Chapter 12

Strategic Leadership
Michael A. Hitt R. Duane Ireland Robert E. Hoskisson
2000 South-Western College Publishing
Ch12-1

Strategic Inputs

Chapter 2 External Environment Strategic Intent Chapter 3 Internal Environment Strategic Mission

The Strategic Management Process

Strategy Implementation
Chapter 10 Corporate Governance
Chapter 12 Strategic Leadership Chapter 11 Structure & Control Chapter 13
Entrepreneurship

Strategy Formulation
Chapter 4 Business-Level Strategy Chapter 5 Competitive Dynamics Chapter 8 International Strategy Chapter 6 Corporate-Level Strategy Chapter 9 Cooperative Strategies

Strategic Actions

Chapter 7 Acquisitions & Restructuring

& Innovation

Outcomes

Strategic

Feedback

Strategic Competitiveness Above Average Returns

Ch12-2

Strategic Leadership
Strategic Leadership involves: The ability to anticipate, envision, maintain flexibility and empower others to create strategic change Multi-functional work that involves working through others

Consideration of the entire enterprise rather than just a sub-unit

A managerial frame of reference
Ch12-3

Strategic Leadership and the Strategic Management Process

Effective Strategic Leadership shapes the formulation of and

Strategic Intent

Strategic Mission

influence
Successful Strategic Actions

Formulation of Strategies

Implementation of Strategies

Strategic Competitiveness Above-Average Returns

Ch12-4

Factors Affecting Managerial Discretion

External Environment
Industry Structure Rate of market growth # and type of competitors Political/Legal constraints Product differentiation

Organizational Characteristics
Size and age Culture Resource availability Employee interaction

Managerial Discretion
Characteristics of the Manager
Tolerance for ambiguity Commitment to the firm Interpersonal skills Aspiration level Self-confidence
Ch12-5

Top Management Teams

Top management teams are comprised of the key manager who are responsible for formulating and implementing the organizations strategies A 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.
Ch12-6

Strategic Leadership
Chief 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 Directors CEOs of long tenure can also wield substantial power The most effective forms of governance share power and influence among the CEO and Board of Directors
Ch12-7

Managerial Labor Markets

The internal labor market is comprised of the career path alternatives available to a firms managers Selecting internal candidates for management positions helps to build on valuable firm-specific knowledge

The external labor market includes the collection of career opportunities for managers outside their firm
Selecting an outsider often brings fresh insights and may energize the firm with innovative new ideas
Ch12-8

Effects of CEO Succession and Top Management Team Composition on Strategy

Managerial Labor Market: CEO Succession
Internal CEO Succession External CEO Succession

Homogeneous

Top Management Team Composition

Heterogeneous

Stable Strategy

Ch12-9

Effects of CEO Succession and Top Management Team Composition on Strategy

Managerial Labor Market: CEO Succession
Internal CEO Succession External CEO Succession

Homogeneous

Top Management Team Composition

Heterogeneous

Stable Strategy

Ambiguous: Possible change in Top Management Team and Strategy

Ch12-10

Effects of CEO Succession and Top Management Team Composition on Strategy

Managerial Labor Market: CEO Succession
Internal CEO Succession External CEO Succession

Homogeneous

Top Management Team Composition

Heterogeneous

Stable Strategy

Ambiguous: Possible change in Top Management Team and Strategy

Stable Strategy with Innovation

Ch12-11

Effects of CEO Succession and Top Management Team Composition on Strategy

Managerial Labor Market: CEO Succession
Internal CEO Succession External CEO Succession

Homogeneous

Top Management Team Composition

Heterogeneous

Stable Strategy

Ambiguous: Possible change in Top Management Team and Strategy

Stable Strategy with Innovation

Strategic Change
Ch12-12

Exercise of Effective Leadership

Effective Strategic Leadership

Determining Strategic Direction

Establishing Balanced Organizational Controls

Exploiting & Maintaining Core Competencies

Developing Human Capital

Sustaining an Effective Organizational Culture

Emphasizing Ethical Practices

Ch12-13

Determining Strategic Direction

Effective Strategic Leadership

Determining Strategic Direction

Establishing Balanced Organizational Controls

Exploiting & Maintaining Core Competencies

Developing Human Capital

Sustaining an Effective Organizational Culture

Emphasizing Ethical Practices

Strategic direction means the development of a longterm vision of a firms 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.
Ch12-14

Exploiting & Maintaining Core Competencies

Effective Strategic Leadership

Determining Strategic Direction

Establishing Balanced Organizational Controls

Exploiting & Maintaining Core Competencies

Developing Human Capital

Sustaining an Effective Organizational Culture

Emphasizing Ethical Practices

Core 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 firms 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.
Ch12-15

Developing Human Capital

firms entire workforce. requires investment.

Effective Strategic Leadership

Determining Strategic Direction

Establishing Balanced Organizational Controls

Exploiting & Maintaining Core Competencies

Developing Human Capital

Sustaining an Effective Organizational Culture

Emphasizing Ethical Practices

Human capital refers to the knowledge and skills of the

Employees are viewed as a capital resource that

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 firms

human capital may be the primary determinant of a firms ability to formulate and implement strategies
Ch12-16

Sustaining an Effective Organizational Culture

Effective Strategic Leadership

Determining Strategic Direction

Establishing Balanced Organizational Controls

Exploiting & Maintaining Core Competencies

Developing Human Capital

Sustaining an Effective Organizational Culture

Emphasizing Ethical Practices

An 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 firms 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. Ch12-17

Changing Culture and Reengineering

The benefits of business reengineering are maximized when employees believe that: Every job in the company is essential and important All employees must create value through their work Constant learning is a vital part of every persons job Teamwork is essential to implementation success Problems are solved only when teams accept the responsibility for the solution
Ch12-18

Emphasizing Ethical Practices

Effective Strategic Leadership

Determining Strategic Direction

Establishing Balanced Organizational Controls

Exploiting & Maintaining Core Competencies

Developing Human Capital

Sustaining an Effective Organizational Culture

Emphasizing Ethical Practices

Ethical 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 firms decision-making process and be an integral part of an organizations culture.

Leaders set the tone for creating an environment of mutualCh12-19

Establishing Balanced Organizational Controls

Effective Strategic Leadership

Determining Strategic Direction

Establishing Balanced Organizational Controls

Exploiting & Maintaining Core Competencies

Developing Human Capital

Sustaining an Effective Organizational Culture

Emphasizing Ethical Practices

Organizational 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 controlCh12-20