Chapter 12 Strategic Leadership by Executives

Group members:

Aw Hoay HoayFatin Shafina Binti Mahadi

Nurulain Binti ZakariaTan Mei Yee

AbstractThis chapter study about the importance of strategic leadership by executives and is supported by three types of research which are studies of CEO succession, case studies of strategic leaders and survey field studies on CEO behavior and firm performance. Executives need understand the constraint and take appropriate action to influence performance determinants such as efficiency and process reliability, human relations and resources and adaptation to the environment in order to reach organizational effectiveness. Besides single leadership by executive, shared leadership by an executive team are also likely to be effective. In addition, monitor the environment and formulate a good competitive strategy is important for the executive to achieve organizational effectiveness.

Organizational

Performance

Adaptation to the

Environment

Efficiency and

Process Reliability Human

Resources and

Relations

Adaptation to the Environment

Responding in appropriate ways Important when volatile and

uncertain More likely to be successful with

a relevant competitive strategy Can be enhanced

Efficiency and Process Reliability Efficiency = Minimize costs and avoid wasted

effort and resources Important when offer lower price or financial

crisis Process Reliability = Avoiding delays, errors,

quality defects or accidents Important component for efficiency Improve by using extra resources to produce

quality and standard product or services Improve when saving > cost

Human Resources and Relations

Human capital = Quality of organization’s human resources

Related to efficiency and adaptation

Eg: Talented, dedicated employees often instrumental for the achievement of both efficiency and adaption

WAYS TO INFLUENCE THE PERFORMANCE DETERMINANTS

Leadership

Behaviors

Programs, Systems,

and Structure

Decisions about

Competitive Strategy

Leadership Behaviors

Three general types Task oriented behaviors Change oriented behaviors Relations oriented behaviors Effectiveness is depends on particular

situation Eg: Change oriented behaviors relevant

in rapidly changing environment and used more by top executives

Programs, Systems, and Structure

Implementing or modifying formal programs, management systems and aspect of formal structure

An indirect leadership and is complementary with direct leadership

More likely to accept or success if explain by, how will benefit, encourage to participate

Can enhance or limit the leadership behavior Serve as substitutes for some types of direct

behaviors

Decisions about Competitive Strategy

Decisions about competitive strategy are important source of influence

Primary focus on adaption but is difficult improves unless consistence changes are made in efficiency and human capital

Required some modification of management program and may involve negotiation

Need for Flexible, Adaptive Leadership

Focus on multiple performance determinants

One cannot be improved without consistent changes in other

Need to find a balance between priorities

Coordinating Leadership Across Levels and Subunits

Decisions cant implemented successfully without support from all level leader

Conflict and resistance will cause drop in performance

Difficult to achieve cooperation and coordination across levels and subunits

Can coordinate or minimize by have a relevant core ideology or increase involvement of different leader in strategic decisions making

Constraints on Executives

CONSTRAINTS

EXTERNALINTERNAL

Constraints on Executives

Internal Coalitions in the organizationsBernard (2007) Agency theory & behavioral model

Organization cultureResistance to change

Constraints on Executives

External Products & services, market External stakeholders Perceive of organization performance

Constraints on Executives

Constraints and executive traits as Joint Determinants Interaction Situation and different traits of

leader

• Constraints and executive traits as Joint DeterminantsInternal

ConstraintsExternal

Constraints

Leader’s Personality

& Skills

Leader’s Behavior

Constraints on Executives

Situation and different traits of leader

▪CEO=figurehead▪consevative, risk-adverse, compliant

▪more freedom▪ambitous, dynamic, innovative

SEVERE CON

STR

AIN

TS

LEAST

CONSTRAI

NTS

Constraints on Executives

Conditions Affecting the Need for Strategic Leadership

Periods of Reorientation Periods of Convergence Influence of Top Management

Role of top management

Conditions Affecting the Need for Strategic Leadership

Reorientation Periods

Convergence Periods

TIME

Conditions Affecting the Need for Strategic Leadership

Periods of Reorientation Intense activity due to major changes in

organization Whole organization will be affected Concurrent changes in interrelated

aspects of strategy, structure, processes and people are required

Resistances are unavoidable Guidance and coordination is necessary

Conditions Affecting the Need for Strategic Leadership

Periods of Convergence Relatively longer periods

compared to reorientation Small incremental changes occur

for better adaption to environment

Pros & cons

Conditions Affecting the Need for Strategic Leadership

Influence of Top Management Tushman & Romanelli (1985)

Forces for

stability

Forces for

changeTop management

Mechanism for mediating

Convergence

Periods

Reorientation

Periods

LessPotentialimpact

LargerPotenti

alimpact

Conditions Affecting the Need for Strategic Leadership

Influence of Top Management When strategy is already not

relevant, executive often try to improve the existing strategy rather than introduce a new one.

Major changes are hard to implement since support are difficult to get.

Majority of reorientation are initiated by new leadership

Political Power and Strategic Leadership

Power of coalitions also influence change

Hickson et al. (1971) stated more power goes to subunits with distinct expertise who can solve critical problems

Salancik & Pfeffer (1977) highlighted that political tactics is used to increase or protect their power even after their expertise is no longer critical

Executive Tenure and Strategic Leadership

Hambrick & Fukutomi life cycle model

Greatly Influenced By Implicit Mandate

Experiment with

different approaches

Narrow minded

and inflexible

RESEARCH ON EFFECT OF CEO LEADERSHIP

Succession studyCase studySurvey field study

STUDIES OF CEO SUCCESSION

“succession studies” attempt to determine how a change in top leadership affects indicators of organizational performances.

Problem: Erroneously interpreted result.

There is three failure: To correct org size To correct dollar-denominated To allow enough time for new leaders to

influences quantitative performances outcomes. Researcher do not take account the effects of

CEO skill.

HOW TO SOLVE THE PROBLEM?

Need to consider internal and external constraints on a successor CEO. Company financial condition. Changing economic.

Timing of succession and timing of the performances outcomes also important.

Succession on the important of CEO have no conclusion because of the many methodological problem.

CASE STUDY OF STRATEGIC LEADERSHIP

Study the influences of the CEO on the performances.

Sources info : Interview, questionnaires, company record,

annual report, financial database. Biographies, autobiographies, magazine

article Case studies of chief executive:

Examine type of decision and action that account for success or failure.

INTENSIVE CASE METHOD

Involved analysis of the decision and action.

Involved the chief executive of a large company in times of uncertainty.

Provide alternative way to explore the effect of CEO succession.

COMPARATIVE CASE

To see similar pattern of strategic decision and behavior.

To compare more or less successful CEOs in similar companies.

Examine CEOs who initially successful but latter experiences failure

LIMITATION OF CASE STUDY

Difficult to get accurate information Information given is biased

Close with CEO. Fear of their reputation. Non-disclosed agreement

Even when accurate info can be obtained, it maybe difficult to asses the influences of single CEO.

Suggestion: Researchers make a systematic effort to

gather the relevant information.

SURVEY FIELD STUDY

CEO behavior and firm performances. Examines the relationship between

CEO charismatic leadership and organizational performances.

Data:QuestionnaireArchival data.

Subordinate were ask to rate the charismatic leadership of their boss.

EFFECTIVENESS is depend on: Correlated with corporate financial performances Environmental uncertainty

Theories of transformational and charismatic leadership are focused primarily on the way leaders influences relations.

PROBLEM: Do not explain a chief executive’s impact on other

organizational-level determinant.Strategic leadership- “managing” rather than

“leading”

STRATEGIC LEADERSHIP BY EXECUTIVE TEAMS. Potential advantages of executive teams: Better strategic decisions when members have

relevant skills and knowledge that the CEO lacks. Members have relevant skills and knowledge that

CEO lack. Decision made. (interest of the member/quality) Important task become easy (share burden) Communication and cooperative among

executives from diff subunit is improved (meeting)

Depends on:

Situation Important in Complex Rapidly changing environment that

places many external demand on CEO. Teams member (diverse) Attitude, personality and skill of the

CEO.

It is more difficult to develop mutual trust and cooperation when team members represent subunits with different objectives or members are competing to become the successor to current CEO.

Executive teams and organization effectiveness

Emphasis on decision making Important element to ensure the

effective of the decision-organization member

Find out-by using simultaneous evaluation and related other strategic decision + consider about technical planning = effective of decision making

Two Key Responsibilities For Top Executive

Responsible that usually important compare to lower-level leader

Offer guideline to ensure that the responsibilities undertaken are effectively

Monitoring the

environment

Developing competitive

strategy

Monitoring the Environment

External environment & identify threats and opportunities for org.-provide information that need for strategic planning.

Guidelines

Identify relevant information to gather

Use multiple source of relevant information

Learn what client and supplier need & want

Learn about the product and activities of competitors

Relate environmental information to strategic plan

Developing Competitive Strategy Compete effectively in the

marketplace and remain profitable.

Competitive strategy-different, low-cost, well-knowledge

Guidelines

Determine long term objectives and priorities

Assess current strengths and weaknesses Identify core competencies Evaluate the need for major change in

strategy Identify promising strategies Evaluate the likely key outcomes of strategy Involves others executive in selecting

strategy

The End

Reference

Gary Yukl. (2010). Leadership in Organizations Seventh Edition. Selangor: Prentice Hall.