The character of a company's culture is a product of the core values and business principles that executives espouse, the standards of what is ethically acceptable and what is not, the work practices and behaviors that define “how we do things around here,” its approach to people management and style of operating, the “chemistry” and the “personality” that permeates its work environment, and the stories that get told over and over to illustrate and reinforce the company's values, business practices, and traditions. A company's culture is important because it influences the organization's actions and approaches to conducting business—in a very real sense, the culture is the company's “operating system” or organizational DNA.

The psyche of corporate cultures varies widely. Moreover, company cultures vary widely in strength and influence. Some are strongly embedded and have a big impact on a company's practices and behavioral norms. Others are weak and have comparatively little influence on company operations. There are four types of unhealthy cultures: (1) those that are highly political and characterized by empire building, (2) those that are change resistant, (3) those that are insular and inwardly focused, and (4) those that are ethically unprincipled and are driven by greed. High-performance cultures and adaptive cultures both have positive features that are conducive to good strategy execution.

A culture grounded in values, practices, and behavioral norms that match what is needed for good strategy execution helps energize people throughout the company to do their jobs in a strategy-supportive manner, adding significantly to the power of a company's strategy execution effort and the chances of achieving the targeted results. But when the culture is in conflict with some aspect of the company's direction, performance targets, or strategy, the culture becomes a stumbling block. Thus, an important part of the managing the strategy execution process is establishing and nurturing a good fit between culture and strategy.

A company's present culture and work climate may or may not be compatible with what is needed for effective implementation and execution of the chosen strategy. When a company's present work climate promotes attitudes and behaviors that are well suited to first-rate strategy execution, its culture functions as a valuable ally in the strategy execution process. When the culture is in conflict with some aspect of the company's direction, performance targets, or strategy, the culture becomes a stumbling block.

Changing a company's culture, especially a strong one with traits that don't fit a new strategy's requirements, is a tough and often time-consuming challenge. Changing a culture requires competent leadership at the top. It requires symbolic actions and substantive actions that unmistakably indicate serious commitment on the part of top management. The more that culture-driven actions and behaviors fit what's needed for good strategy execution, the less managers have to depend on policies, rules, procedures, and supervision to enforce what people should and should not do.

The taproot of a company's corporate culture nearly always is its dedication to certain core values and the bar it sets for ethical behavior. Of course, sometimes a company's stated core values and codes of ethics are cosmetic, existing mainly to impress outsiders and help create a positive company image. But more usually they have been developed to shape the culture. If management practices what it preaches, a company's core values and ethical standards nurture the corporate culture in three highly positive ways: (1) They communicate the company's good intentions and validate the integrity and above-board character of its business principles and operating methods; (2) they steer company personnel toward both doing the right thing and doing things right; and (3) they establish a corporate conscience that gauges the appropriateness of particular actions, decisions, and policies. Companies that really care about how they conduct their business put a stake in the ground, making it unequivocally clear that company personnel are expected to live up to the company's values and ethical standards—how well individuals display core values and adhere to ethical standards is often part of the job performance evaluations. Peer pressures to conform to cultural norms are quite strong, acting as an important deterrent to outside-the-lines behavior.

Leading the drive for good strategy execution and operating excellence calls for five actions on the part of the manager-in-charge:

1. Staying on top of what is happening, closely monitoring progress, ferreting out issues, and learning what obstacles lie in the path of good execution.

2. Putting constructive pressure on the organization to achieve good results and operating excellence.

3. Leading the development of stronger core competencies and competitive capabilities.

4. Displaying ethical integrity and leading social responsibility initiatives.

5. Pushing corrective actions to improve strategy execution and achieve the targeted results.