Chapter 12 Strategic Leadership

Chapter 12Strategic LeadershipMichael A. HittR. Duane IrelandRobert E. Hoskisson©2000 South-Western College PublishingCompetitivenessChapter 3InternalEnvironmentChapter 2ExternalEnvironmentThe StrategicManagementProcessStrategic IntentStrategic MissionStrategicCompetitivenessAbove AverageReturnsFeedbackStrategy FormulationChapter 4Business-LevelStrategyChapter 5CompetitiveDynamicsChapter 6Corporate-LevelStrategyChapter 8InternationalStrategyChapter 9CooperativeStrategiesChapter 7Acquisitions &RestructuringStrategy ImplementationChapter 10CorporateGovernanceChapter 11Structure& ControlChapter 12StrategicLeadershipChapter 13Entrepreneurship & InnovationStrategicInputsStrategicActionsStrategic OutcomesStrategic Leadership involves:Strategic LeadershipThe ability to anticipate, envision, maintain flexibility and empower others to create strategic changeMulti-functional work that involves working through othersConsideration of the entire enterprise rather than just a sub-unitA managerial frame of referenceStrategic CompetitivenessAbove-Average ReturnsEffectiveStrategic Leadershipinfluenceshapes the formulation of andStrategic IntentStrategic MissionSuccessfulStrategic ActionsFormulationof StrategiesImplementationof StrategiesStrategic Leadershipand the Strategic Management ProcessManagerial DiscretionExternal EnvironmentIndustry StructureRate of market growth# and type of competitorsPolitical/Legal constraintsProduct differentiationFactors Affecting Managerial DiscretionInterpersonal skillsTolerance for ambiguityCommitment to the firmAspiration levelSelf-confidenceCharacteristics of the ManagerEmployee interactionOrganizational CharacteristicsResource availabilitySize and ageCultureTop Management TeamsTop management teams are comprised of the key managers who are responsible for formulating and implementing the organization’s strategiesA heterogeneous top management team with varied expertise and knowledge can draw on multiple perspectives when evaluating alternative strategies and building consensus 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.Strategic LeadershipChief 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 DirectorsCEOs of long tenure can also wield substantial powerThe most effective forms of governance share power and influence among the CEO and Board of DirectorsThe internal labor market is comprised of the career path alternatives available to a firm’s managersSelecting internal candidates for management positions helps to build on valuable firm-specific knowledgeThe external labor market includes the collection of career opportunities for managers outside their firmSelecting an outsider often brings fresh insights and may energize the firm with innovative new ideas Managerial Labor MarketsEffects of CEO Succession and Top Management Team Composition on StrategyTop Management Team CompositionManagerial Labor Market:CEO SuccessionHeterogeneousHomogeneousInternalCEO SuccessionStable StrategyExternalCEO SuccessionAmbiguous:Possible change in Top Management Team and StrategyStable StrategyTop Management Team CompositionManagerial Labor Market:CEO SuccessionHeterogeneousHomogeneousInternalCEO SuccessionExternalCEO SuccessionEffects of CEO Succession and Top Management Team Composition on StrategyStable Strategy with InnovationStable StrategyAmbiguous:Possible change in Top Management Team and StrategyTop Management Team CompositionManagerial Labor Market:CEO SuccessionHeterogeneousHomogeneousInternalCEO SuccessionExternalCEO SuccessionEffects of CEO Succession and Top Management Team Composition on StrategyStrategicChangeStable StrategyStable Strategy with InnovationAmbiguous:Possible change in Top Management Team and StrategyTop Management Team CompositionManagerial Labor Market:CEO SuccessionHeterogeneousHomogeneousInternalCEO SuccessionExternalCEO SuccessionEffects of CEO Succession and Top Management Team Composition on StrategyDeterminingStrategicDirectionExploiting &MaintainingCoreCompetenciesDevelopingHumanCapitalSustainingan EffectiveOrganizationalCultureEmphasizingEthicalPracticesEstablishingBalancedOrganizationalControlsExercise of Effective LeadershipEffective Strategic LeadershipStrategic 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.DeterminingStrategicDirectionDeterminingStrategicDirectionExploiting &MaintainingCoreCompetenciesDevelopingHumanCapitalSustainingan EffectiveOrganizationalCultureEmphasizingEthicalPracticesEstablishingBalancedOrganizationalControlsEffective Strategic LeadershipExploiting & MaintainingCore CompetenciesDeterminingStrategicDirectionExploiting &MaintainingCoreCompetenciesDevelopingHumanCapitalSustainingan EffectiveOrganizationalCultureEmphasizingEthicalPracticesEstablishingBalancedOrganizationalControlsEffective Strategic LeadershipCore 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 firm’s competencies are emphasized in strategy implementation efforts.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.Developing HumanCapitalDeterminingStrategicDirectionExploiting &MaintainingCoreCompetenciesDevelopingHumanCapitalSustainingan EffectiveOrganizationalCultureEmphasizingEthicalPracticesEstablishingBalancedOrganizationalControlsEffective Strategic LeadershipHuman capital refers to the knowledge and skills of the firm’s 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 firm’s human capital may be the primary determinant of a firm’s ability to formulate and implement strategies successfully.Sustaining an EffectiveOrganizational CultureDeterminingStrategicDirectionExploiting &MaintainingCoreCompetenciesDevelopingHumanCapitalSustainingan EffectiveOrganizationalCultureEmphasizingEthicalPracticesEstablishingBalancedOrganizationalControlsEffective Strategic LeadershipAn 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 firm’s culture is a central task of effective strategic leadership. 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.Every job in the company is essential and importantThe benefits of business reengineering are maximized when employees believe that:All employees must create value through their workConstant learning is a vital part of every person’s jobTeamwork is essential to implementation successProblems are solved only when teams accept the responsibility for the solutionChanging Culture and ReengineeringEmphasizing Ethical PracticesDeterminingStrategicDirectionExploiting &MaintainingCoreCompetenciesDevelopingHumanCapitalSustainingan EffectiveOrganizationalCultureEmphasizingEthicalPracticesEstablishingBalancedOrganizationalControlsEffective Strategic LeadershipEthical practices increase the effectiveness of strategy implementation processes.Ethical companies encourage and enable people at all organizational levels to exercise ethical judgment. To properly influence employee judgment and behavior, ethical practices must shape the firm’s decision-making process and be an integral part of an organization’s culture.Leaders set the tone for creating an environment of mutual respect, honesty and ethical practices among employees. Establishing BalancedOrganizational ControlsDeterminingStrategicDirectionExploiting &MaintainingCoreCompetenciesDevelopingHumanCapitalSustainingan EffectiveOrganizationalCultureEmphasizingEthicalPracticesEstablishingBalancedOrganizationalControlsEffective Strategic LeadershipOrganizational 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 short-term financial outcomes. Strategic control focuses on the content of strategic actions, rather than their outcomes. 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.