1. ©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. Strategic Management: Concepts and Cases 9e Part III: Strategic Actions: Strategy Implementation Chapter 12: Strategic Leadership

2. ©2011 Cengage Learning. All rights reserved. 12–2 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

3. ©2011 Cengage Learning. All rights reserved. 12–3 “Ten Commandments for Surviving the Executive Branch” Arkansas Governor Mike Huckabee 1.“ Remember who the boss is. ” Taxpayers and residents. Shareholders. 2.“ Lead by loving, not by shoving. ” 3.“ 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.

4. ©2011 Cengage Learning. All rights reserved. 12–4 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 http://www.nytimes.com/2009/04/26/business/26corner.html?th=&emc=th&pa gewanted=print

5. ©2011 Cengage Learning. All rights reserved. 12–5 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. X

6. ©2011 Cengage Learning. All rights reserved. 12–6 Factors Affecting Managerial Discretion 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 ExternalEnvironment

7. ©2011 Cengage Learning. All rights reserved. 12–7 Factors Affecting Managerial Discretion Size Age Culture Availability of resources Patterns of interaction among employees ExternalEnvironment Characteristics of the Organization

8. ©2011 Cengage Learning. All rights reserved. 12–8 Factors Affecting Managerial Discretion Tolerance for ambiguity Commitment to the firm and its desired strategic outcomes Interpersonal skills Aspiration level Degree of self-confidence ExternalEnvironment Characteristics of the Organization Characteristics of the Manager

9. ©2011 Cengage Learning. All rights reserved. 12–9 Factors Affecting Managerial Discretion 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. ExternalEnvironment Characteristics of the Organization Characteristics of the Manager ManagerialDiscretion

10. ©2011 Cengage Learning. All rights reserved. 12–10 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.

11. ©2011 Cengage Learning. All rights reserved. 12–11 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.

12. ©2011 Cengage Learning. All rights reserved. 12–12 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).

13. ©2011 Cengage Learning. All rights reserved. 12–13 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. X

14. ©2011 Cengage Learning. All rights reserved. 12–14 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

15. ©2011 Cengage Learning. All rights reserved. 12–15 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.

16. ©2011 Cengage Learning. All rights reserved. 12–16 FIGURE 12.4 Exercise of Effective Strategic Leadership

17. ©2011 Cengage Learning. All rights reserved. 12–17 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!

18. ©2011 Cengage Learning. All rights reserved. 12–18 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.

19. ©2011 Cengage Learning. All rights reserved. 12–19 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.

20. ©2011 Cengage Learning. All rights reserved. 12–20 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  Proactiveness Innovativeness  Calculated Risk taking

21. ©2011 Cengage Learning. All rights reserved. 12–21 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

22. ©2011 Cengage Learning. All rights reserved. 12–22 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 ​ )

23. ©2011 Cengage Learning. All rights reserved. 12–23 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.

24. ©2011 Cengage Learning. All rights reserved. 12–24 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.

25. ©2011 Cengage Learning. All rights reserved. 12–25 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

26. ©2011 Cengage Learning. All rights reserved. 12–26 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)

27. ©2011 Cengage Learning. All rights reserved. 12–27 World's Top Bribe-Payers 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 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 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.

28. ©2011 Cengage Learning. All rights reserved. 12–28 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

29. ©2011 Cengage Learning. All rights reserved. 12–29 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

30. ©2011 Cengage Learning. All rights reserved. 12–30 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

31. ©2011 Cengage Learning. All rights reserved. 12–31 FIGURE 12.5 Strategic Controls and Financial Controls in a Balanced Scorecard Framework

32. ©2011 Cengage Learning. All rights reserved. 12–32 Balanced Scorecard