GBA 490 Test 3
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.
