executing the strategy: building a capable organization and instilling a culture

Executing the Executing the Strategy: Strategy: Building a Building a Capable Organization Capable Organization

and Instilling a Cultureand Instilling a Culture

Chapter 8 Chapter 8 Chapter 8 Chapter 8

Screen graphics created by:Jana F. Kuzmicki, PhD

Troy University - Florida and Western Region

““An organization’s capacity to An organization’s capacity to execute its strategy depends execute its strategy depends on its ‘hard infrastructure’—on its ‘hard infrastructure’—its organizational structure its organizational structure

and systems—and on its ‘soft’ and systems—and on its ‘soft’ infrastructure—its culture and infrastructure—its culture and

norms.” norms.”

Quote . . . Quote . . . Quote . . . Quote . . .

Amar Bhide


Chapter OutlineChapter Outline

A Framework for Executing Strategy

The Principal Managerial Components of the Strategy Execution Process

Building a Capable Organization

Staffing the Organization

Building Core Competencies and Competitive Capabilities

Organizing the Work Effort

Instilling a Corporate Culture


Crafting the Strategy Primarily a market-driven

activity Successful strategy making

depends on Business vision Perceptive analysis of

market conditions and company capabilities

Attracting and pleasing customers

Outcompeting rivals Using company resources

and capabilities to forge a competitive advantage

Executing the Strategy Primarily an operations-

driven activity Successful strategy execution

depends on Good organization-building

and people management Creating a strategy-

supportive culture Continuous improvement Getting things done and

delivering good results

Crafting vs. Executing Crafting vs. Executing StrategyStrategy


An action-oriented, make-things happen task involving management’s ability toDirect organizational change

Achieve continuous improvement inoperations and business processes Move toward operating excellence

Create and nurture astrategy-supportive culture

Consistently meet or beat performance targets

Tougher and more time-consuming than crafting strategy

Implementation involves . . .

Executing the StrategyExecuting the Strategy


The demanding variety of managerialactivities to be performed

Numerous ways to tackle each activity Requires good people management skills Requires launching and managing

a variety of initiatives simultaneously Number of bedeviling issues to be worked out Battling resistance to change Hard to integrate efforts of many different work groups

into a smoothly-functioning whole

Why Executing Strategy Is aWhy Executing Strategy Is aTough Management JobTough Management Job


Implementing a New Implementing a New StrategyStrategy

Requires Adept LeadershipRequires Adept Leadership Implementing a new strategy

takes adept leadership to

Convincingly communicatereasons for the new strategy

Overcome pockets of doubt

Build consensus and enthusiasm

Secure commitment of concerned parties

Get all the implementation pieces launched, put in place expeditiously, and then coordinated into a smoothly functioning operation


Who Are the StrategyWho Are the StrategyImplementers and Executers?Implementers and Executers?

Implementing and executing strategyinvolves a company’s wholemanagement team and all employeesJust as every part of a watch plays a role in making the

watch function properly, it takes all pieces of an organization working cohesively for a strategy to be well-executed

While top-level managers must lead the processand orchestrate major initiatives, good execution requires that Middle and lower-level managers see that things are in sync

and on track in their areas of responsibility and Employees perform their roles competently on a daily basis


What Are the Goals of theWhat Are the Goals of theStrategy Implementation Strategy Implementation

Process?Process? Unite total organization behind strategy

See that activities are done in a manner that is conducive to first-rate strategy execution

Generate commitment so an enthusiasticcrusade emerges to carry out strategy

Fit how organization conducts itsoperations to requirements of strategy


Fig. 8.1: The Eight Components of the Strategy Fig. 8.1: The Eight Components of the Strategy Execution ProcessExecution Process


Every manager has an active role

No proven “formula” for implementing particular types of strategies

There are guidelines, but no absolute “must do it this way” rules

There are usually several ways to proceed that are capable of working

The process cuts across many aspects of “how to manage”

Characteristics of the Characteristics of the Strategy Implementation Strategy Implementation

ProcessProcess


Each implementation situation occurs in a different context, affected by differingBusiness practices and competitive situations

Work environments and cultures

Policies

Compensation incentives

Mix of personalities and firm histories

Approach to implementation/execution

has to be customized to fit the situation

People implement strategies - Not companies!

Characteristics of the Characteristics of the Strategy Implementation Strategy Implementation

Process Process (continued)(continued)


BUILDING A CAPABLE BUILDING A CAPABLE

ORGANIZATION — ORGANIZATION —

WHAT IS INVOLVED?WHAT IS INVOLVED?


Fig. 8.2: The Three Components of Building a Capable Fig. 8.2: The Three Components of Building a Capable OrganizationOrganization


Assembling a capable management team is a cornerstone of the organization-building task

Find the right people to fill each slot

Existing management teammay be suitable

Core executive groupmay need strengthening

Promote from within

Bring in skilled outsiders

Putting Together a Strong Putting Together a Strong Management TeamManagement Team


Selecting the Management Selecting the Management Team:Team:

Key ConsiderationsKey Considerations Determine mix of

Backgrounds

Experiences and know-how

Beliefs and values

Styles of managing and personalities

Personal chemistry must be right

Talent base needs to be appropriate

Picking a solid management team needs to be acted on early in implementation process


Assemble needed human resources and knowledge base for effective strategy execution

Biggest challenge facing companies

How to recruit and retain the bestand brightest talent with strongskill sets and management potential

Intellectual capital, not tangible assets, is increasingly being viewed as the most important investment

Talented people collaborating to create competencies and capabilities are a prime source of competitive advantage

Recruiting and Retaining Recruiting and Retaining Talented Employees: Issues Talented Employees: Issues

and Challengesand Challenges


Key Human Resource Practices Key Human Resource Practices toto

Attract and Retain Talented Attract and Retain Talented Employees Employees

Spend considerable effort in screening jobapplicants, selecting only those with Suitable skill setsEnergy and initiativeJudgment and aptitudes for learningAbility to adapt to firm’s work

environment and culture

Put employees through training programs throughout their careers

Give promising employees challenging, interesting, and skills-stretching assignments


Rotate employees through jobs with great content, spanning functional and geographic boundaries

Encourage employees toBe creative and innovativeChallenge existing ways of

doing things and offer better waysSubmit ideas for new products or businesses

Foster a stimulating work environment Exert efforts to retain high-potential employees with

excellent salary and benefits Coach average employees to improve their skills

Key Human Resource Practices to Key Human Resource Practices to AttractAttract

and Retain Talented Employees and Retain Talented Employees (continued)(continued)


Building Core CompetenciesBuilding Core Competenciesand Competitive Capabilitiesand Competitive Capabilities

Crafting the strategy involves

Identifying the desired competencies and capabilities to build into the strategy and help achieve competitive advantage

Good strategy execution requires

Putting desired competencies and capabilities in place,

Upgrading them as needed, and

Modifying them as marketconditions evolve


Greater proficiency in product development Better manufacturing know-how Capability to provide better after-sale service Faster response to changing customer needs Superior cost-cutting skills Capacity to speed new products to market Superior inventory management systems Better marketing and merchandising skills Specialized depth in unique technologies Greater effectiveness in promoting

union-management cooperation

Strategically-Relevant Strategically-Relevant Competencies:Competencies:

Some ExamplesSome Examples


Expertise in gasoline enginetechnology and small engine design

Example: Honda’s Core Example: Honda’s Core CompetenceCompetence


Design of complex chipsfor personal computers, servers, and

other electronic devices

Example: Intel’s Core Example: Intel’s Core CompetenceCompetence


Superb marketing-distribution skills and R&D capabilities in five core technologies - fats, oils,

skin chemistry, surfactants, emulsifiers

Example: Procter & Example: Procter & Gamble’sGamble’s

Core CompetenciesCore Competencies


Developing professional managers

with broad problem-solving skills and

proven ability to grow global businesses

Example: One of GeneralExample: One of GeneralElectric’s Core CompetenciesElectric’s Core Competencies


Theme park operation and family entertainment

Example: Disney’s Core Example: Disney’s Core CompetenciesCompetencies


Expertise in electronic technology and ability to translate the expertise into innovative products — miniaturized

radios, digital cameras; TVs and DVDs with unique features, attractively designed PCs, videogame consoles

Example: Sony’s Core Example: Sony’s Core CompetenciesCompetencies


1. Develop ability to do something

2. As experience builds,ability can translate into acompetence or capability

3. If competence or capability continues to be polished and refined, it can become a distinctive competence, providing a potential competitive advantage!

Three-Stage Process of Three-Stage Process of Developing Competencies Developing Competencies

and Capabilitiesand Capabilities


Develop ability to do something

Select people with relevant skills/experience

Broaden or expand individual abilities as needed

Mold efforts and work products ofindividuals into a cooperative effortto create organizational ability

Step 1 in Developing Step 1 in Developing CompetenciesCompetencies


As experience builds and company learns how to perform the activity consistently well and at acceptable cost, the ability gradually evolves into a competence or capability over a period of time

Typically, a capability or competence emerges from establishing and nurturing collaborative relationships betweenIndividuals and groups in different departments and/or A company and its external allies


The process is cross-functional and involves a total team effort to do something particularly well


If company masters the activity, performing itbetter than rivals, the “capability” or “competence” becomes a

Distinctive competence and

Holds potential forcompetitive advantage

This is the optimal outcome of the process

of building capabilities and competencies!



1. Competencies are bundles of skills and know-how growing from combined efforts of different departments

Building competencies is a cross-functional task that entails cross-department cooperation and collaboration

2. Normally, competencies emerge incrementally from various company efforts to respond to market conditions

3. Leveraging competencies into competitive advantage requires concentrating more effort and talent than rivals on strengthening competencies to create valuable capabilities

4. Sustaining competitive advantage requires adjusting competencies to new conditions

Managing the Process of Managing the Process of Building Competencies: Four Building Competencies: Four

Key TraitsKey Traits


Internal development involves eitherStrengthening the company’s base of skills,

knowledge, and intellect orCoordinating and networking the efforts

of various work groups and departments

Partnering with key suppliers, formingstrategic alliances, or outsourcingcertain activities to specialists

Buying a company that has the required capabilities and integrating these competencies into the firm’s value chain

Approaches to Developing Approaches to Developing CompetenciesCompetencies


Competencies and capabilities mustcontinuously be modified and perhapseven replaced with new ones due toNew strategic requirements

Evolving market conditions

Changing customer expectations

Ongoing efforts to keep core competencies up-to-date can provide a basis for sustaining bothEffective strategy execution and

Competitive advantage

Updating Competencies andUpdating Competencies andCapabilities as Conditions Capabilities as Conditions

ChangeChange


When it is difficult to outstrategizerivals with a superior strategy . . .

. . . Best avenue to industry leadership is to out-compete rivals with superior strategy

execution!

Building competencies and capabilitiesrivals can’t match is one of the

best ways to out-compete them!

Competitive Advantage Competitive Advantage PotentialPotential

of Competencies and of Competencies and CapabilitiesCapabilities


Training plays a critical role in implementation whena firm shifts to a strategy requiring differentSkills or core competenciesCompetitive capabilitiesManagerial approachesOperating methods

Types of training approaches Internal “universities”Orientation sessions for new employeesTuition reimbursement programsOnline training courses

Strategic Role of Employee Strategic Role of Employee TrainingTraining


Organizing the Work Effort Organizing the Work Effort toto

Support Good Strategy Support Good Strategy ExecutionExecution

Few hard and fast rules for organizingOne Big Rule: Role and purpose of organization structure is

to support and facilitate good strategy execution!

Each firm’s structure is idiosyncratic, reflectingPrior arrangements and internal politicsExecutive judgments and preferences about how to arrange

reporting relationshipsHow best to integrate and coordinate work effort of different

work groups and departments

Vice President Vice President Vice President

CEO


Fig. 8.3: Structuring the Work Effort Fig. 8.3: Structuring the Work Effort to Promote Successful Strategy Executionto Promote Successful Strategy Execution


Step 1: Decide Which Value Chain Step 1: Decide Which Value Chain Activities to Perform Internally and Activities to Perform Internally and

Which to OutsourceWhich to Outsource

Involves deciding which activities are essentialto strategic success

Most strategies entail certain crucial business processes that must be performed exceedingly well or in closely coordinated fashion if the strategy is to be executed with real proficiency

These processes/activities usually need to be performed internally

Other activities, such as routine administrativehousekeeping and some support functions,may be candidates for outsourcing

Criticalactivities


Pinpointing Strategy-Critical Pinpointing Strategy-Critical ActivitiesActivities

1. What functions or business processes have to be performed extra well or in timely fashion to achieve competitive advantage?

2. In what value-chain activities wouldpoor execution seriously impairstrategic success?


Turn a core competence into a distinctive competence Decrease internal bureaucracies Flatten organization structure Speed internal decision-making Increase competitive responsiveness Provide firm with heightened strategic focus Enhance overall capabilities and resource strengths

Outsourcing makes strategic sense when an outsider can perform an activity cheaper or better!

Potential Benefits ofPotential Benefits ofOutsourcing Non-Critical Outsourcing Non-Critical

ActivitiesActivities


Appeal of OutsourcingAppeal of Outsourcing

Outsourcing non-critical activities allows a firm to concentrate its energies and resources on those value-chain activities where it

Can create unique value

Can be best in the industry

Needs direct control to

Build core competences

Achieve competitive advantage

Manage key customer-supplier-distributor relationships


Dangers of OutsourcingDangers of Outsourcing

A company must guard against hollowing out its knowledge base and capabilities

Way to guard against pitfalls of outsourcing

Avoid sourcing key components from a single supplier

Use two or three suppliers to minimizedependence on any one supplier

Regularly evaluate suppliers

Work closely with key suppliers


Assign managers of strategy-critical activities a visible, influential position

Avoid fragmenting responsibility for strategy-critical activities across many departments

Provide coordinating linkages between related work groups

Meld into a valuablecompetitive capability

Assignmanagerskey roles

Functional departments

Strategicrelation-

ships

Coordi-nation

Valuablecapability

Process-complete departments

Step 2: Make Strategy-CriticalStep 2: Make Strategy-CriticalActivities the Main Building Activities the Main Building

BlocksBlocks


Why Structure Follows Why Structure Follows StrategyStrategy

Changes in strategy typically require a new/modified organization structure

A new strategy often involves different skills,different key activities, and different staffingand organizational requirements

A new strategy signals a need to reassessand modify the organization structure

How work is structured is a means to an end –not an end in itself!


In a centralized structure

Top managers retain authorityfor most decisions

In a decentralized structure

Managers and employees areempowered to make decisions

Trend in most companies

Shift from authoritarian to decentralizedstructures stressing empowerment

Step 3: Determine How MuchStep 3: Determine How MuchAuthority to Delegate to Authority to Delegate to

WhomWhom


Characteristics ofCharacteristics ofCentralized Decision MakingCentralized Decision Making

Top executives retain authorityFor most strategic and operating decisions andKeep a tight rein on lower-level managers

Minimal discretionary authority is granted toFrontline supervisorsRank-and-file employees

Key advantage – Tight control by topmanagers fixes accountability

DisadvantagesLengthens response time to changing conditionsDoes not encourage responsibility among lower-level

managers and employeesDiscourages lower-level managers and employees from

exercising initiative


Advantages of a Decentralized Advantages of a Decentralized StructureStructure

Creates more horizontal structure with fewer management layers

Managers and employees develop their own action plansMake decisions in their areas of responsibility

Held accountable for results

Shortens organizational response times and spursCreative thinking and innovation

Greater involvement of managers and employees

Jobs can be defined more broadly

Fewer managers are needed

Electronic communication systems providequick, direct access to data

Genuine gains in morale and productivity


Place limits on authority empowered employeescan exercise

Hold people accountable for their decisions

Institute compensation incentives that reward employees for doing their jobs in a manner contributing to good company performance

Create a corporate culture wherethere’s strong peer pressure onemployees to act responsibly

Maintaining Control inMaintaining Control ina Decentralized Structurea Decentralized Structure


Classic method of coordinating activities – Have related units report to single manager

Upper-level managers have clout tocoordinate efforts of their units

Support activities should bewoven into structure to

Maximize performance of primary activities

Contain costs of support activities

Formal reporting relationships often need to be supplemented to facilitate coordination

Step 4: Provide for InternalStep 4: Provide for InternalCross-Unit CoordinationCross-Unit Coordination


Process departments

Cross-functional task forces

Dual reporting relationships

Informal networking

Voluntary cooperation

Incentive compensation tied to group performance

Teamwork and cross-departmental cooperation

Coordinating Mechanisms to Coordinating Mechanisms to Supplement the Basic Supplement the Basic Organization StructureOrganization Structure


Step 5: Provide forStep 5: Provide forCollaboration with Outsiders Collaboration with Outsiders

Need multiple ties at multiple levels to ensure

Communication

Coordination and control

Find ways to produce collaborative efforts toenhance firm’s capabilities and resource strengths

While collaborative relationships present opportunities, nothing valuable is realized until the relationship develops into an engine for better organizational performance


Get right people together

Promote good rapport

See plans for specific activitiesare developed and implemented

Help adjust internal procedures and communication systems to

Iron out operating dissimilarities

Nurture interpersonal ties

Roles of Relationship Roles of Relationship ManagersManagers

with Strategic Partnerswith Strategic Partners


BUILD A BUILD A

STRATEGY-SUPPORTIVE STRATEGY-SUPPORTIVE

CORPORATE CULTURE CORPORATE CULTURE


Core values, beliefs, and business principles Ethical standards Operating practices and behaviors defining

“how we do things around here” Approach to people management “Chemistry” and “personality” permeating

work environment Oft-told stories illustrating

Company’s valuesBusiness practicesTraditions

Defining Characteristics Defining Characteristics of Corporate Cultureof Corporate Culture


Dedication to customer satisfaction

Zealous pursuit of low costs

Frugal operating practices

Strong work ethic

Ritualistic Saturday morning meetings

Executive commitment toVisit stores

Listen to customers

Solicit employees’ suggestions

Features of the CorporateFeatures of the CorporateCulture at Wal-MartCulture at Wal-Mart


Deliver exceptional customer service to customers

Company motto

“Respond to UnreasonableCustomer Requests”

Out-of-the-ordinary customer requestsviewed as opportunities for “heroic” acts

Promotions based on outstanding customer service and “heroic” deeds

Compensation based entirely on commission

Features of the CorporateFeatures of the CorporateCulture at Nordstrom’sCulture at Nordstrom’s


Hard-driving, results-oriented atmosphere prevails

All businesses are held to a standard of being #1 or #2 in their industries as well as achieving good business results

Cross-business sharing of ideas, best practices, and learning

Reliance on “workout sessions” to identify, debate, and resolve “burning issues”

Commitment to Six Sigma Quality

Globalization of the company

Features of the CorporateFeatures of the CorporateCulture at General ElectricCulture at General Electric


Long work hours of programmers

Emotional peaks and valleys inencountering and overcoming coding problems

Exhilaration of completing a complex program on schedule

Satisfaction of working on cutting-edge projects

Rewards of being part of a team responsiblefor a popular new software program

Tradition of competing aggressively

Features of the CorporateFeatures of the CorporateCulture at MicrosoftCulture at Microsoft


A company’s culture is manifested in . . . Values, beliefs, and business principles

management preaches and practices Official policies and procedures Revered traditions and oft-repeated stories Attitudes and behaviors of employees Peer pressures that exist to display core values Organizational politics Approaches to people management and problem solving Relationships with external stakeholders “Chemistry” and “personality” permeating work environment

What to Look for inWhat to Look for inIdentifying Corporate CultureIdentifying Corporate Culture


Founder or early leader

Influential individual or work group

Policies, vision, or strategies

Traditions, supervisory practices, employee attitudes

Peer pressures that exist

Organizational politics

Relationships with stakeholders

Company’s approach to people management

Where Does CorporateWhere Does CorporateCulture Come From?Culture Come From?


Selecting new employees who will “fit” in

Systematic indoctrination of new employees

Senior management efforts to reinforce core values, beliefs, principles, key operating practices

Story-telling of company legends

Ceremonies honoring employeeswho display cultural ideals

Visibly rewarding thosewho follow cultural norms

How Is a Company’sHow Is a Company’sCulture Perpetuated?Culture Perpetuated?


Forces and FactorsForces and FactorsCausing Culture to EvolveCausing Culture to Evolve

New challenges in marketplace Revolutionary technologies Shifting internal conditions

Internal crisisTurnover of top executives

Arrival of a new CEO Diversification into new businesses Expansion into foreign countries Rapid growth involving adding new employees Merger with or acquisition of another company


A company’s culture can contribute to –or hinder – successful strategy execution

A culture promoting attitudes and behaviors well-suited to first-ratestrategy execution is a valuable allyin the strategy execution process

A culture embracing attitudes andbehaviors that impede good strategyexecution is a huge obstacle to be overcome

Culture: Ally or ObstacleCulture: Ally or Obstacleto Strategy Execution?to Strategy Execution?


A culture encouraging actions and behaviors supportive of good strategy executionProvides employees with clear guidance regarding what

behaviors and results constitute good job performanceCreates significant peer pressure among coworkers to

conform to culturally acceptable norms A culture imbedded with values and behaviors

that facilitate strategy execution promotesstrong employee commitment to a company’sVisionPerformance targetsStrategy

Why Culture Matters: Why Culture Matters: BenefitsBenefits

of a Tight Culture-Strategy of a Tight Culture-Strategy FitFit


A good job of culture-building by managersPromotes can-do attitudes

Encourages acceptance of change

Instills strong peer pressure forstrategy-supportive behaviors

Enlists enthusiasm and dedicatedeffort to achieve company objectives

Closely aligning corporate culture withrequirements for proficient strategy executionmerits the full attention of senior executives!

Optimal Outcome of a Optimal Outcome of a Tight Culture-Strategy FitTight Culture-Strategy Fit


Conflicts between culturally-approvedbehaviors and behaviors needed for goodstrategy execution send mixed signalsShould employees by loyal to the culture and company

traditions and resist actions and behaviors promotingbetter strategy execution?

Or should they support the strategy by engaging inbehaviors that run counter to the culture?

When a company’s culture is out of sync with whatis needed for strategic success, the culture has to

be changed as rapidly as can be managed!

Perils of Strategy-Culture Perils of Strategy-Culture ConflictConflict


Types of Corporate CulturesTypes of Corporate Cultures

Strong vs. Weak Cultures

Unhealthy Cultures

Adaptive Cultures


Conduct business according to a clear, widely-understood philosophy

Considerable time spent by management communicating and reinforcing values

Values are widely shared and deeply rooted

Have a well-defined corporate character,reinforced by a creed or values statement

Careful screening/selection of newemployees to be sure they “fit in”

Characteristics ofCharacteristics ofStrong Culture CompaniesStrong Culture Companies


How Does a Culture Come to How Does a Culture Come to Be Strong? Be Strong?

Leader who establishes values and behaviors consistent withCustomer needsCompetitive conditionsStrategic requirements

A deep, abiding commitment to espousedvalues, beliefs, and business philosophyPracticing what is preached!

Genuine concern for well-being ofCustomersEmployeesShareholders

ValuesCustomers

EmployeesShareholders


Characteristics ofCharacteristics ofWeak Culture CompaniesWeak Culture Companies

Lack of a widely-shared core set of values

Few behavioral norms evident in operating practices

Few strong traditions

No strong sense of company identity

Little cohesion among departments

Weak employee allegiance tocompany’s vision and strategy


Highly politicized internal environment Issues resolved on basis of political clout

Hostility to changeAvoid risks and don’t screw upExperimentation and efforts to

alter status quo discouraged

“Not-invented-here” mindset – company personnel discount need to look outside forBest practicesNew or better managerial approaches Innovative ideas

Characteristics of Unhealthy Characteristics of Unhealthy CulturesCultures


Willingness to accept change and embrace challenge of introducing new strategies

Risk-taking, experimentation, and innovation to satisfy stakeholders

Internal entrepreneurship is encouraged and rewarded

Funds provided for new products New ideas openly evaluated Genuine interest in well-being

of all key constituencies Proactive approaches to

implement workable solutions

Hallmarks of Adaptive Hallmarks of Adaptive CulturesCultures


Any changes in operating practices and behaviors

Must not compromise core values and long-standing business principles

Must satisfy legitimate interests of key stakeholders

Customers

Employees

Shareholders

Suppliers

Communities

Dominant Traits of Adaptive Dominant Traits of Adaptive CulturesCultures


Creating a Strong FitCreating a Strong FitBetween Strategy and Between Strategy and

CultureCulture

Responsibility of Strategy MakerSelect a strategy compatible with the

sacred or unchangeable parts of organization’s prevailing corporate culture!

Responsibility of Strategy ImplementerOnce strategy is chosen, changewhatever facets of the corporate

culture hinder effective execution!


Fig. 8.4: Changing a Problem CultureFig. 8.4: Changing a Problem Culture


Make a compelling case why a new culture is in best interests of both company and employees

Challenge status quo

Create events where employeesmust listen to angry key stakeholders

Continuously repeat messages of whycultural change is good for stakeholders

Visibly praise and reward peoplewho display new cultural norms

Menu of Culture-Changing Menu of Culture-Changing ActionsActions


Alter incentive compensation toreward desired cultural behavior

Hire new managers and employees who havedesired cultural traits and can serve as role models

Replace key executives stronglyassociated with old culture

Revise policies and proceduresto help drive cultural change

Menu of Culture-Changing Menu of Culture-Changing ActionsActions (continued)(continued)


Emphasize frugality

Eliminate executive perks

Require executives to spend time talking with customers

Ceremonial events to praise people andteams who “get with the program”

Alter practices identified as cultural hindrances

Visible awards to honor heroes

Symbolic Symbolic Culture-ChangingCulture-Changing ActionsActions


Engineer quick successes to highlightbenefits of proposed cultural changes

Bring in new blood, replacingtraditional managers

Change dysfunctional policies Change reward structure Reallocate budget, downsizing and upsizing Reinforce culture through both word and deed Enlist support of cultural norms from frontline

supervisors and employee opinion leaders

Substantive Culture-Changing Substantive Culture-Changing Actions Actions


A culture based on ethical principles isvital to long-term strategic success

Ethics programs help make ethical conduct a way of life

Executives must provide genuine supportof personnel displaying ethical standardsin conducting the company’s business

Core values and ethical principles serve as acornerstone for culture-building

Our ethicsprogram

consists of . . .

Grounding the Culture inGrounding the Culture inCore Values and EthicsCore Values and Ethics


Fig. 8.5: The Two Culture-Building Roles of Fig. 8.5: The Two Culture-Building Roles of aa

Company’s Core Values and Ethical Company’s Core Values and Ethical StandardsStandards


Fig. 8.6: How a Company’s Core Values and Fig. 8.6: How a Company’s Core Values and Ethical Principles Positively Impact the Ethical Principles Positively Impact the

Corporate CultureCorporate Culture


Word-of-mouth indoctrination and tradition Annual reports and Web sites Orientation courses for new employees Training courses for managers and employees Making stakeholders aware of a commitment

to ethical business conduct is attributable toGreater management understanding of role

these statements play in culture buildingRenewed focus on ethical standards

stemming from recent corporate scandalsGrowing numbers of consumers who

prefer to patronize ethical companies

Approaches to Establishing Approaches to Establishing Ethical StandardsEthical Standards


Incorporate values statement and ethicscode in employee training programs

Screen out applicants who do notexhibit compatible character traits

Frequent communications of thevalues and ethics code to all employees

Management involvement and oversight Strong endorsement by CEO Ceremonies and awards for individuals

and groups who display the values Institute ethics enforcement procedures

Instilling Values and Ethics in Instilling Values and Ethics in the Culturethe Culture


Develop procedures forEnforcing ethical standards andHandling potential violations

Scrutinize attitudes, character, and work history of prospective employees

Educate employees about ethical behaviors Encourage employees to raise

issues with ethical dimensions Explain how company values and ethics

code apply at all levels of a company Insist company values and ethical

standards become a way of life

Structuring the Ethics Structuring the Ethics ComplianceCompliance

and Enforcement Processand Enforcement Process


Form an ethics committee to provide guidance Appoint an ethics officer to head compliance effort Establish an ethics hotline/Web site employees can

use toAnonymously report a possible violationGet confidential advice on a

troubling ethics-related situation

Conduct annual ethics audit tomeasure extent ofEthical behavior and Identify problem areas

Structuring the Ethics Structuring the Ethics ComplianceCompliance

and Enforcement Process and Enforcement Process (continued)(continued)


Have mandatory ethics trainings for employees Conduct an annual audit to assess

Each manager’s efforts touphold ethical standards

Actions taken by managersto remedy deficient conduct

Require all employees to sign a statement annually certifying they have complied with firm’s code of ethics

Openly encourage employees to report possible infractions via Anonymous calls to a hotline or

Posting to a special company Web site

Key Approaches toKey Approaches toEnforcing Ethical BehaviorEnforcing Ethical Behavior


Establishing a Strategy-Culture Establishing a Strategy-Culture Fit in Multinational and Fit in Multinational and

Global CompaniesGlobal Companies Institute training programs to

Communicate meaning of core values and

Explain case for common operatingprinciples and practices

Draw on full range of motivational andcompensation incentives to induce personnelto adopt and practice desired behaviors

Allow some leeway for certain core values and principles to be interpreted and applied somewhat differently, if necessary, to accommodate local customs and traditions

executing the strategy: building a capable organization and instilling a culture

Documents

mcgrawhill companies

executing strategycrafting

good resultsmcgrawhillirwin

management team

ongood organization

atough management jobthe

company capabilitiesattracting

work effort