mb0052-slm-unit-15

Strategic Management and Business Policy Unit 15

Sikkim Manipal University Page No. 405

Unit 15 Implementation:Behavioural and Values

Structure15.1 Introduction15.2 Caselet

Objectives15.3 Leadership: Strategic Role15.4 Leadership Styles15.5 Is Leadership Style Portable?15.6 Leadership Role of Top/Senior Management15.7 Organizational Culture15.8 Corporate Ethics and Values15.9 Corporate Politics and Power

15.10 Power, Politics, Strategy and Implementation15.11 Case Study15.12 Summary15.13 Glossary15.14 Terminal Questions15.15 Answers15.16 References

15.1 Introduction

The significance of behavioural factors in strategy implementation in anorganization is clearly understandable. Organizations may plan, formulate andimplement strategies, but, it is the individualsmanagers at different levelswho actually take appropriate actions involved in implementation. So, individual-related or individual-focussed factors or issues like leadership styles, personalethics and values, corporate politics, etc., become very vital. In addition to these,cultural environment in an organizationwork styles, beliefs, shared values,etc., is also equally important. Leadership plays a vital role in addition toorganizational culture and values. So, behavioural implementation of strategiesfocusses on:



A. Role of leadership Strategic role Leadership styles Role of top management

B. Organizational culture, values, politics Organizational culture Business ethics and values Corporate politics and power

We shall analyse each of these factors below. In analysing these factors,we shall discuss changing roles and styles of leaders, cultural web, strategyculture relationship, cultural barriers to strategy implementation, strategysupporting culture, organizational ethics, personal values of managers, corporatepolitics, corporate power equations, etc.

15.2 Caselet

The quality and style of a companys leader is very important in determiningits growth and sustainability. Wipro was a small insignificant vegetable oilcompany in 1947, which grew into a multinational conglomerate in the 21stcentury. Wipro Technologies, one of the largest software companies in India,is headed by Azim Premji (Premji), whose leadership is characterized bysound values, integrity and professional will. It is these qualities that havedriven Premji to churn Wipro from a $2 million company to a $1.76 billionone, serving customers across the globe. Premjis sharp strategic visionand crisp communication skills led his team to strive for excellence. He hasbeen known for his modesty, simplicity and non-extravagance.Source: J. Shalom J and Ravi L (2009), Wipros Azim Premji: Level 5 LeadershipStyle? Available at http://www.ibscdc.org/Case_Studies/HRM/OB0021.htm

ObjectivesAfter studying this unit, you should be able to:

Analyse the role of leadership in strategy implementation Discuss whether leadership style is portable Analyse the role of organizational culture in implementation of strategy



Focus on the role of business ethics and values in implementation Appreciate the role of corporate politics and power

15.3 Leadership: Strategic Role

We had highlighted the critical role of leadership in turnaround situations in Unit9. We had also discussed the role of CEO in the strategic management processin Unit 2. Be it a crisis or turnaround situation, normal times or good times, theleader plays a pivotal role in the functioning and performance of everyorganization. For the manager, leadership is the focus of activity through whichthe goals and objectives of the organization are accomplished.1 Good or greatleaders lead an organization to strategic success, and bad leaders can beinstrumental for the downslide or closure of companies.

A leader performs two strategic roles. First, he is the architect of astrategyinnovates, conceives, plans and formulates strategy ; second, he isthe implementor of strategyinitiates action and induces/drives the employeesinto operations. Successful performance of these two roles presumes manycharacteristics or qualities of a leader. King (1990) has enunciated 10 suchcharacteristics or factors (his original enunciation has nine factors) in relation tostrategy formulation, strategic direction and implementation. Many strategyanalysts agree with him that a leader should

Be a visionary, willing to take risk and be adaptable to change; Develop new capabilities and qualities to perform effectively; Exemplify the goals, values and culture of the organization; Be clearly aware of the environmental factors affecting the business

of the organization; Pay attention to and encourage strategic thinking and intellectual

activities; Adopt a collective view of leadership in which leaders influence is

dispersed across all levels of the organization; Lead by empowering employees and put an increasing emphasis

on statesmanship; Adopt a strong perspective to build subordinates skills and confidence

to make them change agents;



Facilitate transformation of followers into leaders even at lower levels;and

Delegate authority and put emphasis on innovation.2

Self-Assessment Questions

1. A leader implements the strategy formulated by others. (True/False)2. A leader should not delegate authority. (True/False)

15.4 Leadership Styles

Leadership style is a way or pattern of behaviour, which a leader adopts inmanaging the affairs of the organization directing and motivating managersand staff for achievement of organizational objectives. Such definition showsthat leadership styles can be many and varied. A question, therefore, arises asto which is the most appropriate leadership style. A straightforward answer tothis is always difficult because leadership styles depend on organizationalconditions and business/strategic situations. In fact, most leadership styles aresituational. Contingency theories on leadership support this view. Khandwalahas studied leadership styles in a cross-section of organizations. Based on hisstudy, Khandwala distinguishes between leadership styles based on five majorcharacteristics or dimensions. These are presented in Table. 15.1.

Table 15.1 Leadership dimensions and styles

Base/Dimension Style/Characteristics

Risk taking Willingness to take high-risk, high-return decisions Technocracy Use of planning techniques and decision making by

technically qualified persons Organicity Flexibi lity and adaptability in organizational

structuring Participation Team management approach involving managers

at different levels Coercion Authoritarian use of fear and domination by top

management

Source: Adapted from P Khandwala, Some Top Management Styles: Their Contextand Performance, Organization and Administrative Science (Winter, 1977), 2125.



Leadership styles are influenced by environmental factors as shown inthe table, but, styles must relate to organizational strategy. Leadership rolesand styles are, in fact, designed to formulate and implement strategy. As wehad mentioned in Unit 7, such strategies are formulated taking into accountgiven environmental conditions. Styles would also depend on the type of strategyfor effective implementation and success. Leadership styles which suit stabilitystrategies may not be appropriate for growth or diversification strategies orcorporate restructuring or turnaround strategies. Similarly, leadership styles whichmay be most suitable for managing internal change (crisis) would not beapplicable for pursuing or implementing growth or diversification strategies. So,there are three interactive but, different factors: style, strategy and environment.Strategy-environment combination determines leadership styles.

15.4.1 Leadership Styles in PracticeIf we analyse the leadership styles of the global and the Indian CEOs, we wouldfind that each CEO has a distinctive style of his/her own. These styles areinfluenced by environmental conditions and they all relate to organizationalstrategies; but, there is a uniqueness to the style of each of these leaders whichmake him/her successful and, also exemplary. This is true of great global CEOslike Lee lacocca, Jack Welch, Bill Gates, Akio Morita, L N Mittal and IndianCEOs like Dhirubhai Ambani, Ratan Tata; Aditya Birla, Rahul Bajaj, Azim Premji,N R Narayana Murthy, B L Munjal and many others. The predominant styles ofsome of these CEOs are mentioned below.

Jack Welch : Building on strength; entrepreneurial,participative.

L N Mittal : Highly entrepreneurial, highly aggressiveDhirubhai Ambani : Highly entrepreneurial and innovativeAditya Birla : Participative, family approachRatan Tata : Democratic temperament, delegates authorityRahul Bajaj : Friendly and philosophical, believes in level

playing fieldAzim Premji : Focus on developing peoplecreating leadersN R Narayana Murthy : Constantly aspires for more, blends

professionalism with simplicitySome studies suggest that, in the Indian context, a purely authoritarian or

a purely participative style may not be effective. Instead a nurturant-task style



can be more relevant and appropriate. Nurturant-task style means a combinationof tasks, responsibilities and concern for people/subordinates (nurturant), and,is directive as well as paternalistic in approach.3 Maheswari (1980) has studiedthe relationship between decision styles and organizational effectiveness inIndian corporates. He observes that most of the Indian organizations are neitherauthoritarian nor highly participative. The predominant style is consultation withlimited participation, rather than joint decision making or company-wideparticipation. Organizational effectiveness is positively correlated withentrepreneurial style and negatively correlated with bureaucratic style of decisionmaking.4

15.5 Is Leadership Style Portable?

Nohria and others (2006) have researched on a very interesting subject: Isleadership or leadership style portable? Or, to put it in another way: Will a leader,successful in one organization, be necessarily successful in another company?The authors studied job switching of 20 executives of GE (who left the companybetween 1989 and 2001) to become chairmen, CEO or CEO-designates ofother companies. These companies include some of the big international nameslike 3M, Fiat and Home Depot. GE was chosen because the company is widelyregarded in the US as one of the best talent generators.

The authors conducted their analysis of CEO/leadership portability in termsof four different types of human capital: strategic human capital, industry humancapital, relationship human capital and company-specific human capital. Strategichuman capital refers to skills or capabilities required to control or manage differentstrategic situationscost control, competitive threat or fierce competition, newproduct development, etc. Strategic capability or strategic human capital maybe the most portable. Industry human capital pertains to skills and capabilitieswhich are successful in one particular industry, but need not be transferable toanother industry. GE top executives who moved to industries which were quitedifferent from GE businesses were found generally ineffective. Relationshiphuman capital, which may also be called social capital, relates to skills,relationships and understanding an executive develops in course of workingwith his/her team or colleagues, and, a manager would be always moresuccessful in a new job or company if he/she brings along with him/her some ofhis/her former colleagues or team members. Lee lacocca did this when he joinedChrysler. Company-specific human capital refers to skill, knowledge, culture,systems, procedures, informal processes, etc., which exist in a company and,



are unique to particular organizations and, therefore, are least portable ortransferable.

Based on their study of the selected GE executives in terms of the fourtypes of human capital, Nohria et al. have come to some interesting findingsand conclusions about leadership portability or transferability. These aresummarized below:

(a) Certain skillsmostly company-specific oneswill not be relevantto the new job and will have to be unlearned, which takes time.

(b) The more closely the new environment (the company and thebusiness) matches the old environment, the higher the chances ofsuccess of the portable managers.

(c) The new company should be prepared to make necessary changesto allow the newcomer to succeedchanges in systems, proceduresbusiness portfolios, hiring a new team, etc.

(d) The efforts of CEOs/leaders to replicate their performances in newjobs may have only mixed success.

(e) Even the best management talent (CEO/leader) may not be portableif it does not match the new environment.5


3. Leadership _________ is a way or pattern of behaviour, which a leaderadopts in managing the affairs of the organization.

4. Skills or capabilities required to control or manage different strategicsituations are referred to as _________.

5. Skills or capabilities required to control or manage different strategicsituations are referred to as ________.

6. Skills, relationships and understanding an executive develops in courseof working with his/her team or colleagues are referred to as _______.

15.6 Leadership Role of Top/Senior Management6

The primary responsibility for providing effective strategic leadership is vestedat the top, that is, the CEO. The analysis so far has been directed towards this.It does not, however, mean that leadership rests only with the CEO. Other



strategic leaders include members of the board of directors, the top managementteam and senior managers including general manager (GM), vice-president(VP), assistant vice-president (AVP), etc. We had discussed the role of managersat different levels in the strategic management process in Unit 2. The focushere is on leadership styles or qualities of the top/senior managers and theimportant issues related to this.

The top/senior level managers are vested with the responsibility (underthe guidance/supervision of CEO) for formulating and implementing strategiesof the organization. The top/senior level managers take most of the strategicinitiative in the company, and, participate in the process of formulation of strategicplans. Strategic decisions by top/senior level managers influence, to a largeextent, how far corporate goals will be achieved. Top/senior managers alsohelp to develop appropriate organizational structures and systems for successfulimplementation of strategies. In Unit 12, we had analysed how organizationalstructure and reward systems affect implementation of strategies. The top/seniormanagers perform their leadership roles individually or, more often, as a team.

15.6.1 Top Management TeamIn most companies, the complexity of tasks, issues and challenges and theneed for diversity of knowledge and skills require strategic leadership by a teamof managers. Use of a team to make strategic decisions also helps to avoidpotential problems when these decisions are made by the CEO alone: managerialhubris.7 Research has shown that when CEOs begin to believe that they areunlikely to make errors, they are more likely to make poor strategic decisions.8Some felt that part of Carly Fiorinas (CEO, HP) problem was that she seemedto be the only spokesperson for HP, and her refusal to focus more on theoperational details of the business might have been the reflection of her celebritystatus. CEOs and top executives need to have self-confidence but they mustnot allow it to become arrogance and develop a false belief in their invincibility.To guard against CEO overconfidence and poor strategic decisions, companiesoften use the top management team to consider strategic opportunities andproblems, and to make strategic decisions. The nature and quality of the strategicdecisions made by a top management team influences, to a large extent, thecompanys ability to innovate and initiate effective strategic management andchange.

The top management team should be, and usually is, heterogeneous incomposition. A heterogeneous team consists of top/senior managers frommanufacturing, marketing, finance, etc., with varied experience and skills. The



more heterogeneous a top management team is, the more varied knowledgeand experience will be at its disposal for effective interaction and decision making.Different perspectives given by team members during meetings are likely toincrease the quality of the teams decision, particularly when a consensus orsynthesis emerges from diverse perspectives. Research has shown that greaterheterogeneity among top management team members generates healthy debatewhich often leads to better strategic decisions, implementation and organizationalperformance.

15.6.2 Top Management Team, CEO and BoardDiversity among team members may, however, lead to differences of views andalso conflicts. In general, the more heterogeneous and large the top managementteam is, the more difficult it may be for the team to effectively implementstrategies. Comprehensive and long-term strategic plans can be constrainedbecause of communication barriers or problems among top executives whohave different backgrounds of education, experience and skills. A group of topexecutives with diverse backgrounds may complicate the process of decisionmaking if it is not properly managed. In such situations, top management teamsmay fail to logically examine all the issues, opportunities and threats leading toa sub-optimal strategic decision. In such cases, the CEO must attempt to seekbehavioural integration among the team members and ensure that the membersfunction cohesively.

The characteristics of top management teams should be related toinnovation and strategic change. More heterogeneous top management teamsare likely to be associated positively with innovation and strategic changebecause of diverse capability inputs. The heterogeneity may force the team orsome of the members to think out of the box and thus be more creative inmaking decisions. Companies which need to change their strategies are morelikely to succeed if they have top management teams with diverse backgroundsand expertise. When a new CEO is hired from outside the industry, the probabilityof strategic change is greater than if the new CEO is from inside the organizationor inside the industry.9 Hiring a new CEO from outside the company or industryadds diversity to the team, but, the top management team must be managedeffectively to use the diversity in a positive way.

Board of directors may sometimes find it difficult to direct the strategicactions of powerful CEOs and top management teams. It often happens that apowerful CEO appoints to the board a number of sympathetic outside membersand/or inside members who are also in the top management team and report to



the CEO. In either case, the CEO exercises significant control over the boardsactions. Thus, the amount of discretion a CEO has in making strategic decisionsis related to the board of directors and how it oversees the CEOs actions andthe top management team. For poor performance of HP during Carly Fiorinasleadership, the board of directors had to share part of the blame.

Activity 1The predominant styles of eight leaders have been mentioned in the text.Choose any of these leaders and make a detailed analysis of his functioningstyle.


7. The primary responsibility for providing effective strategic leadership isvested at the top, that is, the CEO. (True/False)

8. The leadership of a company rests only with the CEO. (True/False)9. The more _______a top management team is, the more varied knowledge

and experience will be at its disposal for effective interaction and decisionmaking

10. Hiring a new CEO from outside the company or industry adds _______ tothe team.

15.7 Organizational Culture

Among the behavioural factors, next only to leadership style, organizationalculture plays the most important role in the strategy implementation process ofa company. Some people say culture is an abstraction; but it is the culturewhich shapes or moulds the soft Ss in an organization. In McKinseys 7-Sframework, culture represents the seventh Sshared values (or superordinategoals). Culture is not created by declaration; it is mostly unwritten or unstatedassumptions, values, beliefs, etc.

Different authors have attempted different definitions of organizationalculture. One such definition, which is quite representative, is given below:

Organizational culture is the set of assumptions, beliefs, values andnorms that are shared by an organizations members.10



The most important characteristic of organizational culture is sharing orcommon beliefs, values, attitudes, feelings, etc. Sathe (1985) has enunciatedfour components of sharing in organizational culture:

Shared things (e.g., the way people dress) Shared saying (e.g., lets get down to work) Shared action (e.g., a service-oriented approach) Shared feelings (e.g., hard work is rewarded here)11

J R D Tata, former chairman of Tata Group, has well illustrated corporatecultural dimensions while describing the house of Tata:

I would call it a group of individually managed companies united by twofactors. First, a feeling that they are part of a large group which carriesthe name of Tatas, and, public recognition of honesty and realiabilitytrustworthiness. The other reason is more metaphysical. There is aninnate loyalty, a sharing of beliefs. We all feel a certain pride that we aresomewhat different from others.12

15.7.1 Creating Strategy-supportive CultureIn analysing the relationship between culture and strategy, we had mentionedfive alternatives or possibilities. Two of the alternatives involved either adaptingstrategy implementation to the existing culture or changing the strategy itselfmidway through implementation. But, before changing any strategy, a companymust carefully assess the stakes involved in the strategy and the implication ofits change on corporate objectives, growth and profitability. If the strategy hasvery high stake like a major takeover or acquisition or a joint venture or mergerwith long-term organizational growth or diversification, the change of strategywill not be easy or will be at a high cost of organizational sacrifice. Therefore,change of strategy should be the option or compulsion of last resort. In fact, therecommended course for most of the situations is: mould the mindset of thepeople, remove the resistance to change and prepare the organization forstrategic transformation.

Many methods or techniques are available for changing an organizationsculture. These methods include effecting changes in organizational design andstructure, job reallocations, role modelling, training, transfer, promotion, etc.One such method is triangulation. Duncan describes triangulation as an effective,multimethod technique for analysing and changing a companys culture.Triangulation combines obtrusive observations, self-administered questionnairesand personal interviews to analyse the existing organizational culture. The



process of triangulation identifies the changes required to be made in acompanys culture to make it contribute to strategy.13

In addition to using methods like triangulation, it is also possible to identify,through experience and/or research, factors which are useful in positive linkingof culture and strategy. Schein has indicated many elements which can facilitatecreation of a strategy-supportive culture:

(a) Clear statements of organizational philosophy, mission, goals andobjectives;

(b) Organizational design, structure and hierarchy;(c) Organizational systems and procedures;(d) Designing of physical spaces, facades and buildings;(e) Criteria used for selection, recruitment, promotion, leveling off and

retirement of people;(f) Motivation, compensation and reward systems;(g) Stories, legends and myths about key people and events;(h) Role modelling, teaching and coaching by leaders;(i) What leaders pay attention to, measure and control;(j) Leaders reactions to critical incidents and organizational crises.14

15.7.2 Building a Sound Organizational CultureA sound organizational culture is always conducive to strategy formulation andimplementation. Efforts should, therefore, be made by companies to build astrong or sound cultural paradigm.

Strategists and consultants can develop an ambitious strategic plan; theorganization may have the necessary resource base; and, the top management/leadership may be keen on fast and efficient implementation. But, the managersand staff should be prepared to take on the challenge, i.e., the organizationshould be culturally geared up. Sumantra Ghoshal has observed that:

Worldwide, managers are recognizing that while process re-engineering,financial restructuring and strategic repositioning are important meansto corporate renewal, the bedrock of competitiveness ultimately lies inthe behaviour of people. To stimulate initiative, trust, commitment andcooperation within the organization and, in its external relationships,top level managers are increasingly recognizing that the shaping andembedding of organizational values are perhaps their most importantchallenges.15



Building sound organizational culture has been the concern of manycompanies. Researches have been conducted on this to evolve ways andmethods to develop an organizational culture which is positive, proactive, andsupports and strengthens strategy formulation and implementation. Collins andPorras (1994), based on their research, have suggested six guidelines fordeveloping a sound organizational culture:

(a) Preserve core ideologies and values while allowing change to takeplace;

(b) Stimulate growth and development through challenging objectives,purposeful evolution and continuous self-improvement;

(c) Encourage new ideas, thoughts, experimentation and acceptmistakes as lessons for the future;

(d) Allow diverse thinking and accept paradox while accepting or rejectingeither or arguments;

(e) Create alignment by translating core values into organizational goals,strategies and practices; and

(f) Grow new and trained managers internally by promotion from within.16


11. The set of assumptions, beliefs, values and norms that are shared by anorganizations members is called ________.

12. ________ is a method to change organizational culture that combinesobtrusive observations, self-administered questionnaires and personalinterviews to analyse the existing organizational culture.

13. A sound organizational culture is always conducive to strategy formulationand implementation. (True/False)

14. A change of strategy should be the first option for a company.(True/False)

15.8 Corporate Ethics and Values

Corporate culture governs, to a large extent, corporate ethics and values in anorganization. In fact, many feel that ethics and values are embedded in thecultural paradigm itself. We had mentioned about code of corporate governance



and corporate ethics in Unit 3. But, that was more with reference to corporateethics and values in the context of strategy formulation and implementation.

Organizational ethics may be generally understood to be of two kinds: (a)professional ethics or ethics in terms of observance of rules, procedures,systems, etc., and, (b) value ethics or ethics in terms of personal integrity ofindividual managers. In terms of personal values, three types of managers canbe distinguished: the moral manager, the immoral manager and the amoralmanager. The moral manager is fully committed to high standards of ethicalbehaviour both in his individual actions and in his perception of how thecompanys business should be conducted. The immoral manager is openly orclearly opposed to ethical behaviour in business, and willingly ignores ethicalprinciples in his management and decision making. The amoral manager believesthat business and ethics need not be mixed. He feels that it is not necessary tointroduce ethical considerations into his business practices and decisionsbecause business activity lies outside the purview of moral judgement. Corporateethics has three aspects or dimensions: development of the manager as a moralperson; influence of the organization as a moral environment; and, evolvingprocedures, regulations and actions to ensure a high level of ethical performancein general management and strategic operations and implementations.

15.8.1 Different Approaches to Business Ethics

In practice, different companies have different approaches to business ethics.It depends on their prioritization of ethical practices in conducting business.Some companies accord highest priority to the achievement of organizationalobjectives and business targets; ethical practices may have to be compromised.Some companies give almost equal priorities to both. Some companies givevery high priorities to ethics and values; management and strategic functionsare governed or dictated by this. According to Rossouw and Vuuren (2003),approaches adopted by various companies to deal with business ethics maytake one of the four forms. These are shown below in terms of increasing orderof ethical concern:

(a) Unconcerned or ethical non-issue approach

(b) Ethical damage control approach

(c) Ethics compliance approach

(d) Ethical culture approach



Unconcerned or ethical non-issue approach: This approach is adoptedby companies whose managers are either immoral or amoral. Such companiesbelieve that organizational objectives and business targets are the foremost.Business must grow; profit should be generated and maximized. Thesecompanies plan and adopt strategies which may follow general legal andbusiness principles, but may be ethically unsound. They are not really concernedwith the ethical issues in the conventional sense. Many feel that Mittal Steels(L N Mittal) international acquisitions fall in this category.

Ethical damage control approach: In companies in this category, managersare generally amoral, but, they fear adverse publicity or scandal. The objectivein this approach is to protect the company from adverse publicity which may bemade by unhappy stakeholders, external investigation agencies, threats oflitigation, punitive government action, etc. To avoid such a contingent situation,there is a need for rejecting unethical behaviour and introducing corporategovernance safeguards through window-dressing ethics. A company maygenerally ignore or condone questionable methods or actions which may helpto achieve business targets or improve its market position so long as it does notpublicly tarnish the image of the company.

Ethics compliance approach: In this approach, companies are consciousthat they should comply with ethical standards and requirements. The managersare either moral and view strong compliance to prescribed norms or methodsas the best way to enforce ethical practices; or, are unintentionally amoral butare highly concerned about their ethical reputation. Companies which adopt acompliance approach adhere to certain practices to demonstrate theircommitment to ethical conduct: make the code of ethics visible and a regularpart of communication with employees, form ethics committees to give guidanceon ethical matters, introduce ethics training programmes, lay down formalprocedures for investigating alleged ethical violations, conduct ethics audit tomeasure and monitor compliance and institute ethics awards for employees foroutstanding efforts for creating an ethical environment and improving ethicalperformance.

Ethical culture approach: In companies with this approach, ethical businesspractices are rooted in the organizational culture itself. The top management/CEO believes that high ethical principles embedded in the corporate cultureshould guide the managers and staff. The ethical principles contained in thecompanys code of ethics and/or corporate values are seen as integral to thecompanys identity and image. The prevalence and success of the ethical cultureapproach depends heavily on the personal integrity of the individual managers



who create and nurture the culture. It is clearly understood in such companiesthat corporate strategy should be ethical in all respects and ethical behaviourshould also be reflected in strategy implementation.17

15.8.2 Why Unethical Business Behaviour

In todays volatile business environment, it is an established fact that businessethics and values are under severe test. Companies are too busy chasing targetsand managers are under enormous pressure to perform. If the targets or resultsare achieved, the end justifies the means, i.e., certain amount of dubious orunethical business behaviour may be permissible if this helps in the achievementof physical or financial targets. Sometimes, managers themselves may be ofquestionable personal integrity and may adopt unethical practices for personalmotives or interests. If we analyse unethical business behaviour perceived invarious companies, this can be attributed to one or more of three major reasonsor factors:

(a) Company culture encourages unethical behaviour(b) Pressure on company managers to meet or beat targets(c) Pursuit of personal gain and other selfish interests by managers

15.8.3 Company Culture Encourages Unethical BehaviourThere are companies where corporate values are based on unethical foundation.The general work culture is immoral or, at best, amoral. The employees have acompany-approved licence to ignore or underplay conventional ethical normsor standards for pursuing operations and strategies which can significantlycontribute to financial gains of the company. Prompted by such corporateenvironment, even the otherwise ethical or moral managers may commit ethicalerrors and also succumb to opportunities and pressures to resort to unethicalpractices.

Almost a classical example of such companies is now infamous Enron.Enrons top management/leadership encouraged managers to be innovativeand aggressive in finding out what could be done to increase current revenuesand earnings of the company. The company hired the best and the brightestpeople in the industry/market. They were pushed to be creative, exploitopportunities in the environment and exhibit a sense of urgency in producingresults. Managers were encouraged to be entrepreneurial and, go all out tocontribute to corporate growth and profitability. Norms, procedures and ethicscould be underplayed for this. Employees got the messagepushing the limits



and achieving numbers is the key to survival. Managers had to devise cleverways to bolster revenue and earnings even if it meant violating existing policiesand norms and doing things without the knowledge of superiors. In fact, forgenerating profitable new business, out-of-ethics practices were evenappreciated and sometimes celebrated.

15.8.4 Pressure on Company Managers to Meet or Beat TargetsAn organizations cultural foundation need not be amoral or unethical as incompanies like Enron, but pressures to perform may force managers to lookbeyond ethics for the achievement of business targets. Targets can be of variouskinds: quarterly or annual sales targets, profit targets, production or outputtargets, inventory management/liquidation targets, dealer networking targets,etc. Towards the end of the financial year, the pressure builds for meetingspecified targets. Many times, annual compensation packages of managersare linked to organizational performance and their individual performances interms of targets. This puts additional pressure and the fear of loss of financialgains/incentives prompts the managers to bend the rules, norms and values.

Bristol-Myers Squibb (BMS), one of the worlds largest drug manufacturers,can be cited as an example. In BMS, the management engaged in differentkinds of manoeuvres to achieve revenue/profit targets. Number games weresaid to be common earnings management practice at BMS and, according toone former executive, this sent a huge message across the organization thatyou make your numbers at all costs. Some such cases were:

(a) Offering special discounts at the end of a quarter to distributors andlocal pharmacists to build stocks of certain prescription drugsapractice known as channel stuffing;

(b) Giving last-minute price increase signals to prompt/force purchasesand increasing operating margin;

(c) Building excessive reserves in the name of restructuring and thenreversing some of the financing or cost elements to bolster operatingprofit.18

15.8.5 Pursuit of Personal Gain and Other Selfish InterestsImmoral managers are characterized by their lack of personal integrity anddisregard of ethical values. Their only objective is to maximize personal gainand wealth. In many such cases, the organization and the manager/managersmay be working at cross-purposes. The organizational culture may be based



on sound ethical principles and the top management/leadership may notencourage managers to adopt unethical practices. It is the individual managerswho may be indulging in unethical or corrupt practices in disregard oforganizational norms and values. Sometimes, the top management itself maybe unscrupulous and highly corrupt and try to rip off the company financially.

One such glaring case has been reported by the Securities and ExchangeCommission (SEC) of the US. According to a complaint filed by the SEC, CEOof Tyco International, a well-known $36 billion manufacturing and servicescompany, conspired with the companys chief financial officer (CFO) to ransackmore than $170 million from the company. Tycos CEO and CFO were furthercharged with conspiracy to manipulate more than $ 430 million through sales ofcompany shares. They did this by using questionable methods to hide theiractions and indulging in deceptive accounting practices to distort the companysfinancial position during 19952002.

On the charges filed by the SEC, the prosecutor told the judiciary: Thiscase is about lying, cheating, and stealing. These people didnt win the jackpotthey stole it.19

15.8.6 Business Ethics in Indian Companies

In terms of ethical practices, companies in India, as in many other countries,can be classified as good and bad. We have just given the examples of Infosys,Amul, ICICI, etc., which are highly ethical. There are also companies which donot conform to strong ethical norms. We also have regulations like the MRTPAct and FEMA (earlier FERA) for curbing unethical business practices.

KPMG India conducted a survey of 280 top Indian companies forascertaining the level of business ethics in India. Study analysis and findingsare contained in Business Ethics Survey Report: India, 1999. Major findings ofthe study are summarized below:

(a) Mission statement: About 85 per cent of the companies surveyedare reported to have a mission statement. But, most of thesestatements focus on customer service and customer satisfaction.Very few companies emphasize ethical and moral issues such asorganizational values, integrity in business, harassment in theworkplace, etc.

(b) Company policy on ethics: Many companies have a documentedpolicy on ethics. But, implementation or reinforcement of a formalethical system is weak in most of these companies. Some companies



have a grievance cell; some companies conduct periodic workshopon business ethics, but nothing much beyond that.

(c) Ethical risk in the workplace: Many companies express concern aboutlack of ethics in the workplace. Some of the major ethical concernsexpressed by companies are: leakage or misuse of confidentialinformation (77 per cent); insider trading (48 per cent); receivinggifts or favours from suppliers (48 per cent); promoting personalinterest (47 per cent).

(d) External factors in corporate ethics: Most Indian companies feel thatethical problems in business arise because of external orenvironmental factors. Two major external factors are governmentpolicies/regulations and political interference.

(e) Training in business ethics: Majority of the companies feel that trainingin business ethics should be given high priority. Education in ethicsshould be incorporated in the formal management developmentprogrammes of companies.

(f) Strengthening ethical practices: Most Indian companies are of theopinion that, for strengthening ethical business practices, two factorsare important: first, professionalizing company management; and,second, minimizing state or governmental control and interference.20

Activity 2Conduct an analysis of business ethics among Indian companies, withparticular reference to a company of your choice.


15. Organizational ethics may be generally understood to be of two kinds _______ and _______ ethics.

16. In the _______ approach, ethical business practices are rooted in theorganizational culture itself.

17. _________ managers are characterized by their lack of personal integrityand disregard of ethical values.

18. In the ________ approach, companies are generally amoral, but, theobjective is to protect the company from adverse publicity.



15.9 Corporate Politics and Power

All corporate cultures include a political component (corporate politics), and, inthis sense, all organizations are, to a large extent, political in nature. Thispermeates to strategy formulation and implementation also. In Unit 11, we havediscussed the role of pressure groups and also about bargaining in final selectionor choice of strategy. These are actually manifestations of organizational politicsand power. Managers come from different social backgrounds with differentviews/opinions, professional or individual biases, etc. These managerscontinually try to position themselves in the organization so that they can establishtheir dominance or prevail over others with their opinions and decisions in allmanagement matters including strategy. Some tend to call this political view ofstrategy development. Political view of strategy development relates to theproposition that strategies develop as the outcome of process of bargainingand negotiation among powerful internal or external interest groups (orstakeholders).21

Power and politics are different, but, they play interrelated roles in corporatefunctioning and strategic management. Politics stems from power. Managersand strategists use different types of power to influence operations, choice ofstrategy and its implementation. We can distinguish five types or sources ofpower.

(a) Legitimate power: This is derived from positions managers hold inan organization. Managers can use their official positions to influencestrategy and decision making.

(b) Expert power: This emanates from a managers knowledge,competence and expertise acknowledged by others in theorganization.

(c) Referent power: This arises from personality and charisma ofmanagers, and their ability to use these to create liking amongsubordinates and peers.

(d) Reward power: This is derived from the ability of managers (partlybecause of legitimate power) to reward outcomes or results.

(e) Coercive power: This is based on the ability of managers (derivedfrom their positions) to penalize or punish non-performance ornegative results.22



As mentioned above, politics stems from power, and, it is concerned withthe use of power in different forms in organizational matters. Corporate politicsmay be defined/described as the carrying out of activities not prescribed bypolicies for the purpose of influencing the distribution of advantage within theorganization.23 In more clear terms, this means seizing, holding, extractingand executing of power. The nature of organizational structure itself createsconditions for corporate politics. The organizational structure (some call it apower structure) creates hierarchy, positions and relationships; and, this leadsto ambitions, coalitions and conflicts among managers. This happens becausematerial benefits, promotions, career growth, prestige, ego, etc., are involved.We can put it like this:

The who gets what (politics) is endemic to every organization regardlessof size, function or character of ownership. Furthermore, it is to be found inevery level of the hierarchy; and, it intensifies as the stakes become moreimportant and the area of decision possibilities greater.24


19. The ________ view of strategy development relates to the propositionthat strategies develop as the outcome of process of bargaining andnegotiation among powerful internal or external.

20. _______ power emanates from a managers knowledge, competenceand expertise acknowledged by others in the organization.

15.10 Power, Politics, Strategy and Implementation

A common thinking is that power and politics have adverse or negative effectson company operations and strategies, because, power and politics meaninfluence, manipulation and domination. But these can be viewed or used in apositive way also, or, at least, as significant factors in strategy making andimplementation. Mintzberg (1991) observes that corporate politics is neitherinherently good nor bad. Although, more often corporate politics may lead todivisiveness which is not healthy for an organization, but, there are times whenit can be strategically used to bring about changes. There are times when anorganization is emerging from a stage of complacency or stability or incrementalgrowth and entering into a phase of fundamental changes or discontinuousgrowth. Suggesting the need for creating political tension as well as harmony,



Mintzberg contends that the organization must ... pull apart before it can pulltogether again.25 Quinn (1980) observes that most strategic decisions andstrategic thrusts in large enterprises emerge as part of an evolving continuouspolitical consensusbuilding with no precise beginning or end.26

All this tends to indicate that a manager cannot effectively formulate andimplement strategy without being perceptive about company politics and beingadept at political manoeuvring.27 What is important or essential is that managersand strategists should know when to exploit power and politics, and, when toshun them and promote harmony for achievement of organizational objectives.Based on an understanding of the power structure, and, the nature of corporatepolitics, the strategists should master support for acceptable proposals andgarner similar support for discarding unacceptable or unviable ones.

Some strategic analysts feel that power and politics have a more criticalrole to play in strategy implementation than in strategy formulation. There is avalid reason behind such thinking. Strategies are mostly formulated (plannedand finalized) by the strategic planning group under the direction of the topmanagement/CEO. Many functional and operational areas may not beassociated with this. But, implementation invariably involves the major functionaland operational areas. Let us take the example of diversification strategysaylaunching of a new product. Three functional areasmanufacturing, financeand marketingwill play critical roles in implementation of this strategy alongwith the respective operational areas. Successful implementation of this strategynecessitates balancing of interests of all the functional and operational areasinvolved and, therefore, requires conflict resolutions (handling inter-functionaland interpersonal clash of interests), consensus building and managingunderstanding or coalitions. This can be achieved only through careful and,sometimes delicate, management of power and politics.

The strategists and managers responsible for implementation should,therefore, take cognizance of the dominant factors in organizational politicsand power. In other words, managers should make strategic use of power andpolitics in implementation. For this, 10 guidelines28 may be followed. Theguidelines recommend that managers should:

(a) Accept the inevitability of power and politics in organizationalfunctioning.

(b) View power and politics more as positive factors in strategicmanagement.



(c) Understand how an organizations power structure worksindividualsand groups whose opinions matter most and those who can beundermined.

(d) Be sensitive and alert to political signals emanating from differentparts of the organization.

(e) Generally adopt a team approach subject to organizational powerblocks.

(f) Know when to tread softly and rely on coalition management andconsenus building and, when to push through decisions and actionsfor results.

(g) Gather support for acceptable ideas and proposals and let theunacceptable ones die a natural death.

(h) Encourage and reward organizational commitment, and discourageand penalize negative attitude or actions.

(i) Promote and practice principled politics with openness and honestyand counter unprincipled and corrupt politics.


21. According to Mintzberg (1991), corporate politics is inherently bad.(True/ False)

22. Managers should accept the inevitability of power and politics inorganizational functioning. (True/ False)

15.11 Case Study

Hewlett-Packard: What is Right Leadership?Hewlett-Packard (HP) had two contrasting leaders (CEOs): Carly Fiorinaand Mark Hurd with almost diametrically opposite styles. Fiorina was avisionary, and her style or strategy was to provide long-term direction to thecompany rather than focus on immediate or short-term results. She wascharismatic and a well known leader.One of the biggest long-term strategic decisions taken by Fiorina was theacquisition of Compaq. Her decision was based on the directive of theboard of directors to change the course of the company and increase itslong-term competitiveness. The objective was to acquire market power



through integration of the two companies and be able to compete with thelikes of Dell Computer and IBM. This was a high profile acquisition andmany such M&As were not successful in the past. Therefore, Fiorinasdecision involved a high element of risk.

The developments after the acquisition exposed the risk factor. Even afterthree years of merger of Compaq with HP, the new HP could not competewith Dell or IBM. Some analysts think that Fiorina overlooked criticaloperating issues which had to be addressed, particularly to compete withthe super-efficient Dell.*During 2004, HP fell far short of its sale and profit targets. Because of thecompanys poor performance, the stock price fell and investors and otherstakeholders got worried. Many HP managers viewed Fiorinas style moreas a promotional role than as strategic leadership. Many felt that Fiorinahad a vision, but she was unable to secure necessary internal/organizationalsupport to fulfil the vision.** After being in HP for almost six years as CEO,Fiorina was finally fired.HP hired Mark Hurd as the new CEO. Mark was viewed as quiet, unassumingand un-Carly. His approach was traditional. He was a nuts-and-boltsoperation man with apparently no clear vision. Working on short-term targetsto reduce costs without a long-term vision was not considered a goodstrategy of recapturing HPs lost glory. Hurds style has been summarizedas executing, but without a long-term sense of direction.***For HP, some have suggested a combination of (styles of) Fiorina andHurd. This would blend a thinker with vision and a doer who excels inexecution and operational efficiency. Both styles may be required forstrategic leadership. But, it implies dual CEO. Is it possible in practice?* B Elgin, The Inside story of Carlys ouster, Business Week, (February 10, 2005).** .Ibid.*** P Burrows, and P Elgin, The Un-Carly Unveils His Plan, Business Week, June 16,2005.



15.12 Summary

Let us recapitulate the important concepts discussed in this unit: Organizations may plan, formulate and implement strategies, but, it is

the individualsmanagers at different levelswho actually takeappropriate actions involved in implementation.

Individual-related or individual-focussed factors or issues like leadershipstyles, personal ethics and values, corporate politics, etc., are veryimportant. In addition to these, organizational culturework styles, beliefs,shared values, etc.,is equally important or vital.

In an organization, the leader performs two strategic roles. First, he/sheis the architect of a strategyinnovates, conceives, plans and formulatesstrategy; second, he/she is the implementor of strategyinitiates actionand induces/drives the employees into operation.

Leadership style is way or pattern of behaviour which a leader adopts inmanaging the affairs of an organizationdirecting and motivatingmanagers and staff for achievement of organizational objectives.

Next only to leadership style, organizational culture plays the mostimportant role in the strategy implementation process of a company.The most important characteristic of organizational culture is sharing orcommon beliefs, values, attitudes, feelings, etc.

Different companies adopt different approaches to business ethics. Itdepends on their prioritization of ethical practices in conducting business.

15.13 Glossary

Business ethics: A form of professional ethics that examines ethicalprinciples and moral or ethical problems that arise in a businessenvironment. It applies to all aspects of business conduct and is relevantto the conduct of individuals and entire organizations.

Leadership style: A way or pattern of behaviour which a leader adoptsin managing the affairs of the organization.

Organizational culture: The set of assumptions, beliefs, values andnorms that are shared by an organizations members.

Triangulation: A multimethod technique for analysing and changing acompanys culture that combines obtrusive observations, self-administeredquestionnaires and personal interviews to analyse the existingorganizational culture.



15.14 Terminal Questions

1. Discuss the major leadership styles, including the leadershio styles inpractice.

2. Explain how to create a strategy supportive culture. Discuss the varioussteps involved in this.

3. What are the different approaches to business ethics adopted by variouscompanies? Discuss in details.

4. Why does unethical business behaviour exist in many companies? Explainthe major reasons.

5. Discuss the state of business ethics in Indian companies. Analyse in termsof KPMG business ethics survey.

6. Discuss the roles of power and politics in strategy implementation. Focuson different thoughts on this.

15.15 Answers

Answers to Self-Assessment Questions

1. False2. False3. style4. strategic human capital5. Strategic human capital6. Relationship human capital7. True8. False9. heterogeneous

10. diversity11. Organizational culture12. Triangulation13. True14. False



15. professional, value16. Ethical culture approach17. Immoral18. Ethical damage control19. Political20. Expert21. False22. True

Answers to Terminal Questions

1. Leadership styles are influenced by environmental factors. Refer to Section15.4 for further details.

2. In the relationship between culture and strategy, two of the alternativesinvolved are either adapting strategy implementation to the existing cultureor changing the strategy itself midway through implementation. Refer toSection 15.7.1 for further details.

3. Different companies have different approaches to business ethics. Referto Section 15.8.1 for further details.

4. In todays volatile business environment, it is an established fact thatbusiness ethics and values are under severe test. Refer to Section 15.8.2for further details.

5. In terms of ethical practices, companies in India, as in many other countries,can be classified as good and bad. Refer to Section 15.8.6 for furtherdetails.

6. All corporate cultures include a political component. Refer to Section 15.9for further details.

15.16 References

1. Collins, J C, and J I Porras. 1994. Built to last: Successful Habits ofVisionary Companies. New York: Harper Business.

2. Groysberg, B, A Mclean, and N Nohria. Are Leaders Portable? HarvardBusiness Review, May, 2006.



3. Khandwala, P. 1977. Some Top Management Styles: Their Context andPerformance. Organization and Administrative Science, Winter.

4. King, A S. 1990. Evolution of Leadership Theory. Vikalpa. April-June.5. Rossouw, G J., and C J Vuuren. 2003. Modes of Managing Morality: A

Descriptive Model of Strategies for Managing Ethics. Journal of BusinessEthics, September.

Endnotes1 A D Szilagyi Jr, and M J Wallace, Jr. Organisational Behaviour and Performance, 2nd

ed., (Glenview, IL: Foreman and Company, 1980), 274.2 King, A S, Evolution of Leadership Theory, Vikalpa, 1990, 4354.3 Sinha, J B P, The Nurturant Task Leader: A Model of Effective Executive, ASCI Journal

of Management (Vol. 8), 1979, 109194 B L Maheswari, Decision Styles and Organisational Effectiveness, Vikas Publishing House,

1980, ix-x.5 B Groysberg, A N Mclean, and N Nohria, Are Leaders Portable? , Harvard Business

Review, (May, 2006).6 This section is largely based on M A Hitt, et al. (2007), 364-69.7 M A Hitt, et al. (2007), 365.8 M L A Hayward, et al., Believing ones own Press: The Causes and Consequences of

CEO Celebrity, Strategic Management Journal, 25, 2004.9 Y Zhang, and N Rajagopalan, Explaining the New CEO Origin: Firm versus Industry

Antecedents, Academy of Management Journal, 46, 2003.10 C O Reilly, Corporations, Culture and Commitment: Motivation and Social Control in

Organization, California Management Review (Summer, 1989), 10.11 V Sathe, Culture and Related Corporate Realities (Homewood, III: Richard D Irwin, 1985),12 R M Lala, The Creation of Wealth (Mumbai: IBH Publishing, 1981), 198.13 For details, refer J Duncan, Organisational Culture: Getting a Fix on an Elusive Concept,

Academy of Management Executive (August, 1989).14 E H Schein, The Role of the Founder in Creating Organisational Culture, Organisational

Dynamics (Summer, 1983), 13-28.15 S Ghoshal, The Value of Values, Economic Times (Supplement) (March 5,

1999), 1.16 J C Collins and J I Porras. Built to Last: Successful Habits of Visionary Companies (New

York: Harper Business, 1994).17 G J Rossouw, and L J Vuuren, Modes of Managing Morality: A Descriptive Model of

Strategies for Managing Ethics, Journal of Business Ethics (September, 2003), 389400.

18 A A Thompson Jr, A J Strickland III, J E Gamble, and A K Jain, Crafting and ExecutingStrategy: The Quest for Competitive Advantage, 14th ed. (New Delhi: Tata McGraw-Hill,2006), 287.

19 Ibid. 286.



20Picking India Incs Conscience: The KPMG Business Ethics Survey, Financial Express,(October, 1999), 5.

21 This is discussed in D Buchanan, and D Boddy, The Expertise of the Change Agent:Public Performance and Backstage Activity (London: Prentice Hall, 1992).

22 J R P French, and B Raven, The Bases of Social Power, in Studies in Social Power, ed.D Cartwright (Ann Arbor, MI: University of Michigan Press, 1959), 15067.

23 A Sharplin, Strategic Management (New York: McGraw-Hill, 1985), 14124 J M Pfiffner, and F P Sherwood, Administrative Organization (New Delhi: Prentice Hall of

India, 1964), 311.25 H Mintzberg, The Effective Organization: Forces and Forms, Sloan Management Review,

32 (Winter, 1991), 546726 J R Quinn, Strategies for Change: Logical Incrementalism (Homewood, Illinois: Richard

D Irwin, 1980), 119.27 A Zaleznik, Power and Politics in Organisational Life, Harvard Business Review, (48)3,

4760.28 The guidelines are generally based on A Kazmi, Business Policy and Strategy Management

(New Delhi: Tata McGraw-Hill, 2005), 363.

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