1. 13-1© 2006 by Nelson, a division of Thomson Canada Limited. Strategic Leadership Chapter 13

2. 13-2© 2006 by Nelson, a division of Thomson Canada Limited. The Strategic. Management. Process The Strategic Management Process Chapter 5 Bus. - Level Strategy Chapter 6 Competitive Dynamics Chapter 9 International Strategy Chapter 10 Cooperative Strategies Chapter 8 Acquisitions & Restructuring Strategic Inputs Strategic Actions Strategic Outcomes Chapter 4 Internal Environment Chapter 3 External Environment Strat. Intent Strat. Mission Strategy Formulation Strategic Competitiveness Chapter 1 Above Average Returns Chapter 2 Strategic Competitiveness Chapter 1 Chapter 7 Corp. - Level Strategy Chapter 5 Bus. - Level Strategy Chapter 11 Corporate Governance Chapter 12 Structure & Control Chapter 13 Strategic Leadership Chapter 14 Entrepreneurship & Innovation Strategy Implementation Feedback Chapter 13 Strategic Leadership

3. 13-3© 2006 by Nelson, a division of Thomson Canada Limited. 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.

4. 13-4© 2006 by Nelson, a division of Thomson Canada Limited. 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.

5. 13-5© 2006 by Nelson, a division of Thomson Canada Limited. Strategic Leadership Presumes An ability to influence those with whom one works.An ability to influence those with whom one works. The leader understands the emergent strategy process.The leader understands the emergent strategy process. A shared vision of what the organization is to be.A shared vision of what the organization is to be. Agreement among senior manger & board members of opportunities and threats.Agreement among senior manger & board members of opportunities and threats. Visionary leadership that entails many characteristics such as a willingness to take risks.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.Managerial leadership that includes an intended rational way of looking at the world.

6. 13-6© 2006 by Nelson, a division of Thomson Canada Limited. and Influences Strategic Leadership and the Strategic Management Process Effective Strategic Leadership Strategic IntentStrategic Mission Shapes the formation of Successful Strategic Actions Formulation of StrategiesImplementation of Strategies Strategic Competitiveness Above Average Returns Yields

7. 13-7© 2006 by Nelson, a division of Thomson Canada Limited. Managerial Leaders Adopt impersonal, passive attitudes towards goals.Adopt impersonal, passive attitudes towards goals. View work as enabling process that involves some combination of ideas & people interacting to establish strategies & make decisions.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.Relate to other people according to their role in the decision making process. Maintain a low level of emotional involvement in these relationships.Maintain a low level of emotional involvement in these relationships. Influence only the actions & decisions of those with whom they work.Influence only the actions & decisions of those with whom they work. Want stability & order and strive to preserve the existing order.Want stability & order and strive to preserve the existing order.

8. 13-8© 2006 by Nelson, a division of Thomson Canada Limited. Visionary Leadership Shape ideas as opposed to reacting to them.Shape ideas as opposed to reacting to them. Influence changes in the way people think about what is possible, desirable and necessary.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 concerned with ideas & relate to people in intuitive & empathetic ways. Are more likely to make decisions that are based on values.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.Are willing to invest in human capital & creating & maintaining as effective culture to ensure long term viability. Is future-oriented & concerned with risk taking.Is future-oriented & concerned with risk taking. Want creativity, innovation and chaos. * Strive to change the existing order.Want creativity, innovation and chaos. * Strive to change the existing order.

9. 13-9© 2006 by Nelson, a division of Thomson Canada Limited. Strategic Leadership A synergistic combination of managerial & visionary leadership.A synergistic combination of managerial & visionary leadership. Manages the paradox created by the use of managerial & visionary models.Manages the paradox created by the use of managerial & visionary models. Establishes the context through which stakeholders are able to perform at peak efficiency.Establishes the context through which stakeholders are able to perform at peak efficiency. Willing to make candid, courageous & yet pragmatic decisions.Willing to make candid, courageous & yet pragmatic decisions. Solicits corrective feedback from their peers, superiors and employees about the value of their difficult decisions.Solicits corrective feedback from their peers, superiors and employees about the value of their difficult decisions.

10. 13-10© 2006 by Nelson, a division of Thomson Canada Limited. Want stability & to preserve the existing order Guide without a strategic vision. Constrained by values & by using explicit knowledge Guide knowledge creation by encouraging contradictory capabilities (e.g. individual, group, and organizational tacit & explicit knowledge) Are comfortable handling Short- term day-to-day activities M anagerial L eaders S trategic L eaders, V isionary L eaders Define boundaries by use of metaphors, analogies & models to allow for a mix of contradictory concepts Want stability & to preserve the existing order Guide without a strategic vision. Constrained by values & by using explicit knowledge Are comfortable handling Short- term day-to-day activities Want stability & to preserve the existing order Guide without a strategic vision. Constrained by values & by using explicit knowledge Are comfortable handling Short- term day-to-day activities Manage the paradox created by use of managerial & visionary leadership models Control by social- ization & sharing common norms, values & beliefs Are not dependent on the organisation for their sense of who they are Are future-oriented concerned with risk- taking Control by social- ization & sharing common norms, values & beliefs Are future-oriented concerned with risk- taking Are not dependent on the organisation for their sense of who they are Control by social- ization & sharing common norms, values & beliefs Are future-oriented concerned with risk- taking Are not dependent on the organisation for their sense of who they are

11. 13-11© 2006 by Nelson, a division of Thomson Canada Limited. Factors Affecting Managerial Decisions

12. 13-12© 2006 by Nelson, a division of Thomson Canada Limited. Top management teams are comprised of the key managers who are responsible for formulating and implementing the organization’s strategies. 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. A heterogeneous top management team with varied expertise and knowledge can draw on multiple perspectives when evaluating alternative strategies and building consensus. Top Management Teams

13. 13-13© 2006 by Nelson, a division of Thomson Canada Limited. Strategic Leadership Chief executive officers can gain so much power that they are virtually independent of oversight by the board of directors.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.This is especially true when the CEO is also chairman of the board of directors. CEOs of long tenure can also wield substantial power.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.The most effective forms of governance share power and influence among the CEO and board of directors.

14. 13-14© 2006 by Nelson, a division of Thomson Canada Limited. CEO / Board Chair Duality Has been blamed for poor performance & slow response to change.  Occurs most commonly on the largest firms. 

15. 13-15© 2006 by Nelson, a division of Thomson Canada Limited. Exercise of Effective Strategic Leadership

16. 13-16© 2006 by Nelson, a division of Thomson Canada Limited. Determines Strategic Direction Developing a long-term vision of the firm’s Strategic Intent Exploits & Maintains Core Competencies Leaders must ensure that the firm’s 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 Effective Strategic Leadership Determines Strategic Direction Exploits & Maintains Core Competencies Develops Human Capital Sustains an Effective Organizational Culture

17. 13-17© 2006 by Nelson, a division of Thomson Canada Limited. Emphasizaing 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. Effective Strategic Leadership Emphasizing Ethical Practices Establishing Balanced Organizational controls

18. 13-18© 2006 by Nelson, a division of Thomson Canada Limited. Determining Strategic Direction Strategic direction means the development of a long-term vision of a firm’s strategic intent.Strategic direction means the development of a long-term vision of a firm’s strategic intent. A charismatic leader can help achieve 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.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.Executives must structure the firm effectively to help achieve the vision.

19. 13-19© 2006 by Nelson, a division of Thomson Canada Limited. Determining Strategic Actions Developing a long term vision of the firm’s strategic intent The ideal long term vision has two parts: Core ideologyCore ideology An envisioned future.An envisioned future.

20. 13-20© 2006 by Nelson, a division of Thomson Canada Limited. Exploiting and Maintaining Core Competencies In many large firms, and certainly in related- diversified ones, core competencies are exploited effectively when they are developed and applied across different organizational units.In many large firms, and certainly in related- diversified 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.Core competencies cannot be developed or exploited effectively without developing the capabilities of human capital.

21. 13-21© 2006 by Nelson, a division of Thomson Canada Limited. Sustaining an Effective Organizational Culture Changing Culture and Business Reengineering Constant learning is a vital part of every person’s job.Constant learning is a vital part of every person’s job. Teamwork is essential to successful implementation.Teamwork is essential to successful implementation. Problems are solved only when teams accept the responsibility for the solution.Problems are solved only when teams accept the responsibility for the solution.

22. 13-22© 2006 by Nelson, a division of Thomson Canada Limited. 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 

23. 13-23© 2006 by Nelson, a division of Thomson Canada Limited. Ethical Practices Establish & transmit specific goals describing the firm’s ethical standards (e.g., develop / disseminate a code of conduct). Developing an ethical organizational culture: 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.      

24. 13-24© 2006 by Nelson, a division of Thomson Canada Limited. The Balanced Scorecard Complements financial measures of past performance with measures of the drivers of future performance.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.It should translate a business unit’s mission & strategy into tangible objectives & measures. The objectives and measures view organizational performance from four perspectives.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

25. 13-25© 2006 by Nelson, a division of Thomson Canada Limited. The Balanced Scorecard Matrix FinancialCustomer Internal Business Process Learning & Growth Objectives Measures Targets Initiatives

26. 13-26© 2006 by Nelson, a division of Thomson Canada Limited. Strategic and Financial Controls in a Balanced Scorecard Framework PerspectivesCriteria Financial Cash flowCash flow Return on equityReturn on equity Return on assetsReturn on assets Customer Assessment of ability to anticipate customers needsAssessment of ability to anticipate customers needs Effectiveness of customer service practicesEffectiveness of customer service practices Percentage of repeat businessPercentage of repeat business Quality of communications with customersQuality of communications with customers

27. 13-27© 2006 by Nelson, a division of Thomson Canada Limited. Strategic and Financial Controls in a Balanced Scorecard Framework PerspectivesCriteria Internal Business Process Asset utilization improvementsAsset utilization improvements Improvements in employee moraleImprovements in employee morale Changes in turnover ratesChanges in turnover rates Learning and Growth Improvements in innovation abilityImprovements in innovation ability Number of new products compared to competitorsNumber of new products compared to competitors Increases in employees’ skillsIncreases in employees’ skills