Strategic
Management:
Concepts and Cases
9e
Part III: Strategic Actions:
Strategy Implementation
Chapter 12: Strategic Leadership
©2011 Cengage Learning. All Rights Reserved. May not be scanned,
copied or duplicated, or posted to a publicly accessible website, in
whole or in part.
What Administrators, Managers, and Leaders Do
• Administrators:
Help execute a program that someone else has created and has prescribed the
rules and regulations for
 Follow the direction and guidance management has set
 Primarily a science that executes the laws of business
 Have straightforward, objective rules and formulas to administer by (Current
Ratio, NPV, ROI, etc)
• Managers: Create programs, set rules, assign responsibility, supervise administration, and accept
accountability for outcomes
 Formally assigned by the organization
 Manage things, but they lead, inspire, work with, encourage, etc people
• Leaders: People who inspire other people to do what they would not have
otherwise done
 What one thing must all leaders have?
 Emerge (Could be formal or informal leaders)
 Coercing and forcing are not leadership techniques
• This textbook doesn’t make a clear distinction. It blurs the difference and uses
the terms interchangeably. Strategy requires both Management and Leadership—
not always from the same person or group.
• Be a Leader. Hire a Manager. AR Gov Mike Huckabee
©2011 Cengage Learning. All rights reserved.
12–2
“Ten Commandments for Surviving the Executive Branch”
Arkansas Governor Mike Huckabee
“Remember who the boss is.” Taxpayers and residents. Shareholders.
“Lead by loving, not by shoving.”
“Never ask of others what you aren’t willing to do yourself.” This doesn’t mean you
need to help set out all the chairs, but it does mean you should not treat the jobs you
delegate as menial tasks.
4.
“Remember the 7-year-old eating breakfast in Dermott.” This is Huckabee’s way of
saying government officials should always keep in mind how their decisions will affect
those who are still too young to have a political voice.
5.
“If you know everything that’s going on, there’s not enough going on.”
6.
“Be a leader. Hire a manager.”
7.
“Never help a loaded gun that is pointed at your own head.” “Be smart enough to tell the
truth, but don’t tell all the truth you know.” (Tell the truth attractively. Think about BP
Oil CEO Tony Hayward and his yacht.)
8.
“Follow the Golden Rule.” (Confucius was asked: “Is there any one word that could
guide a person throughout life?” Confucius replied: “How about ‘shu’ [恕
reciprocity]: never impose on others what you would not choose for yourself?“)
9.
“Get bad news immediately and in person.” You can’t fix what you don’t know is
broken, and by getting bad news in person, you can tell from the messenger’s body
language just how bad the news really is.
10. “Don’t use all your water on too small a fire.” A leader should not expend too much
energy on a small problem. Likewise, leaders must not burn bridges when they lose.
1.
2.
3.
©2011 Cengage Learning. All rights reserved.
12–3
Strategic Leadership and Style
• Bert’s Definition: Leadership is the ability to inspire other
people to do what they would not have otherwise done.
• Strategic leadership requires the ability to:
 Anticipate and envision. (It doesn’t come from a book!)
 Maintain flexibility. (It doesn’t come from a book!)
 Empower others to create strategic change as necessary.
• Strategic leadership is:
 Multi-functional work that involves working through others.
 Consideration of the entire enterprise rather than just a sub-unit.
 A managerial frame of reference.
• See Richard Anderson, CEO of Delta Airlines, on Leadership
 http://www.nytimes.com/2009/04/26/business/26corner.html?th=&emc=th&pa
gewanted=print
©2011 Cengage Learning. All rights reserved.
12–4
X
Strategic Leadership
• Effective strategic leaders:
 Manage the firm’s operations effectively.
 Sustain a high performance over time.
 Make better decisions than their competitors.
 Make candid, courageous, pragmatic decisions.
 Understand how their decisions affect the internal systems
in use by the firm.
 Solicit feedback from peers, superiors and employees about
their decisions and visions.
©2011 Cengage Learning. All rights reserved.
12–5
Factors Affecting Managerial Discretion
External
Environment
©2011 Cengage Learning. All rights reserved.
•
•
•
•
Industry structure
Rate of market growth
Number and type of competitors
Nature and degree of
political/legal constraints
• Degree to which products can be
differentiated
12–6
Factors Affecting Managerial Discretion
External
Environment
Characteristics of
the Organization
©2011 Cengage Learning. All rights reserved.
•
•
•
•
•
Size
Age
Culture
Availability of resources
Patterns of interaction among
employees
12–7
Factors Affecting Managerial Discretion
External
Environment
Characteristics of
the Organization
Characteristics of
the Manager
©2011 Cengage Learning. All rights reserved.
• Tolerance for ambiguity
• Commitment to the firm and its
desired strategic outcomes
• Interpersonal skills
• Aspiration level
• Degree of self-confidence
12–8
Factors Affecting Managerial Discretion
External
Environment
Characteristics of
the Organization
Characteristics of
the Manager
Managerial
Discretion
©2011 Cengage Learning. All rights reserved.
• The degree of latitude for action
when making strategic decisions,
especially those concerned with
effective implementation of
strategies.
• How managers exercise discretion
when determining appropriate
strategic actions is critical to the
firm’s success.
12–9
Top Management Teams
• Composed of the key managers who are responsible
for selecting and implementing the firm’s strategies.
• A heterogeneous top management team:
 Has varied expertise and knowledge.
 Can draw on multiple perspectives.
 Will evaluate alternative strategies.
 Builds consensus.
©2011 Cengage Learning. All rights reserved.
12–10
Firm Performance and Strategic Change
• Heterogeneous top management teams:
 Have difficulty functioning effectively as a team.
 Require effective management of the team to facilitate the
process of decision making
but …
 Are associated positively with innovation and strategic
change.
 May force the team or members to “think outside of the
box” and be more creative.
 Have greater capacity to provide effective strategic
leadership in formulating strategy.
©2011 Cengage Learning. All rights reserved.
12–11
CEO and Top Management Team Power
• Higher performance is achieved when the board of
directors is more directly involved in shaping strategic
direction.
• A powerful CEO may:
 Appoint sympathetic outside board members.
 Have inside board members who report to the CEO.
 Have significant control over the board’s actions.
 May also hold the position of chairman of the board (CEO
duality, going out of favor in public companies).
©2011 Cengage Learning. All rights reserved.
12–12
X
CEO and Top Management Power
• Duality often relates to poor performance and slow
response to change.
 CEOs of long tenure can also wield substantial power.
 CEOs can gain so much power that they are virtually
independent of oversight by the board of directors.
• The most effective forms of governance share power
and influence among the CEO and board of directors.
©2011 Cengage Learning. All rights reserved.
12–13
Managerial Succession
• Organizations select managers and strategic leaders
from two types of managerial labor markets:
 Internal managerial labor market
• Advancement opportunities related to managerial positions
within a firm.
 External managerial labor market
• Career opportunities for managers in organizations other
than the one for which they currently work.
• This is when and where the difference between
leadership and management often gets confused
©2011 Cengage Learning. All rights reserved.
12–14
Managerial Labor Market
• Advantages of internal managerial labor market
include:
 Experience with the firm and industry environment.
 Familiarity with company products, markets, technologies,
and operating procedures.
 Lower turnover among existing personnel.
• Advantages of the external managerial labor market
include:
 Long-tenured insiders may be “stale in the saddle”—
outsiders may bring fresh perspectives.
©2011 Cengage Learning. All rights reserved.
12–15
FIGURE 12.4
Exercise of Effective Strategic Leadership
©2011 Cengage Learning. All rights reserved.
12–16
Key Strategic Leadership Actions:
Determining Strategic Direction
• Determining strategic direction involves developing a
long-term vision of the firm’s strategic intent.
 Five to ten years into the future
 Philosophy with goals
 The image and character the firm seeks
• Ideal long-term vision has two parts:
 Core ideology
 Envisioned future
• Actually getting there!
©2011 Cengage Learning. All rights reserved.
12–17
Key Strategic Leadership Actions:
Identifying, Exploiting and Maintaining Core
Competencies
• Core competencies
 Resources and capabilities of a firm that serve as a source
of competitive advantage over its rivals.
 Leadership must verify that the firm’s competencies are
emphasized in strategy implementation efforts.
 Firms must continuously develop or even change their core
competencies to stay ahead of competitors.
©2011 Cengage Learning. All rights reserved.
12–18
Key Strategic Leadership Actions:
Developing Human Capital and Social Capital
• Human capital
 The knowledge and skills of the firm’s entire workforce are
a capital resource that requires investment in training and
development.
 Get the right people on the bus
• Social capital
 Relationships inside and outside the firm that help it
accomplish tasks and create value for customers and
shareholders.
 Forces that bind communities together—civic participation
and charitable giving.
©2011 Cengage Learning. All rights reserved.
12–19
Key Strategic Leadership Actions:
Sustaining an Effective Organizational Culture
• Organizational Culture
 The complex set of ideologies, symbols and core values
shared through the firm, that influences the way business is
conducted.
• Entrepreneurial Orientation
 Personal characteristics that encourage or discourage
entrepreneurial opportunities.
• Autonomy
• Innovativeness
©2011 Cengage Learning. All rights reserved.
 Proactiveness
 Calculated Risk taking
12–20
Key Strategic Leadership Actions:
Sustaining an Organizational Culture
• Changing a firm’s organizational culture is more
difficult than maintaining it.
 Effective strategic leaders recognize when change in
culture is needed.
• Shaping and reinforcing culture requires:
 Effective communication
 Problem solving skills
 Selecting the right people
 Effective performance appraisals
 Appropriate reward systems
©2011 Cengage Learning. All rights reserved.
12–21
Key Strategic Leadership Actions:
Emphasizing Ethical Practices
• Effectiveness of processes used to implement the firm’s
strategies increases when based on ethical practices.
• Ethical practices create social capital and goodwill
• Emphasize HELM principle in all dealings inside and
outside the organization:
Honest (诚 实 chéng shí)
Ethical (道德 dào​ dé​),
Legal (合法 hé ​fǎ​),
Moral (品行 pǐn ​xíng​)
©2011 Cengage Learning. All rights reserved.
12–22
Key Strategic Leadership Actions:
Emphasizing Ethical Practices
• Actions that develop an ethical organizational culture
include:
 Establishing and communicating specific goals to describe
the firm’s ethical standards.
 Continuously revising and updating the code of conduct.
 Disseminating the code of conduct to all stakeholders to
inform them of the firm’s ethical standards and practices.
©2011 Cengage Learning. All rights reserved.
12–23
Key Strategic Leadership Actions:
Emphasizing Ethical Practices
• Actions that develop an ethical organizational
culture include:
Developing and implementing methods and
procedures to use in achieving the firm’s ethical
standards.
Creating and using explicit reward systems that
recognize acts of courage.
Creating a work environment in which all people
are treated with dignity.
©2011 Cengage Learning. All rights reserved.
12–24
Ethics
• Doing the Right Thing
 Ethical issues—questions of right and wrong
• Kinds of Ethical Issues Leaders/Managers Will Encounter
 Ethical issues in business operations
• Income and expense reporting (aka skimming) (income tax fraud)
• Truth in advertising—persuasion vs. deception
• Bribing customers and rigging bids
• Direct selling—pyramid schemes, bait-and-switch selling
• Accurately reporting financial information
• Allocating expenses to appropriate projects
 Ethical Issues Employees Will Encounter
•
•
•
•
•
To do an honest day’s work
Fraudulent workers’ compensation claims
Theft of company property and embezzlement of funds
Violation of personal ethics to make a sale
Time Card reporting
©2011 Cengage Learning. All rights reserved.
12–25
Global Ethics
• International Ethical Perspectives
 Bribery versus customary local business practices
• Two Approaches
 Ethical imperialism
• The belief that the ethical standards of one’s own
country can be applied universally.
 Ethical relativism
• The belief that ethical standards are subject to
local interpretation.
• “When in Rome, do as the Romans do” (入乡随
俗 rù xiāng,suí sú)
©2011 Cengage Learning. All rights reserved.
12–26
World's Top Bribe-Payers
More than 11,000 executives were asked which nations’ businessmen are most
likely to offer them bribes when making deals abroad. At left are the Top 10, and
at right are the Bottom 10 most likely to offer bribes according to Transparency
International for 2006.
Most Likely to Offer Bribes
1. India
2. China
3. Russia
4. Turkey
5. Taiwan
6. Malaysia
7. South Africa
8. Brazil
9. Saudi Arabia
10. South Korea
©2011 Cengage Learning. All rights reserved.
Least Likely to Offer Bribes
1. Switzerland
2. Sweden
3. Australia
4. Austria
5. Canada
6. UK
7. Germany
8. Netherlands
9. Belgium
10. US
12–27
Building an Ethical Business
• Building an ethical culture requires







Full commitment to ethical conduct by the firm
Strong, ethical managerial leadership
Being a visible role model
Communicating ethical expectations
Providing ethics training
Visibly rewarding ethical acts and punishing unethical ones
Establishing a formal code of ethics
• Official standards of employee behavior set by the firm
• Foundation for ethical conduct by employees
• Clarifies the rules and gives guidance to employees
– Ethics is not black or white
• Outlines ethical principles and gives plenty of specific examples
 Disseminating the code of ethics to all stakeholders to inform them of the
firm’s ethical standards and practices
©2011 Cengage Learning. All rights reserved.
12–28
Key Strategic Leadership Actions:
Establishing Organizational Controls
• Controls
 Formal, information-based procedures used by managers to
maintain or alter patterns in organizational activities.
• Controls help strategic leaders to:
 Build credibility
 Demonstrate the value of strategies to the firm’s
stakeholders
 Promote and support strategic change
©2011 Cengage Learning. All rights reserved.
12–29
Key Strategic Leadership Actions:
Establishing Balanced Organizational Controls
• The Balanced Scorecard
 A framework used to verify that the firm has established both
strategic and financial controls to assess its performance.
 Prevents overemphasis of financial controls at the expense of
strategic controls
• Four perspectives of the balanced scorecard
 Financial
 Customer
 Internal business processes
 Learning and growth
©2011 Cengage Learning. All rights reserved.
12–30
FIGURE 12.5
Strategic Controls and Financial Controls in a
Balanced Scorecard Framework
©2011 Cengage Learning. All rights reserved.
12–31
Balanced Scorecard
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12–32