Strategic Leadership

Strategic leadership involves:

the ability to anticipate, envision, maintain flexibility and empower others to create strategic change multi-functional work that involves working through others consideration of the entire enterprise rather than just a sub-unit a managerial frame of reference

Strategic Leadership and the Strategic Management Process

Successful Strategic Actions

Formulation of Strategies

Implementation of Strategies

yields

Strategic Competitiveness Above-Average Returns

Strategic Leadership and the Strategic Management Process

Effective Strategic Leadership shapes the formulation of

Strategic Intent
and influence

Strategic Mission

Successful Strategic Actions

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Factors Affecting Managerial Discretion

External Environment

External Environment Industry structure Rate of market growth Number and type of competitors Nature and degree of political/legal constraints Degree to which products can be differentiated
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Factors Affecting Managerial Discretion

External Environment

Characteristics of the Organization

Characteristics of the Organization Size Age Culture Availability of resources Patterns of interaction among employees

Factors Affecting Managerial Discretion

External Environment

Characteristics of the Organization

Characteristics of the Manager

Managerial Discretion

Characteristics of the Manager Tolerance for ambiguity Commitment to the firm and its desired strategic outcomes Interpersonal skills Aspiration level Degree of self-confidence
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Top Management Teams

The top management team is composed of key managers who are responsible for

formulating and implementing the organizations strategies

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

Top Management Teams

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

a heterogeneous team makes this more difficult a heterogeneous team, however, is associated positively with innovation and strategic change

Strategic Leadership

Chief executive officers can gain so much power that they are virtually independent of oversight by the board of directors This is especially true when the CEO is also chairman of the board of directors CEOs of long tenure can also wield substantial power The most effective forms of governance share power and influence among the CEO and board of directors

Managerial Labor Markets

The internal labor market is comprised of the career path alternatives available to a firms managers Selecting internal candidates for management positions helps to build on valuable firmspecific knowledge

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Managerial Labor Markets

The external labor market includes the collection of career opportunities for managers outside their firm Selecting an outsider often brings fresh insights and may energize the firm with innovative new ideas

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Managerial Labor Markets

Managerial Labor Market: CEO Succession Internal CEO External CEO succession succession Ambiguous: possible change in Stable top management strategy team and strategy Stable strategy with innovation Strategic change
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Homogeneous
Top Management Team Composition

Heterogeneous

Exercise of Effective Strategic Leadership

Establishing balanced organizational controls
Determining strategic direction Exploiting and maintaining core competencies

Effective Strategic Leadership Emphasizing ethical practice

Sustaining an effective organizational culture

Developing human capital

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Determining Strategic Direction

Strategic direction means the development of a long-term vision of a firms strategic intent A charismatic leader can help achieve strategic intent It is important not to lose sight of the strengths of the organization when making changes required by a new strategic direction Executives must structure the firm effectively to help achieve the vision

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Exploiting and Maintaining Core Competencies

Core competencies are resources and capabilities that serve as a source of competitive advantage for a firm over its rivals Strategic leaders must verify that the firms competencies are emphasized in strategy implementation efforts

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Exploiting and Maintaining Core Competencies

In many large firms, and certainly in related-diversified ones, core competencies are exploited effectively when they are developed and applied across different organizational units Core competencies cannot be developed or exploited effectively without developing the capabilities of human capital

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Developing Human Capital

Human capital refers to the knowledge and skills of the firms entire workforce Employees are viewed as a capital resource that requires investment No strategy can be effective unless the firm is able to develop and retain good people to carry it out The effective development and management of the firms human capital may be the primary determinant of a firms ability to formulate and implement strategies successfully
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Sustaining an Effective Organizational Culture

An organizational culture consists of a complex set of ideologies, symbols, and core values that is shared throughout the firm and influences the way it conducts business Shaping the firms culture is a central task of effective strategic leadership

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Sustaining an Effective Organizational Culture

An appropriate organizational culture encourages the development of an entrepreneurial orientation among employees and an ability to change the culture as necessary Reengineering can facilitate this process

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Sustaining an Effective Organizational Culture

Changing Culture and Business Reengineering

The benefits of business reengineering are maximized when employees believe that:

every job in the company is essential and important all employees must create value through their work

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Sustaining an Effective Organizational Culture

Changing Culture and Business Reengineering

Constant learning is a vital part of every persons job Teamwork is essential to successful implementation Problems are solved only when teams accept the responsibility for the solution

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Emphasizing Ethical Practices

Ethical practices increase the effectiveness of strategy implementation processes Ethical companies encourage and enable people at all organizational levels to exercise ethical judgment

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Emphasizing Ethical Practices

To properly influence employee judgment and behavior, ethical practices must shape the firms decision-making process and be an integral part of an organizations culture Leaders set the tone for creating an environment of mutual respect, honesty and ethical practices among employees

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Establishing Balanced Organizational Controls

Organizational controls provide the parameters within which strategies are to be implemented and corrective actions taken Financial controls are often emphasized in large corporations and focus on shortterm financial outcomes Strategic control focuses on the content of strategic actions, rather than their outcomes

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Establishing Balanced Organizational Controls

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

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Strategic and Financial Controls in a Balanced Scorecard Framework

Perspectives
Financial

Criteria
Cash flow Return on equity Return on assets
Assessment of ability to anticipate customers needs Effectiveness of customer service practices Percentage of repeat business Quality of communications with customers
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Customer

Strategic and Financial Controls in a Balanced Scorecard Framework

Perspectives
Internal Business Process

Criteria
Asset utilization improvements Improvements in employee morale Changes in turnover rates
Improvements in innovation ability Number of new products compared to competitors Increases in employees skills

Learning and Growth

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