The process of making corrective adjustments in strategy execution

LO 12-1 Identify the key features of a company’s corporate culture and the role of a company’s core values and ethical standards in building corporate culture.

LO 12-2 Explain how and why a company’s culture can aid the drive for proficient strategy execution.

LO 12-3 Identify the kinds of actions management can take to change a problem corporate culture.

LO 12-4 Explain what constitutes effective managerial leadership in achieving superior strategy execution.

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A genuine leader is not a searcher for consensus but a molder of consensus.

Martin Luther King, Jr.—Civil Rights Leader

I came to see, in my time at IBM, that culture isn’t just one aspect of the game, it is the game.

Louis Gerstner—Former Chairman and CEO of IBM

As we look ahead into the next century, leaders will be those who empower others.

Bill Gates—Cofounder and former CEO and chair of Microsoft

process management tools, installing operating systems, and providing the right incentives. In this chapter, we explore the two remaining managerial tasks that contribute to good strategy execution: creating a supportive corporate culture and leading the strategy execution process.

In the previous two chapters, we examined eight of the managerial tasks that drive good strategy execution: staffing the organization, acquiring the needed resources and capabilities, designing the organizational structure, allocating resources, establishing policies and procedures, employing

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348 PART 1 Concepts and Techniques for Crafting and Executing Strategy

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INSTILLING A CORPORATE CULTURE CONDUCIVE TO GOOD STRATEGY EXECUTION

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.1 The character of a company’s culture is a prod- uct of the core values and beliefs that executives espouse, the standards of what is ethically acceptable and what is not, the “chemistry” and the “personality” that permeate the work environment, the company’s traditions, and the stories that get told over and over to illustrate and reinforce the company’s values, business prac- tices, and traditions. In a very real sense, the culture is the company’s automatic, self-replicating “operating system” that defines “how we do things around here.”2 It can be thought of as the company’s psyche or organizational DNA.3 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 as well.

Corporate cultures vary widely. For instance, the bedrock of Walmart’s culture is zealous pursuit of low costs and frugal operating practices, a strong work ethic, ritu- alistic headquarters meetings to exchange ideas and review problems, and company executives’ commitment to visiting stores, listening to customers, and soliciting sugges- tions from employees. The culture at Apple is customer-centered, secretive, and highly protective of company-developed technology. Apple employees share a common goal of making the best products for the consumer; the aim is to make the customer feel delight, surprise, and connection to each Apple device. The company expects creative thinking and inspired solutions from everyone—as the company puts it, “We’re perfec- tionists. Idealists. Inventors. Forever tinkering with products and processes, always on the lookout for better.” According to a former employee, “Apple is one of those compa- nies where people work on an almost religious level of commitment.” To spur innova- tion and creativity, the company fosters extensive collaboration and cross- pollination among different work groups. But it does so in a manner that demands secrecy— employees are expected not to reveal anything relevant about what new project they are working on, not to employees outside their immediate work group and especially not to family members or other outsiders; it is common for different employees working on the same project to be assigned different project code names. The different pieces of a new product launch often come together like a puzzle at the last minute.4 W. L. Gore & Associates, best known for GORE-TEX, credits its unique culture for allow- ing the company to pursue multiple end-market applications simultaneously, enabling rapid growth from a niche business into a diversified multinational company. The company’s culture is team-based and designed to foster personal initiative, with no traditional organizational charts, no chains of command, no predetermined channels of communication. The culture encourages multidiscipline teams to organize around opportunities, and in the process, leaders emerge. At Nordstrom, the corporate cul- ture is centered on delivering exceptional service to customers, where the company’s motto is “Respond to unreasonable customer requests,” and each out-of-the-ordinary request is seen as an opportunity for a “heroic” act by an employee that can further the company’s reputation for unparalleled customer service. Nordstrom makes a point of promoting employees noted for their heroic acts and dedication to outstanding service.

Illustration Capsule 12.1 describes the corporate culture of another exemplary company— Epic Systems, well known by health care providers.

CORE CONCEPT Corporate culture refers to the shared values, ingrained attitudes, core beliefs, and company traditions that determine norms of behav- ior, accepted work practices, and styles of operating.

• LO 12-1 Identify the key fea- tures of a company’s corporate culture and the role of a company’s core values and ethical standards in building corporate culture.

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ILLUSTRATION CAPSULE 12.1

Epic Systems Corporation creates software to support record keeping for mid- to large-sized health care orga- nizations, such as hospitals and managed care organi- zations. Founded in 1979 by CEO Judith Faulkner, the company claims that its software is “quick to implement, easy to use and highly interoperable through industry standards.” Widely recognized for superior products and high levels of customer satisfaction, Epic won the Best Overall Software Suite award for the sixth con- secutive year—a ranking determined by health care professionals and compiled by KLAS, a provider of company performance reviews. Part of this success has been attributed to Epic’s strong corporate culture—one based on the slogan “Do good, have fun, make money.” By remaining true to its 10 commandments and princi- ples, its homegrown version of core values, Epic has nur- tured a work climate where employees are on the same page and all have an overarching standard to guide their actions.

Epic’s 10 Commandments:

1. Do not go public. 2. Do not be acquired. 3. Software must work.

4. Expectations = reality. 5. Keep commitments. 6. Focus on competency. Do not tolerate mediocrity. 7. Have standards. Be fair to all. 8. Have courage. What you put up with is what you