Strategic Management Ch13

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

Strategic Leadership

Chapter Thirteen

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


The Strategic Management Process

Chapter 8:Acquisition & Restructuring

Chapter 9:International

Strategy

Chapter 10:Cooperative

Strategy

Strategy Formulation

Chapter 11:Corporate

Governance

Ch. 12: Org. Structure & Controls

Chapter 13:Strategic

Leadership

Chapter 14:Org. Renewal & Innovation

Strategy Implementation

StrategicActions

Chapter 3:The External Environment

Strategic Competitiveness

Strategic Mission & Strategic Intent

Strategic Objectives & Inputs

Chapter 1: Strategic

ManagementStrategic

Competitiveness Ch. 2: Strat. Mgmt . &

Performance



Chapter 4:The Internal Environment

Chapter 5: Bus.-Level Strategy

Chapter 6:Competitive Dynamics

Chapter 7:Corp.-Level

Strategy


Leadership


Strategic LeadershipKnowledge Objectives1. Describe strategic leadership & differentiate between

strategic, visionary & managerial leadership

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

3. Discuss the value of strategic leadership in deciding a firm’s strategic direction and explain the strategic leaders’ role in exploiting & maintaining core competencies

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

5. Define organizational culture, explain what must be done to sustain an effective culture & what strategic leaders can do to establish & emphasize ethical practice

6. Discuss the importance & use of organizational controls


Strategic Leadership Presumes

• An ability to influence those with whom one works

• The leader understands the emergent strategy process

• A shared vision of what the organization is to be

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

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

• Managerial leadership that includes an intended 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

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

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

• Maintain a low level of emotional involvement in these relationships

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

• Want stability & strive to preserve existing order


Visionary Leadership

• Shape ideas as opposed to reacting to them• Influence changes in the way people think about what

is possible, desirable and necessary• Are concerned with ideas & relate to people in intuitive

& empathetic ways• More likely to make decisions based on values.• Willing to invest in human capital & creating & main-

taining an effective culture to ensure long term viability• Is future-oriented & concerned with risk taking• Want creativity, innovation and chaos• Strive to change the existing order



• A synergistic combination of managerial & visionary leadership

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

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

• Willing to make candid, courageous & yet pragmatic decisions

• Solicits corrective feedback from peers, superiors & employees about the value of their difficult 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


who they are



taking


who they are


Managerial DiscretionManagerial Discretion

External EnvironmentIndustry StructureRate of market growthNumber & type of competitorsPolitical/Legal constraintsProduct differentiation Employee interaction

Organizational Characteristics

Resource availability

Size and ageCulture

Factors Affecting Managerial Decisions

Interpersonal skills

Tolerance for ambiguityCommitment to the firm

Aspiration levelSelf-confidence

Characteristics of the Manager


Top management teams are comprised of 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 strategiesA 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 that they are virtually independent of board of directors oversight

• This is especially true when the CEO is also chairman of the board of directors (CEO / Board Chair Duality)

• CEOs of long tenure can wield substantial power

CEO / Board Chair DualityHas been blamed for poor performance & slow response to change.

Occurs most commonly at the largest firms

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


Determines Strategic Direction

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

Exploits & Maintains Core

Competencies

Ensure firm’s core competencies are emphasized in strategic implementation

Develops Human Capital

No strategy is effective unless a firm develops & retains staff to execute it

Sustains an Effective Organizational Culture

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

Effective Strategic LeadershipDetermines

Strategic Direction

Exploits & Maintains Core

CompetenciesDevelops

Human Capital

Sustains an Effective Organizational Culture

Establishing Balanced Organizational controls

To create controls balanced between financial and strategic measurements.

Establishing Balanced Organizational controls

Emphasizaing Ethical Practices

Enable those at all organization levels to act ethically when doing what is needed to implement firms’ strategies

Emphasizing Ethical Practices


Determining Strategic Direction

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


Determining Strategic Actions

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

The ideal long term vision has 2 parts:• Core ideology

• An envisioned future.


Exploiting & 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.


Sustaining an Effective Organizational Culture

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

• Teamwork is essential to successful implementation

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

Changing Culture & Business ReengineeringChanging Culture & Business Reengineering


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 noting 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 with measures of the drivers of future performance.

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

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

1.Financial 3. Internal Business Process

2.Business Process 4. Learning and Growth

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


The Balanced Scorecard Matrix

Custom Training Knowledge Library

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Strategic Skills

R&D Prog. Customer Mailing

2006 – 15%2007 – 50%2008 – 60%

% Revenue from new Products

Develop New Products

Frequent Buyers Club

95%Customer Retention

Increased Customer

Satisfaction

Sales Promo New Channel Marketing

10% Product A40% Product B50% Product C

Revenue Mix

Broaden Revenue Mix

Learning & Growth

Internal Business Processes

Financial

Customer

InitiativesTargetsMeasuresObjectivesQuestion

To achieve our vision, how will we sustain our ability to change & improve?

What bus. processes must we excel at to satisfy shareholders & customers?

How do we appear to shareholders to succeed financially?

How do we appear to our customers to achieve our vision?

What is critical to success?

How is it measured?

Performance expectation?

Key action Programs?

What is critical to ask?

© 1996 HBR Publishing


Strategic and Financial Controls in a Balanced Scorecard Framework

PerspectivesPerspectives CriteriaCriteria

FinancialFinancial • Cash flow

• Return on equity

• Return on assets

CustomerCustomer • Assessment of ability to anticipate customers needs

• Effectiveness of customer service practices

• Percentage of repeat business• Quality of communications with

customers


Strategic and Financial Controls in a Balanced Scorecard Framework

PerspectivesPerspectives CriteriaCriteria

Internal Business Internal Business ProcessProcess

• Asset utilization improvements

• Improvements in employee morale

• Changes in turnover rates

Learning and Learning and GrowthGrowth

• Improvements in innovation ability

• Number of new products compared to competitors

• Increases in employees’ skills


The Strategic Management Process

Chapter 8:Acquisition & Restructuring

Chapter 9:International

Strategy

Chapter 10:Cooperative

Strategy

Strategy Formulation

Chapter 11:Corporate

Governance

Ch. 12: Org. Structure & Controls


Leadership

Chapter 14:Org. Renewal & Innovation

Strategy Implementation

StrategicActions


Strategic Competitiveness

Strategic Mission & Strategic Intent

Strategic Objectives & Inputs

Chapter 1: Strategic

ManagementStrategic

Competitiveness Ch. 2: Strat. Mgmt . &

Performance



Chapter 4:The Internal Environment

Chapter 5: Bus.-Level Strategy

Chapter 6:Competitive Dynamics

Chapter 7:Corp.-Level

Strategy


Leadership

Education

Strategic Management Ch13