Strategic Leadership
Chapter 13
© 2006 by Nelson, a division of Thomson Canada Limited.
13-1
Strategic
Inputs
The Strategic Management
Process
Chapter 4
Internal
Environment
Strat. Intent
Strat. Mission
Strategy Formulation
Chapter 5
Bus. - Level
Strategy
Chapter 6
Chapter 7
Competitive Corp. - Level
Dynamics
Strategy
Chapter 9
Chapter 8
Acquisitions & International
Strategy
Restructuring
Strategic
Outcomes
Strategic Actions
Chapter 3
External
Environment
Chapter 2
Above Average
Returns
Chapter 10
Cooperative
Strategies
Chapter 1
Strategic
Competitiveness
The Strategic
.
Management
Process
.
Strategy Implementation
Chapter 11
Chapter 12
Corporate
Structure
Governance
& Control
Chapter 13 Chapter 14
Strategic Entrepreneurship
Leadership & Innovation
Feedback
© 2006 by Nelson, a division of Thomson Canada Limited.
13-2
Strategic Leadership
Knowledge Objectives
1. Define strategic leadership & describe top-level
managers’ importance as a resource.
2. Differentiate between the concepts of strategic,
visionary, and managerial leadership.
3. Define top management teams & explain their
efforts on firm performance & their ability to
innovate & make appropriate strategic changes.
4. Discuss the value of strategic leadership in
determining the firm’s strategic direction.
5. Explain strategic leaders’ role in exploiting &
maintaining core competencies.
© 2006 by Nelson, a division of Thomson Canada Limited.
13-3
Strategic Leadership
Knowledge Objectives (continued)
6. Describe the importance of strategic leaders in
developing human capital.
7. Define organizational culture & explain what
must be done to sustain an effective culture.
8. Explain what strategic leaders can do to
establish & emphasize ethical practice.
9. Discuss the importance & use of organizational
controls.
© 2006 by Nelson, a division of Thomson Canada Limited.
13-4
Strategic Leadership Presumes
• An ability to influence those with whom one works.
• The leader understands the emergent strategy
process.
• A shared vision of what the organization is to be.
• Agreement among senior manger & board
members of opportunities and threats.
• Visionary leadership that entails many
characteristics such as a willingness to take risks.
• Managerial leadership that includes an intended
rational way of looking at the world.
© 2006 by Nelson, a division of Thomson Canada Limited.
13-5
Strategic Leadership and the
Strategic Management Process
Effective Strategic Leadership
Shapes the formation of
Strategic Intent
and
Strategic Mission
Influences
Successful Strategic Actions
Formulation of Strategies
Yields
Implementation of Strategies
Strategic Competitiveness Above Average Returns
© 2006 by Nelson, a division of Thomson Canada Limited.
13-6
Managerial Leaders
• Adopt impersonal, passive attitudes towards goals.
• View work as enabling process that involves some
combination of ideas & people interacting to establish
strategies & make decisions.
• Relate to other people according to their role in the
decision making process.
• Maintain a low level of emotional involvement in these
relationships.
• Influence only the actions & decisions of those with
whom they work.
• Want stability & order and strive to preserve the existing
order.
© 2006 by Nelson, a division of Thomson Canada Limited.
13-7
Visionary Leadership
• Shape ideas as opposed to reacting to them.
• Influence changes in the way people think about what is
possible, desirable and necessary.
• Are concerned with ideas & relate to people in intuitive &
empathetic ways.
• Are more likely to make decisions that are based on
values.
• Are willing to invest in human capital & creating &
maintaining as effective culture to ensure long term
viability.
• Is future-oriented & concerned with risk taking.
• Want creativity, innovation and chaos. * Strive to change
the existing order.
© 2006 by Nelson, a division of Thomson Canada Limited.
13-8
Strategic Leadership
• A synergistic combination of managerial & visionary
leadership.
• Manages the paradox created by the use of managerial
& visionary models.
• Establishes the context through which stakeholders are
able to perform at peak efficiency.
• Willing to make candid, courageous & yet pragmatic
decisions.
• Solicits corrective feedback from their peers, superiors
and employees about the value of their difficult
decisions.
© 2006 by Nelson, a division of Thomson Canada Limited.
13-9
Managerial Leaders
Strategic Leaders, Visionary Leaders
Want stability & to
preserve the
existing order
Manage the paradox created
Are future-oriented
by use of managerial &
visionary leadership models concerned with risktaking
Are comfortable
handling Shortterm day-to-day
activities
Define boundaries by use
of metaphors, analogies &
models to allow for a mix of
contradictory concepts
Guide without a
Guide knowledge creation by
strategic vision.
encouraging contradictory
Constrained by values capabilities (e.g. individual,
& by using explicit group, and organizational tacit
knowledge
& explicit knowledge)
Are not dependent on
the organisation for
their sense of who
they are
Control by socialization & sharing
common norms,
values & beliefs
© 2006 by Nelson, a division of Thomson Canada Limited.
13-10
Factors Affecting Managerial Decisions
© 2006 by Nelson, a division of Thomson Canada Limited.
13-11
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.
© 2006 by Nelson, a division of Thomson Canada Limited.
13-12
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.
© 2006 by Nelson, a division of Thomson Canada Limited.
13-13
CEO / Board Chair Duality

Has been blamed for poor performance &
slow response to change.

Occurs most commonly on the largest firms.
© 2006 by Nelson, a division of Thomson Canada Limited.
13-14
Exercise of Effective Strategic Leadership
© 2006 by Nelson, a division of Thomson Canada Limited.
13-15
Effective Strategic Leadership
Determines
Strategic
Direction
Developing a long-term vision of the
firm’s Strategic Intent
Exploits
Maintains Leaders must ensure that the firm’s
Exploits&& Maintains
Core Competencies core competencies are emphasized in
strategic implementation efforts
Develops
Human
Capital
No strategy can be effective unless
the firm is able to develop & retain
good staff to carry it out
Sustains an Effective
Organizational Culture
Leaders play a critical role in shaping
and reinforcing the firm’s culture
© 2006 by Nelson, a division of Thomson Canada Limited.
13-16
Effective Strategic Leadership
Emphasizaing
Emphasizing Ethical
Ethical
Practices
Encourage & enable people at all
organization levels to act ethically
when doing what is necessary to
implement the firms strategies.
Establishing Balanced
Organizational controls
To create controls which are balanced
between financial and strategic
measurements.
© 2006 by Nelson, a division of Thomson Canada Limited.
13-17
Determining Strategic Direction
• 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.
© 2006 by Nelson, a division of Thomson Canada Limited.
13-18
Determining Strategic Actions
Developing a long term vision of the firm’s
strategic intent
The ideal long term vision has two parts:
• Core ideology
• An envisioned future.
© 2006 by Nelson, a division of Thomson Canada Limited.
13-19
Exploiting and Maintaining Core Competencies
• In many large firms, and certainly in relateddiversified 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
capabilities of human capital.
© 2006 by Nelson, a division of Thomson Canada Limited.
13-20
Sustaining an Effective Organizational Culture
Changing Culture and Business Reengineering
• Constant learning is a vital part of every
person’s job.
• Teamwork is essential to successful
implementation.
• Problems are solved only when teams accept
the responsibility for the solution.
© 2006 by Nelson, a division of Thomson Canada Limited.
13-21
Organizational Controls
Common Strategic Controls
 High level of interaction
 High level of interaction between corporate
headquarters and divisions
 Ability to share resources and capabilities among
divisions
 Open communication between corporate and
divisional managers
© 2006 by Nelson, a division of Thomson Canada Limited.
13-22
Ethical Practices
Developing an ethical organizational culture:

Establish & transmit specific goals describing the firm’s
ethical standards (e.g., develop / disseminate a code of
conduct).

Continuously revise & update the code of conduct, based
on inputs from stakeholders.
Disseminate a code of conduct to all stakeholders to inform
them of the firm’s ethical standard / practices.
Develop & implement methods / procedures to use in
achieving the firm’s ethical standards.




Have explicit rewards to recognize acts of courage (e.g., using
proper channels / procedures to report wrongdoing).
Create a work environment in which all people are
treated with dignity.
© 2006 by Nelson, a division of Thomson Canada Limited.
13-23
The Balanced Scorecard
•
Complements financial measures of past performance
with measures of the drivers of future performance.
•
It should translate a business unit’s mission & strategy
into tangible objectives & measures.
•
The objectives and measures view organizational
performance from four perspectives.
1. Financial
2. Business Process
3. Internal Business Process
4. Learning & Growth
Source: “The Balanced Scorecard” by Robert S. Kaplan, David P. Norton
© 2006 by Nelson, a division of Thomson Canada Limited.
13-24
The Balanced Scorecard Matrix
Financial
Customer
Internal
Business
Process
Learning
& Growth
Objectives
Measures
Targets
Initiatives
© 2006 by Nelson, a division of Thomson Canada Limited.
13-25
Strategic and Financial Controls in a
Balanced Scorecard Framework
Perspectives
Criteria
Financial
• Cash flow
• Return on equity
• Return on assets
Customer
• Assessment of ability to anticipate
customers needs
• Effectiveness of customer service
practices
• Percentage of repeat business
• Quality of communications with
customers
© 2006 by Nelson, a division of Thomson Canada Limited.
13-26
Strategic and Financial Controls in a
Balanced Scorecard Framework
Perspectives
Criteria
Internal Business
Process
• Asset utilization improvements
• Improvements in employee morale
• Changes in turnover rates
Learning and
Growth
• Improvements in innovation ability
• Number of new products compared
to competitors
• Increases in employees’ skills
© 2006 by Nelson, a division of Thomson Canada Limited.
13-27