BUSINESS POLICY &

STRATEGY
 CHAPTER 2
IMPLEMENTING AND
EXECUTING STRATEGY:
Governance (Culture)
Business Ethics
“An organization’s capacity
to execute its strategy depends on its “hard”
infrastructure--its organization structure and
systems--and on its “soft” infrastructure--its
Governance (Culture) and norms.”
Amar Bhide
“Quote”

2
 Chapter Outline
 Building a Strategy-Supportive
Corporate Governance (Culture)
 Where Does Corporate Governance (Culture) Come
From?
 Governance (Culture) and Strategy Execution
 Types of Governance (Culture)s
 Creating a Fit Between Strategy and Governance
(Culture)
 Establishing Ethical Standards
 Building a Spirit of High Performance

4
 Exerting Strategic Leadership
 Staying on Top of How Well Things are
Going
 Establishing a Strategy-Supportive
Governance (Culture)
 Keeping Internal Organization Innovative
 Exercising Ethics Leadership
 Making Corrective Adjustments

5
 BUILD A STRATEGY-
SUPPORTIVE CORPORATE
Governance (Culture)

4
 What Makes Up a Company’s
Governance (Culture)?
 Beliefs about how business ought to be conducted
 Values and principles of management
 Work climate and atmosphere
 Patterns of “how we do things around here”
 Oft-told stories illustrating company’s values
 Taboos and political don’ts
 Traditions
 Ethical standards

7
Features of the Corporate
Governance (Culture) at Wal-Mart
 Dedication to customer satisfaction
 Zealous pursuit of low costs
 Belief in treating employees as partners
 Sam Walton’s legendary frugality
 Ritualistic Saturday morning meetings
 Executive commitment to
 Visit stores
 Talk to customers
 Solicit employees’ suggestions
8
Features of the Corporate
Governance (Culture) at General Electric

 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
 Concept of boundary less organization exists
 Reliance upon “workout sessions” to identify, debate,
and resolve “burning issues”
 Commitment to Six Sigma Quality
 Globalization of the company

9
Features of the Corporate
Governance (Culture) at Nordstrom’s

 Company motto
 “Respond to Unreasonable Customer Requests”
 Out-of-the-ordinary customer requests viewed as
opportunities for “heroic” acts
 Promotions based on outstanding service
 Salaries based entirely on commission
 Weeds out those not meeting or living up to
standards/expectations/shared values and rewards
those who do

10
 Where Does Corporate
Governance (Culture) Come From?
 Founder or early leader
 Influential individual or work group
 Policies, vision, or strategies
 Traditions, supervisory practices, employee attitudes
 Organizational politics
 Relationships with stakeholders
 Internal sociological forces

11
 How Is a Company’s Governance
(Culture) Perpetuated?
 Selecting new employees based on how well their
personalities “fit” in
 Systematic indoctrination of new employees
 Senior employees’ reinforcement of core values
 Story-telling of company legends
 Ceremonies honoring employees who display
cultural ideals
 Visibly rewarding those who follow cultural
norms

12
 Forces and Factors
Causing Governance (Culture) to Evolve
 Internal crises
 Revolutionary technologies
 New challenges
 Arrival of new leaders
 Turnover of key employees
 Diversification into new businesses
 Expansion into different geographic areas
 Rapid growth adding new employees
 Merger with or acquisition of another company
 Globalization
13
 Governance (Culture) and
Strategy Execution:
Ally or Obstacle?
 Governance (Culture) can contribute to -- or
hinder -- successful strategy execution

 Requirements for successful strategy execution

may -- or may not -- be compatible with
Governance (Culture)

 A close match between Governance (Culture)

and strategy promotes effective
strategy execution

14
 Why Governance (Culture) Matters: Benefits
of a Good Governance (Culture)-Strategy Fit
 Strategy-supportive Governance
 Shape mood and temperament of the work force,
positively affecting organizational energy, work
habits, and operating practices
 Provide standards, values, informal rules and peer
pressures that nurture and motivate people to do
their jobs in ways that promote
good strategy execution
 Strengthen employee identification with the
company, its performance targets, and strategy

15
Why Governance (Culture) Matters: Benefits
of a
Good Governance (Culture)-Strategy Fit
(continued)
 (Culture)s
 Stimulate people to take on the challenge of realizing
the company’s vision, do their jobs competently and with
enthusiasm, and collaborate with others to execute the
strategy
Can
 Optimal condition: A work Do!
environment that S
 Promotes can do attitudes
 Accepts change
 Breeds needed capabilities

16
Strategic Management
Principle

Anything so fundamental as
implementing a new or different
strategy involves aligning
the organization’s Governance (Culture)
with the requirements
for competent strategy execution!

17
Types of Corporate
Governance (Culture)s
Strong vs. Weak
Governance (Culture)s

Unhealthy Governance (Culture)s

Adaptive Governance (Culture)s

18
 Characteristics of
Strong Governance (Culture) Companies
 Conduct business according to a clear, widely-understood
philosophy
 Management spends considerable time communicating and
reinforcing values
 Values are widely shared and deeply rooted
 Typically have a values statement
 Careful screening/selection of new employees to be sure
they will “fit in”
 Visible rewards for those following norms; penalties for
those who don’t

19
 Characteristics of
Weak Governance (Culture) Companies

 Many sub Governance (Culture)s

 Few values and norms widely shared
 Few strong traditions
 Little cohesion among the departments
 Weak employee allegiance to company’s vision
and strategy
 No strong sense of company identity

20
 Characteristics of Unhealthy or Low
Performance Governance (Culture)s
Avoid
risks!
 Politicized internal environment
 Issues resolved on basis of turf
 Hostility to change
 Experimentation and efforts to alter
status quo discouraged
 Avoid risks
 Promotion of managers more concerned about process and details
than results
 Aversion to look outside for superior practices
 Must-be-invented here syndrome

21
 Hallmarks of Adaptive Governance
(Culture)s
 Introduction of new strategies to achieve
superior performance
 Strategic agility and fast response to
new conditions
 Risk-taking, experimentation, and
innovation to satisfy stakeholders
 Proactive approaches to implement
workable solutions
 Entrepreneurship encouraged and rewarded
 Top managers exhibit genuine concern for
customers, employees, shareholders, suppliers

22
 Creating a Strong Fit
Between Strategy and Governance (Culture)

Diagnose which facets of present

Step 1 Governance (Culture) are strategy-
supportive and which are not
Talk openly about why aspects
of present Governance (Culture)
Step 2
need
to be changed
Follow with swift, visible actions
to modify Governance (Culture) -
Step 3
include both substantive and
symbolic actions 23
 Types of Governance (Culture)-
Changing Actions
 Revising policies and procedures to help
drive cultural change
 Altering incentive compensation to reward
desired cultural behavior
 Visibly praising and recognizing people
who display new cultural traits
 Hiring new managers and employees who have desired
cultural traits and can serve as role models
 Replacing key executives strongly associated with old
Governance (Culture)
 Communicating to all employees the basis for cultural
change and its benefits
24
 Symbolic Governance (Culture)-
Changing Actions
 Emphasize frugality
 Require executives to spend
time talking with customers
 Alter practices identified as cultural hindrances
 Visible awards to honor heroes
 Ceremonial events to praise people and teams who
“get with the program”

25
 Substantive Governance (Culture)-
Changing Actions

 Benchmarking and best practices

 Set world-class performance targets
 Bring in new blood, replacing
traditional managers
 Shake up the organizational
structure
 Change reward structure
 Increase commitment to employee training
 Reallocate budget, downsizing and upsizing
26
Establishing Ethical Standards and
Values
 A Governance (Culture) based on ethical principles is vital
to long-term strategic success
 Ethics programs make ethical conduct a way of life
 Value statements serve as a cornerstone for Governance
(Culture)-building
 A code of ethics serves as a cornerstone for developing a
corporate conscience
 Approaches to establishing
ethical standards
 Word-of-mouth indoctrination and tradition
 Written documents

27
Topics Covered in Value Statements
and Codes of Ethics
Topics in Value Statements
 Customer importance
 Commitment to quality
 Commitment to innovation
 Respect for individual employee
 Importance of honesty
 Duty to stockholders
 Duty to suppliers
 Corporate citizenship
 Protecting the environment
Topics in Codes of Ethics
 Honesty & observing the law
 Conflicts of interest
 Fairness in marketing practices
 Using inside information
 Supplier relations
 Corrupt practices
 Acquiring information
 Political activities
 Use of company assets
 Proprietary information
 Pricing, contracting, & billing
28
Instilling Values and Ethics
in the Governance (Culture)
 Incorporate values statement and ethics code in
employee training programs
 Screen out applicants who do not exhibit
compatible character traits
 Communicate the values and ethics code to all
employees
 Management involvement and oversight
 Strong endorsement
by CEO
 Word-of-mouth
indoctrination
29
 Manager’s Role in
Exercising Ethics Leadership
 Set an excellent ethical example
 Provide training to employees about
what is ethical and what isn’t
 Reiterate unequivocal support of ethics
code
 Remove people from key positions if found guilty of
a violation
 Reprimand people lax in monitoring ethical
compliance

30
Key Approaches to
Enforcing Ethical Behavior
 Conduct an annual audit to assess
 Each manager’s efforts to uphold ethical
standards
 Actions taken by managers to remedy deficient
conduct

 Require all employees to sign a statement annually

certifying they have complied with company’s code
of ethics

31
 Actions Demonstrating Corporate
Citizenship and Social Responsibility

 Having “family friendly” employment practices

 Operating a safe workplace
 Taking special pains to protect the environment
 Taking an active role in community affairs
 Interacting with community officials to minimize impact of
 Layoffs or

 Hiring large numbers of new employees

 Being a generous supporter of charitable causes and

projects that benefit society

32