Strategic Leadership

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Topic 17

• Strategic Leadership

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The Nature of Strategic Leadership
Strategic leadership is the process of providing
the direction and inspiration necessary to create
or sustain an organization
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Figure 13-1 Components of Strategic Leadership
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Guidelines for Formulating Strategy

• Determine long-term objectives and priorities
• Assess current strengths and weaknesses
• Identify core competencies
• Evaluate the need for a major change in strategy
• Identify promising strategies
• Evaluate the likely outcomes of a strategy
• Involve other executives in selecting a strategy

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Systems Thinking
The ability to process information and understand
its consequences for the organization in its
interaction with the environment
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Strategic Planning

• Strategic planning encompasses those activities
  that lead to the statement of goals and
  objectives and the choice of strategy
• Strategic planning often takes the form of a SWOT
  analysis, a method of considering strengths,
  weaknesses, opportunities, and threats in a
  particular situation

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SWOT Analysis

• Represents an effort to examine the interaction
  between the particular characteristics of an
  organization or organizational unit and the
  external environment

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Examples of SWOT Elements

• Strengths Favorable location, talented workers,
  state-of-the-art equipment
• Weaknesses Unfavorable location, outdated
  equipment, limited capital
• Opportunities Culturally diverse customer base,
  changes in technology, deregulation
• Threats Ecommerce, declining market, new
  competitors

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Business Strategy Levels

• Corporate-level strategy asks, What business are
  we in?
• Business-level strategy asks, How do we
  compete?
• Functional-level strategy asks, How do we
  support the business-level strategy?

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Sample Strategies

• Differentiation
• Cost leadership
• Focus
• High quality
• Imitation
• Strategic alliances
• Growth through acquisition

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Sample Strategies (contd)

• High speed and first-mover strategy
• Product and global diversification
• Sticking to core competencies
• Brand leadership
• Creating demand by solving problems
• Conducting business on the Internet
• Peoplepalooza (competitive advantage through
  hiring talented people)

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Differences Between Lower Level and Upper Echelon
Leaders

• Who the leader is
• Scope of responsibility
• Focus
• Effectiveness criteria

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Strategic Forces
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Dual Role of Upper Echelon Leaders
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External Moderators of Executive Discretion

• Environmental uncertainty
• Type of industry
• Market growth
• Legal constraints

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Internal Moderators of Executive Discretion

• Stability
• Size and structure
• Organizational culture
• Stage of organizational growth
• Presence, power, and makeup of TMT

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Themes in Upper Echelon Style

• Challenge Seeking
• Risk taking
• Openness to change
• Willingness to innovate
• Future orientation

• Need for Control
• Delegation
• Centralization
• Uniformity of practices
• Focus on process

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Strategic Leadership Dimensions
HIGH-CONTROL INNOVATOR (HCI) Challenge-seeker
who maintains tight control over organization
PARTICIPATIVE INNOVATOR (PI) Challenge-seeker
who delegates control of organization
STATUS QUO GUARDIAN (SQG) Challenge-averse
who maintains tight control over organization
PROCESS MANAGER (PM) Challenge-averse
who delegates control of organization
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Processes Leaders Use to Impact Their
Organization
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Direct Decisions

• Vision
• Mission
• Strategy
• Structure
• Organizational culture
• Selection of other leaders

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Allocation of Resourcesand Reward System

• Decisions regarding funding and budgets
• Allocation of resources to support goals
• Formal rewards such as salary and bonuses
• Informal rewards such as recognition
• Promotion of other leaders and managers

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Setting the Norms and Role Modeling

• Setting decision criteria and rules by which
  others make decisions
• Active or subtle role modeling of behaviors and
  styles

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Responsibility of Upper Echelon Leaders

• Organizational performance
• Accountability to various internal and external
  constituents
• Ethical behavior and role-modeling

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Factors That Affect Executive Salaries

• Firm size
• Industry competition
• CEO power and discretion
• Internationalization
• High stress and instability

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Constraints on Leaders

• Internal Constraints
• Coalitions in the organization
• Strong organizational culture
• External Constraints
• Organizations primary products and services
• Powerful external stakeholders
• Perception of the organizations performance
• Constraints and Leader Traits as Joint
  Determinants

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Strategic Leadership

• Political Power and Strategic Leadership
• Executive Tenure and Strategic Leadership
• Executive Teams
• Potential advantages of strategic teams
• Executive teams and organizational effectiveness

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How Leaders Influence Organizational Performance

• Efficiency and Process Reliability
• Innovation and Adaptation
• Human Resources and Relations
• Leader Influence on Performance Determinants

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Efficiency and Process Reliability

• Performance management and goal setting programs
  (e.g.,MBO, zero defects)
• Process and quality improvement programs (quality
  circles,TQM, Six Sigma)
• Cost reduction programs (downsizing, outsourcing,
  just-in-time inventory)
• Structural forms (functional specialization,
  formalization, standardization)
• Appraisal, recognition, and reward systems
  focused on efficiency and process reliability

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Human Resources and Relations

• Quality of worklife programs (flextime, job
  sharing, child care, fitness center)
• Employee benefit programs (health care,
  vacations, retirement, sabbaticals)
• Socialization and team building (orientation
  programs, ceremonies and rituals, social events
  and celebrations)
• Employee development programs (training,
  mentoring, 360 feedback, education subsidies)

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Human Resources and Relations

• Human resource planning (succession planning,
  assessment centers, recruiting programs)
• Empowerment programs (self-managed teams,
  employee ownership, industrial democracy)
• Recognition and reward programs focused on
  loyalty, service, or skill acquisition

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Innovation and Adaptation

• Competitor and market analysis programs (market
  surveys, focus groups, consumer panels,
  comparative product testing, benchmarking
  competitor products and processes)
• Innovation programs (intrapreneurship, quality
  circles, innovation goals)
• Knowledge acquisition (consultants, joint
  ventures, import best practices from outside)
• Organizational learning (knowledge management
  systems, postmortums, joint ventures)

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Innovation and Adaptation

• Temporary structural forms for implementing
  change (steering committee, task forces)
• Growth and diversification programs (mergers and
  acquisitions, franchises, joint ventures)
• Structural forms (research departments, small
  product divisions, product managers
  crossfunctional product development teams,
  facilities designed to encourage innovation)
• Appraisal, recognition, and reward systems
  focused on innovation and customer satisfaction

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Questions for External Monitoring

• What do clients and customers need and want?
• What is the reaction of clients and customers to
  the organizations current products and services?
• Who are the primary competitors?
• What strategies are they pursuing (e.g., pricing,
  advertising and promotions, new products,
  customer service, etc.)?
• How do competitors products and services compare
  to those of the managers organization?
• What events affect the acquisition of materials,
  energy, information, and other inputs used by the
  organization to conduct its operations?

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Questions for External Monitoring

• How will the organization be affected by new
  legislation and by government agencies that
  regulate its activities (e.g., labor laws,
  environmental regulations, safety standards, tax
  policies, etc.)?
• How will new technologies affect the
  organizations products, services, and
  operations?
• How will the organization be affected by changes
  in the economy (employment level, interest rates,
  growth rates)?
• How will the organization be affected by changing
  population demographics (e.g., aging, diversity)?
• How will the organization be affected by
  international events (e.g., trade agreements,
  import restrictions, currency changes, wars and
  revolutions)?

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Guidelines for External Monitoring

• Identify relevant information to gather
• Use multiple sources of relevant information
• Learn what clients and customers need and want
• Learn about the products and activities of
  competitors
• Relate environmental information to strategic
  plans

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Knowledge Management andthe Learning Organization

• Knowledge management is the systematic sharing of
  information to achieve such goals as innovation,
  nonduplication of effort, and competitive
  advantage
• A learning organization is one that is skilled at
  creating, acquiring, and transferring knowledge,
  and at modifying behavior to reflect new
  knowledge and insights

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Where Corporate Knowledge Lives
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Initiatives to Enhance Organizational Learning

• Create a strategic intent to learn
• Create a shared vision
• Empower employees to make decisions and seek
  continuous improvement
• Develop systems thinking
• Encourage personal mastery of the job

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Initiatives to Enhance Organizational Learning
(contd)

• Encourage team learning
• Encourage action learning
• Learn from failure
• Encourage continuous experimentation
• Develop political skills to make connections with
  and influence others
• Encourage creative thinking

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Summary

• Strategic leadership deals with the major
  purposes of an organization or organizational
  unit
• Five important components of strategic leadership
  include high-level cognitive ability, multiple
  inputs to strategy formulation, anticipating and
  creating a future, revolutionary thinking, and
  creation of a vision

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Summary (contd)

• Strategic planning often takes the form of a SWOT
  analysis
• Strategic leaders use many different types of
  business strategies
• Leaders must help their organizations adapt to
  the environment by taking initiatives to create a
  learning organization

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Leading ChangeAnne Mulcahy

• In charge of turning Xerox around
• Focus on giving stakeholders hope and confidence
• Role model desired behaviors
• Leading by example

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Leadership In ActionA.G. Lafley

• Soft-spoken and understated
• Careful listener
• Focus on customer
• Repeat simple messages
• Change culture through communication and symbols
• Openness and focus on people

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The Leadership Challenge

• CEO involvement in nomination of board members
  helps assure that members with the right skills
  and expertise are selected
• Those nominated by CEO may have a conflict of
  interest and a positive bias towards the CEO
• Creation of a balance of members nominated by
  different stakeholders is essential