Corporate Culture and Leadership:
Keys to Good Strategy Execution
Chapter Summary
ChapterTwelve exploresthe tworemaining managerialtasks that shape the outcomeof effortsto executea
company’s strategy: creating a strategy-supportive corporate culture and exerting the internal leadership needed
to drive the implementation of strategic initiatives forward and achieve higher plateaus of operating excellence.
Lecture Outline
I. Instilling a Corporate Culture that Promotes Good Strategy Execution
ACTIVITY
Consider adding a LearnSmart assignment requiring the student to review this section of the chapter as
an interactive question and answer review. The assignment can be graded and posted automatically.
1. Every company has its own unique corporate culture; the shared values, ingrained attitudes, and
2. 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 work
practicesandbehaviorsthatdene“howwedothingaroundhere,”itsapproachtopeoplemanagement
3. Illustration Capsule 12.1 describes the corporate culture of another exemplar company, Epic Systems,
well known by health care providers.
257
CHAPTER 12
Chapter 12 Corporate Culture and Leadership: Keys to Good Strategy Execution
258
ILLUSTRATION CAPSULE 12.1
Strong Guiding Principles Drive the High-Performance Culture at Epic
Discussion Question: In what way do Epic’s 10 Commandments and Principles help create a
high-performance culture?
Answer: The student should identify that these two lists articulate the values and beliefs of the
A. Identifying the Key Features of a Company’s Corporate Culture
1. A company’s corporate culture is mirrored in the character or “personality” of it work environment: The
chief things to look for include the following:
a. The values, business principles, and ethical standards that management preaches and practices—
actions speak louder than words
b. Thecompany’sapproachtopeoplemanagementandtheocialpolicies,proceduresandoperating
practices that paint the white lines for the behavior of company personnel
of compensation and promotion.
g. The company’s revered traditions and oft-repeated stories about “heroic act” and “how we do things
around here:
h. The manner in which the company deals with external stakeholders (particularly vendors and local
communities where it has operations.
2. The values, beliefs, and practices that undergird a company’s culture can come from anywhere in
3. The Role of Core Values and Ethics:The culture-shaping signicance of core values and ethical
5. Figure 12.1, The Two Culture-Building Roles of a Company’s Core Values and Ethical Standards,
provides an illustration of how these two forces shape culture.
Chapter 12 Corporate Culture and Leadership: Keys to Good Strategy Execution
259
6. Embedding Cultural Norms in the Organization and Perpetuating the Culture: values and ethical
standards must be institutionalized in the company’s policies and practices and embedded in the conduct
of company personnel. This can be accomplished by:
a. Screening applicants and hiring those who will mesh well with the culture.
b. Incorporating discussions of the company’s culture and behavioral norms into orientation programs
and training courses.
c. Having senior executives frequently reiterate the importance and role of company values and ethical
principles.
h. Holding periodic ceremonies to honor people who excel in displaying the company values and
ethical principles.
7. The Role of Stories: Frequently,asignicantpartofacompany’scultureiscapturedinthestoriesthat
8. Forces that Cause a Company’s Culture to Evolve: New challenges in the marketplace, revolutionary
technologies, and shifting internal conditions—especially an internal crisis, a change in company
direction, or top executive turnover—tend to breed new ways of doing things and, in turn, drive cultural
evolution.
B. Strong vs. Weak Cultures
1. Corporate cultures vary widely in the degree to which they are embedded in company practices and
behavioral norms.
2. Strong-Culture Companies: The hallmark of a strong-culture company is the dominating presence
of certain deeply rooted values and behavioral norms that “regulate” the conduct of company personnel
as they go about the company’s business. Two factors contribute to the development of strong cultures:
Chapter 12 Corporate Culture and Leadership: Keys to Good Strategy Execution
260
3. Weak-Culture Companies: In direct contrast to strong-culture companies, weak-culture companies
lack widely shared and strongly held values, principles, and behavioral norms.
4. They also lack cultural mechanisms for aligning, constraining, and regulating the actions, decisions, and
behaviors of company personnel.
5. Weak cultures provide little or no strategy-implementing assistance because there are no traditions,
beliefs, values, common bonds, or behavioral norms that management can use as levers to mobilize
commitment to executing the chosen strategy.
C. Why Corporate Cultures Matter to the Strategy Execution Process
1. Strongculturescanhaveapowerfuleffectonthestrategyexecutionprocess,andthiseffectmaybe
positive or negative.
2. A culture that is grounded in actions, behaviors, and work practices that are conducive to good strategy
implementationassiststhestrategyexecutioneffortinthreeways:
a. A culture that is well matched to the requirements of the strategy execution effort focuses the
3. Insharpcontrast,whenacultureisinconictwithwhatisrequiredtoexecutethecompany’sstrategy
well,astrongculturebecomesahindrancetothesuccessoftheimplementationeffort.
D. Healthy Cultures That Aid Good Strategy Execution: A strong culture, provided it embraces execution-
supportiveattitudes,behaviors,andworkpractices,isdenitelyahealthyculture.Twoothertypesofcultures
exist that tend to be healthy and largely supportive of good strategy execution:
1. High-Performance Cultures
a. The standard cultural traits of high performance cultures are a can-do spirit, pride in doing things
2. Adaptive Cultures
a. The hallmark of adaptive corporate cultures is willingness on the part of organizational members to
accept change and take on the challenge of introducing and executing new strategies.
Chapter 12 Corporate Culture and Leadership: Keys to Good Strategy Execution
261
d. For an adaptive culture to remain intact over time, top management must orchestrate the respon ses
in a manner that demonstrates genuine care for the well-being of all key constituencies and tries to
satisfy all their legitimate interests simultaneously.
e. In fast-changing business environments, a corporate culture that is receptive to altering organizational
practices and behaviors is a virtual necessity.
E. Unhealthy Cultures That Impede Good Strategy Execution: The distinctive characteristic of an un-
healthy corporate culture is the presence of counterproductive cultural traits that adversely impact the work
climateandcompanyperformance.Thereareveparticularlyunhealthyculturaltraits:
1. Change-Resistant Cultures
a. In less adaptive cultures where skepticism about the importance of new developments and resistance
2 Politicized Cultures
3. Insular, Inwardly Focused Cultures
4. Unethical and Greed-Driven Cultures: Companies that have little regard for ethical standards or that
arerunbyexecutivesdrivenbygreedandegograticationarescandalswaitingtohappen.
5. Incompatible Subcultures
a. Values, beliefs, and practices within a company sometimes vary signicantly by department,
F. Changing a Problem Culture
1. Changing a problem culture is one of the toughest tasks because of the heavy anchor of ingrained
behaviors and ways of doing things.
2. Thesinglemostvisiblefactorthatdistinguishessuccessfulculture-changeeffortsfromfailedattempts
Chapter 12 Corporate Culture and Leadership: Keys to Good Strategy Execution
262
b. Second,managershavetoclearlydenethedesirenewbehaviorsandfeaturesoftheculturethey
3. Figure 12.2, Steps to Take in Changing a Problem Culture, illustrates this essential leadership
process.
4. Making a Compelling Case for Culture Change: Management must sell company personnel on the
need for new-style behaviors and work practices by making a compelling case for why the company’s
newstrategicdirectionandculture-remodelingeffortsareintheorganizationbestinterest.Thiscanbe
5. Argumentsfornewwaysofdoingthingsandnewworkpracticestendtobeembracedmorereadilyif
employeesunderstandhowtheywillbenetcompanystakeholders.
6. Substantive Culture-Changing Actions:Companyexecutiveshavetogivetheculture-changeeffort
some teeth by initiating a series of actions that company personnel will see as credible and unmistakably
indicative of management’s commitment.
a. Replacing key executives who are resisting or obstructing needed organizational and cultural
changes.
b. Promotingindividualswhohavesteppedforwardtospearheadtheshifttoadifferentcultureand
who can serve as role models for the desired cultural behavior.
c. Appointingoutsiderswiththedesiredculturalattributestohigh-prolepositions-bringinginnew-
out front, led the adoption of the desired work practices, displayed the new-style behaviors, and
achieved pace-setting results.
h. Revising policies and procedures in ways that will help drive cultural change
Chapter 12 Corporate Culture and Leadership: Keys to Good Strategy Execution
263
7. Symbolic Culture-Changing Actionstoalteraproblemcultureandtightenthestrategy—culturet:
a. Lead by example.
8. How Long Does It Take to Change a Problem Culture?
a. Plantingandgrowingtheseedsofanewculturerequireadeterminedeffortbythechiefexecutive
and other senior managers.
9. Illustration Capsule 12.2, Culture Transformation at America Latina Logistica, discusses the
approachesusedbyCEOAlexandreBehringtotransformALLintoanecientrailoperation.
ILLUSTRATION CAPSULE 12.2
Culture Transformation at America Latina Logistica
Discussion Question: What elements were put in place to transform the culture at ALL?
Answer: The student should identify several substantive actions to include the recruitment of a new
management team and the termination of dozens of political appointees previously administering
ACTIVITY
Consider adding a File Attachment assignment requiring the student to fully explore and explain how
the new management team at ALL was able to transform its culture.
Ask the student to describe specific areas of operation that were impacted and specific actions taken
to ensure that leadership was seen as being part of the change process.
II. Leading the Strategy-Execution Process
ACTIVITY
Consider adding a LearnSmart assignment requiring the student to review this section of the chapter as
an interactive question and answer review. The assignment can be graded and posted automatically.
Chapter 12 Corporate Culture and Leadership: Keys to Good Strategy Execution
264
1. Topexecutiveshavetobeoutfrontpersonallyleadingtheimplementation/executionprocessanddriving
thepaceofprogressforanenterprisetoexecuteitsstrategyinatrulyprocientfashion.
2. The strategy execution process must be driven by mandates to get things on the right track and show
good results.
3. In general, leading the drive for good strategy execution and operating excellence calls for three actions
on the part of the manager in charge:
4. Staying on top of How Well Things Are Going: What is happening and closely monitoring progress.
To stay on top of how well the strategy execution process is going, senior executives have to tap into
5. Mobilizing the Effort for Excellence in Strategy Execution: Putting constructive pressure on the
organization to execute the strategy well and achieve operating excellence. Managers have to be out
front in mobilizing organizational energy behind the drive for good strategy execution and operating
excellence. This can include actions such as:
a. Treating employees as valued partners in the drive for operating excellence and good business
performance.
g. Using the full range of motivational techniques and compensation incentives to inspire company
personnel, nurture a results-oriented work climate, and enforce high-performance standards.
h. Celebrating individual, group, and company successes.
6. Leading the Process of Making Corrective Adjustments
Chapter 12 Corporate Culture and Leadership: Keys to Good Strategy Execution
265
b. Success in making corrective actions hinges on three things:
1) A thorough analysis of the situation
2) The exercise of good business judgment in deciding what actions to take
3) Good implementation of the corrective actions that are initiated.
III. A Final Word on Managing the Process
1. In practice it is hard to separate the leadership requirements of executing strategy from the other pieces
2. The best tests of good strategic leadership are whether the company has a good strategy and whether the
strategyexecutioneffortisdeliveringthehoped-forresults.