Organisational strategy, culture and leadership

Introduction

Future challenges for business organisation will vary in so many ways compared to the past. Organisations in this 21st century are working on different ways of doing things to stay in the competition or beat it. In this fast moving and fluctuating economic environment, finding market opportunities and developing a competitive edge for any organisation is critical and it involves lots of executive time and effort. To ensure sustainable growth for any company, the leaders of any organisation should plan strategically and tactically to meet the needs and wants of the customer in the long run and increase the shareholder value.

In this context, leadership in modern organisations is a challenge in this dynamic social and cultural environment. As Elkin(2007) describes, strategies for organisational wellbeing is their ability to understand what should be done today and tomorrow to live up to customer expectations and prosper in the long run. Jonson et al (2008) argue that historical and cultural perspectives of an organisation are vital to understand the opportunities and the threats in the business environment. So, it is clear that the culture of an organisation is the central thesis of organisational strategy and implementation.

To ensure successful Strategy formulation, implementation and the evaluation/measurement, need right talent within the organisation. This is where leadership of the organisation comes handy. Giving employees a purpose, directing them willingly to it and creating a feeling of importance and ownership is very important to drive the organisation towards the super ordinate goal. Therefore, it is evident that leadership in an organisation is vital in organisational development and change to achieve strategic objectives. “Strategic leadership is the ability to shape the organisation’s decisions and deliver high value overtime, not only personally but also inspiring and managing others in the organisation.” – Lynch R (2009: 9)

Lynch’s clearly state about delivering high value or increasing shareholder value, ensuring individual and team performance in a stressed atmosphere where the change is the name of the game plan. Therefore, the author of this paper attempts to understand the concepts of organisational strategy, leadership and culture and how each of these concepts and theories can be applied in a practical scenario. Specifically, the author attempts to understand and clarify how organisational culture influence leaders in forming and performing organisational strategies.

Organisational Strategy

“Strategy is the direction and scope of an organisation over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations” – Johnson et al (2008: pg 3)

In simple term literature describes strategy as a long term plan, a course of action to achieve competitive advantage, a path to get from where they are to where they want to be. Elkin (2007) describes strategy as a process of positioning an organisation in its environment to achieve and sustain competitive advantage profitably. Whereas, McGee et al (2005) in their chapter on the concept of strategy, discussing Chandler’s (1963) definition on strategy concludes that it as the determination of basic long -term goal and objectives, and the action plan and the allocation of resources to achieve them. Mintzberg (1994) defines strategy as a set of interrelated decisions to achieve articulated results and Appelbaum (1991:pg.41) definition characterises strategy:

“As a coherent grouping of actions intended to gain distinct advantage over competition”

Why strategy

To achieve business stability and growth in this competitive business environment, even a sole trade organisation cannot do things on an adhoc basis. The Pereto Principle (80 – 20 rule) applies to products, customers and markets as well. Therefore, the leaders should plan to invest in 20% value adding markets. This requires logical and creative thinking in place and some extra effort from leaders. According to Jonson et al (2008), Elkin (2007) and Juran (1994), to ensure sustainable growth and to enhance shareholder value, today’s organisation should have a long term direction, and a course of action to bridge the competition.

Companies who make occasional improvements at a pedestrian pace cannot possibly hope to keep up with their competitors; they need to set ambitious goals – Juran (1994.pg 48)

Saying this Juran (1994) further emphasises the need for set goals to keep up with their competitors. Lafley ( 2009), chairman Procter & Gamble (P & G) says that they are purpose driven and values and principle led, he further state that is why they could navigate through two world wars, regional, local wars, periodic panics and recessions. Having formulated five main strategies (Product, Operations, social responsibility, employees, stakeholders – www.pg.com) for P&G, they emphasis the need for a long term direction for survival and sustainable growth and is a living example for a strategy driven organisation.

Basic Dynamics of Strategy

“Every organisation has to manage its strategies in main three areas;

1. The organisation’s internal resources;
2. The external environment within which the organisation operates;
3. The organisation’s ability to add value to what it does. Lynch R ( 2009:52)

And further, he describes five key elements of strategy which are needed for value addition and create the competitive edge over competitors; those are sustainability, process, competitive advantage, the exploitation of linkages between the organisation and the environment, vision. McGee et al (2005) introduces main three factors that control organisational plans, decisions and actions. In his model of basic dynamics in strategy, he explains that goals are derived considering external environment [PESTEL, Five forces Model (Porter, 1980)] and resources that an organisation has.

Strategy formulation, execution and evaluation are highly integrated with organisations external and internal environments. Johnson et al (2008) also takes kind of similar approach and believes them as basic dynamic of organisational strategy.

Leadership

“Leadership is fundamental aspect of strategic management and paramount in strategy implementation” – Sherman .et al (2007:pg.167)

Leadership is the ability to influence, motivate individuals and teams to get the contribution towards organisational strategy willingly. (House et al, 1997; Blanchard, 2007). These are the qualities that Nelson Mandela got even after being in the jail for 28 years (www.anc.org.za, New York Times, 1990), Mother Theresa was another example with a great passion to motivate and persuade people for the end state (nobelprice.org). Hughes and Beatty (2005) state that individuals and teams become strategic as they think, act, influence towards sustainable competitive advantage and he further emphasis that Strategic thinking, Strategic acting and strategic influencing are key skills for a leader. As an example, Martin Luther King’s “I have a Dream” changed the America’s direction as a country in terms of culture, strategy as well as leadership. It is his acumen as a leader, ability to shape decisions to deliver high value which created this atmosphere (Lynch, 2009). When looking at great leaders in the past and the future, it is clear that the self belief, confidence, courage, integrity and being yourself, with skills (Goffee and Jones, 2000) have guaranteed the sustainability as a nation or any formal or informal organisation.

Why leadership

In most of the organisations in today’s business context, interest of employees and employers are not aligned. As success highly depends on human capital readiness, it is leader’s responsibility and the ability to get the right commitment from all in the ship.

Doz and Thanheiser (2000) say that “Inventing a creative recipe and cooking a perfect dish still require much talent from leaders”. So, it is leaders’ responsibility to formulate strategy and create a strategic intent to drive the organisation for results. In any organisation existing structure is very important for employees as they are comfortable with the existing power bases, rewards and recognitions as well as the job security. Appelbaum (1991) emphasises that success of any strategic change is highly depend on the key people. So, adjusting the roles, responsibilities and accountabilities would be the challenge and leaders have to apply different types of leadership styles depending on employees’ educational, cultural, religious and social background as well as the organisational values and beliefs.

Leadership Styles

Leadership literature emphasises that there is no single effective style of leadership (Goffee and Jones, 2000; Gill, 2001; Higgs and Rowland, 2003). But Sherman et al (2007) points out that transformational leadership has been successful in getting the work done willingly while giving people a sense ownership. He further states that transformational leaders are change agents and cheer leaders in organisations. Sherman continues saying that transactional leaders enhance organisational performance by providing support and guidance to accomplish specific tasks or functions. Yukl (2006) calls transformational leadership as relationship oriented and transactional as task oriented where he points out that the appropriate mix of both depending on circumstances as situational leadership. Servant leadership takes place when leaders assume the position of servant in their relationship says Russell & Stone (2002). Autocratic route is rarely an acceptable option even in sole trader organisations, Nolan et al (2007). It is very clear that different authors argue in various ways and has come up with a range of suggestions for leading styles.

For example, Jack Welch approach to turn around GE is a prime example of varying leadership styles depending on the situation and the long existed organisational and the social climate. At the initial stage as a senior leader, he creates a vision and strategy to re-organise and drive GE towards success where he had to dismiss people, sell under performing units etc. During this time, he uses his positional power and authority and acted as an autocratic leader most of the time as a result he was nick named as “Neutron Jack”. Once he made GE lean and a flexible organisation without boundaries his approach was more democratic. Fujio Mitarai at Canon is also renowned for taking a similar kind of approach where as Paul Kennedy – a fictional HBR leader is renowned as a soft negotiator who is not willing to push for best deal, critics called him as a Laissez -faire leader. But nobody justifies his approach was wrong and is totally Laissez-faire approach (Strategic Direction, 2006) as Laissez-faire style is associated with dissatisfaction, unproductiveness and ineffectiveness.

Though Jack Welch was earlier called as a neutron, later he was recognised as a transformational leader who turns around GE as the most recognised and valuable organisation in the world. He proved that the right mix with all styles drives organisation towards success. Goffee and Jones (2000) state that being your self, with skills is important as a leader, so it is clear that successful leaders represent this argument introducing their own way of doing things. Prime example is Finnish mobile manufacturer Nokia, Jorma Ollila, who is a silent CEO but with high-performance. It is believed that he take servant to transformational style as and when required.

Organisational Culture

Deshpande and Webster (1989), define culture as a set of tacitly understood rules and procedures which guide employees behaviours depending on the situation where as Williams at el. (1993) describes it as common and stable beliefs, values and attitudes . Schein (2004) and Johnson et al (2008) share their view stating culture as a shared basic assumptions that has worked well in the past, so they are forced to think and feel same when it comes to same kind of situations and Johnson put this into his words;

“”Organisational culture is the basic assumptions and belief that are shared by members of an organisation that operate unconsciously and define in basic taken – for – grated fashion an organisation’s view of it and its environment”. – (Johnson et al, 2008: pg 189)

Therefore, in general culture can be defined as norms, values and belief or assumptions people in an organisation shares commonly and be guided by. For example, Fujio cho, the president Toyota says that their business practices are based on core principles created values, beliefs and business methods and he further states those have become competitive edge over the years. So, for Toyota, culture is more important and they drive organisation benefiting from their strong homogeneous culture (Liker, 2004)

Johnson, et al (2008) emphasis that individuals are surrounded by four different cultures, namely national/regional, organisational field, organisational and functional/divisional and he further states that the importance of understanding all four frames of culture in order to be successful in the business environment. McDonald’s approach to enter and operate in India is a prime example for this. McDonald’s menus in India do not contain pork or beef. Vegetarian and non – vegetarian food products are kept separate throughout the sourcing, supply chain, cooking and serving process, (cordthinking.wordpress.com). They have been successful in achieving their strategic objectives with the thorough understanding the all forms of cultures that Jonson explains.

Burt et al (1994) and Burt (2000), say that in some sectors corporate culture does not have say on performance but in others culture play a pivotal role in creating completive edge. Toyota, P&G are prime example for organisations which take edge from their strong cultures. He continues stating that understanding culture’s contingent value is important as it says when and when not to consider about culture in strategy formulation and leadership.

Composition of culture

Literature describes culture is a composite of values, belief, behaviours and norms which has been existence and accepted for a certain period of time (Schein, 2004; Liker, 2004; Burt, 2000). Where as Johnson, et al (2008) points out that paradigm is the base for culture and he explain in his below model that behaviours, belief and values are guided by this paradigm.

Types of cultures

Sherman et al (2007) introduces three different types’ cultures in organisations;

• Homogenous – characterised by consistency, consider organisation as one and they react to changes as a unit. Toyota’s culture is prime example for it as all employees’ values, behaviours and belief are guided by the culture.
• Differentiated – there are majority and minority subculture but the majority runs the organisation.
• Fragmented – small units maintain their unique cultural identities; a subculture will dominate only due to organizational necessity. It is not clear that which culture runs the firm. Trade unions and other formal and informal groups also have a say and influence on organisational decisions. Royal Mail trade union dispute and current organisational issue have been created through these cultural norms as they do not have a strong organisational consensus.

Strategy, Culture and Leadership

Schein E.H (2004) sees culture and leadership as two sides of same coin and he further says that leaders first create cultures and then groups and organisations.

“The culture often determines the degree of co-operation and commitment among the staff as well as the organisation’s strength of purpose and the CEO is usually responsible for setting this tone” – Appelbaum (1991:pg.50)

Therefore, strength of organisational purpose, employee commitment and co -operation are highly depending on organisational culture. As Appelbaum (1991) says, leader is the creator of it. To achieve sound business performance while exploring unprecedented business opportunities with highest risk ever, business managers plan strategically. P&G’s “connect & develop”, GE’s “work out” are transformational strategies from which they turn around their organisations. According to Appelbaum (1991), Leaders can ignore the culture, fit culture to strategy or fit the strategy to culture compromising performance. In GE’s and P&G’s case, strategic leaders were not ready to compromise on results they really cared about value addition in terms of customers, shareholders and for the society as whole. For example P&G’s A.G. Lafley has created a homogeneous culture which supports their strategy. Understanding the importance of culture for organisational well being he as the leader lives with it talks it all the time, in almost all reports such as sustainability, annual reports etc makes sure that they communicate their values, beliefs and the organisational purpose to all stakeholders and in that leadership creates the culture which supports to organisation’s end state. Schein (2004) says understanding culture is desirable for all but is a must for leaders. So, it is evident that Welch and Lafley live with this argument when driven their organisations to greatest states ever.

The Work-Out “in essence turned the company upside down says Welch so that the workers told the bosses what to do. That forever changed the way people behaved at the company (www.1000ventures.com). Formulating sound organisational strategy, giving sense of ownership and creating the right cultural environment have been the key to winning leaders success at GE. In contrast to GE and PG, Toyota takes a different approach as they have a strong culture in built to the organisation. They train their leaders from inception to live with their values, and belief and to get the commitment from shop flow level to the board for their culture driven strategy. (Like, 2004; Appelbaum ,1991) further talks about the need of a right mix stating leadership is responsible for creating comprehensive aspirations and goals for all emphasising the need to blend aspirations with values to get the commitment to the organisational strategy.

Sherma.et al (2007) emphasises that creating the right culture to support strategy does not guarantee performance. According to him it is all about creating an organisational profile which consists of organisational culture, competitive method, market approach, leadership style and the structure.

Jack Welch at GE has taken this into consideration creating different profiles at different stages of the strategy execution at GE changing his styles of leading from Autocratic, transformational to servant changing organisational structure from hierarchical to a more flexible boundary less organisation. Practitioners argue that organizations can have sound strategies in place and well documented policies and procedures. But the success relies on how competent an organisation is to implement it.

“Many strategies fail due to poor implementation” – Mcdonald (1998.pg 458)

It is highly recognised that managing the knowledge workforce in this 21st century is critical and retention is a challenge with the unprecedented opportunities around. As McGee et al (2005) state in his basic dynamic of strategy it is very important to know what we have within (human capital, competencies, and other resources). In this context social and emotional intelligence of leaders come into handy. GE Welch accepts that this aspect of his leadership has been poor though he has been successful.

Therefore, it is still in debate what leadership style is best suit for organisational success and what strategy is best or how culture should be changed to support organisational strategy. But it is very clear, if a leader does not want to compromise on where they want to be, the organisation’s should formulate strategy and demand a cultural change. This is all about taking the challenge to deliver results. From formulation of strategy, implementation and to measurement of success leadership of any organisation pay a pivotal role. Any organisation capable of placing drivers in the right seats will ensure organisational success in the long run as those drivers are capable of creating the right profile for the organisation creating the right balance among leadership, culture and strategy.

Conclusion

Energy stems from a genuine belief from both leadership and self and focus, innovation and growth derived from organisational strategy, (Kipp, 2005). To ensure sustainable growth in this fast moving unpredictable business environment, it is vital to have these all elements in place. But the success depends on how competent the organisation in implementing their well defined plans (McDonald, 1998). In this context, organisational culture can act as a barrier or as a strong favourable factor for positive organisational changes. According to Drago (1996), culture can be used to focus on resources and activities for the set direction as IBM’s cultural emphasis is exceptional customer service, which organisation as a whole are driven and lived with.

Therefore, it is pivotal for any leader to have a cultural awareness in formulation, exaction and evaluation of strategy process for any organisation irrespective of their purpose of existence. Ultimately it is leader’s ability to strike the right balance between Strategy, leadership and culture to realise organisational vision ethically, Kaplan and Norton (2001).

References

• Appelbaum (1991), the strategic Management Model: A prescription (Rx) for the CEO, international Journal of Public Sector Management, Vol. 4 No. 1, pp. 41-57. MCB University Press.
• Blanchard, K.2007, Leading at a higher level, Blanchard leadership on high performing organisations, Prentice Hall, financial times.
• Burt, R.S (2000) financial times, mastering the strategy, the complete MBA companion in strategy “When is corporate culture a competitive asset?” Pearson Education Limited.
• Burt, R.S., Gabbay, S.M., Holt,G. and Morgan,P.(1994), ” Contingent organisation as a network theory, the culture performance contingent function,” Acta Socioloica, no. 37, pp. 345 – 70.
• Drago W.A (1996), Strategic plan intensity and competitive strategy, Management research news, Vol.19.No.11,pp.13 – 25
• Doz, Y. and Thanheiser, H. (2000) financial times, mastering the strategy, the complete MBA companion in strategy “The art and science of corporate renewal” Pearson Education Limited.
• Deshpande, R. and Webster, F.E (1989), “Organizational Culture and Marketing: Defining the Research Agenda,” Journal of Marketing, Vol. 53, pp. 3-15.
• Elkin P. M (2007), Mastering Business planning and strategy, “The power and application of strategic thinking”, 2nd edition, Thorogood Publishing.
• Goffee, R. and Jones, G. (2000), “Why should anyone be led by you?”, Harvard Business Review,
  September-October, pp. 63-70.
• Gill, R. (2001), “Towards and integrated theory of leadership, paper presented at EIASM leadership conference, Oxfords.
• House, R.J., Wright, N.S., and Aditya, R.N (1997), Cross cultural research on organisational leadership: critical analysis and proposed theory, In P.C. Early and M.Erez (Eds.), New perspectives on international/organisational psychology; San Francisco: New Lexington Press, pp. 535 – 625
• Higgs, M.J. and Rowland, D. (2003), “Is change changing? An examination of approaches to change and its leadership”, Henley Working Paper 0313, Henley Management College,
• Henley, available at: www: henleymc.ac.uk
• Hughes, L.R and Beatty, K.C (2005), Becoming a Strategic Leader, “Your role in your organisation’s enduring success”, Jossy- Bass
• Huczynski A.A & Buchanan, D.A ( 2007), Organisational Behaviour, 6th edition, Pearson education limited.
• http://cordthinking.wordpress.com/2009/06/28/mcdonalds-set-the-standard-for-indian-market-entry/ [accessed on 18th Oct 2009, 18.05)
• http://news.bbc.co.uk/1/hi/business/1530536.stm (assessed on 28th of October 2009, 19.57)
• http://www.anc.org.za/people/mandela.html (accessed on 27th of October 2009, 20.12)
• http://www.pg.com/innovatingsustainability/history/strategy-goals.shtml (accessed on 29thOctober 2009; 21.59)
• http://www.nytimes.com/1990/02/11/world/south-africa-s-new-era-mandela-go-free-today-de-klerk-proclaims-ending-chapter.html (accessed on 20th October 2009, 21.18)
• http://www.1000ventures.com/business_guide/cs_change-mgmt_ge_work-out.html (accessed on 20th October 2009, 20.12)
• Johnson, G., Scholes, K, and Whittington (2008), Exploring Corporate Strategy, Text and Cases, 8th Edition, Pearson education Ltd.
• Juran, J .M (1994), Managerial Breakthrough, A classic book on improving management performance, 2nd edition, McGraw Hill.
• Kipp, M. F (2005), Strategic Leadership in permanent whitewater, hand book of business Strategy, pp. 163 – 170
• Kaplan R.S and Norton D.P (2001), The Strategy Focused Organisation, ” How balance scorecard companies thrive in new business environment, Harvard business school press.
• Lynch R (2009), Strategic Management, 5th edition, Pearson Education Limited.
• Liker, J.K ( 2004), The Toyota way, 14 management principles form the world’s greatest manufacturer, McGraw – Hill.
• Limsila, K and Ogunlana, S.O (2008), Performance and leadership outcome correlates of leadership styles and subordinate commitment, vol.15, no. 2, pp.164 – 184.
• Lafley, A.G ( 2009), Business, A force for growth.. and a force for good, Speech transcript, committee for economic development, business statementship awards. http://pg.com/news/pdf/AGL_CED.pdf (accessed on 1st November 2009, 20.05)
• McDonald (1998), Stop Strategic Planning…..and create shareholder value, Management Decision, MCB university press, pp.456 – 459
• McGee, J., Thomas, H., Wilson, D (2005) Strategy analysis and Practice, McGraw – Hill Education.
• Mintzberg, H. (1994), The Rise and fall of strategic Planning, free Press, New York.
• New York Times (1990), http://www.nytimes.com/1990/02/11/world/south-africa-s-new-era-mandela-go-free-today-de-klerk-proclaims-ending-chapter.html
• Nobelprize.org, http://nobelprize.org/nobel_prizes/peace/laureates/1979/teresa-bio.html
• Nolan, E., Robertson, P., Rothwell, S. (2007), “Spiritual leadership: a changing management paradigm”, in Singh-Sengupta, S., Fields, D. (Eds),Integrating Spirituality and Organisational Leadership, Macmillan, New Delhi
• Russell, R.F & Stone, A.G (2002), A review of servant leadership attributes: developing a practical model, leadership and organisational development journal, 23/3, pp. 145 – 157.
• Sherman, H., Daniel, J., Rowley and Armandi, B.R (2007), Developing a strategic profile: the pre-planning phase of the strategic management, Business Strategy series, vol.8, no. 3, pp. 162 – 171.
• Schein E.H (2004) Organisational culture and leadership, 3rd edition, Jossey- Bass
• Strategic direction (2006), Leadership Styles at GE and Cannon, Jack Welch and Fujio Mitarai’s differing approaches, vol.22, no.11, pp. 15-18.
• Williams A., Dobson P., Walters M ( 1993), Changing Culture, “New organisational approach”, 2nd edition, Cromwell Press.
• Yukl, G. (2006), Leadership in organisations, 7th edition, Pearson education, Inc.