Organizational culture can be a powerful force that clarifies what's important and coordinates the work of employees without the costs and inefficiencies of close supervision. Culture also identifies an organization's distinctive competence to external constituencies. To employ culture effectively as a leadership tool, managers must recruit and select employees who fit the firm's culture, socialize and train employees to share the firm's values, and reward employees whose efforts reflect and reinforce the firm's culture. In addition, managers must both act and be perceived as acting in ways that are consistent with the values they want employees to share.

Corporate values can motivate employees, but handled incorrectly they can do just the opposite. A recent study shows how the CEO of a small ad agency promoted strong values, only to see his staff misinterpret them and brand him as a hypocrite. Here's how to avoid a similar catastrophe.