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13-1 © 2006 by Nelson, a division of Thomson Canada Limited.
Strategic Leadership
Chapter 13
13-2 © 2006 by Nelson, a division of Thomson Canada Limited.
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
13-3 © 2006 by Nelson, a division of Thomson Canada Limited.
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.
13-4 © 2006 by Nelson, a division of Thomson Canada Limited.
Strategic Leadership
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.
13-5 © 2006 by Nelson, a division of Thomson Canada Limited.
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.
13-6 © 2006 by Nelson, a division of Thomson Canada Limited.
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
13-7 © 2006 by Nelson, a division of Thomson Canada Limited.
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.
13-8 © 2006 by Nelson, a division of Thomson Canada Limited.
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.
13-9 © 2006 by Nelson, a division of Thomson Canada Limited.
Strategic Leadership
• 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.
13-10 © 2006 by Nelson, a division of Thomson Canada Limited.
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
Want stability & to preserve the existing order
Guide without a strategic vision. Constrained by values & by using explicit knowledge
Are comfortable handling Short-term day-to-day activities
Want stability & to preserve the existing order
Guide without a strategic vision. Constrained by values & by using explicit knowledge
Are comfortable handling Short-term day-to-day activities
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
Control by social- ization & sharing common norms, values & beliefs
Are future-oriented concerned with risk-
taking
Are not dependent on the organisation for their sense of who
they are
Control by social- ization & sharing common norms, values & beliefs
Are future-oriented concerned with risk-
taking
Are not dependent on the organisation for their sense of who
they are
13-11 © 2006 by Nelson, a division of Thomson Canada Limited.
Factors Affecting Managerial Decisions
13-12 © 2006 by Nelson, a division of Thomson Canada Limited.
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
13-13 © 2006 by Nelson, a division of Thomson Canada Limited.
Strategic Leadership
• 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.
13-14 © 2006 by Nelson, a division of Thomson Canada Limited.
CEO / Board Chair Duality
Has been blamed for poor performance & slow response to change.
Occurs most commonly on the largest firms.
13-15 © 2006 by Nelson, a division of Thomson Canada Limited.
Exercise of Effective Strategic Leadership
13-16 © 2006 by Nelson, a division of Thomson Canada Limited.
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
Effective Strategic Leadership
Determines Strategic
Direction
Exploits & Maintains Core
Competencies
Develops Human
Capital
Sustains an Effective Organizational Culture
13-17 © 2006 by Nelson, a division of Thomson Canada Limited.
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.
Effective Strategic Leadership
Emphasizing Ethical Practices
Establishing Balanced Organizational controls
13-18 © 2006 by Nelson, a division of Thomson Canada Limited.
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.
13-19 © 2006 by Nelson, a division of Thomson Canada Limited.
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.
13-20 © 2006 by Nelson, a division of Thomson Canada Limited.
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.
13-21 © 2006 by Nelson, a division of Thomson Canada Limited.
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.
13-22 © 2006 by Nelson, a division of Thomson Canada Limited.
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
13-23 © 2006 by Nelson, a division of Thomson Canada Limited.
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.
13-24 © 2006 by Nelson, a division of Thomson Canada Limited.
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
13-25 © 2006 by Nelson, a division of Thomson Canada Limited.
The Balanced Scorecard Matrix
Financial Customer
Internal Business Process
Learning & Growth
Objectives
Measures
Targets
Initiatives
13-26 © 2006 by Nelson, a division of Thomson Canada Limited.
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
13-27 © 2006 by Nelson, a division of Thomson Canada Limited.
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