chapter 12 leadership - ridwaniskandar blog ... management competitiveness and globalization:...

©© 2007 Thomson/South2007 Thomson/South--Western.Western.All rights reserved.All rights reserved.

PowerPoint Presentation by Charlie CookPowerPoint Presentation by Charlie CookThe University of West AlabamaThe University of West Alabama

Strategic ManagementStrategic ManagementCompetitiveness and Globalization:Competitiveness and Globalization:Concepts and CasesConcepts and Cases

Michael A. Hitt •R. Duane Ireland •Robert E. Hoskisson

Seventh edition

STRATEGIC

ACTIONS:

STRATEGY

IMPLEMENTATION

STRATEGIC

ACTIONS:

STRATEGY

IMPLEMENTATION

CHAPTER 12CHAPTER 12

LeadershipLeadership

Management of StrategyManagement of StrategyConcepts and CasesConcepts and Cases

© 2007 Thomson/South-Western. All rights reserved. 12–2

KKNOWLEDGENOWLEDGE OOBJECTIVESBJECTIVES

1.1. Define strategic leadership and describe theDefine strategic leadership and describe theimportance of topimportance of top--level managers.level managers.

2.2. Define top management teams and explain their effectsDefine top management teams and explain their effectson firm performance.on firm performance.

3.3. Describe the managerial succession process usingDescribe the managerial succession process usinginternal and external managerial labor markets.internal and external managerial labor markets.

4.4. Discuss the value of strategic leadership in determiningDiscuss the value of strategic leadership in determiningthe firmthe firm’’s strategic direction.s strategic direction.

Studying this chapter should provide you with the strategicmanagement knowledge needed to:


KKNOWLEDGENOWLEDGE OOBJECTIVESBJECTIVES (cont(cont’’d)d)

5.5. Describe the importance of strategic leaders inDescribe the importance of strategic leaders inmanaging the firmmanaging the firm’’s resources, with emphasis ons resources, with emphasis onexploiting and maintaining core competencies, humanexploiting and maintaining core competencies, humancapital, and social capital.capital, and social capital.

6.6. Define organizational culture and explain what must beDefine organizational culture and explain what must bedone to sustain an effective culture.done to sustain an effective culture.

7.7. Explain what strategic leaders can do to establish andExplain what strategic leaders can do to establish andemphasize ethical practices.emphasize ethical practices.

8.8. Discuss the importance and use of organizationalDiscuss the importance and use of organizationalcontrols.controls.

Studying this chapter should provide you with the strategicmanagement knowledge needed to:


FIGUREFIGURE 12.112.1

Strategic LeadershipStrategic Leadershipand the Strategicand the StrategicManagement ProcessManagement Process


Strategic Leadership and StyleStrategic Leadership and Style

••Strategic leadership requires the ability to:Strategic leadership requires the ability to:Anticipate and envision.Anticipate and envision.Maintain flexibility.Maintain flexibility.Empower others to create strategic change asEmpower others to create strategic change as

necessary.necessary.

••Strategic leadership is:Strategic leadership is:MultiMulti--functional work that involves working throughfunctional work that involves working through

others.others.Consideration of the entire enterprise rather than justConsideration of the entire enterprise rather than just

a suba sub--unit.unit.A managerial frame of reference.A managerial frame of reference.


Strategic Leadership (contStrategic Leadership (cont’’d)d)

••Effective strategic leaders:Effective strategic leaders:Manage the firmManage the firm’’s operations effectively.s operations effectively.

Sustain a high performance over time.Sustain a high performance over time.

Make better decisions than their competitors.Make better decisions than their competitors.

Make candid, courageous, pragmatic decisions.Make candid, courageous, pragmatic decisions.

Understand how their decisions affect the internalUnderstand how their decisions affect the internalsystems in use by the firm.systems in use by the firm.

Solicit feedback from peers, superiors and employeesSolicit feedback from peers, superiors and employeesabout their decisions and visions.about their decisions and visions.


Managers as an Organizational ResourceManagers as an Organizational Resource

••Managers often use their discretion whenManagers often use their discretion whenmaking strategic decisions and implementingmaking strategic decisions and implementingstrategies.strategies.

••Factors affecting the amount of decisionFactors affecting the amount of decision--makingmakingdiscretion include:discretion include:External environmental sourcesExternal environmental sourcesCharacteristics of the organizationCharacteristics of the organizationCharacteristics of the managerCharacteristics of the manager


FIGUREFIGURE 12.212.2

Factors AffectingFactors AffectingManagerial DiscretionManagerial Discretion

Source: Adapted from S. Finkelstein & D. C. Hambrick, 1996,Strategic Leadership: Top Executives and Their Effects onOrganizations, St. Paul, MN: West Publishing Company.


Factors Affecting Managerial DiscretionFactors Affecting Managerial Discretion

••Industry structureIndustry structure••Rate of market growthRate of market growth••Number and type ofNumber and type of

competitorscompetitors••Nature and degree ofNature and degree of

political/legal constraintspolitical/legal constraints••Degree to which products canDegree to which products can

be differentiatedbe differentiated

ExternalExternalEnvironmentEnvironment



••SizeSize••AgeAge••CultureCulture••Availability of resourcesAvailability of resources••Patterns of interaction amongPatterns of interaction among

employeesemployees


Characteristics ofCharacteristics ofthe Organizationthe Organization



••Tolerance for ambiguityTolerance for ambiguity••Commitment to the firm and itsCommitment to the firm and its

desired strategic outcomesdesired strategic outcomes••Interpersonal skillsInterpersonal skills••Aspiration levelAspiration level••Degree of selfDegree of self--confidenceconfidence



Characteristics ofCharacteristics ofthe Managerthe Manager



••The degree of latitude forThe degree of latitude foraction when making strategicaction when making strategicdecisions, especially thosedecisions, especially thoseconcerned with effectiveconcerned with effectiveimplementation of strategies.implementation of strategies.

••How managers exerciseHow managers exercisediscretion when determiningdiscretion when determiningappropriate strategic actions isappropriate strategic actions iscritical to the firmcritical to the firm’’s success.s success.



Characteristics ofCharacteristics ofthe Managerthe Manager

ManagerialManagerialDiscretionDiscretion


Top Management TeamsTop Management Teams

••Composed of the key managers who areComposed of the key managers who areresponsible for selecting and implementing theresponsible for selecting and implementing thefirmfirm’’s strategies.s strategies.

••A heterogeneous top management team:A heterogeneous top management team:

Has varied expertise and knowledge.Has varied expertise and knowledge.

Can draw on multiple perspectives.Can draw on multiple perspectives.

Will evaluate alternative strategies.Will evaluate alternative strategies.

Builds consensus.Builds consensus.


Firm Performance and Strategic ChangeFirm Performance and Strategic Change

••Heterogeneous top management teams:Heterogeneous top management teams:Have difficulty functioning effectively as a team.Have difficulty functioning effectively as a team.

Require effective management of the team toRequire effective management of the team tofacilitate the process of decision making butfacilitate the process of decision making but ……

Are associated positively with innovation and strategicAre associated positively with innovation and strategicchange.change.

May force the team or members toMay force the team or members to ““think outside ofthink outside ofthe boxthe box””and be more creative.and be more creative.

Have greater capacity to provide effective strategicHave greater capacity to provide effective strategicleadership in formulating strategy.leadership in formulating strategy.


CEO and Top Management Team PowerCEO and Top Management Team Power

••Higher performance is achieved when board ofHigher performance is achieved when board ofdirectors are more directly involved in shapingdirectors are more directly involved in shapingstrategic direction.strategic direction.

••A powerful CEO may:A powerful CEO may:

Appoint sympathetic outside board members.Appoint sympathetic outside board members.

Have inside board members who report to the CEO.Have inside board members who report to the CEO.

Have significant control over the boardHave significant control over the board’’s actions.s actions.

May also hold the position of chairman of the boardMay also hold the position of chairman of the board((CEO dualityCEO duality).).


CEO and Top Management PowerCEO and Top Management Power

••Duality often relates to poor performance andDuality often relates to poor performance andslow response to change.slow response to change.

CEOs of long tenure can also wield substantialCEOs of long tenure can also wield substantialpower.power.

CEOs can gain so much power that they are virtuallyCEOs can gain so much power that they are virtuallyindependent of oversight by the board of directors.independent of oversight by the board of directors.

••The most effective forms of governance shareThe most effective forms of governance sharepower and influence among the CEO and boardpower and influence among the CEO and boardof directors.of directors.


Managerial SuccessionManagerial Succession

••Organizations select managers and strategicOrganizations select managers and strategicleaders from two types of managerial laborleaders from two types of managerial labormarkets:markets:Internal managerial labor marketInternal managerial labor market

••Advancement opportunities related to managerialAdvancement opportunities related to managerialpositions within a firm.positions within a firm.

External managerial labor marketExternal managerial labor market

••Career opportunities for managers in organizationsCareer opportunities for managers in organizationsother than the one for which they currently work.other than the one for which they currently work.


Managerial Labor Market (contManagerial Labor Market (cont’’d)d)

••Advantages of internal managerial labor marketAdvantages of internal managerial labor marketinclude:include:Experience with the firm and industry environment.Experience with the firm and industry environment.

Familiarity with company products, markets,Familiarity with company products, markets,technologies, and operating procedures.technologies, and operating procedures.

Lower turnover among existing personnel.Lower turnover among existing personnel.

••Advantages of the external managerial laborAdvantages of the external managerial labormarket include:market include:LongLong--tenured insiders may betenured insiders may be ““stale in the saddlestale in the saddle””——

ooutsiders may bring fresh perspectives.utsiders may bring fresh perspectives.


FIGUREFIGURE 12.312.3 Effects of CEO Succession and Top ManagementEffects of CEO Succession and Top ManagementTeam Composition on StrategyTeam Composition on Strategy


FIGUREFIGURE 12.412.4 Exercise of Effective Strategic LeadershipExercise of Effective Strategic Leadership


Key Strategic Leadership Actions:Key Strategic Leadership Actions:Determining Strategic DirectionDetermining Strategic Direction••Determining strategic direction involvesDetermining strategic direction involves

developing a longdeveloping a long--term vision of the firmterm vision of the firm’’ssstrategic intent.strategic intent.Five to ten years into the futureFive to ten years into the future

Philosophy with goalsPhilosophy with goals

The image and character the firm seeksThe image and character the firm seeks

••Ideal longIdeal long--term vision has two parts:term vision has two parts:Core ideologyCore ideology

Envisioned futureEnvisioned future


Key Strategic Leadership Actions:Key Strategic Leadership Actions:Exploiting and Maintaining CoreExploiting and Maintaining CoreCompetenciesCompetencies••Core competenciesCore competencies

Resources and capabilities of a firm that serve as aResources and capabilities of a firm that serve as asource of competitive advantage over its rivals.source of competitive advantage over its rivals.

Leadership must verify that the firmLeadership must verify that the firm’’s competenciess competenciesare emphasized in strategy implementation efforts.are emphasized in strategy implementation efforts.

Firms must continuously develop or even changeFirms must continuously develop or even changetheir core competencies to stay ahead of competitors.their core competencies to stay ahead of competitors.


Key Strategic Leadership Actions:Key Strategic Leadership Actions:Developing Human Capital and Social CapitalDeveloping Human Capital and Social Capital••Human capitalHuman capitalThe knowledge and skills of the firmThe knowledge and skills of the firm’’s entires entire

workforce are a capital resource that requiresworkforce are a capital resource that requiresinvestment in training and development.investment in training and development.

••Social capitalSocial capitalRelationships inside and outside the firm that help itRelationships inside and outside the firm that help it

accomplish tasks and create value for customers andaccomplish tasks and create value for customers andshareholders.shareholders.


Key Strategic Leadership Actions:Key Strategic Leadership Actions:Sustaining an Effective Organizational CultureSustaining an Effective Organizational Culture••Organizational CultureOrganizational CultureThe complex set of ideologies, symbols and coreThe complex set of ideologies, symbols and core

values shared through the firm, that influences thevalues shared through the firm, that influences theway business is conducted.way business is conducted.

••Entrepreneurial OrientationEntrepreneurial OrientationPersonal characteristics that encourage or discouragePersonal characteristics that encourage or discourage

entrepreneurial opportunities.entrepreneurial opportunities.••AutonomyAutonomy ProactivenessProactiveness••InnovativenessInnovativeness Risk takingRisk taking


Key Strategic Leadership Actions:Key Strategic Leadership Actions:Sustaining an Organizational Culture (contSustaining an Organizational Culture (cont’’d)d)••Changing a firmChanging a firm’’s organizational culture is mores organizational culture is more

difficult than maintaining it.difficult than maintaining it.Effective strategic leaders recognize when change inEffective strategic leaders recognize when change in

culture is needed.culture is needed.

••Shaping and reinforcing culture requires:Shaping and reinforcing culture requires:Effective communicationEffective communicationProblem solving skillsProblem solving skillsSelection of the right peopleSelection of the right peopleEffective performance appraisalsEffective performance appraisalsAppropriate reward systemsAppropriate reward systems


Key Strategic Leadership Actions:Key Strategic Leadership Actions:Emphasizing Ethical PracticesEmphasizing Ethical Practices••Effectiveness of processes used to implementEffectiveness of processes used to implement

the firmthe firm’’s strategies increases when based ons strategies increases when based onethical practices.ethical practices.

••Ethical practices create social capital andEthical practices create social capital andgoodwill for the firm.goodwill for the firm.


Key Strategic Leadership Actions:Key Strategic Leadership Actions:Emphasizing Ethical Practices (contEmphasizing Ethical Practices (cont’’d)d)••Actions that develop an ethical organizationalActions that develop an ethical organizational

culture include:culture include:Establishing and communicating specific goals toEstablishing and communicating specific goals to

describe the firmdescribe the firm’’s ethical standards.s ethical standards.

Continuously revising and updating the code ofContinuously revising and updating the code ofconduct.conduct.

Disseminating the code of conduct to all stakeholdersDisseminating the code of conduct to all stakeholdersto inform them of the firmto inform them of the firm’’s ethical standards ands ethical standards andpractices.practices.


Key Strategic Leadership Actions:Key Strategic Leadership Actions:Emphasizing Ethical Practices (contEmphasizing Ethical Practices (cont’’d)d)••Actions that develop an ethical organizationalActions that develop an ethical organizational

culture include:culture include:Developing and implementing methods andDeveloping and implementing methods and

procedures to use in achieving the firmprocedures to use in achieving the firm’’s ethicals ethicalstandards.standards.

Creating and using explicit reward systems thatCreating and using explicit reward systems thatrecognize acts of courage.recognize acts of courage.

Creating a work environment in which all people areCreating a work environment in which all people aretreated with dignity.treated with dignity.


Key Strategic Leadership Actions:Key Strategic Leadership Actions:Establishing Organizational ControlsEstablishing Organizational Controls••ControlsControlsFormal, informationFormal, information--based procedures used bybased procedures used by

managers to maintain or alter patterns inmanagers to maintain or alter patterns inorganizational activities.organizational activities.

••Controls help strategic leaders to:Controls help strategic leaders to:Build credibilityBuild credibility

Demonstrate the value of strategies to the firmDemonstrate the value of strategies to the firm’’ssstakeholdersstakeholders

Promote and support strategic changePromote and support strategic change


Key Strategic Leadership Actions:Key Strategic Leadership Actions:Establishing Balanced Organizational ControlsEstablishing Balanced Organizational Controls••The Balanced ScorecardThe Balanced ScorecardA framework used to verify that the firm hasA framework used to verify that the firm has

established both strategic and financial controls toestablished both strategic and financial controls toassess its performance.assess its performance.

Prevents overemphasis of financial controls at thePrevents overemphasis of financial controls at theexpense of strategic controlsexpense of strategic controls

••Four perspectives of the balanced scorecardFour perspectives of the balanced scorecardFinancialFinancial CCustomerustomer

Internal business processesInternal business processes

Learning and growthLearning and growth


FIGUREFIGURE 12.512.5 Strategic Controls and Financial ControlsStrategic Controls and Financial Controlsin a Balanced Scorecard Frameworkin a Balanced Scorecard Framework

chapter 12 leadership - ridwaniskandar blog ... management competitiveness and globalization:...

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