Corporate Culture and Leadership: Keys to Good Strategy Execution
Strategic Planning Final Exam
Deborah Holloway
(Please Insert Your School)
INTRODUCTION
(1991) define strategy as the “deliberate search for a plan of action that will develop a business’ competitive advantage and compound it” (). Corporate strategy occurs in a cyclical or repetitive manner starting with the recognition and assessment of the present status or position of the firm in relation to financial stability, resources that it holds, and its market. A comparison of the status of the firm relative to other industry players allows the company to determine its relative competitive position, determine areas of strengths and weaknesses, and develop a plan that capitalizes on the strengths and addresses its weaknesses to achieve a better position in the industry or market. (2002) describe strategies as the “unique and sustainable ways by which organizations create value” (). Businesses concerned with the creation of value need to work closely with employees and consumers since competitive advantage comes from the knowledge, experiences and competencies of employees and the quality of their relationships with consumers instead of incurring expenditures on non-material assets. Strategy involves the alignment of business units, support departments and employees to the needs and goals of the firm. Based on these definitions, strategic management involves three key processes, which are: 1) the creation of a mission and vision to communicate the reason and effective means of accomplishing business purposes; 2) establishment of a formal organizational structure to facilitate the accomplishment of goals; and 3) management of resources and relationships, with the fusion of these three processes reflected in corporate culture.
GOOD STRATEGY and CORPORATE CULTURE
Executing good strategy depends upon its ‘hard and soft’ infrastructures, with hard infrastructure pertaining to the organization of the various business units, departments and employees while soft structure refers to the culture and norms of the company that is geared towards the achievement of the goals of the firm (2007). Corporate culture links these infrastructures. Corporate culture refers to the core values, business principles, ethical standards, operating practices, approaches, and working environment of a business firm. The aggregate of these values, beliefs and principles translate into the attitudes and behaviors of employees charged with the execution of strategy. This means that if the corporate culture does not influence its employees to develop positive attitudes towards the efficient accomplishment of strategies or create an environment that encourages employees to recognize their important contribution to the fulfillment of the strategies of the firm, then the business would likely not have good strategies or fail to implement its policies.
Business firms should then develop a corporate culture that motivates efficiencies in strategic implementation. Generally, there are four classifications of corporate culture. First is strong versus weak cultures. On one hand, strong corporate culture is characterized by the accomplishment of business purposes through a clear and widely accepted philosophy, investment in the communication and reinforcements of values, development of shared and rooted values, establishment of a unified corporate character, and selection and nurturing of employees to facilitate motivation, cooperation and loyalty. A business culture becomes strong through the aggregate existence of three factors. One is the presence of a leader that embodies values and attitudes in line with consumer needs, competitive situations, and strategic objectives. Another is a leader and a business environment that encourages practiced commitment to the values and belief systems of the company. Still another factor is the communication and supporting action expressing the concern over the well-being of employees, shareholders and customers. On the other hand, weak corporate culture is characterized by the non-existence of a commonly applied core values and beliefs, non-observance of values and beliefs in the operations or performance of the business units, weak traditions, lack of a corporate identity or weak employee alignment with the corporate identity, weak cohesive or collaborative action among business units and departments, and lack of commitment to the values and practices of the company. (2007)
Comparison of strong and weak corporate cultures relative to the implementation of good strategies indicates that strong corporate culture facilitates the fulfillment of good strategies more than weak corporate culture. This is because strong cultures provide a working environment that provides a common value and belief system to motivate collaboration and commitment among business units and departments. This in turn allows a business firm to implement its strategies in the most efficient manner. General Electric is an example of a company with a strong corporate culture revolving around the core value of quality systems and collaborative relationships. This enabled the company to achieve its Six Sigma strategy of minimizing errors and delays in its processes resulting to high quality products. General Electric developed a result-oriented environment so that all its subsidiaries or business units hold a leading or second position in the industries where these operate. To support a result-oriented environment, General Electric encourages the extensive sharing of ideas, learning and best practices across its various global operations to achieve uniform, high quality standards. In dealing with problems, General Electric also applies the same collaboration and communicative approach in identifying, debating and determining solutions to problems. (2007)
Second is unhealthy corporate culture. One characteristic of this classification of corporate culture is the existence of a greatly politicized working environment so that problems are resolved and goals depend on the political influence of the majority perspective. The business organization engages in continuous power plays that end with the losing out of the weaker view, which is not necessarily the wrong perspective. Another characteristic is the negative attitude of the organization towards change due to the avoidance of risk and the failure to deviate from the present comfort zones. Still another characteristic is the too narrow or closed perspective of the organization that discounts learning from outside of the business. This results to the failure of the organization to learn about best practices applicable to the context of the firm, new management approaches, and innovative solutions. Finally, another characteristic is the disregard for ethical standards together with the excessive zealousness of the firm leaders in multiplying wealth. Concentration on financial aspects shifts firm focus from the hard and soft infrastructures. ( 2007)
An unhealthy corporate culture prevents the implementation of good strategies because the lack of a strong leader who should guide and integrate the contributions of the various business units or departments since the leaders are engrossed with ways of achieving exponential gains. Without a strong leader embodying business values and corporate identity, the performance of the rest of the organization would like be scattered and uncoordinated, which in turn prevents the implementation of good strategies. The lack of a uniform direction for the efforts of the members of the organization means that its outcomes would also be for various purposes according to the dominating political bloc. Lack of employee collaboration prevents communications and linkages that prevent an efficient strategic implementation.
Third is high-performance corporate culture, which as suggested by the name is geared towards high result standards. This is characterized by a number of traits such as a can do attitude, pride in achieving expected results, a high degree of accountability, and a results-oriented working environment. Moreover, this corporate culture also finds expression in the encouragement of the involvement and contribution of all members of the organization through the balance between having a room for the expression and development of creativity and initiative and the common goals of the business firm. The attitudes and behavior of employees working in a business firm with a high-performance corporate culture is towards pro-active action rather than reactive. The organization is in tune with imminent and expected issues resulting to the development of preventive plans. (2007) Having a high-performance corporate culture closely supports the implementation of a good strategy. This is because of the great concern given by this type of corporate culture towards the achievement of goals and the development of competencies, infrastructures and relationships to support efficient goal achievement.
Fourth is adaptive corporate culture, which is characterized by organization’s openness to change, innovation, risk-taking and experimentation. The organization encourages entrepreneurship and greatly rewards these efforts. It also allocates a significant percentage of its budget to innovation and research as well as the complete evaluation of new ideas developed. In this type of corporate culture, there is a genuine interest in the overall welfare of various stakeholders. Moreover, the firm also applies pro-active methods in implementing workable solutions. (2007) Business firms adhering to the adaptive corporate culture also implements food strategy because of the combination of financial, infrastructural and management support accorded to the exploration of new ideas and innovations, changes needed in the organization, and the solutions to impending issues. Through the integration of all these material and non-material resources, good strategy implementation follows.
Except for weak corporate culture, business firms can select from one or a combination of these corporate cultures depending upon its needs and objectives contexts. Nevertheless, regardless of the selected corporate cultural direction, business firms need to consider ethical and social responsibilities in implementing good strategies because these corporate culture elements affect employees and consumers alike.
GOOD STRATEGY and ETHICAL/SOCIAL RESPONSIBILITIES
Ethical and social responsibilities are elements of corporate culture that influence strategic success of businesses but are highly ignored by most business firms. Accrual of these elements resulted to the coining of the term corporate social responsibility, which pertains to the commitment of the company towards overall stakeholder well-being by implementing discretionary corporate practices and contributing some of its corporate resources.
(2001) enumerate the various benefits accruing to business firms from engaging in corporate social responsibility including: 1) risk expectation and management; 2) firm reputation improvement and management; 3) staff recruitment, development, and retention; 4) product and market competitiveness and positioning; 5) operational and cost savings; 6) supply chain efficiency; 7) change management enhancement; 8) social permission for community operations; 9) capital accessibility; and 10) relationship building with regulatory bodies.
These benefits imply that corporate social responsibility, which considers ethical and social aspects, can promote good strategy. This is because the degree of acceptance and commitment to ethical and social responsibilities can contribute to either the demise or success of strategic execution. A corporate culture of stakeholder accountability promotes the development of attitudes and behavior that fits first-rate strategy implementation by facilitating the integration of all resources and factors necessary in executing strategy. This finds expression in guidance given to employees regarding the results and behaviors constituting good strategy implementation. Corporate culture also encourages commitment to the vision, mission, targets and strategies of the company.
However, committing to ethical and social responsibilities as part of corporate culture to facilitate good strategy implementation is neither easy nor simple. This is because of the possible existence of problems since the company is addressing the interests of various stakeholders. In applying corporate social responsibility, it can happen that conflicting interests arise among stakeholders such as between board of directors and consumers. An example of a scenario that describes the problems that corporate social responsibility can face is in the area of resource allocation. The board of directors of the company may implement programs intended to multiply investments and expand the company but the purpose and means of accomplishing this program may have adverse effects on consumers and employees. Body Shop is a ‘green’ company that became popular as a staunch advocate of animal rights and rallied the EU to pass a regulation against animal testing. Through its commitment to this ethical and social responsibility, it gained a wide-range of followers from animal rights advocates to ‘green’ consumers. Recently, the board of directors sold Body Shop to L’Oreal, a cosmetics firm known for animal testing, because the firm stands to gain millions in capital infusion. This received strong reactions from consumers as well as the weakening of the corporate identity of the company that necessarily affects the alignment of employees with the core values and principles of the firm. Although, it is yet too early to determine the extent of impact of this decision, Body Shop needs to redefine its core values and build on a new identity. While Body Shop is yet to achieve this, reversal of its commitment towards the advocacy of animal rights affects its consumer base and employees. Consumers learning that it collaborated with a cosmetics company that tests its products on animals would be discouraged to continue firm patronage. Employees unguided by strong and clear core values would find it difficult to implement good strategies.
CONCLUSION
Good strategy implementation finds close links to corporate culture because the values, beliefs and principles of the company create an atmosphere of commitment and collaboration that ties individual outputs to an aggregate result directed towards the efficient and successful implementation of strategy. Ethical and social responsibilities constitute elements of corporate culture. This means that corporate culture is strengthened or enhanced through the firm’s engagement in ethical and social responsibilities that address the well-being of its stakeholder such as employees, shareholders and consumers. If a firm fails to assume and deviates from its existing ethical and social responsibility or accountability, it stands to lose any or all of its stakeholders. When this happens, the business firm would likely incur problems in implementing good strategy. To execute a winning strategy, business firms should consider corporate culture as a tool and the venue for strategy implementation. As such, ethical and social issues affecting stakeholders should also be given priority. Strategy implementation through corporate culture should be consistent with the ethical and social responsibility of the firm to consumers, employees and shareholders.
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