Post on 20-Dec-2015
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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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Factors Affecting Managerial Discretion
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
External EnvironmentExternal Environment
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Factors Affecting Managerial Discretion
External EnvironmentExternal Environment
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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Managerial Labor Markets
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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Managerial Labor Markets
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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Sustaining an Effective Organizational Culture
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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Sustaining an Effective Organizational Culture
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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Sustaining an Effective Organizational Culture
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