developing New Capabilities Responding to changes requires top management intervention to establish new: Organizational capabilities Resource strengths and competencies Senior managers must lead the effort because Competencies reside in combined efforts, requiring integration Clout is needed to enforce necessary networking and cooperation 31 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Role #4: Dealing with Politics in strategy-making Winning agreement on long-term direction, objectives, and

Role #4: Dealing with Politics in strategy-making Winning agreement on long-term direction, objectives, and strategy Politics in implementing strategy Choosing people to fill key positions Delegation of authority Whether and how to reorganise Who reports to whom Deciding which units get biggest budget increases and which get downsized 32 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

The Political Role of the Strategy Leader Stimulate options Nurture support for strong proposals

The Political Role of the Strategy Leader Stimulate options Nurture support for strong proposals and kill weak ones Guide formation of coalitions on certain issues Achieve consensus and commitment 33 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Political Tactics of Successful Executives Let weakly supported ideas die Lead the strategy but

Political Tactics of Successful Executives Let weakly supported ideas die Lead the strategy but don’t via inaction dictate it Establish hurdles for strongly supported ideas that shouldn’t be opposed Keep low profile on unacceptable ideas by getting subordinates to say no Stay alert to symbolic impact of one’s actions Ensure all major power bases have access to top managers Inject new views when considering major changes Let most negative decisions Minimize political exposure on come from group consensus highly controversial issues 34 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998

Role #6: Lead the Process of Making Corrective Adjustments Requires both Reactive adjustments Proactive

Role #6: Lead the Process of Making Corrective Adjustments Requires both Reactive adjustments Proactive adjustments Involves Reshaping long-term direction, objectives, and strategy to unfolding events Promoting initiatives to align internal activities and behaviour with strategy 35 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1998