Which of the following are standout traits of a change-resistant culture

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Copyright © 2020 by Arthur A. Thompson. All rights reserved. Reproduction and distribution of the contents are expressly prohibited without the author’s written permission

Strategy: Core Concepts and Analytical Approaches

An e-book published by McGraw-Hill Education

Arthur A. Thompson, The University of Alabama 6th Edition, 2020-2021

257

chapter 12 Corporate Culture and Leadership—Keys to Good Strategy Execution The biggest levers you’ve got to change a company are strategy, structure, and culture. If I could pick two, I’d pick strategy and culture. —Wayne Leonard, CEO, Entergy

Weak leadership can wreck the soundest strategy; forceful execution of even a poor plan can often bring victory. —Sun Zi, ancient Chinese general and philosopher

Leadership is accomplishing something through other people that wouldn’t have happened if you weren’t there . . . Leadership is being able to mobilize ideas and values that energize other people . . . Leaders develop a story line that engages other people. —Noel Tichy, Professor

You’ve got to have a vision. You’ve got to have a plan to implement it. Then you’ve got to set the example, develop the principles and values that are important, and get people to buy into it. —Nick Saban, Head Football Coach, The University of Alabama

In the previous two chapters, we examined six of the eight managerial tasks that drive good strategy execution and operating excellence: staffing the organization and developing the resources, capabilities, and organization structure to execute the strategy successfully; steering the needed resources to execution-critical value chain activities; ensuring that policies and procedures facilitate rather than impede strategy execution; adopting best practices and employing process management tools to drive continuous improvement in how value chain activities are performed; installing information and operating systems that enable better execution; and tying rewards and incentives directly to the achievement of strategic and financial performance targets and other execution-critical outcomes. In this chapter, we explore the two remaining managerial tasks that enhance a company’s efforts to execute its strategy: creating a corporate culture that promotes good strategy execution and leading the strategy execution process.

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Instilling a Corporate Culture That Promotes Good Strategy Execution

Every company has its own unique culture. The character of a company’s culture or work climate is a product of the core values and business principles that executives espouse, the standards of what is ethically acceptable and what is not, the company’s people management practices and style of operating, the collective attitudes and ingrained behaviors of company personnel, the “chemistry” flowing from how company personnel interact and behave in the workplace, the “personality” that permeates the work environment, and the stories that get told over and over to illustrate and reinforce the company’s values, business practices, and traditions. The specific cultural traits that emerge from a company’s meshing of these culture- determining factors define its corporate culture.1 In effect, a company’s culture defines and shapes “how we do things around here.”2 It functions 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 and, often, its business performance as well.

There are big variations in the character of company cultures. For instance, the bedrock of Walmart’s culture is zealous pursuit of low costs and frugal operating practices, a strong work ethic, ritualistic headquarters meetings to exchange ideas and review problems, and company executives’ commitment to visiting stores, listening to customers, and soliciting suggestions 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 perfectionists. Idealists. Inventors. Forever tinkering with products and processes, always on the lookout for better.”4 According to a former employee, “Apple is one of those companies where people work on an almost religious level of commitment.”5 To spur innovation 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 codenames. The different pieces of a new product launch often come together like a puzzle at the last minute.6 Moreover, Apple management is obsessive about protecting company-developed technology and innovative know-how; the measures that Apple takes to protect its proprietary technology and intellectual capital are unparalleled in Silicon Valley.

W. L. Gore & Associates (known worldwide for its GORE-TEX membrane used to make outerwear products waterproof, windproof, and breathable) 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 culture is centered on delivering exceptional service to customers—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 a customer-pleasing shopping experience. Nordstrom makes a point of promoting employees noted for their heroic acts and dedication to outstanding service; the company motivates its salespeople with a commission-based compensation system that enables Nordstrom’s best salespeople to earn more than double what other department stores pay.

CORE CONCEPT Corporate culture refers to the character of a company’s internal work climate and psyche—as shaped by its core values, business principles, ethical standards, ingrained beliefs and behaviors, approach to people management, style of operating, and traditions.

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Identifying the Key Features of a Company’s Corporate Culture A company’s corporate culture is mirrored in the character or “personality” of its work environment—the features that underpin how the company goes about its business and the workplace behaviors held in high esteem. Some of these features are readily apparent, and others operate quite subtly. The chief things to look for include:

n The values, business principles, and ethical standards that management preaches and practices—these are the key to a company’s culture, but actions speak much louder than words here.

n The company’s approach to people management and the official policies, procedures, and operating practices that paint the white lines for the behavior of company personnel.

n The atmosphere and spirit that pervade the work climate—whether the workplace is innovative and vibrant or resistant to change, collegial or politicized, quick to adapt or comfortable with methodical progress (or even the status quo), all business or fun-loving and laid back, and the like.

n How managers and employees interact and relate to one another—whether there is heavy or weak reliance on collaboration and teamwork, the extent to which manager-employee and employee-employee communications are free flowing or restricted and infrequent, whether there is empowered exercise of initiative or whether actions are directed mostly by higher authority, the extent to which there is good camaraderie, whether people are called by their first names, and whether coworkers spend little or lots of time together outside the workplace.

n The strength of peer pressures to do things in particular ways and conform to expected norms.

n The actions and behaviors management explicitly encourages and rewards in the form of compensation and promotion and those that are frowned upon (and sometimes punished).

n The company’s revered traditions and oft-repeated stories about “heroic acts” and “how we do things around here and why we do them that way.”

n The manner in which the company deals with external stakeholders (particularly vendors and local communities where it has operations)—whether it treats suppliers as business partners or prefers hard- nosed, arm’s-length business arrangements, and the strength and genuineness of the commitment to corporate citizenship and environmental sustainability.

The values, beliefs, and practices that function as cornerstones of a company’s culture can come from anywhere in the organization hierarchy. Typically, key elements of the culture originate with a founder or certain strong leaders who articulated them as a set of business principles, company policies, operating approaches, and ways of dealing with employees, customers, vendors, shareholders, and local communities where the company has operations. They also stem from exemplary actions on the part of company personnel, and evolving consensus about “how we ought to do things around here.”7 Over time, these cultural underpinnings take root, come to be accepted by company managers and employees alike, and become ingrained in how the company conducts its business.

Company Cultures Are Often Grounded in Core Values and Ethics A company’s corporate culture and behavioral norms are strongly influenced by its core values and the bar it sets for ethical behavior. The culture-shaping significance of core values and ethical behaviors accounts for why so many companies have developed a formal values statement and a code of ethics. Of course, sometimes a company’s stated core values and code of ethics are cosmetic, existing mainly to impress outsiders and help create a positive

A company’s culture is, to a very large extent, shaped by its core values and ethical standards.

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company image. But more usually a company’s values and ethical standards have been developed to deliberately mold the culture and communicate what actions and behaviors are expected of all company personnel. Many executives want the work climate at their companies to mirror certain values and ethical standards, partly because they are personally committed to these values and ethical standards but mainly because they are convinced that adherence to such values and ethical principles will improve strategy execution, make the company a better performer, and positively impact its reputation.8 And, not incidentally, strongly ingrained values and ethical standards reduce the likelihood of lapses in ethical and socially approved behavior that mar a company’s public image and put its financial performance and market standing at risk.

As depicted in Figure 12.1, a company’s stated core values and ethical principles have two roles in the culture- building process. One, a company that works hard at putting its stated core values and ethical principles into practice fosters a work climate where company personnel share common and strongly held convictions about how the company’s business is to be conducted. Second, the stated values and ethical principles provide company personnel with guidance about the manner in which they are to do their jobs—what behaviors and ways of doing things are approved (and expected) and which are out-of-bounds. These values-based and ethics-based cultural norms serve as yardsticks for gauging the appropriateness of particular actions, decisions, and behaviors, thus helping steer company personnel toward both doing things right and doing the right thing.

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

A Company’s

Stated Core

Values and Ethical

Principles

Foster a work climate where company personnel share common and strongly held convictions about how the company’s business is to be conducted

Signal employees that they are expected to: • Display the company’s core values in

their actions (do things the right way) • Uphold the company’s ethical

standards (do the right thing)

Ingraining Cultural Norms and Perpetuating the Culture Once established, company cultures can be embedded and perpetuated by drawing on some or all of the following eight actions:9

1. Screening and selecting new employees that will mesh well with the culture.

2. Incorporating discussions of the company’s culture and the desired cultural behaviors into orientation programs for new employees and training courses for managers and employees.

A company’s values statement and code of ethics communicate expectations of how all company personnel should conduct themselves in the workplace.

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3. Having senior managers frequently reiterate core values, ethical standards, and the desired cultural behaviors in daily conversations, at company events, and internal communications to employees.

4. Stressing that managers all the way down to first-level supervisors give ongoing attention to explaining the desired cultural traits and behaviors in their areas and why they are important.

5. Expecting managers at all levels to be cultural role models and exhibit the advocated cultural norms in their own behavior.

6. Encouraging company personnel to exert strong peer pressure on coworkers to conform to expected cultural norms.

7. Making the display of cultural norms a factor in evaluating each person’s job performance, granting compensation increases, and deciding who to promote.

8. Holding periodic ceremonies to honor people who excel in exhibiting and role modeling the desired cultural behaviors.

As a rule, companies are attentive to the task of hiring people who will fit in and who exhibit character traits compatible with the prevailing culture. And, usually, job seekers lean toward accepting jobs at companies where they feel comfortable with the atmosphere and the people they will be working with. Frequently, significant facets of the company’s culture are conveyed in the stories that are told over and over again (by managers and in training sessions) to illustrate to newcomers the importance of certain traits and behaviors and the depth of the commitment that various company personnel have displayed. Employees who don’t hit it off at a company (sometimes because they do not like the culture and work climate) tend to leave quickly, while employees who are comfortable and pleased with the work environment and cultural norms stay on, eventually moving up the ranks to positions of greater responsibility. The longer people stay at an organization, the more they come to embrace and mirror the corporate culture—their values, beliefs, and behaviors tend to be molded by mentors, fellow workers, company training programs, and the reward structure. Normally, employees who have worked at a company for a long time play a major role in indoctrinating new employees into the culture. But, in the final analysis, deeply ingraining and perpetuating the expected cultural behaviors require senior executives’ active involvement. Top management must make it unequivocally clear that conforming to the company’s values, ethical standards, and cultural norms has to be “a way of life” at the company and that there will be adverse consequences for “outside the lines” behavior.

It takes months to initiate the development of a culture and many more months for a new culture’s shallow roots to begin growing and start influencing behavior. And it can take years, sometimes a decade or more, for cultural values, attitudes, and behaviors to become deeply ingrained and exert a truly major influence on how a company operates. But once strongly implanted, the values, behaviors, and ways of doing things are deeply rooted and hard to weed out.

The Forces That Cause a Company’s Culture to Evolve Company cultures are far from static; just like strategy, they evolve. The introduction of revolutionary technologies and new market challenges that dictate a change in company direction and big strategy changes tend to breed new ways of doing things and, in turn, drive cultural evolution. An incoming CEO who decides to shake up the existing business and take it in new directions often triggers a cultural shift, perhaps a big one. Likewise, diversification into new businesses, expansion into foreign countries, rapid growth that brings an influx of new employees, and a merger with or acquisition of another company all precipitate significant cultural change.

The Presence of Company Subcultures Although it is common to speak about corporate culture in the singular, it is not unusual for companies to have multiple cultures (or subcultures).10 Values, beliefs, and practices within a company sometimes vary significantly by department, geographic location, division, or business unit. Subcultures can exist because a company has recently acquired other companies. Global and

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multinational companies tend to be at least partly multicultural because cross-country organization units have different operating histories and work climates, as well as members who speak different languages, have grown up under different social customs and traditions, and have different sets of values and beliefs. The problem with subcultures is that they can clash, or at least not mesh well, particularly if they embrace conflicting business philosophies or operating approaches, if key executives employ different approaches to people management, or if important differences between a company’s culture and those of recently acquired companies have not yet been ironed out. On a number of occasions, companies have decided to pass on acquiring particular companies because of culture conflicts they believed would be hard to resolve.

Nonetheless, the existence of subcultures does not preclude important areas of commonality and compatibility. Company managements are quite alert to the importance of cultural compatibility in making acquisitions and the need to address how to merge and integrate the cultures of newly acquired companies—cultural due diligence is often as important as financial due diligence in deciding whether to go forward on an acquisition or merger. Also, in today’s globalizing world, multinational companies are learning how to make strategy-related cultural traits travel across country boundaries and create a workably uniform culture worldwide. AES, a global power company with 9,000 employees and operations in 16 countries on four continents, has found that people in most countries readily embrace the five core values that underlie its culture—putting safety first; being honest, trustworthy and dependable; moving quickly, anticipating opportunities, avoiding risk and changing direction as necessary; having fun through work; and striving for excellence. Moreover, AES tries to define and practice its cultural values the same way in all of its locations while still being sensitive to differences that exist among various peoples and groups around the world. Top managers at AES have expressed the view that people across the globe are more similar than different and that the company’s culture is as meaningful in Chile, Vietnam, or India as in the United States.

Strong vs. Weak Cultures Company cultures vary widely in strength and influence. Some are strongly embedded and have a big influence on a company’s operating practices and the behavior of company personnel. Others are weakly ingrained and have only a small effect on behaviors and how company activities are conducted.

Strong-Culture Companies The hallmark of a strong-culture company is the dominating presence of certain deeply rooted values, business principles, behavioral norms, and ways of doing things that “regulate” the conduct of a company’s business and the climate of its workplace.11 In strong-culture companies, senior managers make a point of explaining and reiterating why these values, principles, norms, and operating approaches need to govern how the company conducts its business and how they ultimately lead to better business performance. Furthermore, they make a conscious effort to display these values, principles, and behavioral norms in their own actions—they walk the talk. Then, they take the essential step of expressing their clear expectation that all company personnel will do the same. An unequivocal expectation that company personnel will act and behave in accordance with the adopted values, principles, and ways of doing business leads to two important outcomes: (1) Over time, the professed values and business principles come to be widely shared by rank-and-file employees, prompting them to act in accordance with the expected behavioral norms—people who dislike the culturally approved behaviors and ways of doing things tend to leave, and (2) individuals encounter strong peer pressure from coworkers to observe the culturally approved behaviors and operating approaches. Hence, a strongly implanted corporate culture ends up having a powerful influence on “how we do things around here” because so many company personnel are accepting of the company’s culturally approved behaviors and because this acceptance is reinforced both by management expectations and coworker peer pressure to conform to cultural norms.

CORE CONCEPT In a strong­culture company, culturally approved behaviors and ways of doing things flourish, while culturally disapproved behaviors and work practices get squashed.

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Strong cultures emerge only after a period of deliberate and rather intensive culture building that generally takes years (sometimes decades). Two factors contribute to the development of strong cultures: (1) a founder or strong leader who establishes and then gradually embeds values, principles, and practices that are viewed as having contributed to the company’s success and (2) strong top management commitment to operating the business in accordance with stated core values and certain behavioral norms, and then holding employees accountable for displaying these values and norms. Continuity of leadership, low workforce turnover, geographic concentration, and considerable organizational success all contribute to the emergence and sustainability of a strong culture.12

In strong-culture companies, values and behavioral norms are so ingrained they can endure leadership changes at the top—although their strength can erode over time if new CEOs cease to nurture them or move aggressively to institute cultural adjustments. And the cultural norms in a strong-culture company may not change much as strategy evolves and the organization makes strategy adjustments, either because the new strategies are compatible with the present culture or because the culture’s dominant traits are somewhat strategy neutral and compatible with evolving versions of the company’s strategy.

Weak-Culture Companies In direct contrast to strong-culture companies, weak-culture companies lack widely-shared and strongly-held values, principles, and behavioral norms, often because the company has had a series of CEOs with differing values and differing views about how the company’s business ought to be conducted. On occasion, cultural weakness stems from moderately entrenched subcultures that block the emergence of a well-defined companywide work climate. Both clashing subcultures and a lack of cultural continuity from one top management regime to the next tend to produce a weak-culture company that has few, if any, entrenched operating practices and culture-induced norms to align, constrain, or otherwise paint the white lines for the actions, decisions, and behavior of company personnel. In the absence of any longstanding top management commitment to particular values, business principles, operating practices, and behavioral norms, most company personnel encounter little pressure to do things in particular ways. Such a dearth of companywide cultural influences and revered traditions produces a work climate where there is no strong employee allegiance to what the company stands for or to operating the business in well-defined ways. While individual employees may well have some bonds of identification with, and loyalty toward, their department, their colleagues, their union, or their boss, there’s neither passion about helping the company achieve its objectives nor emotional connection to its stated business purpose and/or strategic vision—conditions that often result in many employees viewing their company as just a place to work and their job as just a way to make a living.

Why Corporate Cultures Matter to the Strategy Execution Process A company’s present culture and work climate may or may not be compatible with what is needed for effective implementation and execution of the chosen strategy. When a company’s present culture promotes attitudes, behaviors, and ways of doing things that are in sync with first-rate strategy execution, the culture functions as a valuable ally in the strategy execution process. A good match between a company’s cultural influences and the requirements of good strategy execution support management’s strategy execution effort in three ways:13

1. Execution-supportive cultural norms and behaviors make it easier for management to win the commitment and cooperation of company personnel in undertaking whatever new execution-related actions, modified operating approaches, and different work practices are needed. The stronger the match between cultural influences and the requirements of good strategy execution, the more that company personnel tend to accept management’s explanations and supervisory efforts regarding what needs to

CORE CONCEPT A culture that encourages actions, behaviors, and work practices conducive to good strategy execution adds significantly to the power and effectiveness of a company’s strategy execution effort.

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be done to put the strategy in place and execute it proficiently. Low employee resistance to making execution-related internal changes assists managerial efforts to focus employee attention on execution- critical performance outcomes and becoming proficient in executing their pieces of the strategy, thereby accelerating the process of implementing and executing the strategy.

2. Culture-instigated peer pressures steer company personnel into actions and behaviors that aid the cause of good strategy execution. In a strong culture company where behavioral norms are well-matched to the requirements of good strategy execution, co-worker peer pressures provide a major strategy-execution assist by spurring company personnel to make timely and effective adjustments in operating approaches and how particular value chain activities are performed. Indeed, coworker peer pressures and embedded cultural norms are likely to be more powerful in shaping and supporting the strategy execution effort than managerial calls-to-action and efforts to directly supervise/monitor employees and may even be more powerful in driving needed changes in operating practices and behavior than financial incentives.

3. Execution-supportive cultural influences not only help rally company personnel to implement whatever internal changes are needed but also to exert their best efforts to attain execution-critical performance targets. Greater employee buy-in for what the company is trying to accomplish boosts motivation and marshals organizational energy behind the drive for good strategy execution, often enhancing worker productivity in the process. An energized workforce enhances the chances of achieving execution- critical performance targets and good strategy execution.

The overall assist management gets from a strong, execution-supportive culture thus turns out to be very significant. For example, a culture where frugality and thrift are values widely shared by organizational members nurtures employee actions to identify cost-saving opportunities—the very behavior needed for successful execution of a low-cost leadership strategy. A culture that encourages and celebrates employees’ efforts to offer suggestions for new and improved products, exercise initiative and creativity, explore new frontiers, take risks, and embrace change is conducive to successful execution of strategies keyed to product innovation and technological leadership. The outcomes of a strongly implanted, execution-supportive culture thus tend to be highly positive and managerially valuable: The process of achieving good strategy execution is faster and smoother, there’s little resistance to and lots of whole-hearted support for implementing the desired internal changes, employees are more enthusiastic about contributing to the strategy execution effort, the likelihood of achieving good strategy execution is enhanced, and worker morale, job satisfaction, and productivity are all likely to be higher.

In sharp contrast, when cultural influences clash with some or many of the execution-supportive behaviors and ways of performing value chain activities, the culture becomes a stumbling block.14 Some of the very behaviors and approaches needed to execute strategy successfully run contrary to the attitudes, behaviors, and operating practices embedded in the prevailing culture. Such conflicts pose a real dilemma for company personnel. Should they be loyal to the culture and company traditions (to which they are likely to be emotionally attached) and thus resist or be indifferent to actions and behaviors that will promote better strategy execution—a choice that will certainly weaken the drive for good strategy execution? Alternatively, should they go along with management’s strategy execution effort and engage in actions and behaviors that run counter to the culture—a choice that will likely impair morale and lead to a less-than-enthusiastic commitment to good strategy execution? Neither choice leads to desirable outcomes. Culture-bred resistance to the actions and behaviors needed for good execution, particularly if strong and widespread, poses a formidable hurdle that must be cleared for a company’s strategy execution effort to be successful.

In companies with execution­supportive cultural influences, managers can use the ingrained values, business principles, behavioral norms, and established ways of doing things as levers to mobilize the energy and actions of company personnel squarely behind the drive for good strategy execution.

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The consequences of having—or not having—an execution-supportive corporate culture says something important about the task of managing the strategy execution process: Closely aligning corporate culture with the requirements for proficient strategy execution merits the full attention of senior executives. The culture-building objective is to create a work climate and style of operating that mobilizes the energy and behavior of company personnel squarely behind efforts to execute strategy competently. The more deeply management can embed execution-supportive ways of doing things, the more management can rely on the culture to automatically steer company personnel toward behaviors and work practices that aid good strategy execution and veer from doing things that impede it.

Trying to Execute Strategy in a Weak-Culture Company A weak culture is a liability in executing strategy because there are no ingrained, execution-supportive traditions, values, peer pressures, or behavioral norms that management can rely upon to help align the actions and behavior of employees with the requirements for good strategy execution. While a weak culture has the advantage of not erecting high barriers that block the path of management’s strategy execution effort, this plus is overridden by the negative of not providing managers with any strategy execution support. Absent a work climate that channels organizational energy in the direction of good strategy execution, managers are left with the options of urging employee support of managerial efforts to implement and competently execute the chosen strategy, directing employees to take this or that action and closely supervising their compliance, instituting a manual of strictly enforced rules that mandate desired actions and behaviors, and/or introducing a set of compensation incentives to induce employees to undertake execution-supportive actions and behaviors. While company managers may sometimes be savvy enough to make satisfactory progress in executing strategy with these approaches, their success will not match what is achievable in situations where managers can rely upon deeply embedded cultural influences to assist their push for good strategy execution.

Healthy Cultures That Aid Good Strategy Execution A strong culture, provided it embraces execution-supportive attitudes, behaviors, and work practices, is definitely a healthy culture. Two other types of cultures that tend to be healthy and largely supportive of good strategy execution are high-performance cultures and adaptive cultures.

High-Performance Cultures Some companies have so-called “high-performance” cultures where the standout traits are a “can-do” spirit, pride in doing things right, no-excuses accountability, and a pervasive results- oriented work climate where people go the extra mile to meet or beat stretch objectives.15 In high-performance cultures, there’s a strong sense of involvement on the part of company personnel and an emphasis on individual initiative and creativity. There is a results-oriented work environment where performance expectations are clearly delineated for the company as a whole, for each organizational unit, and for each individual. A strong bias for being proactive instead of reactive exists; issues and problems are promptly addressed. There is a razor- sharp focus on what needs to be done. The clear and unyielding expectation is that all company personnel, from senior executives to frontline employees, will display high-performance behaviors and a passion for making the company successful. Such a culture—permeated by a spirit of achievement and constructive pressure to achieve good results—is a valuable contributor to good strategy execution and operating excellence. Results- oriented cultures are permeated with a spirit of achievement and have a good track record in meeting or beating performance targets.16

Adaptive Cultures The hallmark of adaptive corporate cultures is willingness on the part of organization members to accept change and take on the challenge of introducing and executing new strategies.17 Company personnel share a feeling of confidence that the organization can deal with whatever threats and opportunities come down the pike; they are receptive to risk-taking, experimentation, innovation, and making changes in

It is in management’s best interest to invest considerable time and effort in establishing and nourishing a corporate culture that automatically steers company personnel toward actions and behaviors that promote good strategy execution.

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strategy and work practices. The work climate is supportive of managers and employees who propose or help initiate useful change. Internal entrepreneurship on the part of individuals and groups is encouraged and rewarded. Senior executives seek out, support, and promote individuals who exercise initiative, spot opportunities for improvement, and display the skills to implement them. Managers openly evaluate ideas and suggestions, fund initiatives to develop new or better products, and take prudent risks to pursue emerging market opportunities. As in high-performance cultures, the company exhibits a proactive approach to identifying issues, evaluating the implications and options, and quickly moving ahead with workable solutions. Strategies and traditional operating practices are modified as needed to adjust to or take advantage of changes in the business environment.

But why is change so willingly embraced in an adaptive culture? Why are organization members not fearful of how change will affect them? Why does an adaptive culture not become unglued with ongoing changes in strategy, operating practices, and behavioral norms? The answers lie in two distinctive and dominant traits of an adaptive culture: (1) Management is careful to institute changes in operating practices and behaviors that do not compromise core values and long-standing business principles (since they are at the root of the culture), and (2) management is careful to institute changes in ways that lessen any adverse impact on key constituencies— customers, employees, shareowners, suppliers, and the communities where the company operates.18 In other words, what sustains an adaptive culture is that organization members perceive the changes management is trying to institute as legitimate, in keeping with culturally approved values and business principles, and in the overall best interests of stakeholders.19 Unless fairness to all stakeholders is a decision-making principle and a commitment to doing the right thing is evident to organization members, the changes are not likely to be readily accepted and implemented wholeheartedly.20 Not surprisingly, company personnel are usually more receptive to change when their employment security is not threatened and they view new duties or job assignments as part of the process of adapting to new conditions. Should workforce downsizing be necessary, it is important that layoffs be handled humanely and employee departures be made as painless as possible.

Technology companies, software companies, and Internet-based companies are good illustrations of organizations with adaptive cultures. Such companies thrive on change—driving it, leading it, and capitalizing on it (but sometimes also succumbing to change when they make the wrong move or are swamped by better technologies or the superior business models of rivals). Companies like Google, Facebook, Adobe, Cisco Systems, Amazon. com, and Apple cultivate the capability to act and react rapidly. They are avid practitioners of entrepreneurship and innovation, with a demonstrated willingness to take bold risks to create altogether new products, new businesses, and new industries. To create and nurture a culture that can adapt rapidly to shifting business conditions, they make a point of staffing their organizations with people who are proactive, who rise to the challenge of change, and who have an aptitude for adapting well to new circumstances.

In fast-changing business environments, a corporate culture that is receptive to altering organizational practices and behaviors is a virtual necessity. However, adaptive cultures work to the advantage of all companies, not just those in rapid-change environments. Every company operates in a market and business climate that is changing to one degree or another and that, in turn, requires internal operating responses and new behaviors on the part of organization members.

Unhealthy Cultures That Impede Good Strategy Execution The distinctive characteristic of an unhealthy corporate culture is the presence of counterproductive cultural traits that adversely impact the work climate, company performance, and strategy execution initiatives.21 Five particularly unhealthy cultural traits are hostility to change, heavily politicized decision-making, insular thinking, unethical and greed-driven behaviors, and the presence of incompatible, clashing subcultures.

As a company’s strategy evolves, an adaptive culture is a definite ally in the strategy­ implementing, strategy­executing process because of the relative ease with which needed (and “legitimate”) changes can be made.

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Change-Resistant Cultures In change-resistant cultures, there is much skepticism about the merits of rushing to adjust the company’s strategy or competitive approach whenever new market developments occur and/or rival companies launch bold strategic actions. Executives exhibit a strong preference for avoiding what may prove to be “unnecessary” disruption of internal operations, and they definitely prefer to go slow in altering current approaches to competing in the marketplace and conducting internal operations. Because slow internal change is the norm, most company personnel are happy continuing to do what they are comfortable doing. When signals of market change first sound, change-resistant companies have little appetite for being first movers or fast followers, believing that being in the forefront of change is too risky and acting too quickly increases vulnerability to costly mistakes. They are more inclined to adopt a wait-and-see posture, carefully analyze several alternative responses, learn from any missteps of early movers, and then move forward cautiously with initiatives deemed safe. In change-resistant cultures, proposals to do things differently face an uphill battle and people who champion them may be seen as either something of a nuisance or a troublemaker. Instead, a lot of energy goes into justifying what the company is presently doing, with little discussion of what it should consider doing differently—there is strong aversion to bold action. Executives who don’t value managers or employees with initiative and new ideas put a damper on product R&D, experimenting with different sales and marketing tactics, and undertaking ongoing efforts to achieve operating excellence; they are lax about developing innovative new products, identifying and implementing best practices, and striving to out-manage rival companies in improving the performance of value chain activities. Often, the managers of companies with change-resistant cultures put a high priority on not disrupting the status quo and guarding their immediate interests. Hostility to change is most often found in companies with multilayered management bureaucracies that have enjoyed considerable market success in years past and are wedded to a philosophy of “We have done it this way for years, and it has worked well for us—why rock the boat and try to fix something that’s not broken?”

Politicized Cultures What makes a politicized internal environment so unhealthy is that political infighting consumes a great deal of organizational energy, often with the result that what’s best for the company takes a backseat to political maneuvering. In companies where internal politics pervades the work climate, empire- building managers jealously guard their decision-making prerogatives. They have their own agendas and operate the work units under their supervision as autonomous “fiefdoms,” and the positions they take on issues are usually aimed at protecting or expanding their turf. Collaboration with other organizational units is viewed with suspicion, and cross-unit cooperation occurs grudgingly. When something goes awry, people point fingers and make excuses—no one takes responsibility, even the person in charge of the activity that went awry. The support or opposition of politically influential executives and/or coalitions among departments with vested interests in a particular outcome tend to shape what actions the company takes. All this political maneuvering, departmental infighting, and excuse-making takes away from efforts to execute strategy with real proficiency and frustrates company personnel who are less political and more inclined to try to resolve problems and make changes they believe are in the company’s best interests.

Insular, Inwardly-Focused Cultures Sometimes a company reigns as an industry leader or enjoys great market success for so long that its personnel start to believe they have all the answers or can develop them on their own. There is a strong tendency to be complacent about what customers are saying and how their needs and expectations are changing. Such confidence in the correctness of how it does things and an unflinching belief in the company’s skills and capabilities to fix things as problems arise breeds arrogance, prompting company personnel to discount the merits of what outsiders are doing and to see little payoff from studying best-in-class performers. Insular thinking, internally driven solutions, and a must-be-invented-here mindset come to permeate the corporate culture which, in turn, gives rise to managerial inbreeding and a failure to recruit people who can offer fresh thinking and outside perspectives. The big risk of insular cultural thinking is that the company can underestimate the competencies and competitive abilities of rival companies while overestimating its own—all of which diminishes a company’s competitiveness over time.

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Unethical and Greed-Driven Cultures Companies that have little regard for ethical standards or are run by executives aggressively pursuing self-gain are scandals waiting to happen. Such executives exude the negatives of greed, ego-gratification, and an “ends-justify-the-means” mentality in pursuing stretch revenue and profitability targets—usually to qualify for big performance bonuses or stock awards.22 Such executives are prone to wink at unethical behavior on the part of others, but may sometimes cross over the line to unethical (and sometimes criminal) behavior themselves. They frequently push for the adoption of accounting principles that make financial performance look better than it really is. Legions of companies have fallen prey to unethical behavior and aggressive pursuit of self-gain; prominent examples include Enron, HealthSouth, Tyco, Rite Aid, Peregrine Financial Group, Pilot Flying J, Marsh & McLennan, Siemens, Countrywide Financial, Autonomy, Stanford Financial Group, JP Morgan Chase, Goldman Sachs, Deutsche Bank, and HSBC (Europe’s biggest bank), with the guilty companies paying huge fines and/or executives being indicted and often convicted of criminal behavior.

Incompatible, Clashing Subcultures Company subcultures are unhealthy when they embrace conflicting business philosophies, approaches to people management, and/or styles of operating. Sometimes incompatible subcultures spawn the emergence of warring factions within the company, creating a poisonous atmosphere. The politics surrounding clashing subcultures distracts company personnel from the business of business as they debate the opposing cultural traits and take part in the internal jockeying among the subcultures for cultural dominance. All this impedes teamwork among the company’s various organizational units and blocks the emergence of a collaborative approach to strategy execution. Such a lack of consensus about how to proceed is likely to result in fragmented or inconsistent approaches to implementing new strategic initiatives and limited success in executing the company’s overall strategy.

Changing a Problem Culture When a company’s culture is unhealthy or otherwise out of sync with the actions and behaviors needed to execute the strategy successfully, the culture must be changed as rapidly as can be managed. This means eliminating any unhealthy or dysfunctional cultural traits as fast as possible and aggressively striving to ingrain new behaviors and work practices that facilitate first-rate strategy execution. The more entrenched the unhealthy or mismatched aspects of the culture, the more likely the culture will impede strategy execution and the greater the need for cultural change.

Changing a company culture that impedes proficient strategy execution is among the toughest management tasks because of the heavy anchor of incompatible subcultures and/or ingrained behaviors and ways of doing things and/or other unhealthy or dysfunctional or mismatched cultural traits. It is natural for company personnel to cling to familiar practices and to be wary, if not hostile, of new approaches to handling specific activities. Consequently, it takes concerted management action over a period of time to root out certain unwanted behaviors and replace an out-of-sync culture with different behaviors and more effective ways of doing things. The single most visible factor that distinguishes successful culture-change efforts from failed attempts is competent leadership at the top. Great power is needed to force major cultural change and overcome the spring-back resistance of entrenched cultures (or incompatible subcultures)—and great power is possessed only by the most senior executives, especially the CEO. However, while top management must be out front leading the effort, the tasks of marshaling support for a new culture and, more important, ingraining the desired cultural behaviors must involve a company’s whole management team. Middle managers and frontline supervisors play a key role in implementing the new work practices and operating approaches, helping win rank- and-file acceptance of and support for the changes, and instilling the desired behavioral norms.

As shown in Figure 12.2, the first step in fixing a problem culture is for top management to identify those aspects of the present culture that are dysfunctional and pose obstacles to executing new strategic initiatives and meeting or beating company performance targets. Second, managers must clearly define the desired new behaviors and features of the culture they want to create. Third, managers have to convince company personnel

Copyright © 2020 by Arthur A. Thompson. All rights reserved. Reproduction and distribution of the contents are expressly prohibited without the author’s written permission

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why the present culture poses problems and why and how new behaviors and operating approaches will improve company performance—the case for cultural change and the benefits of a reformed culture must be persuasive. Finally, and most important, all the talk about remodeling the present culture must be followed swiftly by visible forceful actions to promote the desired new behaviors and work practices—actions that company personnel will interpret as a determined top-management commitment to alter the culture and instill a different work climate and different ways of operating. The actions to implant the new culture must be both substantive and symbolic.

Figure 12.2 Changing a Problem Culture

Identify facets of the present culture that are dysfunctional and impede good strategy execution, operating

excellence, and the achievement of performance targets

Specify what new actions, behaviors, and work practices should

characterize the “new” culture

Talk openly about problems of the present culture and make a persuasive case for how the proposed new actions

and behaviors will improve company performance

Follow with visible, forceful actions—both substantive and symbolic—to ingrain a new set of behaviors, operating practices, and cultural norms

Substantive Culture-Changing Actions No culture change effort can get very far when leaders merely talk about the need for different actions, behaviors, and work practices. Company executives must give the culture-change effort some teeth by initiating a series of actions that company personnel will see as unmistakably indicative that top management is dead serious about cultural change. Actions that indicate management is determined to instill a new culture include:

n Replacing high-profile executives and managers who are allied with the old culture and either openly or covertly oppose needed organizational and cultural changes.

n Promoting individuals who are known to possess the desired cultural traits, who have stepped forward to advocate the shift to a different culture, and who can serve as role models for the desired cultural behavior.

n Appointing outsiders with the desired cultural attributes to influential positions where they can function as change agents. Bringing in new-breed managers to help drive the culture-change movement sends an unmistakable message that a new era is dawning and reinforces the actions of company personnel who support the culture-change effort and are trying to help move it forward.

n Screening all candidates for new positions carefully, hiring only those who appear to fit in with the new culture—this helps build a critical mass of people to help turn the tide in favor of the new culture. The greater the number of new employees a company is hiring, the more important it becomes to screen job applicants as much for how well their values, beliefs, and personalities match up with the culture as for their technical skills and experience. For example, a company that stresses operating with integrity and

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fairness must hire people who themselves have integrity and place a high value on fair play. A company whose culture revolves around creativity, product innovation, and leading change must screen new hires for their ability to think outside the box, generate new ideas, and thrive in a climate of rapid change and ambiguity.

n Mandating that all company personnel attend culture-training programs to better understand the new culture-related actions and behaviors that are expected.

n Designing compensation incentives that boost the pay of teams and individuals who display the desired cultural behaviors. Company personnel are much more inclined to exhibit the desired actions and behaviors when it is in their financial best interest to do so.

n Letting word leak out that generous pay raises have been awarded to individuals who have stepped out front, led the adoption of the desired work practices, displayed the new-style behaviors, and achieved pace-setting results.

n Revising policies and procedures in ways that will help drive cultural change.

The series of actions initiated by top management must command attention, creating lots of hallway talk across the whole company, getting the culture-change process off to a fast start, and leaving no room for company personnel to doubt that fundamental cultural change is inevitable. The initial wave of actions must be promptly followed by a forceful managerial campaign to firmly establish the new work practices, desired behaviors, and style of operating as “standard.” To convince doubters and skeptics they cannot just wait things out in hopes the culture-change initiative will soon lose steam, top executives must seize every opportunity to openly state that conforming to the new cultural norms has to become “a way of life” at the company. Senior executives must be keenly aware that the new culture cannot grow deep roots until company employees recognize it is in their best interests to observe the desired cultural norms and risky to engage in actions and behavior that conflict with or undercut these norms.

Symbolic Culture-Changing Actions There’s also an important place for symbolic managerial actions to alter a problem culture and tighten the strategy-culture fit. The most important symbolic actions are those that top executives take to lead by example. For instance, if the organization’s strategy involves a drive to become the industry’s low-cost producer, senior managers must display frugality in their own actions and decisions—examples include inexpensive decorations in the executive suite, conservative expense accounts and entertainment allowances, a lean staff in the corporate office, scrutiny of budget requests, and few executive perks. At Walmart, all the executive offices are simply decorated, executives are habitually frugal in their own actions, and they are zealous in their efforts to control costs and promote greater efficiency. At Nucor, one of the world’s low-cost producers of steel products, executives fly coach class and use taxis at airports rather than limousines. Because company personnel closely watch top executives to see if their actions and decisions match their rhetoric, it is crucial for top executives to lead by example and make sure their actions and decisions will be construed as consistent with the new cultural values and behaviors they are advocating.23

Another category of symbolic actions includes holding ceremonial events to single out and honor people whose actions and performance exemplify what is called for in the new culture. In addition, each culture-change success (and any other outcome management would like to see happen again) needs to be celebrated. Executives sensitive to their role in promoting strategy-supportive and execution-supportive cultural fits make a habit of appearing at ceremonial functions to praise individuals and groups that exhibit the desired behaviors. They show up at employee training programs to stress strategic priorities, values, ethical principles, and cultural norms. Every group gathering is seen as an opportunity to repeat and ingrain values, praise good deeds, expound on the merits of the new culture, and cite instances of how the new work practices and operating approaches have produced good results.

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The use of symbols in culture building is widespread. Numerous businesses have employee-of-the-month awards. The military has a longstanding custom of awarding ribbons and medals for exemplary actions. Mary Kay cosmetics awards an array of prizes—from ribbons to pink Cadillacs—to its beauty consultants for reaching various sales plateaus. Many universities give outstanding teacher awards each year to symbolize their commitment to good teaching and their esteem for instructors who display exceptional classroom talents.

How Long Does It Take to Change a Problem Culture? Planting the seeds of a new culture and helping it grow strong roots require a determined, sustained effort by the chief executive and other senior managers. It takes time for a new culture to emerge and prevail. Changing a problem culture is never a short-term exercise— overnight transformations simply don’t occur. Deeply embedding the desired cultural behaviors and making them a way of life is a long-term process. The bigger the organization and the greater the cultural shift needed to produce an execution-supportive fit, the longer it takes. In large companies, fixing a problem culture and ingraining a new set of attitudes and behaviors can take two to five years. In fact, it is usually tougher to reform an entrenched problematic culture than it is to instill a strategy-supportive culture from scratch in a newly- formed organization.

Leading the Strategy Execution Process

The litany of managing the process of crafting and executing strategy is simple enough: Craft a sound strategic plan, implement and execute it to the fullest, make adjustments as needed, and meet or beat the targeted levels of performance! Even though all managers have a role in executing the strategy proficiently and striving for operating excellence, top executives should most definitely assume a lead role in the strategy implementation process, exerting influence over and approving what specific initiatives are undertaken, keeping a close eye on how well things are progressing, and ensuring that effective actions are taken promptly to correct whatever problems and stumbling blocks are encountered.

Because the details of how to implement and execute strategy are always specific to each company’s circumstances, the implementation/execution process needs to start with understanding what the company will need to do differently or better in order to make good progress in executing strategy proficiently and meet or beat performance targets. Afterward comes a diagnosis of the organization’s capabilities and preparedness to implement these various internal changes and operating improvements and then communicating these to all the relevant managers and company personnel. Once plans are made for launching the process and schedules/ deadlines are developed, then begins the hard and time-consuming part: initiating changes and overseeing efforts to build proficiency in all of the execution-critical value chain activities, achieving the intended results on time and ideally under budget, and measuring how well the company is progressing along the path to good strategy execution and operating excellence—and intervening to make corrective adjustments whenever progress is too slow or something goes off track.24 In general, leading the drive for good strategy execution and operating excellence calls for three actions on the part of the managers in charge:

n Staying on top of what is happening, singling out areas where progress is lagging, learning what problems and obstacles lay in the path of good execution, and then helping clear the way for progress.

n Putting constructive pressure on the organization to achieve good results and operating excellence.

n Pushing corrective actions to improve strategy execution and achieve the targeted results.

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Staying on Top of How Well Things Are Going To stay on top of how well the strategy execution process is going, senior executives have to tap into information from a wide range of sources. In addition to talking with key subordinates, staying in close contact with key company personnel in outlying locations via e-mail and telephone, attending meetings and quizzing presenters and attendees, reviewing the latest operating results, watching the competitive actions of rival firms, and visiting with key customers and suppliers to get their perspectives, it is customary for top-level executives to visit various company facilities and talk with many different company personnel at many different organization levels—a technique often labeled as management by walking around (MBWA). Most managers attach great importance to 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. Facilities tours and face-to-face contacts with operating-level employees give executives a good grasp of the progress being made, the problems being encountered, and whether additional resources or different approaches may be needed. Just as important, MBWA provides opportunities to give encouragement, lift spirits, focus attention on key priorities and needed accomplishments, and create excitement— all of which generate positive energy and organizational support for the strategy execution effort.

Jeff Bezos, Amazon.com’s CEO, is noted for his practice of MBWA, firing off a battery of questions when he tours facilities and insisting that Amazon managers spend time in the trenches with their people to prevent overly abstract thinking and getting disconnected from the reality of what’s happening.25 Walmart executives have had a longstanding practice of spending two to three days every week visiting Walmart’s stores and talking with store managers and employees. Sam Walton, Walmart’s founder, insisted, “The key is to get out into the store and listen to what the associates have to say.” Jack Welch, the highly effective CEO of GE from 1980 to 2001, not only spent several days each month personally visiting GE operations and talking with major customers, but also arranged his schedule so he could spend time exchanging information and ideas with GE managers from all over the world who were attending classes at the company’s leadership development center near GE’s headquarters.

Many manufacturing executives make a point of strolling the factory floor to talk with workers and meeting regularly with union officials. Some managers operate out of open cubicles in big spaces populated with open cubicles for other personnel so they can interact easily and frequently with coworkers. Managers at some companies host weekly get-togethers (often on Friday afternoons) to create a regular opportunity for tidbits of information to flow freely between down-the-line employees and executives.

Putting Constructive Pressure on the Organization to Achieve Good Results and Operating Excellence Part of the leadership task in mobilizing organizational energy behind the drive for good strategy execution entails nurturing a results-oriented work climate, where performance standards are high and a spirit of achievement is pervasive. A can-do, high-performance culture speeds the process of building execution-related proficiencies, raises the chances of achieving good-to-excellent business results, and shortens the time it takes to attain operating excellence. Success in instilling a high-achieving, results-producing culture is typically characterized by such leadership actions and managerial practices as:

CORE CONCEPT Management by walking around (MBWA) is one of the techniques effective leaders use to stay informed about how well the strategy execution process is progressing and determine whether and when to intervene to help move things along.

MBWA allows managers to learn firsthand how well the strategy execution process is proceeding, spot gridlock, learn what obstacles lie in the path of good execution, and start considering what might be done to clear the way for better progress.

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n Treating employees as valued partners and contributors in organizational efforts to achieve good business results. Some companies symbolize the value of individual employees and the importance of their contributions by referring to them as cast members (Disney), crew members (McDonald’s), job owners (Graniterock), partners (Starbucks), or associates (Walmart, LensCrafters, W. L. Gore, Edward Jones, Publix Supermarkets, and Marriott International). Often there is a strong company commitment to training each employee thoroughly, offering attractive compensation and career opportunities, emphasizing promotion from within, providing a high degree of job security, and otherwise making employees feel well treated and valued.

n Fostering an esprit de corps that energizes organizational members. The task here is to skillfully use people-management practices calculated to build morale, foster pride in working for the company, promote teamwork and collaborative group effort, win the emotional commitment of individuals and organization units to what the company is trying to accomplish, and inspire company personnel to do their best in achieving good results.26

n Using empowerment to help create a fully engaged workforce. Top executives—and, to some degree, the enterprise’s entire management team—must seek to engage the full organization in the strategy execution effort. A fully engaged workforce where individuals bring their best to work every day is necessary to produce great results.27 So is having a group of high-impact people dedicated to making a big difference at work. One of the best things top-level executives can do to create a fully engaged organization is delegating authority to middle and lower-level managers to get the implementation/ execution process moving and empowering employees to act on their own initiative in matters involving their area of responsibility. It is unwise for company personnel to feel powerless to change anything significant and just wait to follow orders from higher-level managers. Operating excellence requires constant individual and group efforts to do things in the best possible way. All organization members have to exercise initiative and creativity in performing their work effectively and cost efficiently. And all company personnel have to actively participate in the ongoing process of identifying and suggesting ways to improve work practices and other operating activities.

n Setting stretch objectives and clearly communicating an expectation that company personnel are to give their best in achieving these performance targets. Unleashing a companywide campaign to pursue and achieve stretch objectives (outcomes that are just beyond the organization’s immediate reach) puts constructive pressure on company personnel to increase their resolve and go all out to boost their proficiency in performing execution-critical value chain activities and attaining the stretch outcomes. When stretch objectives are met, the resulting pride of accomplishment boosts employee morale and acts to spur continued organizational drive to “overachieve” and perform at a high level.

n Using the tools of benchmarking, best practices, business process reengineering, TQM, and/or Six Sigma to focus attention on internal operating improvements. These are proven tools for improving operating results and improving better strategy execution.

n Using the full range of motivational techniques and compensation incentives to inspire company personnel, foster a results-oriented work climate, and reward high performance. Managers cannot mandate innovative improvements by simply exhorting people to “be creative,” nor can they make continuous progress toward operating excellence with directives to “try harder.” Rather, they must foster a culture where innovative ideas and experimentation with new ways of doing things can blossom and thrive. Individuals and groups should be strongly encouraged to brainstorm, let their imaginations fly in all directions, and come up with proposals for improving how things are done. This means giving company personnel enough autonomy to stand out, excel, and contribute. And it means the rewards for successful champions of new ideas and operating improvements should be large and visible. It is particularly important that people who champion an unsuccessful idea are not punished or sidelined but rather encouraged to try again. Encouraging lots of “tries” is important since many ideas won’t pan out.

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n Celebrating individual, group, and company successes. Top executives should miss no opportunity to express high regard for the efforts and accomplishments of individual employees and to praise extraordinary individual and group effort.28 Companies like Google, Mary Kay, Tupperware, and McDonald’s actively seek reasons and opportunities to give pins, buttons, badges, and medals for good showings by average performers to express appreciation and give a motivational boost to people who stand out in doing ordinary jobs. At Kimpton Hotels, employees who create special moments for guests are rewarded with “Kimpton Moment” tokens that can be redeemed for paid days off, gift certificates to restaurants, flat-screen TVs, and other prizes. Cisco Systems and 3M Corporation ceremoniously honor individuals who believe so strongly in their ideas that they take it on themselves to hurdle the bureaucracy, maneuver their projects through the system, and turn them into improved services, new products, or even new businesses.

While leadership efforts to instill a results-oriented high-performance culture usually accentuate the positive, negative consequences for poor performance must be in play, too. Managers whose units consistently perform poorly must be replaced. Low-performing employees must be weeded out or at least moved to positions where subpar performance can be tolerated. Average performers should be candidly counseled that they have limited career potential unless they show more progress in the form of additional effort, better skills, and improved ability to deliver good results.

Leading the Process of Making Corrective Adjustments There comes a time at every company when managers have to fine-tune or overhaul the approaches to strategy execution and push for better results since no action plan for implementing and executing strategy can foresee all the events and problems that will arise. Clearly, when a company’s strategy execution effort is not delivering good results, it is the leader’s responsibility to step forward and initiate corrective actions, although sometimes it must be recognized that unsatisfactory performance may be due as much or more to flawed strategy as weak strategy execution.29 Success in initiating corrective actions hinges on:

n Accurate analysis of the circumstances causing unacceptable performance (correcting flawed strategy execution entails actions different than correcting flawed strategy).

n The exercise of good business judgment in deciding when corrective adjustments are needed and deciding what adjustments to make.

n Good implementation of the corrective actions that are initiated.

Successful managers are skilled in getting a struggling organization back on track quickly. They (and their staffs) are good at discerning what actions to take in turning unsatisfactory performance into better performance and sustainable improvements over time. Managers who misdiagnose the causes of weak performance or are habitually slow to implement corrective actions that produce better results are candidates for being replaced.

The process of making corrective adjustments varies according to the situation. In a crisis, taking remedial action quickly is of the essence. But it still takes time to assess the situation, gather and examine the available data, identify and evaluate options (crunching whatever numbers may be appropriate to determine which options are likely to generate the best outcomes), and decide what to do.30 When the situation allows managers to proceed deliberately in deciding when to make changes and what changes to make, most managers seem to prefer a process of incrementally solidifying commitment to a particular course of action.31 The process that managers go through in deciding on corrective adjustments is essentially the same for both proactive and reactive changes: They sense needs, gather information, broaden and deepen their understanding of the situation, develop options and explore

The process of making corrective adjustments is not about searching for the “right” or “provably correct” way to proceed. It’s about instituting actions deemed likely to result in better strategy execution and improved ability to attain the targeted levels of business performance.

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their pros and cons, put forth action proposals they are comfortable with, evaluate any proposed modifications, strive for a consensus, and finally formally adopt an agreed-on course of action.32 The time frame for deciding what corrective changes to initiate can take a few hours, a few days, a few weeks, or even a few months if the situation is particularly complicated.

The challenges of making the right corrective adjustments and leading a successful strategy execution effort are, without question, substantial.33 There’s no generic, by-the-book prescription for always getting the job done commendably. Each instance of executing strategy occurs under different organizational circumstances, with some situations being messier and more complex than others. Consequently, the managerial agenda for executing strategy always needs to be situation specific, requiring considerable managerial judgment about how to proceed. But the job is definitely doable. There is no magic right answer; any of several courses of action may produce good results. As was said at the beginning of Chapter 10, executing strategy is an action-oriented, make-the-right-things-happen task that challenges a manager’s ability to lead and direct organizational change, create or reinvent business processes, manage and motivate people, and achieve performance targets. If you now better understand what the challenges are, what tasks are involved, what tools can be used to aid the managerial process of executing strategy, and why the action agenda for implementing and executing strategy sweeps across so many aspects of administrative and managerial work, then the discussions in Chapters 10, 11, and 12 have been a success.

A Final Word on Leading the Process of Crafting and Executing Strategy In practice, it is hard to separate leading the process of executing strategy from leading the other pieces of the strategy process. As we emphasized in Chapter 1, the job of crafting, implementing, and executing strategy consists of five interrelated and linked tasks, with much looping and recycling to fine-tune and adjust strategic visions, objectives, strategies, and implementation/execution approaches to fit one another and to fit changing circumstances. The process is continuous, and the conceptually separate acts of crafting and executing strategy blur together in real-world situations. The best tests of good strategic leadership are whether the company has a good strategy, whether the strategy is being competently executed, and whether the enterprise is meeting or beating its performance targets. If these three conditions exist, then there is every reason to conclude the company has competent strategic leadership and is well managed.

Key Points

The character of a company’s culture or work climate is a product of the core values and business principles that executives espouse, the standards of what is ethically acceptable and what is not, the company’s people management practices and style of operating, the collective attitudes and ingrained behaviors of company personnel, the “chemistry” flowing from how company personnel interact and behave in the workplace, the “personality” that permeates the work environment, and the stories that get told over and over to illustrate and reinforce the company’s values, business practices, and traditions. In effect, a company’s culture defines and shapes “how we do things around here.”34 It functions as the company’s psyche or organizational DNA. A company’s culture is important because it molds the character of the company’s work environment, shapes the actions and behavior of company personnel in conducting the company’s business, and, often, affects the company’s overall business performance as well.

Company cultures vary widely in strength and influence. Some are strongly embedded and have a big impact on a company’s practices and behavioral norms. Others are weak and have comparatively little influence on company operations.

When a company’s present culture promotes attitudes, behaviors, and ways of doing things that are in sync with first-rate strategy execution, the culture functions as a valuable ally in the strategy execution process. Execution- supportive cultural norms and behaviors make it easier for management to win the commitment and cooperation of company personnel to undertake new execution-related actions and modify the operating approaches and

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different work practices that are needed. The stronger the culture and the better-matched cultural norms are to the requirements of good strategy execution, the stronger and more successful are coworker peer pressures in spurring timely and effective adoption of called-for adjustments in operating approaches and how particular value chain activities are performed. Execution-supportive cultural influences not only help rally company personnel to implement whatever internal changes are needed but also to exert their best efforts to attain execution-critical performance targets.

High-performance cultures and adaptive cultures have positive healthy features that are highly conducive to good strategy execution. Five particularly unhealthy cultural traits are hostility to change, heavily politicized decision-making, insular thinking, unethical and greed-driven behaviors, and the presence of incompatible, clashing subcultures. All five impede good strategy execution.

Changing a company culture that impedes proficient strategy execution is among the toughest management tasks because of the heavy anchor of incompatible subcultures and/or ingrained behaviors and ways of doing things. Success in changing a problematic culture requires competent and forceful leadership at the top. The actions to implant the new culture must be both substantive and symbolic. Culture-change actions initiated by top management must create lots of hallway talk across the whole company, get the change process off to a fast start, and be followed by unrelenting efforts to firmly establish the new work practices, desired behaviors, and style of operating as “standard.”

Leading the drive for good strategy execution and operating excellence calls for three actions on the part of the manager-in-charge:

n Staying on top of what is happening, spotting problems, pinpointing obstacles that lay in the path of good execution, and then helping clear the way for progress.

n Putting constructive pressure on the organization to achieve good results and operating excellence.

n Pushing corrective actions to improve strategy execution and achieve the targeted results.

Ultimately, the task of good strategic leadership boils down to crafting an excellent strategy, achieving excellent strategy execution, and producing excellent business results.