Chapter 13

13-1 © 2006 by Nelson, a division of Thomson Canada Limited.

Strategic Leadership

Chapter 13


The Strategic .

Management .

Process

The Strategic Management Process

Chapter 5Bus. - Level

Strategy

Chapter 6Competitive

Dynamics

Chapter 9International

Strategy

Chapter 10CooperativeStrategies

Chapter 8Acquisitions &Restructuring

Str

ateg

icIn

pu

ts

Str

ateg

icA

ctio

ns

Str

ateg

ic O

utc

om

esChapter 4Internal

Environment

Chapter 3External

Environment Strat. Intent

Strat. Mission

Strategy Formulation

Strategic Competitiveness

Chapter 1

Above Average Returns

Chapter 2Strategic

Competitiveness

Chapter 1

Chapter 7Corp. - Level

Strategy

Chapter 5Bus. - Level

Strategy

Chapter 11Corporate

Governance

Chapter 12Structure& Control

Chapter 13Strategic

Leadership

Chapter 14Entrepreneurship & Innovation

Strategy Implementation

Feedback

Chapter 13Strategic

Leadership


Strategic LeadershipKnowledge Objectives1.1. Define strategic leadership & describe top-level Define strategic leadership & describe top-level

managers’ importance as a resource.managers’ importance as a resource.

2.2. Differentiate between the concepts of strategic, Differentiate between the concepts of strategic, visionary, and managerial leadership.visionary, and managerial leadership.

3.3. Define top management teams & explain their Define top management teams & explain their efforts on firm performance & their ability to efforts on firm performance & their ability to innovate & make appropriate strategic changes.innovate & make appropriate strategic changes.

4.4. Discuss the value of strategic leadership in Discuss the value of strategic leadership in determining the firm’s strategic direction.determining the firm’s strategic direction.

5.5. Explain strategic leaders’ role in exploiting & Explain strategic leaders’ role in exploiting & maintaining core competencies.maintaining core competencies.



Knowledge Objectives (continued)

6. Describe the importance of strategic leaders in 6. Describe the importance of strategic leaders in developing human capital.developing human capital.

7. Define organizational culture & explain what 7. Define organizational culture & explain what must be done to sustain an effective culture.must be done to sustain an effective culture.

8. Explain what strategic leaders can do to 8. Explain what strategic leaders can do to establish & emphasize ethical practice.establish & emphasize ethical practice.

9. Discuss the importance & use of organizational 9. Discuss the importance & use of organizational controls.controls.


Strategic Leadership Presumes

• An ability to influence those with whom one works.An ability to influence those with whom one works.

• The leader understands the emergent strategy The leader understands the emergent strategy process.process.

• A shared vision of what the organization is to be.A shared vision of what the organization is to be.

• Agreement among senior manger & board members Agreement among senior manger & board members of opportunities and threats.of opportunities and threats.

• Visionary leadership that entails many Visionary leadership that entails many characteristics such as a willingness to take risks.characteristics such as a willingness to take risks.

• Managerial leadership that includes an intended Managerial leadership that includes an intended rational way of looking at the world.rational way of looking at the world.


and

Influences

Strategic Leadership and the Strategic Management Process

Effective Strategic Leadership

Strategic Intent Strategic Mission

Shapes the formation of

Successful Strategic Actions

Formulation of Strategies Implementation of Strategies

Strategic Competitiveness Above Average Returns

Yields


Managerial Leaders

• Adopt impersonal, passive attitudes towards goals.Adopt impersonal, passive attitudes towards goals.

• View work as enabling process that involves some View work as enabling process that involves some combination of ideas & people interacting to establish combination of ideas & people interacting to establish strategies & make decisions.strategies & make decisions.

• Relate to other people according to their role in the Relate to other people according to their role in the decision making process.decision making process.

• Maintain a low level of emotional involvement in these Maintain a low level of emotional involvement in these relationships.relationships.

• Influence only the actions & decisions of those with Influence only the actions & decisions of those with whom they work.whom they work.

• Want stability & order and strive to preserve the existing Want stability & order and strive to preserve the existing order.order.


Visionary Leadership

• Shape ideas as opposed to reacting to them.Shape ideas as opposed to reacting to them.

• Influence changes in the way people think about what is Influence changes in the way people think about what is possible, desirable and necessary.possible, desirable and necessary.

• Are concerned with ideas & relate to people in intuitive & Are concerned with ideas & relate to people in intuitive & empathetic ways.empathetic ways.

• Are more likely to make decisions that are based on Are more likely to make decisions that are based on values.values.

• Are willing to invest in human capital & creating & Are willing to invest in human capital & creating & maintaining as effective culture to ensure long term maintaining as effective culture to ensure long term viability.viability.

• Is future-oriented & concerned with risk taking.Is future-oriented & concerned with risk taking.

• Want creativity, innovation and chaos. * Strive to change Want creativity, innovation and chaos. * Strive to change the existing order.the existing order.



• A synergistic combination of managerial & visionary A synergistic combination of managerial & visionary leadership.leadership.

• Manages the paradox created by the use of managerial Manages the paradox created by the use of managerial & visionary models.& visionary models.

• Establishes the context through which stakeholders are Establishes the context through which stakeholders are able to perform at peak efficiency.able to perform at peak efficiency.

• Willing to make candid, courageous & yet pragmatic Willing to make candid, courageous & yet pragmatic decisions.decisions.

• Solicits corrective feedback from their peers, superiors Solicits corrective feedback from their peers, superiors and employees about the value of their difficult and employees about the value of their difficult decisions.decisions.


Want stability & to preserve the existing order

Guide without a strategic vision. Constrained by values & by using explicit knowledge

Guide knowledge creation by encouraging contradictory capabilities (e.g. individual,

group, and organizational tacit & explicit knowledge)

Are comfortable handling Short-term day-to-day activities

Managerial Leaders Strategic Leaders, Visionary Leaders

Define boundaries by useof metaphors, analogies & models to allow for a mix of

contradictory concepts







Manage the paradox created by use of managerial &

visionary leadership models

Control by social- ization & sharing common norms, values & beliefs

Are not dependent on the organisation for their sense of who

they are

Are future-oriented concerned with risk-

taking



taking


they are



taking


they are


Factors Affecting Managerial Decisions


Top management teams are comprised of the key managers who are responsible for formulating and implementing the organization’s strategies.

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

Top Management Teams



• Chief executive officers can gain so much power Chief executive officers can gain so much power that they are virtually independent of oversight that they are virtually independent of oversight by the board of directors.by the board of directors.

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

• CEOs of long tenure can also wield substantial CEOs of long tenure can also wield substantial power.power.

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


CEO / Board Chair Duality

Has been blamed for poor performance & slow response to change.

Occurs most commonly on the largest firms.


Exercise of Effective Strategic Leadership


Determines Strategic

Direction

Developing a long-term vision of the firm’s Strategic Intent

Exploits & Maintains Core

Competencies

Leaders must ensure that the firm’s core competencies are emphasized in strategic implementation efforts

Develops Human

Capital

No strategy can be effective unless the firm is able to develop & retain

good staff to carry it out

Sustains an Effective Organizational Culture

Leaders play a critical role in shaping and reinforcing the firm’s culture


Determines Strategic

Direction

Exploits & Maintains Core

Competencies

Develops Human

Capital

Sustains an Effective Organizational Culture


Emphasizaing Ethical Practices

Encourage & enable people at all organization levels to act ethically when doing what is necessary to implement the firms strategies.

Establishing Balanced Organizational controls

To create controls which are balanced between financial and strategic measurements.


Emphasizing Ethical Practices

Establishing Balanced Organizational controls


Determining Strategic Direction

• Strategic direction means the development of Strategic direction means the development of a long-term vision of a firm’s strategic intent.a long-term vision of a firm’s strategic intent.

• A charismatic leader can help achieve A charismatic leader can help achieve strategic intent.strategic intent.

• It is important not to lose sight of the strengths It is important not to lose sight of the strengths of the organization when making changes of the organization when making changes required by a new strategic direction.required by a new strategic direction.

• Executives must structure the firm effectively Executives must structure the firm effectively to help achieve the vision.to help achieve the vision.


Determining Strategic Actions

Developing a long term vision of the firm’s Developing a long term vision of the firm’s strategic intent strategic intent

The ideal long term vision has two parts:The ideal long term vision has two parts:• Core ideologyCore ideology

• An envisioned future.An envisioned future.


Exploiting and Maintaining Core Competencies

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

• Core competencies cannot be developed or Core competencies cannot be developed or exploited effectively without developing the exploited effectively without developing the capabilities of human capital.capabilities of human capital.


Sustaining an Effective Organizational Culture

Changing Culture and Business ReengineeringChanging Culture and Business Reengineering

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

• Teamwork is essential to successful Teamwork is essential to successful implementation.implementation.

• Problems are solved only when teams accept Problems are solved only when teams accept the responsibility for the solution.the responsibility for the solution.


Organizational Controls

Common Strategic Controls

High level of interaction

High level of interaction between corporate headquarters and divisions

Ability to share resources and capabilities among divisions

Open communication between corporate and divisional managers


Ethical Practices

Establish & transmit specific goals describing the firm’s ethical standards (e.g., develop / disseminate a code of conduct).

Developing an ethical organizational culture:

Continuously revise & update the code of conduct, based on inputs from stakeholders.

Disseminate a code of conduct to all stakeholders to inform them of the firm’s ethical standard / practices.Develop & implement methods / procedures to use in achieving the firm’s ethical standards.

Have explicit rewards to recognize acts of courage (e.g., using proper channels / procedures to report wrongdoing).

Create a work environment in which all people are treated with dignity.


The Balanced Scorecard

• Complements financial measures of past performance Complements financial measures of past performance with measures of the drivers of future performance.with measures of the drivers of future performance.

• It should translate a business unit’s mission & strategy It should translate a business unit’s mission & strategy into tangible objectives & measures.into tangible objectives & measures.

• The objectives and measures view organizational The objectives and measures view organizational performance from four perspectives.performance from four perspectives.

1.1.FinancialFinancial

2.2.Business ProcessBusiness Process

3.3.Internal Business ProcessInternal Business Process

4.4.Learning & GrowthLearning & Growth

Source: “The Balanced Scorecard” by Robert S. Kaplan, David P. Norton


The Balanced Scorecard Matrix

Financial Customer

Internal Business Process

Learning & Growth

Objectives

Measures

Targets

Initiatives


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


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

Date post:	20-Jan-2015
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