GBA 490 Test 3

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The Implied Social Contract:

"Its the right thing to do"

Why Corporate Cultures Matter to the Strategy Execution Process

-A culture that is well matched to the chosen strategy and the requirements of the strategy execution effort focuses the attention of employees on what is most important to this effort. -Culture-induced peer pressure further induces personnel to do things in a manner that aids the cause of good strategy execution. -A culture that is consistent with the requirements for good strategy execution can energize employees, deepen their commitment to execute the strategy flawlessly, and enhance worker productivity.

Integrated Social Contracts Theory effects on ethical standards

-Adherence to universal ethical norms takes precedence over local norms. -A local custom is not ethical if it violates universal ethical norms. -Application of codes of ethics should first follow universal standards with allowance for local ethical diversity and influence.

Six Sigma principles

-All work is a process. -All processes have variability. -All processes create data that explain variability.

How long does it take to change a problem culture

-Changing a problem culture is never a short-term exercise. -A sustained and persistent effort to reinforce the culture at every opportunity through word and deed is required. -It takes time for a new culture to emerge and prevail; it takes even longer for it to become deeply embedded. -Fixing a problem culture and instilling a new set of attitudes and behaviors can take 2 to 5 years

Five action steps that can be take to realize the value of TQM and Six Sigma initiatives are:

-Committing to total quality and continuous improvement -Fostering quality-supportive behaviors -Empowering all employees to improve quality -Using online systems to speed the adoption of best practices -Emphasizing the necessity for improved performance

Key Strategic Performance Indicators Tracked by Information Systems

-Customer data -Operations data -Employee data -Supplier data -Financial performance data

Benefits of information technologies

-Enable better strategy execution through data-based decisions -Strengthen organizational capabilities -Allow for real-time tracking of implementation initiatives and daily operations -Provide monitoring of empowered employee performance (electronic scorecards) -Build closer relationships with customers

Making a Compelling Case for Culture Change: Selling the change

-Explain why and how certain behavioral norms and work practices are obstacles to good execution of strategic initiatives. -Explain how new behaviors and work practices will produce better results. -If the need for cultural change is due to a change in strategy, cite reasons why the current strategy has to be modified.

Unethical Strategies and Business Behaviors

-Faulty Oversight and Self Dealing -Pressure for Short-term Performance -A Weak or Corrupt Ethical Environment

Strong-Culture Firm

-Has deeply rooted widely-shared values, behavioral norms, and operating approaches. -Insists that its values and principles be reflected in the decisions and actions taken by all company personnel.

Help enforce consistency in how strategy- critical activities are performed

-Improve the quality and reliability of strategy execution -help coordinate the strategy execution efforts of individual and groups throughout the organization

Unhealthy cultures that impede good strategy execution

-Incompatible subcultures -Insular, inwardly focused cultures -Unethical and green-driven cultures -Politicized cultures -Change-resistant cultures

A final word on leading the process of crafting and executing strategy

-It is difficult to separate leading the process of executing strategy from leading the strategy process. -Crafting, implementing, and executing strategy is a continuous process that requires much adjusting and fine-tuning of the strategy to fit changing circumstances. -The tests of strategic leadership are whether the firm has a good strategy and business model, whether its strategy is competently executed, and whether the firm is achieving its performance targets. -If these three conditions exist, then the firm has good strategic leadership and is a well-managed enterprise.

Weak-Culture Firm

-Lacks values and principles that are consistently preached or widely shared. -Has few or no traditions, beliefs, values, common bonds, or behavioral norms.

Causes of cultural change

-New or revolutionary technologies -Diversification into new businesses -Rapid growth of the firm -Merger or acquisition of another firm -Shifting internal conditions -New challenges in the marketplace

The implied social contract means a company will

-Operate ethically and legally -Provide good work conditions for employees -Be a good environmental steward -Display good corporate citizenship

Substantive Culture-Changing Actions

-Replace key executives who are stonewalling needed organizational and cultural changes. -Promote individuals who advocate for cultural shifts and can serve as a role model for the cultural behavior. -Appoint outsiders with the desired cultural attributes to high-profile positions. -Screening candidates for positions carefully, hiring only those who appear to fit in with the new culture. -Mandate that all personnel attend culture-training. -Design compensation incentives that boost the pay of teams and individuals.

Leading Strategy Execution Requires:

-Staying on top of what is happening and closely monitoring progress -Putting constructive pressure on the organization to execute the strategy well and achieve operating excellence -Initiating corrective actions to improve strategy execution and achieve the targeted performance results

Variations in Ethical Standards

-The use of underage labor -the payment of bribes and kickbacks, -relativism can result in multiple sets of standards, -the use of local morality to guide ethical behavior

A strong culture is developed by

-a founder or strong leader with strong values -commitment by the firm to ethical behavior

Making corrective actions successfully requires:

-a thorough analysis of the situation -good business judgement in deciding what actions to take -good implementation of the corrective actions

Ethics Code Litmus Test

-areas of ambiguity, -conflict or potential problem, -ethically objectionable action

Provide top-down guidance about how certain things need to be done

-channel individual and group efforts along a strategy-supportive path -align the actions and behavior of company personnel with the requirements for good strategy execution -Place limits on independent action and help overcome resistance to change

A company's stated core value and ethical principles

-foster a work climate where company personnel share common and strongly held convictions about how the company's business is to be conducted -provide company personnel with guidance about how to do their jobs steering them toward both doing things right and doing the right thing

The Visible Costs companies incur when ethical wrongdoing is discovered

-government fines and penalties, -civil penalties, -the costs to shareholders

The Internal Costs Companies incur when ethical wrongdoing is discovered

-legal and investigative costs, -providing remedial education and ethics training, -corrective actions, -admin costs to ensure future compliance

Well conceived policies and procedures

-provide top-down guidance about how certain things need to be done -help enforce consistency in how strategy-critical activities are performed -Promote the creation of a work climate that facilitates good strategy execution

Consequences when strategies fail the ethical litmus test

-sizable civil fines and stockholders lawsuits, -devastating image and public relations hits, -sharp stock price drops as investors loss confidence, -criminal indictments and convictions

An environmental sustainability strategy

-to protect the environment -provide for the longevity of natural resources -maintain ecological support systems for future generations -guard against endangerments leading to the ultimate destruction of the planet

The culture of an organization can be changed by

-top executive and upper management behaviors -ceremonial events to honor exemplary employees -physical symbols that represent the new culture

The culture of an organization can be changed by

-top executive and upper management behaviors -by ceremonial events to honor exemplary employees -physical symbols that represent the new culture

Managing for Continuous Improvement

-total quality management (TQM) -Best practices -Benchmarking -Process reengineering -Six Sigma quality programs

Drivers of Unethical Business Behavior

A culture that puts profitability and business performance ahead of ethical behavior.

One eight key features of a company's corporate culture is:

Actions and behaviors encouraged and rewarded

One of the five components of a Corporate Social Responsibility Strategy

Actions to enhance employee well-being and make the company a great place to work

One of the five components of a Corporate Social Responsibility Strategy

Actions to ensure the company operates honorably and ethically

One of the five components of a Corporate Social Responsibility Strategy

Actions to promote workforce diversity

One of the five components of a Corporate Social Responsibility Strategy

Actions to protect and sustain the environment

One of the five components of a Corporate Social Responsibility Strategy

Actions to support philanthropy, participate in community service, and better the quality of life worldwide

Guideline for designing effective incentive compensation systems

Administer the reward system with scrupulous objectivity and fairness.

One eight key features of a company's corporate culture is:

Atmosphere and spirit embodied in the firm's work climate

Guideline for designing effective incentive compensation systems

Avoid rewarding effort rather than results.

Six Sigma and New projects: DMADV

Define, Measure, Analyze, Design, and Verify

Existing Processes and Six Sigma: DMAIC

Define, Measure, Analyze, Improve, Control

A company is measured by three dimensions of performance

Economic (Profit), Social (People), and Environmental (Planet)

Guideline for designing effective incentive compensation systems

Ensure that the performance targets set for each individual or team involve outcomes that the individual or team can personally affect.

Whether business related actions is right or wrong in Ethical Universalism depends on

Ethical Standards

Changing a problem culture: Step 3

Explain why the current culture poses problems and make a persuasive case for cultural reform.

Drivers of Unethical Business Behavior

Faulty internal oversight allows self-dealing in the pursuit of personal gain, wealth, and self-interest.

Changing a problem culture: Step 4

Follow with visible, forceful actions, both substantive and symbolic, to ingrain a new set of behaviors, practices, and norms.

Guideline for designing effective incentive compensation systems

Have incentives that extend to all managers and all workers, not just top management.

Ethical Universalism

Holds that common understandings across multiple cultures and countries about what constitutes right and wrong give rise to universal ethical standards that apply to all societies, all firms, and all businesspeople.

Ethical Relativism

Holds that differing beliefs, customs, and behavioral norms across countries and cultures give rise to multiple sets of standards of what is ethically right or wrong.

One eight key features of a company's corporate culture is:

How managers and employees interact and relate to one another

One eight key features of a company's corporate culture is:

How the firm treats its stakeholders

Changing a problem culture: Step 1

Identify facets of the present culture that are dysfunctional and impede good strategy execution.

Management by walking around (MBWA)

Involves spending time with people at company facilities, asking questions, listening to their opinions and concerns, and gathering firsthand information about how well aspects of the strategy execution process are going.

Business Ethics

Is the application of general ethical principles to the actions and decisions of businesses and the conduct of their personnel.

Corporate culture

Is the meshing of shared values, beliefs, business principles, and traditions that imbues a firm's operating style, behavioral norms, ingrained attitudes, and work atmosphere.

Areas of Ambiguity:

Is what we are proposing to do fully compliant with our code of ethics?

Guideline for designing effective incentive compensation systems

Keep the time between achieving performance target and receiving the reward as short as possible.

One of the three techniques for winning sustained, energetic commitment of employees to the strategy execution process are

Linking employee rewards to strategically relevant organizational performance outcomes

Guideline for designing effective incentive compensation systems

Make financial incentives a major, not minor, piece of the total compensation package.

One eight key features of a company's corporate culture is:

Management practices and organizational policies

Ethics and Integrative Social Contracts Theory

Posits that the collective views of multiple societies form universal (first order) ethical principles that all persons have a contractual duty to observe in all situatuions

Middle-Ground approach

Prescribe enough policies to give organization members clear direction and to place reasonable boundaries on their actions; then empower them to act within these boundaries in pursuit of company goals.

One of the three techniques for winning sustained, energetic commitment of employees to the strategy execution process are

Providing Incentives and engaging in motivational practices that facilitate good strategy execution

Drivers of Unethical Business Behavior

Short-termism pressure to meet or beat short-term performance targets.

Changing a problem culture: Step 2

Specify clearly what new actions, behaviors, and work practices should characterize the new culture

One eight key features of a company's corporate culture is:

Strength of peer pressure to conform and observe norms

One of the three techniques for winning sustained, energetic commitment of employees to the strategy execution process are

Striking the right balance between rewards and punishment for individual performance

Sources of Ethical Standards

The School of Ethical Universalism, The School of Ethical Relativism, Integrated Social Contracts Theory

Possible adverse resource allocation outcomes

Too little funding or too much funding

One eight key features of a company's corporate culture is:

Traditions and stories and "how we do things around here"

One eight key features of a company's corporate culture is:

Values, principles, and ethical standards in actual use

Ethically objectionable action:

Will our stakeholders, our competitors, the SEC under the SOX act, or the news and social media view this action as ethically objectionable?

Ethics and Integrative Social Contracts Theory

Within contract, cultures or groups can specift locally ethical (second-order) actions

Corporate Social Responsibility (CSR)

a firm's duty to operate in an honorable manner, provide good working conditions for employees, encourage workforce diversity, be a good steward of the environment, and actively work to better the quality of life in the local communities where it operates and in society at large.

The moral case for an ethical strategy

a strategy that is unethical is morally wrong and reflects badly on the character of the firms personnel.

As a company's strategy evolves, an _____ culture is a definite ally in the strategy-implementing, strategy-executing process as compared to cultures that are resistant to change

adaptive

Business Process Reengineering

aims at one-time quantum improvement

Continuous Improvement (Kaizen)

aims at ongoing incremental improvements

The business case for ethical strategies

an ethical strategy can be both good business and serve the self interest of the shareholders.

Ambidextrous organizations

are adept at employing continuous improvement in operating processes but allowing R&D to operate under a set of rules that allows for exploration and the development of breakthrough innovations

Sustainable Business Practices

are those practices of a firm that meet the needs of the present without compromising the ability to meet the needs of the future.

What is necessary for culture-change efforts to succeed

competent leadership at the top

A company's culture is grounded in and shaped by its

core values and ethical standards

Business process reengineering uses

cross-functional teams, cutting-edge technology, and information systems to reset and refocus the organization's strategy

In a strong-culture company,

deeply rooted values and norms of behavior are widely shared and regulate how it conduct its business

Th more that organizational units use best practices in performing their work, the closer a company comes to achieving ___ and _____ strategy execution

effective; efficient

A company's values statement and code of ethics communicate expectations of how

employees should conduct themselves in the workplace

Total Quality Management (TQM)

entails creating a total quality culture, involving managers and employees at all levels, bent on continuously improving the performance of every value chain activity

The moral case

focuses on stakeholder, not just shareholder benefits

High-performance cultures

have a commitment to achieving stretch objectives and accountability

Adaptive cultures

have a willingness to accept change and take on challenges

Healthy cultures that aid good strategy execution

high-performance and adaptive

Financial rewards provide ____-_____ _____ when rewards are tied to specific objectives

high-powered; incentives

The purpose of using benchmarking, best practices, business process reengineering, TQM, and Six Sigma programs is to

improve the performance of strategy critical activities and thereby enhance strategy execution

Business process reengineering

involves radically redesigning and streamlining how an activity is performed, with the intent of achieving quantum improvements in performance

Total Quality Management (TQM)

is a long-term race without a finish in which success comes slowly in small steps forward (kaizen)

A best practice

is a method of performing an activity that consistently delivers superior results compared to other approaches

Management by waling around (MBWA)

is one of the techniques that effective leaders use to stay informed about how well the strategy execution process is progressing

Sustainability

is the relationship of a firm to its environmental and its use of natural resources

Short-termism

is the tendency for managers to focus excessively on short-term performance objectives at the expense of longer-term strategic objectives. It has negative implications for the likelihood of ethical lapses as well as company performance in the longer run.

Conflict or potential problem:

is this action in harmony with our core values?

Why is corporate culture important

it influences the firm's actions and approaches to conducting business.

Adherence to universal ethical norms takes precedence over

local norms

The key to creating a reward system that promotes good strategy execution is to

make measures of good business performance and good strategy execution the dominating basis for designing incentives, evaluating individual and group efforts, and handing out rewards

It is _____ best interest to dedicate considerable effort to establishing a corporate culture that encourages behaviors and work practices conducive to good strategy executions

managments

The unwavering standard for judging whether individuals, teams, and organizational units have done a good job must be whether they ______ or _____ performance targets that reflect good strategy execution

meet; beat

Business ethics are

not materially different from ethical principles in general because business actions must be judged in the context of society's standards of right and wrong.

Self-Dealing

occurs when managers take advantage of their position to further their own private interests rather than those of the firm

Socially responsible strategies that create value for customers and lower costs can improve company ______ and ______ ________ at the same time that they address other stakeholder interest

profits; and shareholder value

What is management most powerful tool for mobilizing organizational commitment to successful strategy execution and aligning efforts throughout the organization with strategic priorities?

properly designed reward structure

Ethics and Integrative Social Contracts Theory

provides a middle ground balance between universalism and relativism

Corporate social agendas that address only social issues may help boost a company's ________ for corporate citizenship but are unlikely to improve its ______ ________ in the marketplace

reputation; competitive strength

Incentive must be based on accomplishing the right ______, not on ____ performing assigned tasks

results; dutifully

Two motivational approaches a firm can take toward affecting employee performance are

rewards and punishment

Too little funding

slows progress and impedes the efforts of organizational units to execute their pieces of the strategic plan proficiently

A company's CSR strategy is defined by the specific combination of ______ _______ activities the company opts to support with its contributions of time, money, and other resources

socially beneficial

A company's operating budget must be both ____-____ and _____

strategy-driven; lean

To deeply ingrain the stated core values and high ethical standards, firms must turn them into

strictly enforced cultural norms

Two primary reasons for pursuing a sustainable CSR strategy in the firms value chain activities are

the moral case and business case

The first principle in designing an effective incentive compensation system is to

tie rewards to performance outcomes that are directly linked to good strategy execution and to the achievement of financial and strategic objectives

A local custom is not ethical if it violates

universal ethical norms

Application of codes of ethics should first follow ________ with allowance for local ethical diversity and influence

universal standards

Whether a business related action in right or wrong in Ethical Universalism is judged by

universal standards

Six Sigma quality control programs

utilize statistical methods to improve quality by reducing defects and variability in business processes

Too much funding

wastes organizational resources and reduces financial performance

The business case

which focuses on valuable competitive advantages gained from the CSR

Promoting good strategy execution

•Allocating ample resources to execution-critical value chain activities •Instituting policies and procedures that facilitate good strategy execution •Employing process management tools to drive continuous improvement in how value chain activities are performed •Installing information and operating systems that enable company personnel to carry out their strategic roles proficiently •Using rewards and incentives to promote better strategy execution and the achievement of strategic and financial targets

Intangible or Less Visible Costs of Unethical Behavior

•Customer defections •Loss of reputation •Lower employee morale and higher degrees of employee cynicism •Higher employee turnover •Higher recruiting costs and difficulty in attracting talented employees •Adverse effects on employee productivity •The costs of complying with harsher government regulations

Linking reward to achieving the right outcomes includes,

•Focus on and reward results, not effort. •Create a results-oriented work environment that focuses on what to achieve, not what to do. •Set strategically-relevant, specific, and measurable stretch performance goals that are difficult but achievable. •Link the performance goals of each individual in an organizational unit to the unit's goals. •Reward and recognize as success superior performance in accomplishing the goals.

The Business Case for CSR and Environmentally Sustainable Business Practices

•Increased buyer patronage •Reduced risk of reputation-damaging incidents •Lower employee turnover costs and enhanced recruiting and workforce retention •Increased revenue enhancement opportunities due to the use of CSR and sustainability •CSR and sustainability best serving long-term interests of shareholders

Harmful and unethical business actions and behaviors can lead to

•Increased public awareness of misdeeds and bad behavior by firms •Increased legislation and regulation to correct and punish firms •Refusal to do business with irresponsible firms

non monetary approaches to enhancing motivation

•Provide attractive perks and fringe benefits. •Give awards and other forms of public recognition. •Rely on promotion from within whenever possible. •Invite and act on ideas and suggestions. •Create a work atmosphere of caring and mutual respect. •State the strategic vision in inspirational terms. •Share the firm's critical information with employees. •Provide a comfortable working environment.

Policies and operating procedures facilitate strategy execution by:

•Providing top-down guidance regarding how things need to be done. •Helping ensure consistency in how execution-critical activities are performed. •Promoting the creation of a work climate that facilitates good strategy execution.

Strategy-Driven Budgeting: allocation of resources

•Screen resource requests carefully. •Approve only those that contribute to strategy execution. •Provide the level of resources necessary for the success of strategic initiatives. Shift resources to higher-priority activities where new execution initiatives are needed

Fostering Quality-Supportive behaviors

•Screening job applicants rigorously and hiring only those with attitudes and aptitudes that are right for quality-based performance •Providing quality training for employees •Using teams and team-building exercises to reinforce and nurture individual effort •Recognizing and rewarding individual and team efforts to improve quality regularly and systematically •Stressing prevention (doing it right the first time), not correction (instituting ways to undo or overcome mistakes)

Mobilizing the effort for excellence in strategy execution

•Treat employees as valued partners. •Foster an esprit de corps that energizes members. •Use empowerment to create a fully engaged workforce. •Set stretch objectives that require personnel to give their best in achieving performance targets. •Use benchmarking, reengineering, TQM, and Six Sigma tools to focus attention on continuous improvement. •Use motivational techniques and compensation incentives to inspire, nurture a results-oriented work climate, and enforce high standards. •Celebrate individual, group, and company successes.


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