The ideologies and philosophies of top management as a team and of the CEO as the leader of the team have a profound effect on managerial policy and the strategic development process. According to Steiner: [The CEO’s] aspirations about his personal life, the life of his company as an institution, and the lives of those involved in his business are major determinants of choice of strategy. His mores, habits, and ways of doing things determine how he behaves and decides. His sense of obligation to his company will decide his devotion and choice of subject matter to think about.Rene McPherson, former CEO of Dana Corporation, incessantly emphasized cost reduction and productivity improvement: the company doubled its productivity in seven years. IBM chairmen have always preached the importance of calling on customers - to the point of stressing the proper dress for a call. Over time, a certain way of dressing became an accepted norm of behavior for the entire corporation. Texas Instruments’ ex-chairman Patrick Haggerty made it a point to drop in at a development laboratory on his way home each night when he was in Dallas to emphasize his view of the importance of new products for the company. Such single-minded focus on a value becomes an integral part of a company’s culture. As employees steeped in the corporate culture move up the ladder, they become role models for newcomers, and the process continues.

How companies in essentially the same business move in different strategic directions because of different top management values can be illustrated with an example from American Can Company and Continental Group. Throughout the 1970s, both Robert S. Hatfield, then Continental’s chairman, and William F. May, his counterpart at American Can, made deep changes in their companies’ product portfolios. Both closed numerous, aged can-making plants. Both divested tangential businesses they deemed to have lackluster growth prospects. And both sought either to hire or promote executives who would steer their companies in profitable directions. But similar as their overall strategies might seem, their concepts of their companies diverged markedly. May envisioned American Can as a corporate think tank, serving as both a trend spotter and a trendsetter. He put his trust in the advice of financial experts who, although lean on operating experience, were knowledgeable about business theory. They took American Can into such diverse fields as aluminum recycling, record distribution, and mail-order consumer products. By contrast, Hatfield sought executives with proven records in spotting new potential in old areas. The company acquired Richmond Corporation, an insurance holding company, and Florida Gas Company.

Importance of Value Orientation in the Corporate Environment

It would be wrong to assume that every firm wants to grow. There are companies that probably could grow faster than their current rates indicate. But when top management is averse to expansion, sluggishness prevails throughout the organization, inhibiting growth. A large number of companies start small, perhaps with a family managing the organization. Some entrepreneurs at the helm of such companies are quite satisfied with what they are able to achieve. They would rather not grow than give up complete control of the organization. Obviously, if managerial values promote stability rather than growth, strategy will form accordingly. For Ben & Jerry’s Homemade Inc., social agenda is more important than business expansion. When a top supplier from Tokyo called to offer distribution in Japan, a lucrative ice-cream market, the company said no because the Japanese company had no reputation for backing social causes. Of course, if the owners find that their expectations are in conflict with the value system of top management, they may seek to replace the company’s management with a more philosophically compatible team. As an example, a flamboyant CEO who emphasizes growth and introduces changes in the organization to the extent of creating suspicion among owners, board members, and colleagues may lead to the CEO’s exit from the organization. An unconventionally high debt-to-equity ratio can be sufficient cause for a CEO to be dismissed. Conflict over the company’s social agenda cost Ben & Jerry’s the services of a CEO, Robert Holland Jr. He resigned after less than two years on the job because he ran into opposition from the cofounders regarding no-fat sorbet because that meant buying less hormone-free milk from those virtuous dairy farmers. And when Holland tried to distribute products in France, a dispute arose when cofounder Ben issued a statement condemning France’s nuclear-testing program. In brief, the value systems of the individual members of top management serve as important inputs in strategy development.

If people at the top hold conflicting values, the chosen strategy will lack the willing cooperation and commitment of all executives. Generally, differing values are reflected in conflicts over policies, objectives, strategies, and structure. This point may be illustrated with reference to Johnson & Johnson, a solidly profitable company. Its core businesses are entering market maturity and offer limited long-term growth potential. In the mid-1980s, therefore, the company embarked on a program to manufacture sophisticated technology products. But the development and marketing of high-tech products require a markedly different culture than that needed for Johnson & Johnson’s traditional products. High-tech products require greater cooperation among corporate units, which is sometimes hard to obtain. Traditionally, Johnson & Johnson’s various businesses have been run as completely decentralized units with total autonomy. To successfully achieve the shift to technology products, the CEO of the company, James E. Burke, is tinkering in subtle but important ways with a management style and corporate culture that have long been central to the company’s success. Similar efforts are at work at Procter & Gamble: “Pressed by competitors and aided by new technology, P&G is, in fact, remodeling its corporate culture - a process bringing pain to some, relief to others and wonderment to most.”

Top Management Values and Corporate Culture Over time, top management values come to characterize the culture of the entire organization. Corporate culture in turn affects the entire perspective of the organization. It influences its product and service quality, advertising content, pricing policies, treatment of employees, and relationships with customers, suppliers, and the community. Corporate culture gives employees a sense of direction, a sense of how to behave and what they ought to be doing. Employees who fail to live up to the cultural norms of the organization find the going tough. This point may be illustrated with reference to PepsiCo and J.C. Penney Company. At PepsiCo, beating the competition is the surest path to success. In its soft drink operation, Pepsi takes on Coke directly, asking consumers to compare the taste of the two colas. This kind of direct confrontation is reflected inside the company as well. Managers are pitted against each other to grab more market share, to work harder, and to wring more profits out of their businesses. Because winning is the key value at PepsiCo, losing has its penalties. Consistent runners-up find their jobs gone. Employees know they must win merely to stay in place and must devastate the competition to get ahead. But the aggressive manager who succeeds at Pepsi would be sorely out of place at J.C. Penney Company, where a quick victory is far less important than building long-term loyalty. Indeed, a Penney store manager once was severely rebuked by the company’s president for making too much profit. That was considered unfair to customers, whose trust Penney seeks to win. The business style set by the company’s founder - which one competitor describes as avoiding “taking unfair advantage of anyone the company did business with” - still prevails today.

Customers know they can return merchandise with no questions asked; suppliers know that Penney will not haggle over terms; and employees are comfortable in their jobs, knowing that Penney will avoid layoffs at all costs and will find easier jobs for those who cannot handle more demanding ones. Not surprisingly, Penney’s average executive tenure is 33 years while Pepsi’s is 10. These vastly different methods of doing business are just two examples of corporate culture. People who work at PepsiCo and at Penney sense that corporate values constitute the yardstick by which they will be measured. Just as tribal cultures have totems and taboos that dictate how each member should act toward fellow members and outsiders, a corporation’s culture influences employees’ actions toward customers, competitors, suppliers, and one another. Sometimes the rules are written, but more often they are tacit. Most often they are laid down by a strong founder and hardened by success into custom. One authority describes four categories of corporate culture - academies, clubs, baseball teams, and fortresses.Each category attracts certain personalities. The following are some of the traits among managers who gravitate to a particular corporate culture.

    Academies
   -   Have parents who value self-reliance but put less emphasis on honesty and  consideration.
   -   Tend to be less religious.
   -   Graduate from business school with high grades.
   -   Have more problems with subordinates in their first ten years of work.
    Clubs
   -   Have parents who emphasize honesty and consideration.
   -   Have a lower regard for hard work and self-reliance.
   -   Tend to be more religious.
   -   Care more about health, family, and security and less about future income and
 autonomy.
   -   Are less likely to have substantial equity in their companies.
    Baseball  Teams
   -   Describe their fathers as unpredictable.
   -   Generally have more problems planning their careers in the first ten years  after
  business  school and work for more companies during that period than classmates
 do.
   -   Include personal growth and future income among their priorities.
   -   Value security less than others.
    Fortresses
   -   Have parents who value curiosity.
   -   Were helped strongly by mentors in the first year out of school.
   -   Are less concerned than others with feelings of belonging, professional growth,
 and future income.
   -   Experience problems in career planning, on-the-job decisions, and job  implementation.

An example of an academy is IBM, where managers spend at least 40 hours each year in training, being carefully groomed to become experts in a particular function. United Parcel Service represents a club culture, which emphasizes grooming managers as generalists, with initiation beginning at the entry level. Generally speaking, accounting firms, law firms, and consulting, advertising, and software development companies exhibit baseball team cultures. Entrepreneurial in style, they seek out talent of all ages and experience and value inventiveness. Fortress companies are concerned with survival and are usually best represented by companies in a perpetual boom-and-bust cycle (e.g., retailers and natural resource companies). Many companies cannot be neatly categorized in any one way. Many exhibit a blend of corporate cultures. For example, within General Electric, the NBC unit has baseball team qualities, whereas the aerospace division operates like a club, the electronics division like an academy, and the home appliance unit like a fortress. Companies may move from one category to another as they mature or as forced by the environment. For example, Apple started out as a baseball team but now appears to be emerging as an academy. Banks have traditionally exhibited a club culture, but with deregulation, they are evolving into baseball teams. In the current environment, the changes that businesses are being forced to make merely to stay competitive - improving quality, increasing speed, becoming customer oriented - are so fundamental that they must take root in a company’s very essence; that is, its culture. Cultural change, while difficult and timeconsuming to achieve, is nevertheless feasible if approached properly. The CEO must direct change to make sure that it happens coherently. He or she must live the new culture, become the walking embodiment of it, and spot and celebrate subordinates who exemplify the values that are to be inculcated. The following are keys to cultural change:

     -  Understand your old culture first. You can’t chart a course until you  know
   where you are.
     -  Encourage those employees who are bucking the old culture and have ideas  for a
   better one.
     -  Find the best subculture in your organization, and hold it up as an  example from
   which others can learn.
     -  Don’t attack culture head on. Help employees find their own new ways to
   accomplish their tasks, and a  better culture will follow.
     -  Don’t count on a vision to work miracles. At best, a vision acts as a  guiding principle
   for change.
     -  Figure on five to ten years for significant, organization-wide  improvement.
     -  Live the culture you want. As always, actions speak louder than words.

Trying to change an institution’s culture is certain to be frustrating. Most people resist change, and when the change goes to the basic character of the place where they earn a living, many people become upset. A company trying to improve its culture is like a person trying to improve his or her character. The process is long, difficult, often agonizing. The only reason that people put themselves through such difficulty is that it is correspondingly satisfying and valuable. As AT&T’s CEO Robert Allen comments: It’s not easy to change a culture that was very control oriented and top down. We’re trying to create an atmosphere of turning the organization chart upside down, putting the customers on top. The people close to the customer should be doing the key decision-making.