Corporate Culture and Leadership

Corporate culture refers to the character of a company’s internal work climate and personality –as shaped by its core values, beliefs, business principles, traditions,ingrained behaviours, work practices, and style of operating. It is important because it influences the organization’s actions and approaches to conducting business. It is like company’s “operating system” or organizational DNA.

Key features of a company’s corporate culture are as follows: (1) the values, business principles, and ethical standards, (2) the company’s approach to people management and the official policies, procedures, and operating practices, (3) the spirit and character that pervades the work climate, (4) how managers and employees interact
and relate to each other, (5) the strength of peer pressures to do things in particular ways and conform to expected norms, (6) the company’s revered traditions and offrepeated stories about “heroic acts” and “how we do things around here.” (7) the manner in which the company deals with external stakeholders.

Company cultures vary widely in strength and influence. In a strong-culture company, culturally approved behaviours and ways of doing things are nurtured while culturally disapproved behaviors and work practices get squashed. In a strong culture company values and behavioral norms are like crabgrass: deeply rooted and hard to weed out. In direct contract, weak-culture companies lack values and principles that are consistently preached or widely shared. As a consequence, weak cultures provide little or no assistance in executing strategy 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.

However there can be unhealthy cultures that prevent the company in promoting the strategic execution:
1. A highly politicized internal environment in which many issues get resolved and decisions made on the basis of which individuals or groups have the most political clout to carry the day.
2. Hostility to change and a general wariness of people who champion new ways of doing things.
3. An insular “not-invented-here” mind-set that makes company personnel averse to looking outside the company for best practices, new managerial approaches, and innovative ideas.
4. A disregards for high ethical standards and overzealous pursuit of wealth and status on the part of key executives.

On the contrary, there are also some cultures that can highly promote the strategic execution:
1. A high performance culture where the standout culture traits are a can-do spirit, no-excuses accountability, and a pervasive result-oriented work climate where people go the extra mile to meet or beat stretch objectives.
2. Adaptive culture where there is a spirit of doing what’s necessary to ensure long-term organizational success provided the new behaviours and operating practices that management is calling for are seen as legitimate and consistent with the core values and business principles underpinning the culture. It is well suited to companies with fast-changing strategies and market environments.

Though changing a problem culture is among the toughest management tasks, but the good news is that it can be done. These are steps in changing a problem culture:
Step 1 : Identify facets of present culture that are conducive to strategy execution and operating excellence and those that are not.
Step 2 : Specify what new actions, behaviours, and work practices should be prominent in the “new” culture
Step 3 : Talk openly about problems of present culture and how new behaviors will improve performance
Step 4 : Follow with visible, forceful actions –both substantive and symbolic- to ingrain a new set of behaviors, practices, and cultural norms.

A company’s culture is grounded in and shaped by its core values and the bar it sets for ethical behavior. The benefits of cultural norms grounded in core values and ethical principles are: (a) Communicates the company’s goal intentions and validates the integrity and above board nature of the company’s conduct of its business, (b)
steers company personnel toward doing things right and doing the right things, (c)establishes a corporate conscience and provides yardsticks for gauging the appropriateness of particular actions, decisions, and policies.

A multinational company needs to build its corporate culture around values and operating practices that travel well across borders. The leadership challenge in achieving consistently good strategy execution ultimately boils down to two things:deciding when corrective adjustments are needed and deciding what adjustments to make.

Source: Thompson, Crafting and Executing Strategy, Chapter 12.