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Chapter Thirteen:Chapter Thirteen:Strategic LeadershipStrategic Leadership

Chapter Thirteen: Chapter Thirteen: Strategic LeadershipStrategic Leadership

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The Strategic Management ProcessThe Strategic Management Process

Chapter 5: Bus.-Level Strategy

Chapter 6:Competitive Dynamics

Chapter 7:Corp.-Level

Strategy

Chapter 8:Acquisition & Restructuring

Chapter 9:International

Strategy

Chapter 10:Cooperative

Strategy

Strategy Formulation

Chapter 11:Corporate

Governance

Ch. 12: Org. Structure & Controls

Chapter 13:Strategic

Leadership

Chapter 14:Org. Renewal & Innovation

Strategy Implementation

StrategicActions

Ch. 1: Strat. Mgmt. & Com-petitiveness

Ch. 2: Strat. Mgmt . &

Performance

Chapter 3:The External Environment

Chapter 4:The Internal Environment

Strategic Competitiveness

Strategic Mission & Strategic Intent

Strategic Objectives & Inputs

Chapter 13:Strategic

Leadership

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Strategic LeadershipStrategic Leadership

Knowledge ObjectivesKnowledge Objectives1.1. Describe strategic leadership: differentiate Describe strategic leadership: differentiate

between strategic, visionary & managerial leadershipbetween strategic, visionary & managerial leadership2.2. Define top management teams & explain their efforts Define top management teams & explain their efforts

on firm performance, innovation & strategic changeon firm performance, innovation & strategic change3.3. Note the value of strategic leadership in deciding a Note the value of strategic leadership in deciding a

firm’s strategic direction & explain the strategic firm’s strategic direction & explain the strategic leaders’ role in exploiting & core competenciesleaders’ role in exploiting & core competencies

4.4. Describe the importance of strategic leaders in Describe the importance of strategic leaders in developing human capital developing human capital

5.5. Note the importance & use of organizational controlsNote the importance & use of organizational controls6.6. Define organizational culture, explain what must be Define organizational culture, explain what must be

done to sustain an effective one & what strategic done to sustain an effective one & what strategic leaders can do to emphasize ethical practice leaders can do to emphasize ethical practice

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Strategic Strategic Leadership PresumesLeadership Presumes• An ability to influence An ability to influence

those with whom one works those with whom one works

• The leader understands the The leader understands the emergent strategy process emergent strategy process

• A shared vision of what the organization is to beA shared vision of what the organization is to be

• Agreement among senior manger & board Agreement among senior manger & board members of opportunities and threatsmembers of opportunities and threats

• Visionary leadership that entails many Visionary leadership that entails many characteristics such as a willingness to take riskscharacteristics such as a willingness to take risks

• Managerial leadership that includes an intended Managerial leadership that includes an intended rational way of looking at the worldrational way of looking at the world

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and

Influences

Strategic Leadership and the Strategic Leadership and the Strategic Management ProcessStrategic Management Process

Strategic Vision / Intent Strategic Mission

Shapes the formation of

Formulation of Strategies Implementation of Strategies

Strategic Competitiveness / Above Average Returns

Yields

Successful Strategic Actions

Effective Strategic Leadership

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Managerial LeadersManagerial Leaders

• Adopt impersonal, passive Adopt impersonal, passive attitudes towards goalsattitudes towards goals

• View work as enabling process that involves View work as enabling process that involves some combination of ideas & people interacting some combination of ideas & people interacting to establish strategies & make decisionsto establish strategies & make decisions

• Relate to other people according to their role in Relate to other people according to their role in the decision making processthe decision making process

• Maintain a low level of emotional involvement in Maintain a low level of emotional involvement in these relationshipsthese relationships

• Influence only the actions & decisions of those Influence only the actions & decisions of those with whom they workwith whom they work

• Want stability & strive to preserve existing orderWant stability & strive to preserve existing order

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Visionary LeadersVisionary Leaders

• Shape ideas versus reacting to themShape ideas versus reacting to them

• Influence changes in the way people think Influence changes in the way people think about what is possible, desirable and necessaryabout what is possible, desirable and necessary

• Are concerned with ideas & relate to people in Are concerned with ideas & relate to people in intuitive & empathetic waysintuitive & empathetic ways

• More likely to make decisions based on values.More likely to make decisions based on values.

• Willing to invest in human capital & creating & main-Willing to invest in human capital & creating & main-taining effective culture to ensure long term viabilitytaining effective culture to ensure long term viability

• Are future-oriented & concerned with risk takingAre future-oriented & concerned with risk taking

• Want creativity, innovation and chaosWant creativity, innovation and chaos

• Strive to change the existing orderStrive to change the existing order

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Strategic LeadersStrategic Leaders

• A synergistic combination of A synergistic combination of managerial & visionary leadershipmanagerial & visionary leadership

• Manages the paradox created by the use Manages the paradox created by the use of managerial & visionary models of managerial & visionary models

• Establishes the context through which stake-Establishes the context through which stake-holders are able to perform at peak efficiencyholders are able to perform at peak efficiency

• Willing to make candid, courageous & yet Willing to make candid, courageous & yet pragmatic decisionspragmatic decisions

• Solicits corrective feedback from peers, Solicits corrective feedback from peers, superiors & employees about the value superiors & employees about the value of their difficult decisionsof their difficult decisions

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Want stability & Want stability & to preserve the to preserve the existing orderexisting order

Guide without a Guide without a strategic vision. strategic vision. Constrained by Constrained by values & by using values & by using explicit knowledgeexplicit knowledge

GuideGuide knowledgeknowledge creationcreation by by encouraging contradictory encouraging contradictory capabilities (e.g. individual, capabilities (e.g. individual, group, and organizational group, and organizational tacit & explicit knowledge)tacit & explicit knowledge)

Are comfortable Are comfortable handling Short-handling Short-term day-to-day term day-to-day activitiesactivities

Managerial Leaders Managerial Leaders Strategic LeadersStrategic Leaders Visionary LeadersVisionary Leaders

Define boundaries by useDefine boundaries by useof metaphors, analogies & of metaphors, analogies &

models to allow for a mixmodels to allow for a mix of of contradictory conceptscontradictory concepts

Want stability & Want stability & to preserve the to preserve the existing orderexisting order

Guide without a Guide without a strategic vision. strategic vision. Constrained by Constrained by values & by using values & by using explicit knowledgeexplicit knowledge

Are comfortable Are comfortable handling Short-handling Short-term day-to-day term day-to-day activitiesactivities

Want stability & Want stability & to preserve the to preserve the existing orderexisting order

Guide without a Guide without a strategic vision. strategic vision. Constrained by Constrained by values & by using values & by using explicit knowledgeexplicit knowledge

Are comfortable Are comfortable handling Short-handling Short-term day-to-day term day-to-day activitiesactivities

Manage the paradox Manage the paradox created by use of created by use of

managerial & visionary managerial & visionary leadership modelsleadership models

Control by social- Control by social- ization & sharing ization & sharing common norms, common norms, values & beliefsvalues & beliefs

Are not dependent Are not dependent on the organisation on the organisation for their sense of for their sense of

who they arewho they are

Are future-oriented Are future-oriented concerned with concerned with

risk-takingrisk-taking

Control by social- Control by social- ization & sharing ization & sharing common norms, common norms, values & beliefsvalues & beliefs

Are future-oriented Are future-oriented concerned with concerned with

risk-takingrisk-taking

Are not dependent Are not dependent on the organisation on the organisation for their sense of for their sense of

who they arewho they are

Control by social- Control by social- ization & sharing ization & sharing common norms, common norms, values & beliefsvalues & beliefs

Are future-oriented Are future-oriented concerned with concerned with

risk-takingrisk-taking

Are not dependent Are not dependent on the organisation on the organisation for their sense of for their sense of

who they arewho they are

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Managerial DiscretionManagerial Discretion

External EnvironmentIndustry StructureRate of market growthNumber & type of competitorsPolitical/Legal constraintsProduct differentiation Employee interaction

Organizational Characteristics

Resource availability

Size and ageCulture

Factors Affecting Factors Affecting Managerial DecisionsManagerial Decisions

Interpersonal skills

Tolerance for ambiguityCommitment to the firm

Aspiration levelSelf-confidence

Characteristics of the Manager

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Top management teams are Top management teams are comprised of key managers who comprised of key managers who are responsible for formulating and are responsible for formulating and implementing the organization’s strategiesimplementing the organization’s strategies

A top management team must also be able to A top management team must also be able to function effectively as a team in order to function effectively as a team in order to implement strategiesimplement strategies

A heterogeneous team makes this more difficultA heterogeneous team makes this more difficult

A heterogeneous top management team with A heterogeneous top management team with varied expertise and knowledge can draw on varied expertise and knowledge can draw on multiple perspectives when evaluating multiple perspectives when evaluating alternative strategies and building consensusalternative strategies and building consensus

Top Management TeamsTop Management Teams

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Strategic LeadershipStrategic Leadership• Chief executive officers can gain so much Chief executive officers can gain so much

power that they are virtually independent power that they are virtually independent of board of directors oversight of board of directors oversight

• This is especially true when the CEO is also chair This is especially true when the CEO is also chair of the board of directors (CEO / Board Chair Duality)of the board of directors (CEO / Board Chair Duality)

• The most effective forms of governance share power The most effective forms of governance share power & influence among the CEO & board of directors& influence among the CEO & board of directors

• CEOs of long tenure can weild great powerCEOs of long tenure can weild great power

CEO / Board Chair DualityCEO / Board Chair DualityHas been blamed for poor performance Has been blamed for poor performance & slow response to change. & slow response to change.

Occurs most commonly at large firmsOccurs most commonly at large firms

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Determines Strategic Direction

Developing a long-term vision of the firm’s Strategic Intent

Exploits & Maintains Core Competencies

Ensure firm’s core competencies are emphasized in strategic implementation

Develops Human Capital

No strategy is effective unless a firm develops & retains staff to execute it

Sustains an Effective Organizational Culture

Leaders play a critical role in shaping and reinforcing the firm’s culture

Effective Effective Strategic LeadershipStrategic Leadership

Establishing Balanced Organizational controls

To create controls balanced between financial and strategic measurements

Emphasizing Ethical Practices

Enable all levels to act ethically when do-ing what’s needed to implement strategy

Determines Strategic Direction

Exploits & Maintains Core Competencies

Develops Human Capital

Sustains an Effective Organizational Culture

Establishing Balanced Organizational controls

Emphasizing Ethical Practices

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Determining Determining Strategic DirectionStrategic Direction

• Strategic direction means the Strategic direction means the development of a long-term vision development of a long-term vision of a firm’s strategic intent of a firm’s strategic intent

• A charismatic leader can help achieve A charismatic leader can help achieve a well accepted strategic visiona well accepted strategic vision

• It is important not to lose sight of the It is important not to lose sight of the strengths of the organization when making strengths of the organization when making changes required by a new strategic directionchanges required by a new strategic direction

• Executives must structure the firm Executives must structure the firm effectively to help achieve the visioneffectively to help achieve the vision

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Determining Determining Strategic ActionsStrategic Actions

Develop a long term vision of the firm Develop a long term vision of the firm The ideal long term vision has 2 parts:The ideal long term vision has 2 parts:– Core ideologyCore ideology

– An envisioned future.An envisioned future.

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Exploiting & Maintaining Exploiting & Maintaining Core CompetenciesCore Competencies

• In many large firms, and certainly in In many large firms, and certainly in related-diversified ones, core competencies related-diversified ones, core competencies are exploited effectively when they’re developed are exploited effectively when they’re developed & applied across different organizational units.& applied across different organizational units.

• Core competencies cannot Core competencies cannot be developed or exploited be developed or exploited effectively without developing effectively without developing the capabilities of human capital. the capabilities of human capital.

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Sustaining an Effective Sustaining an Effective Organizational CultureOrganizational Culture

• Constant learning is a vital Constant learning is a vital part of every person’s job part of every person’s job

• Teamwork is essential to Teamwork is essential to successful implementation successful implementation

• Problems are solved only Problems are solved only when teams accept the when teams accept the responsibility for the responsibility for the solutionsolution

Changing Culture & Business Reengineering

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Organizational ControlsOrganizational Controls

Common Strategic ControlsCommon Strategic Controls

High level of interactionHigh level of interaction

High level of interaction between corporate High level of interaction between corporate headquarters and divisionsheadquarters and divisions

Ability to share resources and capabilities Ability to share resources and capabilities among divisionsamong divisions

Open communication between corporate Open communication between corporate and divisional managersand divisional managers

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Ethical PracticesEthical Practices

Establish & transmit specific goals Establish & transmit specific goals noting the firm’s ethical standards noting the firm’s ethical standards

Developing an ethical organizational culture:Developing an ethical organizational culture:

Continuously revise & update the code of conduct, Continuously revise & update the code of conduct, based on inputs from stakeholdersbased on inputs from stakeholders

Disseminate a code of conduct to all stakeholders to Disseminate a code of conduct to all stakeholders to inform them of the firm’s ethical standard / practicesinform them of the firm’s ethical standard / practices

Develop & implement methods / procedures to Develop & implement methods / procedures to use in achieving the firm’s ethical standardsuse in achieving the firm’s ethical standards

Have explicit rewards to recognize acts of courage Have explicit rewards to recognize acts of courage (e.g. proper channels / wrongdoing report procedures)(e.g. proper channels / wrongdoing report procedures)

Create a work environment in which Create a work environment in which all people are treated with dignityall people are treated with dignity

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The Balanced ScorecardThe Balanced Scorecard

• Complements financial measures Complements financial measures of past performance with measures of past performance with measures of the drivers of future performance. of the drivers of future performance.

• It should translate a business unit’s mission & It should translate a business unit’s mission & strategy into tangible objectives & measures.strategy into tangible objectives & measures.

• The objectives & measures view organizational The objectives & measures view organizational performance from four perspectives.performance from four perspectives.

1.1.Financial 3. Internal Business ProcessFinancial 3. Internal Business Process

2.2.Business Process 4. Learning and GrowthBusiness Process 4. Learning and Growth

Source: “The Balanced Scorecard” by Robert S. Kaplan, David P. NortonSource: “The Balanced Scorecard” by Robert S. Kaplan, David P. Norton

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The Balanced The Balanced Scorecard MatrixScorecard Matrix

New TrainingNew Training KnowledgeKnowledge LibraryLibrary

90%90%Cross-TrainCross-TrainDevelop Develop Strategic SkillsStrategic Skills

R&D Prog.R&D Prog. CustomerCustomer MailingMailing

2006 – 15%2006 – 15%2007 – 50%2007 – 50%2008 – 60%2008 – 60%

% Revenue % Revenue from new from new ProductsProducts

Develop New Develop New ProductsProducts

FrequentFrequent BuyersBuyers ClubClub

95%95%Customer Customer RetentionRetention

Increased Increased Customer Customer

SatisfactionSatisfaction

Sales PromoSales Promo New ChannelNew Channel MarketingMarketing

10% Product A10% Product A40% Product B40% Product B50% Product C50% Product C

Revenue Revenue MixMix

Broaden Broaden Revenue MixRevenue Mix

LearningLearning & Growth& Growth

InternalInternal BusinessBusiness ProcessesProcesses

FinancialFinancial

CustomerCustomer

InitiativesInitiativesTargetsTargetsMeasuresMeasuresObjectivesObjectivesQuestionQuestion

How do we sustain How do we sustain ability to change & ability to change & improve?improve?

What bus. processes What bus. processes must we excel at to must we excel at to satisfy stakeholders?satisfy stakeholders?

How do we appear to How do we appear to shareholders to shareholders to succeed financially? succeed financially?

How do we appear to How do we appear to our customers to our customers to achieve our vision? achieve our vision?

What is critical What is critical to success?to success?

How is it How is it measured?measured?

Performance Performance expectation?expectation?

Key action Key action Programs?Programs?

What is critical to What is critical to ask?ask?

© 1996 HBR Publishing

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Strategic & Financial Strategic & Financial Controls in a Balanced Controls in a Balanced Scorecard FrameworkScorecard Framework

PerspectivesPerspectives CriteriaCriteria

FinancialFinancial • Cash flowCash flow• Return on equityReturn on equity• Return on assetsReturn on assets

CustomerCustomer • Assessment of ability to anticipate Assessment of ability to anticipate customers needscustomers needs

• Effectiveness of customer service practicesEffectiveness of customer service practices• Percentage of repeat businessPercentage of repeat business• Quality of communications with customersQuality of communications with customers

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Strategic and Financial Strategic and Financial Controls in a Balanced Controls in a Balanced Scorecard FrameworkScorecard Framework

PerspectivesPerspectives CriteriaCriteria

Internal Internal Business Business ProcessProcess

• Asset utilization improvementsAsset utilization improvements

• Improvements in employee moraleImprovements in employee morale

• Changes in turnover ratesChanges in turnover rates

Learning and Learning and GrowthGrowth

• Improvements in innovation abilityImprovements in innovation ability

• Number of new products compared Number of new products compared to competitorsto competitors

• Increases in employees’ skillsIncreases in employees’ skills

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The Strategic Management ProcessThe Strategic Management Process

Chapter 5: Bus.-Level Strategy

Chapter 6:Competitive Dynamics

Chapter 7:Corp.-Level

Strategy

Chapter 8:Acquisition & Restructuring

Chapter 9:International

Strategy

Chapter 10:Cooperative

Strategy

Strategy Formulation

Chapter 11:Corporate

Governance

Ch. 12: Org. Structure & Controls

Chapter 13:Strategic

Leadership

Chapter 14:Org. Renewal & Innovation

Strategy Implementation

StrategicActions

Ch. 1: Strat. Mgmt. & Com-petitiveness

Ch. 2: Strat. Mgmt . &

Performance

Chapter 3:The External Environment

Chapter 4:The Internal Environment

Strategic Competitiveness

Strategic Mission & Strategic Intent

Strategic Objectives & Inputs

Chapter 13:Strategic

Leadership