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Arthur A Thompson
Margaret A Peteraf
John E Gamble
A J Strickland IIIArun K Jain 1eCopyright © 2012 The McGraw-Hill Companies, Inc.Copyright © 2012 The McGraw-Hill Companies, Inc.
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1e
Chapter 12CORPORATE CULTURE AND LEADERSHIP: Keys to Good
Strategy Execution
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1$ %e able to identif& the ke& features of a firm'scorporate culture and appreciate the role of a
firm's core (alues and ethical standards in
building corporate culture$
!$ Gain an understanding of ho) and )h& a firm'sculture can aid the dri(e for proficient strateg&
e*ecution and operating e*cellence$
#$ +earn the kinds of actions management can take
to change a problem corporate culture$
,$ -nderstand )hat constitutes effecti(e managerial
leadership in achie(ing superior strateg&
e*ecution$
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INTI!!ING " C#$%#$"T& C'!T'$&TH"T %$#M#T& G##( T$"T&G)
&*&C'TI#N
+ Corporate Cltre
Is the meshing o share/ ales, elies,siness principles, an/ tra/itions that imes
a irms operating style, ehaioral norms,
ingraine/ attit/es, an/ wor3 atmosphere.
Is important ecase it inlences the irms
actions an/ approaches to con/cting
siness.
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4ey 5eatres o a 5irms Corporate Cltre
Strength of peer
pressure to
conform and
obser(e norms
Actions and
beha(iors
encouraged
and re)arded
Traditions and
stories and /ho)
)e do things
around here0
o) the firm
treats its
stakeholders
2eatures of a 3orporate 3ulture
4alues5 principles5
and ethical
standards
in actual use
Management
practices and
organi6ational
polices
Atmosphere and
spirit embodied
in the firm's )ork
climate
o) managers and
emplo&ees interact
and relate to one
another
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1!$1 The T)o 3ulture8%uilding 9oles of a 3ompan&'s 3ore 4alues
and Ethical Standards
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Transorming Core 6ales an/ &thicaltan/ar/s into Cltral Norms
+ $ecrit an/ hire applicants with ales an/
ethics compatile to those o the irm.
+ Incorporate the ales statement an/ the co/e
o ethics into orientation an/ training programs.
+ Hae senior e7ecties re8ently reiterate an/
stress the irms ales an/ ethical principles.
+ 'se ales statements an/ co/es o ethics as
enchmar3s or the irms polices an/ practices.
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Transorming Core 6ales an/ &thicaltan/ar/s into Cltral Norms 9cont/:
+ 'se core ales an/ ethical principles when
ealating each persons ;o perormance.
+ &ncorage all employees to help enorce the
oserance o core ales an/ ethicalstan/ar/s.
+ %erio/ically hae ceremonial occasions to
recogni<e in/ii/als an/ grops who /isplaythe irms ales an/ ethical principles.
+ Institte strict ethics enorcement proce/res.
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%erpetating the Cltre
Screening and
selecting ne)
emplo&ees
S&stematic
indoctrination of
ne) members
4ocal support b&
senior managers
9e)arding those
)ho displa&cultural norms
3eremonies
honoring
emplo&ees
Telling and
retelling of thefirm's legends
Perpetuating
the 3ulture
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5orces That Case a 5irmsCltre to &ole
=e) challenges in
the marketplace
Merger or ac>uisition
of another firm
Shifting internal
conditions
3auses of
3ultural
3hange
?i(ersification into
ne) businesses
=e) or re(olutionar&
technologies
9apid gro)th
of the firm
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Company Cltres Can =e tronglyor >ea3ly &me//e/
+ Strong83ulture 2irm Has /eeply roote/
wi/ely-share/ ales,
ehaioral norms, an/operating approaches.
Insists that its ales
an/ principles e
relecte/ in the /ecisions
an/ actions ta3en y all
company personnel.
+ @eak83ulture 2irm !ac3s ales an/
principles that are
consistently preache/or wi/ely share/.
Has ew or no
tra/itions, elies,
ales, common
on/s, or ehaioral
norms.
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(eelopment o a trong Cltre
3ommitment
b& the firm to
ethicalbeha(ior
2ounder or
strong leader
)ith strong(alues
Strong
3ulture
3losel& aligning corporate culture )ith the re>uirementsfor proficient strateg& e*ecution merits the full attention
of senior e*ecuti(es$
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>hy Corporate Cltres Matter tothe trategy &7ection %rocess
+ " cltre well matche/ to the re8irements o the
strategy e7ection eort ocses the attention o
employees on what is most important to this eort.
+Cltre-in/ce/ peer pressre in/ces personnel to /othings in a manner that ai/s goo/ strategy e7ection.
+ " cltre consistent with the re8irements or goo/
strategy e7ection can energi<e employees, /eepen
their commitment to e7ecte the strategy, an/ enhancewor3er pro/ctiity.
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Healthy Cltres That "i/Goo/ trategy &7ection
Good Strateg&
E*ecution
Adapti(e
3ultures
igh8Performance
3ultures
3ommitment to
achie(ing stretch
obecti(es and
accountabilit&
@illingness to accept
change and take on
challenges
Performance
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'nhealthy Cltres That Impe/eGoo/ trategy &7ection
3hange8resistant
cultures
IncompatibleSubcultures
Politici6ed
cultures
-nhealth&
3ultures
Insular5 in)ardl&
focused cultures
-nethical and greed8
dri(en cultures
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Changing a %rolem Cltre?The $ole o !ea/ership
+ " strong, ot o sync, or nhealthy cltre mst
e change/ in or/er to e7ecte strategy
sccesslly.
+ Competent lea/ership at the top is necessaryor cltre-change eorts to sccee/.
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1!"1:
1!$! Steps to Take in 3hanging a Problem 3ulture
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Ma3ing a Compelling Caseor Cltre Change
+ elling the Change
&7plain why an/ how certain ehaioral norms an/
wor3 practices are ostacles to goo/ e7ection o
strategic initiaties. &7plain how new ehaiors an/ wor3 practices will
e pro/ce etter reslts.
Cite reasons why the crrent strategy has to e
mo/iie/, i the nee/ or cltral change is /e to achange in strategy.
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stantie Cltre-Changing "ctions
+ $eplace 3ey e7ecties who are stonewalling nee/e/organi<ational an/ cltral changes.
+ %romote in/ii/als who a/ocate or cltral shits an/
can sere as a role mo/el or the cltral ehaior.
+ "ppoint otsi/ers with the /esire/ cltral attrites to
high-proile positions.
+ creening can/i/ates or positions carelly, hiring only
those who appear to it in with the new cltre.
+ Man/ate that all personnel atten/ cltre-training.
+ (esign compensation incenties that oost the pay o
teams an/ in/ii/als.
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ymolic Cltre-Changing "ctions
Top e*ecuti(e
and upper
managementbeha(iors
3eremonial
e(ents to honor
e*emplar&emplo&ees
Ph&sical s&mbols
that represent
the ne) culture
3hanging the culture
of an organi6ation
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How !ong (oes It Ta3e to Changea %rolem Cltre@
+ Changing a prolem cltre is neer a short-term
e7ercise.
+ " sstaine/ an/ persistent eort to reinorce the
cltre at eery opportnity throgh wor/ an/ /ee/is re8ire/.
+ It ta3es time or a new cltre to emerge an/
preailA it ta3es een longer or it to ecome /eeply
eme//e/.
+ 5i7ing a prolem cltre an/ instilling a new set o
attit/es an/ ehaiors can ta3e two to ie years.
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!&"(ING TH& T$"T&G) &*&C'TI#N%$#C&
+ !ea/ing trategy &7ection re8ires?
taying on top o what is happening an/
closely monitoring progress.
%tting constrctie pressre on the
organi<ation to e7ecte the strategy well
an/ achiee operating e7cellence.
Initiating correctie actions to improestrategy e7ection an/ achiee the
targete/ perormance reslts.
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taying on Top o How Things "re Going
+ Management y >al3ing "ron/ 9M=>": Is se/ y lea/ers to stay inorme/ aot how well
the strategy e7ection process is progressing.
Inoles spen/ing time with people at companyacilities, as3ing 8estions, listening to their opinions
an/ concerns, an/ gathering irsthan/ inormation
aot how well aspects o the strategy e7ection
process are going.
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%ressring #rgani<ational 'nits to &7ectetrategy >ell an/ "chiee #perating &7cellence
+ Treat employees as ale/ partners.
+ 5oster an esprit /e corps that energi<es memers.
+ 'se empowerment to create a lly engage/ wor3orce.
+ Ma3e champions ot o the people who spearhea/ new
i/eas an/Bor trn in winning perormances.
+ et stretch o;ecties that re8ire personnel to gie their
est in achieing perormance targets.
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%ressring #rgani<ational 'nits to &7ectetrategy >ell an/ "chiee #perating &7cellence
+ 'se enchmar3ing, reengineering, TM, an/ i7 igma
to ocs attention on continos improement.
+ 'se motiational techni8es an/ compensation
incenties to inspire, nrtre a reslts-oriente/ wor3climate, an/ enorce high stan/ar/s.
+ Celerate in/ii/al, grop, an/ company sccesses.
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!ea/ing the %rocess o Ma3ingCorrectie "/;stments
A thorough
anal&sis of the
situation
Good business
udgment indeciding )hat
actions to take
Good
implementationof the correcti(e
actions
Making correcti(e actions
successfull& re>uiresB
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" 5IN"! >#$( #N !&"(ING TH& %$#C C$"5TING "N( &*&C'TING T$"T&G)
+ It is /iiclt to separate lea/ing the process o e7ecting strategy
rom lea/ing the strategy process.
+ Crating, implementing, an/ e7ecting strategy is a continos
process that re8ires mch a/;sting an/ ine-tning o the
strategy to it changing circmstances.
+ The tests o strategic lea/ership are whether the irm has a goo/
strategy an/ siness mo/el, whether its strategy is competently
e7ecte/, an/ whether the irm is achieing its perormance
targets.+ I these three con/itions e7ist, then the irm has goo/ strategic
lea/ership an/ is a well-manage/ enterprise.