Download - Strategic Leadership and Culture

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Strategic Leadership

Strategic leadership involves:Strategic leadership involves: the ability to anticipate, envision, maintain the ability to anticipate, envision, maintain

flexibility and empower others to create flexibility and empower others to create strategic changestrategic change

multi-functional work that involves working multi-functional work that involves working through othersthrough others

consideration of the entire enterprise rather consideration of the entire enterprise rather than just a sub-unitthan just a sub-unit

a managerial frame of referencea managerial frame of reference

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SuccessfulSuccessfulStrategic ActionsStrategic Actions

Strategic Leadership and the Strategic Management Process

Effective StrategicEffective StrategicLeadershipLeadership

Strategic IntentStrategic Intent Strategic MissionStrategic Mission

shapes the formulation ofshapes the formulation of

andandinfluenceinfluence

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Strategic Leadership and the Strategic Management Process

StrategicStrategicCompetitivenessCompetitiveness

Above-Average ReturnsAbove-Average Returns

FormulationFormulationof Strategiesof Strategies

ImplementationImplementationof Strategiesof Strategies

SuccessfulSuccessfulStrategic ActionsStrategic Actions

yieldsyields

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Factors Affecting Managerial Discretion

External EnvironmentExternal Environment• Industry structureIndustry structure• Rate of market growthRate of market growth• Number and type of Number and type of

competitorscompetitors• Nature and degree of Nature and degree of

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

can be differentiatedcan be differentiated

External EnvironmentExternal Environment

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Characteristics of theCharacteristics of theOrganizationOrganization

Characteristics of the Characteristics of the OrganizationOrganization• SizeSize• AgeAge• CultureCulture• Availability of resourcesAvailability of resources• Patterns of interaction Patterns of interaction

among employeesamong employees


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Characteristics of theCharacteristics of theOrganizationOrganization

Characteristics of theCharacteristics of theManagerManager

ManagerialManagerialDiscretionDiscretion

Characteristics of the Characteristics of the ManagerManager• Tolerance for ambiguityTolerance for ambiguity• Commitment to the firm Commitment to the firm

and its desired strategic and its desired strategic outcomesoutcomes

• Interpersonal skillsInterpersonal skills• Aspiration levelAspiration level• Degree of self-confidenceDegree of self-confidence

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Top Management Teams

The top management team is composed of The top management team is composed of key managers who are responsible forkey managers who are responsible for formulating andformulating and implementingimplementing the organization’s strategiesthe organization’s strategies

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

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Top Management Teams

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 team, however, is associated a heterogeneous team, however, is associated

positively with innovation and strategic changepositively with innovation and strategic change

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Strategic 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 oversight by the board of directorsof oversight by the board of directors

This is especially true when the CEO is This is especially true when the CEO is also chairman of the board of directorsalso chairman of the board of directors

CEOs of long tenure can also wield CEOs of long tenure can also wield substantial powersubstantial power

The most effective forms of governance The most effective forms of governance share power and influence among the share power and influence among the CEO and board of directorsCEO and board of directors

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Managerial Labor Markets

The internal labor market is comprised of the The internal labor market is comprised of the career path alternatives available to a firm’s career path alternatives available to a firm’s managersmanagers

Selecting internal candidates for management Selecting internal candidates for management positions helps to build on valuable firm-positions helps to build on valuable firm-specific knowledgespecific knowledge

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The external labor market includes the The external labor market includes the collection of career opportunities for collection of career opportunities for managers outside their firmmanagers outside their firm

Selecting an outsider often brings fresh Selecting an outsider often brings fresh insights and may energize the firm with insights and may energize the firm with innovative new ideasinnovative new ideas

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StrategicStrategicchangechange

StableStablestrategystrategy

Stable strategyStable strategywith innovationwith innovation

Managerial Labor Market:Managerial Labor Market:CEO SuccessionCEO Succession

Internal CEOInternal CEOsuccessionsuccession

External CEOExternal CEOsuccessionsuccession

Top ManagementTop ManagementTeam CompositionTeam Composition

HeterogeneousHeterogeneous

HomogeneousHomogeneous

Ambiguous:Ambiguous:possible change inpossible change intop managementtop managementteam and strategyteam and strategy

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Exercise of Effective Strategic Leadership

EstablishingEstablishingbalancedbalancedorganizationalorganizationalcontrolscontrols

EmphasizingEmphasizingethicalethicalpracticepractice

DevelopingDevelopinghumanhumancapitalcapital

Exploiting andExploiting andmaintainingmaintainingcorecorecompetenciescompetencies

SustainingSustainingan effectivean effectiveorganizationalorganizationalcultureculture

DeterminingDeterminingstrategicstrategicdirectiondirection

Effective StrategicEffective StrategicLeadershipLeadership

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Determining Strategic Direction Strategic direction means the development of Strategic direction means the development of

a long-term vision of a firm’s strategic intenta long-term vision of a firm’s strategic intent A charismatic leader can help achieve A charismatic leader can help achieve

strategic intentstrategic intent 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 effectively Executives must structure the firm effectively to help achieve the visionto help achieve the vision

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Exploiting and Maintaining Core Competencies

Core competencies are resources and Core competencies are resources and capabilities that serve as a source of capabilities that serve as a source of competitive advantage for a firm over its competitive advantage for a firm over its rivalsrivals

Strategic leaders must verify that the Strategic leaders must verify that the firm’s competencies are emphasized in firm’s competencies are emphasized in strategy implementation effortsstrategy implementation efforts

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Exploiting and Maintaining Core Competencies

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

Core competencies cannot be developed Core competencies cannot be developed or exploited effectively without or exploited effectively without developing the capabilities of human developing the capabilities of human capitalcapital

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Developing Human Capital

Human capital refers to the knowledge and Human capital refers to the knowledge and skills of the firm’s entire workforceskills of the firm’s entire workforce

Employees are viewed as a capital resource Employees are viewed as a capital resource that requires investmentthat requires investment

No strategy can be effective unless the firm No strategy can be effective unless the firm is able to develop and retain good people to is able to develop and retain good people to carry it outcarry it out

The effective development and management The effective development and management of the firm’s human capital may be the of the firm’s human capital may be the primary determinant of a firm’s ability to primary determinant of a firm’s ability to formulate and implement strategies formulate and implement strategies successfullysuccessfully

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Sustaining an Effective Organizational Culture

An organizational culture consists of a An organizational culture consists of a complex set of ideologies, symbols, and complex set of ideologies, symbols, and core values that is shared throughout the core values that is shared throughout the firm and influences the way it conducts firm and influences the way it conducts businessbusiness

Shaping the firm’s culture is a central task Shaping the firm’s culture is a central task of effective strategic leadershipof effective strategic leadership

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An appropriate organizational culture An appropriate organizational culture encourages the development of an encourages the development of an entrepreneurial orientation among entrepreneurial orientation among employees and an ability to change the employees and an ability to change the culture as necessaryculture as necessary

Reengineering can facilitate this processReengineering can facilitate this process

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Changing Culture and Business Changing Culture and Business ReengineeringReengineering

The benefits of business reengineering are The benefits of business reengineering are maximized when employees believe that:maximized when employees believe that: every job in the company is essential and every job in the company is essential and

importantimportant all employees must create value through their all employees must create value through their

workwork

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Changing Culture and Business Changing Culture and Business ReengineeringReengineering

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

Teamwork is essential to successful Teamwork is essential to successful implementationimplementation

Problems are solved only when teams accept Problems are solved only when teams accept the responsibility for the solutionthe responsibility for the solution

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Emphasizing Ethical Practices

Ethical practices increase the Ethical practices increase the effectiveness of strategy implementation effectiveness of strategy implementation processesprocesses

Ethical companies encourage and enable Ethical companies encourage and enable people at all organizational levels to people at all organizational levels to exercise ethical judgmentexercise ethical judgment

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Emphasizing Ethical Practices

To properly influence employee judgment To properly influence employee judgment and behavior, ethical practices must and behavior, ethical practices must shape the firm’s decision-making process shape the firm’s decision-making process and be an integral part of an and be an integral part of an organization’s cultureorganization’s culture

Leaders set the tone for creating an Leaders set the tone for creating an environment of mutual respect, honesty environment of mutual respect, honesty and ethical practices among employeesand ethical practices among employees

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Establishing Balanced Organizational Controls

Organizational controls provide the Organizational controls provide the parameters within which strategies are to parameters within which strategies are to be implemented and corrective actions be implemented and corrective actions takentaken

Financial controls are often emphasized in Financial controls are often emphasized in large corporations and focus on short-large corporations and focus on short-term financial outcomesterm financial outcomes

Strategic control focuses on the content of Strategic control focuses on the content of strategic actions, rather than their strategic actions, rather than their outcomesoutcomes

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Establishing Balanced Organizational Controls

Successful strategic leaders balance Successful strategic leaders balance strategic control and financial control strategic control and financial control (they do not eliminate financial control) (they do not eliminate financial control) with the intent of achieving more positive with the intent of achieving more positive long-term returnslong-term returns

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Strategic and Financial Controls in a Balanced Scorecard 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 Effectiveness of customer service practicespractices

• Percentage of repeat businessPercentage of repeat business• Quality of communications with Quality of communications with

customerscustomers

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Strategic and Financial Controls in a Balanced Scorecard Framework

PerspectivesPerspectives CriteriaCriteria

Internal Business Internal 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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