Strategic Leadership

Strategic External
Environment
The Strategic
Management
Inputs
Strategic Intent
Strategic Mission
Internal
Environment
Process

Strategy Formulation Strategy Implementation

Business-Level Competitive Corporate-Level Corporate Structure

Strategic
Actions

Strategy Dynamics Strategy Governance & Control

Acquisitions & International Cooperative Strategic Entrepreneurship

Restructuring Strategy Strategies Leadership & Innovation
Outcomes
Strategic

Strategic
Competitiveness
Above Average
Feedback
Returns
 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

Strategic Leadership Effective
Effective
and the Strategic Strategic
Strategic Leadership
Leadership
Management Process shapes the formulation of

Strategic and
Strategic Intent
Intent Strategic
Strategic Mission
Mission
influence

Successful
Successful
Strategic
Strategic Actions
Actions

Formulation
Formulation Implementation
Implementation
of
of Strategies
Strategies of
of Strategies
Strategies

Strategic
Strategic Competitiveness
Competitiveness
Above-Average
Above-Average Returns
Returns
Factors Affecting Managerial Discretion
External Environment Organizational
Industry Structure Characteristics
Rate of market growth Size and age
# and type of competitors Culture
Political/Legal constraints Resource availability
Product differentiation Employee interaction

Managerial
Managerial Discretion
Discretion

Characteristics of the Manager

Tolerance for ambiguity Aspiration level
Commitment to the firm Self-confidence
Interpersonal skills
 Top Management Teams
Top management teams are comprised of the key
managers who are responsible for formulating and
implementing the organization’s 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.
 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
 Managerial
Managerial Labor
Labor Markets
Markets

The internal labor market is comprised of the career

path alternatives available to a firm’s 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
 Effects of CEO Succession and Top
Management Team Composition on Strategy
Managerial Labor Market:
CEO Succession
Internal External
CEO Succession CEO Succession

Homogeneous
Stable
Top Strategy
Management
Team
Composition

Heterogeneous
 Effects of CEO Succession and Top
Management Team Composition on Strategy
Managerial Labor Market:
CEO Succession
Internal External
CEO Succession CEO Succession

Ambiguous:
Homogeneous
Stable Possible change in
Top Strategy Top Management
Management Team and Strategy
Team
Composition

Heterogeneous
 Effects of CEO Succession and Top
Management Team Composition on Strategy
Managerial Labor Market:
CEO Succession
Internal External
CEO Succession CEO Succession

Ambiguous:
Homogeneous
Stable Possible change in
Top Strategy Top Management
Management Team and Strategy
Team
Composition
Stable
Heterogeneous Strategy with
Innovation
 Effects of CEO Succession and Top
Management Team Composition on Strategy
Managerial Labor Market:
CEO Succession
Internal External
CEO Succession CEO Succession

Ambiguous:
Homogeneous
Stable Possible change in
Top Strategy Top Management
Management Team and Strategy
Team
Composition
Stable
Heterogeneous Strategy with Strategic
Innovation Change
 Exercise of Effective Leadership

Effective
Effective Strategic
Strategic Leadership
Leadership

Determining
Determining Establishing
Establishing
Strategic Balanced
Balanced
Strategic Organizational
Direction Organizational
Direction Controls
Controls

Exploiting
Exploiting &
& Sustaining
Sustaining
Developing
Developing Emphasizing
Emphasizing
Maintaining
Maintaining an
an Effective
Effective
Human
Human Ethical
Ethical
Core
Core Organizational
Organizational
Capital
Capital Practices
Practices
Competencies
Competencies Culture
Culture
Determining
Effective
EffectiveStrategic
StrategicLeadership
Leadership

Strategic Determining Establishing

Establishing
Determining Balanced
Strategic
Strategic Balanced
Organizational
Organizational
Direction
Direction Controls
Controls

Direction Exploiting
Exploiting&&
Maintaining
Maintaining
Developing
Developing
Human
Sustaining
an
Sustaining
anEffective
Effective
Emphasizing
Emphasizing
Ethical
Core Human Organizational Ethical
Core Capital Organizational Practices
Competencies Capital Culture Practices
Competencies Culture

•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.
 Effective
EffectiveStrategic
StrategicLeadership

Exploiting &
Leadership

Establishing

Maintaining
Determining
Determining Establishing
Strategic Balanced
Balanced
Strategic Organizational
Direction Organizational
Direction Controls
Controls

Core Competencies Exploiting

Exploiting&&
Maintaining
Maintaining
Core
Developing
Developing
Human
Human
Sustaining
an
Sustaining
anEffective
Effective
Organizational
Emphasizing
Emphasizing
Ethical
Ethical
Core Capital Organizational Practices

•Core competencies are resources and capabilities

Competencies Capital Culture Practices
Competencies Culture

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
 Effective
EffectiveStrategic
StrategicLeadership

Developing
Leadership

Establishing

Human
Determining
Determining Establishing
Strategic Balanced
Balanced
Strategic Organizational
Direction Organizational
Direction Controls
Controls

Capital Exploiting
Exploiting&&
Maintaining
Maintaining
Core
Developing
Developing
Human
Human
Sustaining
an
Sustaining
anEffective
Effective
Organizational
Emphasizing
Emphasizing
Ethical
Ethical
Core Capital Organizational Practices
Competencies Capital Culture Practices
Competencies Culture

•Human 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 Effective
EffectiveStrategic
StrategicLeadership
Leadership

Effective Determining
Determining
Strategic
Strategic
Direction
Direction
Establishing
Establishing
Balanced
Balanced
Organizational
Organizational
Controls
Controls

Organizational Exploiting
Exploiting&& Developing
Developing
Sustaining
Sustaining Emphasizing
Emphasizing
Maintaining an
anEffective

Culture
Maintaining Human Effective Ethical
Core Human Organizational Ethical
Core Capital Organizational Practices
Competencies Capital Culture Practices
Competencies Culture

•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 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.
 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 person’s job

Teamwork is essential to implementation success

Problems are solved only when teams accept the

responsibility for the solution
Emphasizing
Effective
EffectiveStrategic
StrategicLeadership
Leadership

Ethical Determining Establishing

Establishing
Determining Balanced
Strategic
Strategic Balanced
Organizational
Organizational
Direction
Direction Controls
Controls

Practices Exploiting
Exploiting&&
Maintaining
Maintaining
Developing
Developing
Human
Sustaining
an
Sustaining
anEffective
Effective
Emphasizing
Emphasizing
Ethical
Core Human Organizational Ethical
Core Capital Organizational Practices
Competencies Capital Culture Practices
Competencies Culture

•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 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
Establishing Balanced Effective
EffectiveStrategic
StrategicLeadership
Leadership

Organizational Controls Determining

Determining
Strategic
Strategic
Establishing
Establishing
Balanced
Balanced
Organizational
Organizational
Direction
Direction Controls
Controls

Exploiting
Exploiting&& Sustaining
Sustaining
Developing
Developing Emphasizing
Emphasizing
Maintaining an
anEffective

•Organizational controls provide the parameters

Maintaining Human Effective Ethical
Core Human Organizational Ethical
Core Capital Organizational Practices
Competencies Capital Culture Practices
Competencies Culture

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.
 The Entrepreneurial Process

• Seeks to produce creativity and entrepreneurship in frontline

managers.

• Motivates employees to run their operations as if they own them.

• Encourage bottom - up ideas and initiatives.

• This can result only when frontline manager role is transformed

from implementer to initiator and top management’s role is to act
as facilitator so that entrepreneurship ideas nourish in the
organization.
 The Entrepreneurial Process

• Thus for facilitating entrepreneurial process in the

organization, SBU managers should be made Profit Center
Heads.

• They should have financial autonomy, control their own

balance sheets and borrow money independently.

• The top management’s role should be to establish internal

discipline and to set performance standards that motivate
frontline manager for superior performance.
 The competence building process
• Competence with reference to large companies is about

a) flexibility and responsiveness;

b) economies of scale;

c) depth and breadth of employees,

talents and knowledge;

d) efficient utilization of diverse

resources.

• The top management limits its own role to seeing that those competencies
are shared through cross unit flow of resources, knowledge and people.

• Employees develop multiple vertical and horizontal relationships and are

proactive in their approaches.
 The Renewal Process
• Promotes continuous renewal of strategies and ideas that drive
the business.

• Designed to challenge a company’s strategies and assumptions

behind them.

• It envisages that top managers must take a new role that

disturbs the organizational equilibrium and develops a
constructive confrontation.
 From structuring tasks to shaping behaviors

• The strategy-structure-systems approach is limited to

allocating resources, assigning responsibilities and effective
management.

• This should be replaced by purpose-process-people approach,

which is concerned to shape the behavior of people and create
an environment that enables them to take initiative to co-
operate and to learn.