STRATEGY Core Concepts and Approaches ConceptsAnalytical and Analytic Strategy – Core Arthur 5th Arthur A A Thompson Thompson 5th Edition Edition (2018-2019) (2018-2019) Approaches 5e The The University University of of Alabama Alabama Authur A Thompson, The University of Alabama CHAPTER 12 CHAPTER What Is Strategy and Why Corporate Culture Is It Important? and Leadership— Keys to Good Strategy Execution An An e-book e-book published published and and distributed distributed by byMcGraw McGrawHill Hill Education, Education,Burr Burr Ridge, Ridge,Illinois Illinois Copyright Copyright©©2018 2018 by byArthur ArthurA A.Thompson, Thompson,Glo-Bus Glo-Bus Software, Software,Inc Inc All All rights rights reserved reserved.Not Notfor for distribution distribution “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 Former CEO, Entergy Copyright © 2016 by Glo-Bus Software, Inc 12–2 “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 Copyright © 2016 by Glo-Bus Software, Inc 12–3 “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 and consultant Copyright © 2016 by Glo-Bus Software, Inc 12–4 “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 Copyright © 2016 by Glo-Bus Software, Inc 12–5 Chapter 12 Learning Objectives Be able to identify the key features of a company’s corporate culture and appreciate the role of a company’s core values and ethical standards in shaping the corporate culture Understand how and why a company’s culture can aid or block the drive for good strategy execution and operating excellence Learn the kinds of actions management can take to change a problem corporate culture Understand what constitutes effective managerial leadership in achieving superior strategy execution and operating excellence Copyright © 2016 by Glo-Bus Software, Inc 12–6 Chapter 12 Roadmap Instilling a Corporate Culture that Promotes Good Strategy Execution ► Identifying the Key Features of a Corporate Culture ► Cultures Are Often Grounded in Core Value and Ethics ► Strong vs Weak Cultures ► Why Cultures Matter to the Strategy Execution Process ► Healthy Cultures That Aid Good Strategy Execution ► Unhealthy Cultures Impede Good Strategy Execution ► Changing a Problem Culture Leading the Strategy Execution Process Copyright © 2016 by Glo-Bus Software, Inc 12–7 Instilling a Corporate Culture That Promotes Good Strategy Execution Each firm has a unique culture that is a product of: ► The core values and business principles articulated by executives ► Its standards of what is ethically acceptable and what is not ► The ingrained work practices, beliefs, and behaviors that define “how we things around here” ► Its approach to people management and its style of operating ► The “chemistry” and the “personality” that permeates its work environment ► Stories told repeatedly to reinforce its values, business practices, and traditions The specific cultural traits that emerge from a firm’s meshing of these culture-determining factors define its corporate culture ► A firm’s culture is its psyche or organizational DNA ► A firm’s culture is important because it influences its actions and approaches to conducting its business ► There are large variations in the character of company cultures Copyright © 2016 by Glo-Bus Software, Inc 12–8 Core Concept Corporate culture refers to the character of a firm’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 Copyright © 2016 by Glo-Bus Software, Inc 12–9 Identifying the Key Features of a Company’s Corporate Culture Values, principles, and ethical standards in actual use Approach to people management and key policies and procedures Atmosphere and spirit that pervades the firm’s work climate How managers and employees interact and relate to one another A Company’s Corporate Culture Strength of peer pressure to conform and observe norms Copyright © 2016 by Glo-Bus Software, Inc Actions and behaviors encouraged and rewarded Traditions and stories and “how we things around here” How the firm treats its stakeholders 12–10 FIGURE 12.2 Changing a Problem Culture Copyright © 2016 by Glo-Bus Software, Inc 12–47 Substantive Culture-Changing Actions Efforts to replace a problem culture are made credible by initiating a series of visible, forceful change actions: ► Replace recalcitrant “old culture” executives and managers ► Promote advocates of the shift to a different culture who can function as new-culture role models ► Appoint outsiders with the desired cultural attributes to high-profile positions ► Screen all candidates for new positions carefully, hiring only those who appear to fit in with the new culture ► Mandate that all personnel attend culture-training programs Copyright © 2016 by Glo-Bus Software, Inc 12–48 Substantive Culture-Changing Actions (continued) Ways to change a problem culture: ► Design compensation incentives that boost the pay of teams and individuals who display the desired cultural behaviors ► Let 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 ► Revise policies and procedures to better drive cultural change Copyright © 2016 by Glo-Bus Software, Inc 12–49 Symbolic Culture-Changing Actions Symbolic actions that top executives can take: ► Lead by example—Walk the talk • If the firm is striving to be a low-cost provider, top executives must display frugality in their own actions and minimize executive perks • If the culture change imperative is to be more responsive to customers’ needs and to pleasing customers, then executives must spend time talking with customers ► Hold ceremonial events • To praise and honor people who display the desired cultural traits • To celebrate each culture-change success ► Appear at employee training programs to stress strategic priorities, values, ethical principles, and cultural norms Copyright © 2016 by Glo-Bus Software, Inc 12–50 How Long Does It Take to Change a Problem Culture? Changing a problem culture is not a short-term exercise: ► A new culture takes time to emerge and prevail, overnight transformations not occur ► A new culture can take 2-5 years (maybe longer) to become deeply embedded ► The larger the organization and the greater the cultural shift needed to produce an execution-supportive fit, the longer change takes Copyright © 2016 by Glo-Bus Software, Inc 12–51 Leading the Strategy Execution Process Managing the strategy process is simple enough: ► Craft a sound strategic plan, implement it, fully execute it, adjust it as needed, and win! Leading the strategy execution process is a topdown management activity: ► Stay on top of what is happening, monitor progress, remove obstacles to good execution, and decide how to get things done ► Use constructive pressure to achieve good results and operating excellence ► Push corrective actions to improve strategy execution and achieve the targeted results Copyright © 2016 by Glo-Bus Software, Inc 12–52 Staying on Top of How Well Things Are Going Requires senior executives to tap into information from a wide range of sources: ► Talk with key subordinates ► Stay in close contact with key personnel in outlying locations via email and telephone ► Attend meetings and quiz presenters and attendees ► Review the latest operating results ► Watch the competitive reactions of rival firms ► Visit with key customers and suppliers to get their perspectives ► Practice managing by walking around (MBWA)—learn firsthand how well the strategy execution process is going (gather information by visiting facilities, talking with different personnel at different organization levels, asking lots of questions, listening to concerns and opinions, soliciting ideas) Copyright © 2016 by Glo-Bus Software, Inc 12–53 Core Concept Management by walking around (MBWA) is one of the techniques that 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 see 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 Copyright © 2016 by Glo-Bus Software, Inc 12–54 Putting Constructive Pressure on the Organization to Achieve Good Results and Operating Excellence Mobilizing organizational energy behind the drive for good strategy execution and operating excellence entails nurturing a results-oriented work climate, where performance standards are high and a spirit of achievement is pervasive ► The goal is to build a good organizational track record in meeting or beating stretch performance targets Copyright © 2016 by Glo-Bus Software, Inc 12–55 Instilling a Spirit of High Achievement Into the Culture Treating employees as valued partners and contributors in organizational efforts to achieve good business results Fostering an esprit de corps that energizes organizational members Using benchmarking, best practices, business process reengineering, TQM, and Six Sigma to focus attention on internal operating improvements Using the full range of motivational techniques and compensation incentives to inspire company personnel, nurture a results-oriented work climate, and reward high performance Celebrating individual, group, and company successes Using empowerment to help create a fully engaged workforce Setting stretch objectives and clearly communicating an expectation that personnel are to give their best in achieving performance targets Copyright © 2016 by Glo-Bus Software, Inc 12–56 Leading the Process of Making Corrective Adjustments Success in initiating corrective actions hinges on: ► Accurate analysis of unacceptable performance (correcting flawed strategy execution is different than correcting flawed strategy) ► Exercise of good business judgment in deciding when and what corrective adjustments to make ► Good implementation of the corrective actions that are initiated Successful managers get an organization back on track quickly because: ► They (and their staffs) are good at discerning what actions to take and in driving them through to a successful conclusion ► 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 Copyright © 2016 by Glo-Bus Software, Inc 12–57 Leading the Process of Making Corrective Adjustments Making corrective actions successfully requires: Accurate analysis of the situation Copyright © 2016 by Glo-Bus Software, Inc Good business judgment in deciding what actions to take Good implementation of the corrective actions 12–58 Strategic Insight 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 Copyright © 2018 by Glo-Bus Software, Inc 11–59 “Good Results” Are the Best Sign of Effective Leadership Doing a good job of leading the strategy execution process is not about searching for the “right” way to proceed or for provably “correct” solutions It is about proceeding in a manner that produces good results, namely proficient strategy execution, progress toward operating excellence, and good business performance Copyright © 2016 by Glo-Bus Software, Inc 12–60 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 Strategy consists of five interrelated and linked tasks requiring continuous fine-tuning and adjustments to strategic visions, objectives, strategies, and implementation/execution approaches to fit everchanging circumstances The best tests of good strategic leadership and management are ► Whether the firm has a good strategy ► Whether the strategy is being competently executed ► Whether the enterprise is meeting or beating its performance targets Copyright © 2016 by Glo-Bus Software, Inc 12–61 ... 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... features of a company’s corporate culture and appreciate the role of a company’s core values and ethical standards in shaping the corporate culture Understand how and why a company’s culture can aid... Strength of peer pressure to conform and observe norms Copyright © 2016 by Glo-Bus Software, Inc Actions and behaviors encouraged and rewarded Traditions and stories and “how we things around here”