Strategic Leadership & Organisational culture From Hoskisson and Hitt

Topics Strategic Leadership Organisational Culture Balance Score card

What is Strategic Leadership It is the ability to anticipate, envision, maintain flexibility and empower others to create strategic change as necessary

Critical skills required in strategic leadership To fill key positions with talented people and manage them effectively To be able to manage in changing times To have the ability to manage knowledge and create and commercialise innovation

Who needs to show strategic leadership Any individual with the responsibility for the performance of human capital and/or part of the firm is a strategic leader The CEO, members of the Board of Directors, the top management team and the divisional general managers.

Style of Strategic Leadership Transformational leadership This style entails motivating followers to exceed the expectations others have of them, to continuously enrich their capabilities and to place the interest of the organizations above their own. Transformational leaders develop and communicate a vision for the organization and formulate a strategy to achieve their vision They make the followers aware of the need to achieve organisational outcomes and encourage them to achieve organisational goals and strive for higher achievements.

The role of top managers To form and implement effective strategies Use of discretion in making strategic decisions Amount of decision making discretion depends on Industry structure Market growth rate Degree of product differentiation Characterisitcs of the organisation like age, size, resources Characterisitcs of the manager inlcuding commitment to the firm, tolerance for ambiguity, skills in working with different people

Top management team It is composed of key individuals who are responsible for selection and implementation of firm’s strategies. The top management team requires to have broad knowledge of the firm’s operations as well as knowledge about the firm’s general, industry and competitor environment. For that a firm requires a heterogeneous top management team – which has individuals with different functional backgrounds. Individuals with different backgrounds may have communication problems and integrating their efforts is the CEO’s job. Heterogeneous teams are positively correlated to innovation and strategic change – since heterogeneity forces them to think ‘out of the box’

CEO and top management team power Board of directors need to control the CEO and the top management team but they lose control if the CEO is the chairman of the Board of Directors. CEO duality - Should the CEO be the chairman of the Board of Directors ????? Should the CEO have a long tenure or a short tenure Long tenure brings human skills and domain specific knowledge , short tenure bring wide learning base due to wider experience.

Managerial succession CEO – from internal managerial labour market or external managerial labour market ???? Effect of CEO succession and impact on strategy Internal CEO succession External CEO succession Homogeneous Top management Team Heterogeneous team Stable strategy Ambiguous: change in top management Stable strategy with innovation Strategic change

Key strategic Leadership actions Determining strategic direction Effectively managing the firm’s resource portfolio Exploiting and managing firm’s core competencies Developing human capital and social capital Sustaining an effective organizational culture Establishing balanced organisational controls

Effective strategic leadership Determining strategic Establishing balanced Direction organisational controls Effectively Sustaining Emphasizing managing the an effective ethical practices Firm’s Organisational Resource culture portfolio

Sustaining effective organisational culture Organisational culture – complex set of ideologies, symbols and core values. Organisational culture influences how firms do business and helps regulate and control employee behavior and can be a source of competitive advantage. Organisational culture should promote entrepreneurial mindset Five dimensions for it are 1. Autonomy 2. Innovativeness 3. Risk taking 4. Proactive ness 5. Competitive aggressiveness

Balanced score card It is a framework that can be used by firms to that they have established both strategic and financial controls to assess their performance It is most appropriate for business level strategies but can be used for corporate, international strategies etc There are four premises in the balanced score card 1. Financial control 2. Customer control 3. Internal business processes 4. Learning and growth

Financial control Cash flow Return on equity Return on assets

Customer control Assessment of ability to anticipate customer’s needs Effectiveness of customer service practices Percentage of repeat business Quality of communications with customers

Internal business processes Asset utilisation improvement Improvement in employee morale Changes in turnover ratio

Learning and Growth Improvements in innovation ability Number of new products compared to competitors Increases in employees skills