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
Strategic Mission
Chapter 3
Internal
Environment
Strategy Implementation
Chapter 4
Business-Level
Strategy
Chapter 5
Competitive
Dynamics
Chapter 6
Corporate-Level
Strategy
Chapter 10
Corporate
Governance
Chapter 11
Structure
& Control
Chapter 7
Acquisitions &
Restructuring
Chapter 8
International
Strategy
Chapter 9
Cooperative
Strategies
Chapter 12
Strategic
Leadership
Chapter 13
Outcomes
Strategic
Strategic
Actions
Strategy Formulation
The Strategic
Management
Process
Feedback
Entrepreneurship
& Innovation
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
Strategic Intent
and
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
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.
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 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
Ch12-8
Effects of CEO Succession and Top
Management Team Composition on Strategy
Managerial Labor Market:
CEO Succession
Internal
CEO Succession
Homogeneous
Top
Management
Team
Composition
External
CEO Succession
Stable
Strategy
Heterogeneous
Ch12-9
Effects of CEO Succession and Top
Management Team Composition on Strategy
Managerial Labor Market:
CEO Succession
Homogeneous
Top
Management
Team
Composition
Internal
CEO Succession
External
CEO Succession
Stable
Strategy
Ambiguous:
Possible change in
Top Management
Team and Strategy
Heterogeneous
Ch12-10
Effects of CEO Succession and Top
Management Team Composition on Strategy
Managerial Labor Market:
CEO Succession
Homogeneous
Top
Management
Team
Composition
Heterogeneous
Internal
CEO Succession
External
CEO Succession
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
Homogeneous
Top
Management
Team
Composition
Heterogeneous
Internal
CEO Succession
External
CEO Succession
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
Establishing
Balanced
Organizational
Controls
Determining
Strategic
Direction
Exploiting &
Maintaining
Core
Competencies
Developing
Human
Capital
Sustaining
an Effective
Organizational
Culture
Emphasizing
Ethical
Practices
Ch12-13
Determining
Strategic
Direction
Effective Strategic Leadership
Establishing
Balanced
Organizational
Controls
Determining
Strategic
Direction
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 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.
Ch12-14
Exploiting &
Maintaining
Core Competencies
Effective Strategic Leadership
Establishing
Balanced
Organizational
Controls
Determining
Strategic
Direction
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 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.
Ch12-15
Developing
Human
Capital
Effective Strategic Leadership
Establishing
Balanced
Organizational
Controls
Determining
Strategic
Direction
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
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
Ch12-16
Sustaining an
Effective
Organizational
Culture
Effective Strategic Leadership
Establishing
Balanced
Organizational
Controls
Determining
Strategic
Direction
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 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.
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 person’s 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
Establishing
Balanced
Organizational
Controls
Determining
Strategic
Direction
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 firm’s decision-making
process and be an integral part of an organization’s
culture.
• Leaders set the tone for creating an environment of mutualCh12-19
Establishing
Balanced
Organizational
Controls
Effective Strategic Leadership
Establishing
Balanced
Organizational
Controls
Determining
Strategic
Direction
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