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© 2007 Thomson/South-Western.© 2007 Thomson/South-Western.All rights reserved.All rights reserved.

PowerPoint Presentation by Charlie CookPowerPoint Presentation by Charlie CookThe University of West AlabamaThe University of West Alabama

Strategic Strategic ManagementManagementCompetitiveness and Globalization: Competitiveness and Globalization: Concepts and CasesConcepts and Cases Michael A. Hitt • R. Duane Ireland • Robert E. Hoskisson

Seventh edition

STRATEGIC

ACTIONS:

STRATEGY

IMPLEMENTATION

STRATEGIC

ACTIONS:

STRATEGY

IMPLEMENTATION

CHAPTER 12CHAPTER 12

Strategic LeadershipStrategic Leadership

© 2007 Thomson/South-Western. All rights reserved. 12–2

KKNOWLEDGENOWLEDGE O OBJECTIVESBJECTIVES

1.1. Define strategic leadership and describe the Define strategic leadership and describe the importance of top-level managers.importance of top-level managers.

2.2. Define top management teams and explain their effects Define top management teams and explain their effects on firm performance.on firm performance.

3.3. Describe the managerial succession process using Describe the managerial succession process using internal and external managerial labor markets.internal and external managerial labor markets.

4.4. Discuss the value of strategic leadership in determining Discuss the value of strategic leadership in determining the firm’s strategic direction.the firm’s strategic direction.

Studying this chapter should provide you with the strategic management knowledge needed to:


KKNOWLEDGENOWLEDGE O OBJECTIVES BJECTIVES (cont’d)(cont’d)

5.5. Describe the importance of strategic leaders in Describe the importance of strategic leaders in managing the firm’s resources, with emphasis on managing the firm’s resources, with emphasis on exploiting and maintaining core competencies, human exploiting and maintaining core competencies, human capital, and social capital.capital, and social capital.

6.6. Define organizational culture and explain what must be Define organizational culture and explain what must be done to sustain an effective culture.done to sustain an effective culture.

7.7. Explain what strategic leaders can do to establish and Explain what strategic leaders can do to establish and emphasize ethical practices.emphasize ethical practices.

8.8. Discuss the importance and use of organizational Discuss the importance and use of organizational controls.controls.

Studying this chapter should provide you with the strategic management knowledge needed to:


FIGUREFIGURE 12.112.1

Strategic Leadership Strategic Leadership and the Strategic and the Strategic Management ProcessManagement Process


Strategic Leadership and StyleStrategic Leadership and Style

• Strategic leadership requires the ability to:Strategic leadership requires the ability to: Anticipate and envision.Anticipate and envision. Maintain flexibility.Maintain flexibility. Empower others to create strategic change as Empower others to create strategic change as

necessary.necessary.

• Strategic leadership is:Strategic leadership is: Multi-functional work that involves working through Multi-functional work that involves working through

others.others. Consideration of the entire enterprise rather than just Consideration of the entire enterprise rather than just

a sub-unit.a sub-unit. A managerial frame of reference.A managerial frame of reference.


Strategic Leadership (cont’d)Strategic Leadership (cont’d)

• Effective strategic leaders:Effective strategic leaders: Manage the firm’s operations effectively.Manage the firm’s operations effectively.

Sustain a high performance over time.Sustain a high performance over time.

Make better decisions than their competitors.Make better decisions than their competitors.

Make candid, courageous, pragmatic decisions.Make candid, courageous, pragmatic decisions.

Understand how their decisions affect the internal Understand how their decisions affect the internal systems in use by the firm.systems in use by the firm.

Solicit feedback from peers, superiors and employees Solicit feedback from peers, superiors and employees about their decisions and visions.about their decisions and visions.


Managers as an Organizational Managers as an Organizational ResourceResource• Managers often use their discretion when Managers often use their discretion when

making strategic decisions and implementing making strategic decisions and implementing strategies.strategies.

• Factors affecting the amount of decision-making Factors affecting the amount of decision-making discretion include:discretion include: External environmental sourcesExternal environmental sources Characteristics of the organizationCharacteristics of the organization Characteristics of the managerCharacteristics of the manager


FIGUREFIGURE 12.212.2

Factors Affecting Factors Affecting Managerial Managerial DiscretionDiscretion

Source: Adapted from S. Finkelstein & D. C. Hambrick, 1996, Strategic Leadership: Top Executives and Their Effects on Organizations, St. Paul, MN: West Publishing Company.


Factors Affecting Managerial DiscretionFactors Affecting Managerial Discretion

• Industry structureIndustry structure• Rate of market growthRate of market growth• Number and type of Number and type of

competitorscompetitors• Nature and degree of Nature and degree of

political/legal constraintspolitical/legal constraints• Degree to which products can Degree to which products can

be differentiatedbe differentiated

ExternalExternalEnvironmentEnvironment



• SizeSize• AgeAge• CultureCulture• Availability of resourcesAvailability of resources• Patterns of interaction among Patterns of interaction among

employeesemployees


Characteristics of Characteristics of the Organizationthe Organization



• Tolerance for ambiguityTolerance for ambiguity• Commitment to the firm and its Commitment to the firm and its

desired strategic outcomesdesired strategic outcomes• Interpersonal skillsInterpersonal skills• Aspiration levelAspiration level• Degree of self-confidenceDegree of self-confidence



Characteristics of Characteristics of the Managerthe Manager



• The degree of latitude for The degree of latitude for action when making strategic action when making strategic decisions, especially those decisions, especially those concerned with effective concerned with effective implementation of strategies.implementation of strategies.

• How managers exercise How managers exercise discretion when determining discretion when determining appropriate strategic actions is appropriate strategic actions is critical to the firm’s success.critical to the firm’s success.



Characteristics of Characteristics of the Managerthe Manager

ManagerialManagerialDiscretionDiscretion


Top Management TeamsTop Management Teams

• Composed of the key managers who are Composed of the key managers who are responsible for selecting and implementing the responsible for selecting and implementing the firm’s strategies.firm’s strategies.

• A heterogeneous top management team:A heterogeneous top management team:

Has varied expertise and knowledge.Has varied expertise and knowledge.

Can draw on multiple perspectives.Can draw on multiple perspectives.

Will evaluate alternative strategies.Will evaluate alternative strategies.

Builds consensus.Builds consensus.


Firm Performance and Strategic ChangeFirm Performance and Strategic Change

• Heterogeneous top management teams:Heterogeneous top management teams: Have difficulty functioning effectively as a team.Have difficulty functioning effectively as a team.

Require effective management of the team to facilitate Require effective management of the team to facilitate the process of decision making but …the process of decision making but …

Are associated positively with innovation and strategic Are associated positively with innovation and strategic change.change.

May force the team or members to “think outside of May force the team or members to “think outside of the box” and be more creative.the box” and be more creative.

Have greater capacity to provide effective strategic Have greater capacity to provide effective strategic leadership in formulating strategy.leadership in formulating strategy.


CEO and Top Management Team PowerCEO and Top Management Team Power

• Higher performance is achieved when board of Higher performance is achieved when board of directors are more directly involved in shaping directors are more directly involved in shaping strategic direction.strategic direction.

• A powerful CEO may:A powerful CEO may:

Appoint sympathetic outside board members.Appoint sympathetic outside board members.

Have inside board members who report to the CEO.Have inside board members who report to the CEO.

Have significant control over the board’s actions.Have significant control over the board’s actions.

May also hold the position of chairman of the board May also hold the position of chairman of the board ((CEO dualityCEO duality).).


CEO and Top Management PowerCEO and Top Management Power

• Duality often relates to poor performance and Duality often relates to poor performance and slow response to change.slow response to change.

CEOs of long tenure can also wield substantial power.CEOs of long tenure can also wield substantial power.

CEOs can gain so much power that they are virtually CEOs can gain so much power that they are virtually independent of oversight by the board of directors.independent of oversight by the board of directors.

• The most effective forms of governance share The most effective forms of governance share power and influence among the CEO and board power and influence among the CEO and board of directors.of directors.


Managerial SuccessionManagerial Succession

• Organizations select managers and strategic Organizations select managers and strategic leaders from two types of managerial labor leaders from two types of managerial labor markets:markets: Internal managerial labor marketInternal managerial labor market

• Advancement opportunities related to managerial Advancement opportunities related to managerial positions within a firm.positions within a firm.

External managerial labor marketExternal managerial labor market

• Career opportunities for managers in organizations Career opportunities for managers in organizations other than the one for which they currently work.other than the one for which they currently work.


Managerial Labor Market (cont’d)Managerial Labor Market (cont’d)

• Advantages of internal managerial labor market Advantages of internal managerial labor market include:include: Experience with the firm and industry environment.Experience with the firm and industry environment.

Familiarity with company products, markets, Familiarity with company products, markets, technologies, and operating procedures.technologies, and operating procedures.

Lower turnover among existing personnel.Lower turnover among existing personnel.

• Advantages of the external managerial labor Advantages of the external managerial labor market include:market include: Long-tenured insiders may be “stale in the saddle”Long-tenured insiders may be “stale in the saddle”——

ooutsiders may bring fresh perspectives.utsiders may bring fresh perspectives.


FIGUREFIGURE 12.312.3 Effects of CEO Succession and Top Effects of CEO Succession and Top Management Team Composition on Management Team Composition on StrategyStrategy


FIGUREFIGURE 12.412.4 Exercise of Effective Strategic LeadershipExercise of Effective Strategic Leadership


Key Strategic Leadership Actions: Key Strategic Leadership Actions: Determining Strategic DirectionDetermining Strategic Direction• Determining strategic direction involves Determining strategic direction involves

developing a long-term vision of the firm’s developing a long-term vision of the firm’s strategic intent.strategic intent. Five to ten years into the futureFive to ten years into the future

Philosophy with goalsPhilosophy with goals

The image and character the firm seeksThe image and character the firm seeks

• Ideal long-term vision has two parts:Ideal long-term vision has two parts: Core ideologyCore ideology

Envisioned futureEnvisioned future


Key Strategic Leadership Actions: Key Strategic Leadership Actions: Exploiting and Maintaining Core Exploiting and Maintaining Core CompetenciesCompetencies• Core competenciesCore competencies

Resources and capabilities of a firm that serve as a Resources and capabilities of a firm that serve as a source of competitive advantage over its rivals.source of competitive advantage over its rivals.

Leadership must verify that the firm’s competencies Leadership must verify that the firm’s competencies are emphasized in strategy implementation efforts.are emphasized in strategy implementation efforts.

Firms must continuously develop or even change their Firms must continuously develop or even change their core competencies to stay ahead of competitors.core competencies to stay ahead of competitors.


Key Strategic Leadership Actions:Key Strategic Leadership Actions:Developing Human Capital and Social Developing Human Capital and Social CapitalCapital• Human capitalHuman capital

The knowledge and skills of the firm’s entire The knowledge and skills of the firm’s entire workforce are a capital resource that requires workforce are a capital resource that requires investment in training and development.investment in training and development.

• Social capitalSocial capital Relationships inside and outside the firm that help it Relationships inside and outside the firm that help it

accomplish tasks and create value for customers and accomplish tasks and create value for customers and shareholders.shareholders.


Key Strategic Leadership Actions: Key Strategic Leadership Actions: Sustaining an Effective Organizational Sustaining an Effective Organizational CultureCulture• Organizational CultureOrganizational Culture

The complex set of ideologies, symbols and core The complex set of ideologies, symbols and core values shared through the firm, that influences the values shared through the firm, that influences the way business is conducted.way business is conducted.

• Entrepreneurial OrientationEntrepreneurial Orientation Personal characteristics that encourage or discourage Personal characteristics that encourage or discourage

entrepreneurial opportunities.entrepreneurial opportunities.• AutonomyAutonomy Proactiveness Proactiveness• InnovativenessInnovativeness Risk taking Risk taking


Key Strategic Leadership Actions: Key Strategic Leadership Actions: Sustaining an Organizational Culture Sustaining an Organizational Culture (cont’d)(cont’d)• Changing a firm’s organizational culture is more Changing a firm’s organizational culture is more

difficult than maintaining it.difficult than maintaining it. Effective strategic leaders recognize when change in Effective strategic leaders recognize when change in

culture is needed.culture is needed.

• Shaping and reinforcing culture requires:Shaping and reinforcing culture requires: Effective communicationEffective communication Problem solving skillsProblem solving skills Selection of the right peopleSelection of the right people Effective performance appraisalsEffective performance appraisals Appropriate reward systemsAppropriate reward systems


Key Strategic Leadership Actions: Key Strategic Leadership Actions: Emphasizing Ethical PracticesEmphasizing Ethical Practices• Effectiveness of processes used to implement Effectiveness of processes used to implement

the firm’s strategies increases when based on the firm’s strategies increases when based on ethical practices.ethical practices.

• Ethical practices create social capital and Ethical practices create social capital and goodwill for the firm.goodwill for the firm.


Key Strategic Leadership Actions: Key Strategic Leadership Actions: Emphasizing Ethical Practices (cont’d)Emphasizing Ethical Practices (cont’d)• Actions that develop an ethical organizational Actions that develop an ethical organizational

culture include:culture include: Establishing and communicating specific goals to Establishing and communicating specific goals to

describe the firm’s ethical standards.describe the firm’s ethical standards.

Continuously revising and updating the code of Continuously revising and updating the code of conduct.conduct.

Disseminating the code of conduct to all stakeholders Disseminating the code of conduct to all stakeholders to inform them of the firm’s ethical standards and to inform them of the firm’s ethical standards and practices.practices.


Key Strategic Leadership Actions: Key Strategic Leadership Actions: Emphasizing Ethical Practices (cont’d)Emphasizing Ethical Practices (cont’d)• Actions that develop an ethical organizational Actions that develop an ethical organizational

culture include:culture include: Developing and implementing methods and Developing and implementing methods and

procedures to use in achieving the firm’s ethical procedures to use in achieving the firm’s ethical standards.standards.

Creating and using explicit reward systems that Creating and using explicit reward systems that recognize acts of courage.recognize acts of courage.

Creating a work environment in which all people are Creating a work environment in which all people are treated with dignity.treated with dignity.


Key Strategic Leadership Actions:Key Strategic Leadership Actions:Establishing Organizational ControlsEstablishing Organizational Controls• ControlsControls

Formal, information-based procedures used by Formal, information-based procedures used by managers to maintain or alter patterns in managers to maintain or alter patterns in organizational activities.organizational activities.

• Controls help strategic leaders to: Controls help strategic leaders to: Build credibilityBuild credibility Demonstrate the value of strategies to the firm’s Demonstrate the value of strategies to the firm’s

stakeholdersstakeholders Promote and support strategic changePromote and support strategic change


Key Strategic Leadership Actions: Key Strategic Leadership Actions: Establishing Balanced Organizational Establishing Balanced Organizational ControlsControls• The Balanced ScorecardThe Balanced Scorecard

A framework used to verify that the firm has A framework used to verify that the firm has established both strategic and financial controls to established both strategic and financial controls to assess its performance.assess its performance.

Prevents overemphasis of financial controls at the Prevents overemphasis of financial controls at the expense of strategic controlsexpense of strategic controls

• Four perspectives of the balanced scorecardFour perspectives of the balanced scorecard FinancialFinancial CustomerCustomer

Internal business processesInternal business processes

Learning and growthLearning and growth


FIGUREFIGURE 12.512.5 Strategic Controls and Financial Strategic Controls and Financial Controls in a Balanced Scorecard Controls in a Balanced Scorecard FrameworkFramework

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