Topic 17

Strategic Leadership

The Nature of Strategic Leadership

Strategic leadership is the process of providing the direction and inspiration necessary to create or sustain an organization

Strategic leadership is the process of providing the direction and inspiration necessary to create or sustain an organization

Figure 13-1 Components of Strategic Leadership

Guidelines for Formulating Strategy

Determine long-term objectives and priorities Assess current strengths and weaknesses Identify core competencies Evaluate the need for a major change in strategy Identify promising strategies Evaluate the likely outcomes of a strategy Involve other executives in selecting a strategy

Systems Thinking

The ability to process information and understand its consequences for the organization in its interaction with the environment

Strategic Planning

Strategic planning encompasses those activities that lead to the statement of goals and objectives and the choice of strategy

Strategic planning often takes the form of a SWOT analysis, a method of considering strengths, weaknesses, opportunities, and threats in a particular situation

SWOT Analysis

Represents an effort to examine the interaction between the particular characteristics of an organization or organizational unit and the external environment

Examples of SWOT Elements

Strengths: Favorable location, talented workers, state-of-the-art equipment

Weaknesses: Unfavorable location, outdated equipment, limited capital

Opportunities: Culturally diverse customer base, changes in technology, deregulation

Threats: Ecommerce, declining market, new competitors

Business Strategy Levels

Corporate-level strategy asks, “What business are we in?”

Business-level strategy asks, “How do we compete?”

Functional-level strategy asks, “How do we support the business-level strategy?”

Sample Strategies

Differentiation Cost leadership Focus High quality Imitation Strategic alliances Growth through acquisition

Sample Strategies (cont’d)

High speed and first-mover strategy Product and global diversification Sticking to core competencies Brand leadership Creating demand by solving problems Conducting business on the Internet Peoplepalooza (competitive advantage

through hiring talented people)

Differences Between Lower Level Differences Between Lower Level and Upper Echelon Leadersand Upper Echelon Leaders

Who the leader is

Scope of

responsibility

Focus

Effectiveness criteria

Strategic ForcesStrategic Forces

ORGANIZATIONS

LeadershipLeadershipEnvironment

Strategy Culture

StructureTechnology

Dual Role of Dual Role of Upper Echelon LeadersUpper Echelon Leaders

StrategyFormulation

StrategyImplementation

Performance

LeadershipCharacteristics

ModeratingFactors

External Moderators of Executive Discretion

Environmental

uncertainty

Type of industry

Market growth

Legal constraints

Internal Moderators of Executive Discretion

Stability

Size and structure

Organizational culture

Stage of organizational growth

Presence, power, and makeup of TMT

Themes in Upper Echelon StyleThemes in Upper Echelon Style

Challenge Seeking

Risk taking

Openness to

change

Willingness to

innovate

Future orientation

Need for Control

Delegation

Centralization

Uniformity of

practices

Focus on

process

Strategic Leadership DimensionsStrategic Leadership Dimensions

NEED FOR CONTROL

High control Low control

High challenge-seeking

Low challenge-seeking

CHALLENGE-SEEKING

HIGH-CONTROLINNOVATOR (HCI)

Challenge-seeker whomaintains tight control

over organization

STATUS QUOGUARDIAN (SQG)

Challenge-averse whomaintains tight control

over organization

PARTICIPATIVEINNOVATOR (PI)

Challenge-seeker whodelegates control of organization

PROCESSMANAGER (PM)

Challenge-averse whodelegates control of organization

Processes Leaders Use to Processes Leaders Use to Impact Their OrganizationImpact Their Organization

LEADER

Environment

Strategy

Culture

Structure

Leadership

Technology

• Direct decisions• Allocation of

resources• Reward system• Selection of other

leaders• Promotions• Role-modeling

Direct DecisionsDirect Decisions

Vision

Mission

Strategy

Structure

Organizational culture

Selection of other

leaders

Allocation of ResourcesAllocation of Resourcesand Reward Systemand Reward System

Decisions regarding funding and budgetsAllocation of resources to support goalsFormal rewards such as salary and bonusesInformal rewards such as recognitionPromotion of other leaders and managers

Setting the Norms and Setting the Norms and Role ModelingRole Modeling

Setting decision

criteria and rules by

which others make

decisionsActive or subtle role modeling of behaviors and styles

Responsibility of Responsibility of Upper Echelon LeadersUpper Echelon Leaders

Organizational performance

Accountability to various

internal and external

constituents

Ethical behavior and role-

modeling

Factors That Affect Factors That Affect Executive SalariesExecutive Salaries

Firm size Industry competition CEO power and discretion Internationalization High stress and instability

Constraints on Leaders

Internal Constraints Coalitions in the organization Strong organizational culture

External Constraints Organizations primary products and services Powerful external stakeholders Perception of the organization’s performance

Constraints and Leader Traits as Joint Determinants

Strategic Leadership

Political Power and Strategic Leadership Executive Tenure and Strategic Leadership Executive Teams

Potential advantages of strategic teams Executive teams and organizational effectiveness

How Leaders Influence Organizational Performance

Efficiency and Process Reliability Innovation and Adaptation Human Resources and Relations Leader Influence on Performance

Determinants

Efficiency and Process Reliability

Performance management and goal setting programs (e.g.,MBO, zero defects)

Process and quality improvement programs (quality circles,TQM, Six Sigma)

Cost reduction programs (downsizing, outsourcing, just-in-time inventory)

Structural forms (functional specialization, formalization, standardization)

Appraisal, recognition, and reward systems focused on efficiency and process reliability

Human Resources and Relations

Quality of worklife programs (flextime, job sharing, child care, fitness center)

Employee benefit programs (health care, vacations, retirement, sabbaticals)

Socialization and team building (orientation programs, ceremonies and rituals, social events and celebrations)

Employee development programs (training, mentoring, 360 feedback, education subsidies)

Human Resources and Relations

Human resource planning (succession planning, assessment centers, recruiting programs)

Empowerment programs (self-managed teams, employee ownership, industrial democracy)

Recognition and reward programs focused on loyalty, service, or skill acquisition

Innovation and Adaptation Competitor and market analysis programs (market

surveys, focus groups, consumer panels, comparative product testing, benchmarking competitor products and processes)

Innovation programs (intrapreneurship, quality circles, innovation goals)

Knowledge acquisition (consultants, joint ventures, import best practices from outside)

Organizational learning (knowledge management systems, postmortums, joint ventures)

Innovation and Adaptation Temporary structural forms for implementing change

(steering committee, task forces) Growth and diversification programs (mergers and

acquisitions, franchises, joint ventures) Structural forms (research departments, small product

divisions, product managers crossfunctional product development teams, facilities designed to encourage innovation)

Appraisal, recognition, and reward systems focused on innovation and customer satisfaction

Questions for External Monitoring

What do clients and customers need and want? What is the reaction of clients and customers to the

organization’s current products and services? Who are the primary competitors? What strategies are they pursuing (e.g., pricing,

advertising and promotions, new products, customer service, etc.)?

How do competitors’ products and services compare to those of the manager’s organization?

What events affect the acquisition of materials, energy, information, and other inputs used by the organization to conduct its operations?

Questions for External Monitoring

How will the organization be affected by new legislation and by government agencies that regulate its activities (e.g., labor laws, environmental regulations, safety standards, tax policies, etc.)?

How will new technologies affect the organization’s products, services, and operations?

How will the organization be affected by changes in the economy (employment level, interest rates, growth rates)?

How will the organization be affected by changing population demographics (e.g., aging, diversity)?

How will the organization be affected by international events (e.g., trade agreements, import restrictions, currency changes, wars and revolutions)?

Guidelines for External Monitoring

Identify relevant information to gather Use multiple sources of relevant information Learn what clients and customers need and

want Learn about the products and activities of

competitors Relate environmental information to strategic

plans

Knowledge Management andthe Learning Organization

Knowledge management is the systematic sharing of information to achieve such goals as innovation, nonduplication of effort, and competitive advantage

A learning organization is one that is skilled at creating, acquiring, and transferring knowledge, and at modifying behavior to reflect new knowledge and insights

Where Corporate Knowledge Lives

Initiatives to Enhance Organizational Learning

Create a strategic intent to learn Create a shared vision Empower employees to make decisions and

seek continuous improvement Develop systems thinking Encourage personal mastery of the job

Initiatives to Enhance Organizational Learning (cont’d)

Encourage team learning Encourage action learning Learn from failure Encourage continuous experimentation Develop political skills to make connections

with and influence others Encourage creative thinking

Summary

Strategic leadership deals with the major purposes of an organization or organizational unit

Five important components of strategic leadership include high-level cognitive ability, multiple inputs to strategy formulation, anticipating and creating a future, revolutionary thinking, and creation of a vision

Summary (cont’d)

Strategic planning often takes the form of a SWOT analysis

Strategic leaders use many different types of business strategies

Leaders must help their organizations adapt to the environment by taking initiatives to create a learning organization

In charge of turning Xerox around

Focus on giving stakeholders hope and confidence

Role model desired behaviors

Leading by example

Leading Change:Leading Change:Anne MulcahyAnne Mulcahy

Soft-spoken and understated Careful listener Focus on customer Repeat simple messages Change culture through

communication and symbols Openness and focus on people

Leadership In Action:Leadership In Action:A.G. LafleyA.G. Lafley

o CEO involvement in nomination of board members helps assure that members with the right skills and expertise are selected

o Those nominated by CEO may have a conflict of interest and a positive bias towards the CEO

o Creation of a balance of members nominated by different stakeholders is essential

The Leadership ChallengeThe Leadership Challenge