1. ©1999 South-Western College Publishing
Chapter 12
Strategic Leadership
Michael A. Hitt
R. Duane Ireland
Robert E. Hoskisson
©1999 South-Western College Publishing 1

2. The Strategic Management Process Strategy Formulation
Chapter 2
The Strategic
Management
Process
External
Competitiveness
Strategic
Inputs
Environment
Strategic Intent
Strategic Mission
Chapter 3
Internal
Environment
Strategy Formulation
Strategy Implementation
Chapter 4
Chapter 5
Chapter 6
Chapter 10
Chapter 11
Business-Level
Competitive
Corporate-Level
Corporate
Structure
Strategy
Dynamics
Strategy
Governance
& Control
Strategic
Actions
Chapter 7
Chapter 8
Chapter 9
Chapter 12
Chapter 13
Acquisitions &
International
Cooperative
Strategic
Entrepreneurship
& Innovation
Restructuring
Strategy
Strategies
Leadership
Strategic
Outcomes
Strategic
Competitiveness
Above Average
Feedback
Returns 2

3. Strategic Leadership Strategic Leadership involves:
The ability to anticipate, envision, maintain flexibility and empower others to create strategic change
Multi-functional work that involves working through others
Consideration of the entire enterprise rather than just a subunit
Requires a Managerial frame of reference 7

4. Effective Strategic Leadership
shapes the development of
Strategic Intent
Strategic Mission
and
influence
Successful
Strategic Actions
Formulation of Strategies
Implementation of Strategies 11

5. Managerial Discretion
External Environment
Factors which affect...
Industry Structure
Rate of market growth
# and type of competitors
Political/Legal constraints
Managerial Discretion
Organizational Characteristics
Product differentiation
Size and age
Culture
Resource availability
Employee interaction
Characteristics
of the Manager
Tolerance for ambiguity
Commitment to the firm
Interpersonal skills
Aspiration level
Self-confidence 15

6. 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. 18

7. 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 19

8. Managerial Labor Markets
The internal labor market is comprised of the career path alternatives available to a firm’s managers
Selecting internal candidates for management positions helps to build on valuable firm-specific knowledge
The external labor market includes the collection of career opportunities for managers outside their firm
Selecting an outsider often brings fresh insights and may energize the firm with innovative new ideas 21

9. Stable Strategy with Innovation Strategic Change
Effects of CEO Succession and Top Management Team Composition on Strategy
Managerial Labor Market:
CEO Succession
Internal
CEO Succession
External
CEO Succession
Ambiguous:
Possible change in Top Management Team and Strategy
Stable Strategy
Homogeneous
Top Management Team Composition
Stable Strategy with Innovation
Strategic
Change
Heterogeneous 27

10. Effective Strategic Leadership
Exercise of Effective Leadership
Determining Strategic Direction
Effective Strategic Leadership
Developing a long-term vision of the firm’s Strategic Intent 28

11. Effective Strategic Leadership
Exercise of Effective Leadership
Determining Strategic Direction
Effective Strategic Leadership
Exploiting & Maintaining Core Competencies
Leaders must ensure that the firm’s core competencies are emphasized in strategic implementation efforts 29

12. Effective Strategic Leadership
Exercise of Effective Leadership
Determining Strategic Direction
Effective Strategic Leadership
Exploiting & Maintaining Core Competencies
Developing Human Capital
No strategy can be effective unless the firm is able to develop and retain good people to carry it out 30

13. Effective Strategic Leadership
Exercise of Effective Leadership
Determining Strategic Direction
Effective Strategic Leadership
Exploiting & Maintaining Core Competencies
Developing Human Capital
Sustaining
an Effective Organizational Culture
Leaders play a critical role in shaping and reinforcing the firm’s culture 31

14. Changing Culture and Reengineering
The benefits of Business Reengineering are maximized when employees believe that:
Every job in the company is essential and important
All employees must create value through their work
Constant learning is a vital part of every person’s job
Teamwork is essential to implementation success
Problems are solved only when teams accept the responsibility for the solution 36

15. Effective Strategic Leadership
Exercise of Effective Leadership
Determining Strategic Direction
Effective Strategic Leadership
Exploiting & Maintaining Core Competencies
Developing Human Capital
Sustaining
an Effective Organizational Culture
Leaders set the tone for creating an environment of mutual respect, honesty and ethical practices among employees
Emphasizing Ethical Practices 37

16. Effective Strategic Leadership
Exercise of Effective Leadership
Determining Strategic Direction
Effective Strategic Leadership
Exploiting & Maintaining Core Competencies
Developing Human Capital
Sustaining
an Effective Organizational Culture
Controls set the parameters for strategic implementation and for taking corrective action
Emphasizing Ethical Practices
Establishing Balanced Organizational Controls 38