Lecture Organizational strategies for the 21st century - Chapter 12

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Chapter 12 - Strategic leadership. After reading the material in this chapter, you should be able to: Define strategic leadership and describe the importance of top-level managers, define top management teams and explain their effects on firm performance, describe the managerial succession process using internal and external managerial labor markets,...

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Nội dung Text: Lecture Organizational strategies for the 21st century - Chapter 12

Chapter 12: Strategic Leadership (SL)  Overview:  Strategic leadership & top-level managers importance  Top management teams and effects on firm performance  Managerial succession process  Value of strategic leadership in determining firm’s strategic direction  Importance of strategic leaders in managing firm’s resources  Organizational culture and actions to sustain it  Ethical practices: establishment and emphasis  Importance and use of organizational controls 1
The Strategic Management Process 2
Strategic Leadership and Style  Strategic leadership: the ability to anticipate, envision, maintain flexibility, and empower others to create strategic change as necessary  Multifunctional task that involves  Managing through others  Managing an entire enterprise rather than a functional unit  Corporate, business, and international strategies  Coping with change from internal and external environments  Attracting and managing human (includes intellectual) capital  Being able to meaningfully influence others  Strategic leaders make a major difference in how well a firm performs 3
Strategic Leadership and the Strategic Management Process  Effective strategic leadership is the foundation for successfully using the strategic management process  Strategic leaders:  Shape the formation of vision and mission  Facilitate strategy formulation and strategy implementation  Are needed for the achievement of strategic competitiveness and above-average returns. 4
The Role of TopLevel Managers  Top level managers play a critical role in strategy formulation and implementation  Their strategic decisions influence how an organization is designed and how goals are achieved  Top managers also develop structure, culture, reward systems, and policies/SOPs  Having a top management team with superior managerial skills is critical (and can be a source of CA and AAR)  Managers make a difference because of the discretion (or latitude for action) they use when making strategic decisions  This discretion influences firm outcomes like performance  A manager’s decision-making discretion is determined by several factors 5
Factors Affecting Managerial Discretion 6
The Role of TopLevel Managers  Top Management Teams (TMT)  In most firms there is a team of strategic leaders called the top management team  A team is needed to deal with the complexity of challenges and the need for substantial amounts of information and knowledge to make strategic decisions  TMT composed of key individuals who are responsible for selecting and implementing firm’s strategies  Usually includes officers of the corporation (VP and above) and members of BOD  TMT characteristics must fit strategy and strategy implementation  TMTs affect firm performance and strategic change 7
The Role of TopLevel Managers  TMTs, Firm Performance & Strategic Change  Top managers need to operate the internal organization and deal with the external environment and stakeholders groups  A heterogeneous TMT can facilitate this  Managerial group of individuals with different functional backgrounds, experiences, and education  Introduce a variety of perspectives and can lead to better decisions  Tend to "think outside of the box," leading to more creative decision making, innovation, and strategic change  Offers various areas of expertise and promotes debate  Having a top management team that functions cohesively and having members with expertise in the firms core functions and businesses is also important 8
The Role of TopLevel Managers  The CEO & TMT Power  TMT characteristics can give the CEO’s team power relative to the board of directors and can influence the amount of strategic leadership the board provides  Can affect CEO discretion and the ability to appoint board members  CEO Duality and longer tenure can also lead to greater CEO power  The relative degrees of power held by the board and TMT should be appropriate for the organization  TMT characteristics must fit strategy and strategy implementation 9
Managerial Succession  The choice of executives is a critical decision with important implications for the firm’s performance  Organizations select managers and strategic leaders from two types of managerial labor markets  Internal Managerial Labor Market – opportunities for managerial positions to be filled from within the firm  External Managerial Labor Market – opportunities for managerial positions to be filled by candidates from outside of the firm  Impacts company performance and the ability to embrace change in today's competitive landscape  Succession, top management team composition and strategy are related 10
Effects of CEO Succession and Top Management Team Composition on Strategy 11
Managerial Succession  Benefits of Internal Managerial Labor Market  Leads to continuity and continued commitment to firm’s vision, mission, and strategies  Insiders are familiar with company products, markets, technologies, and operating procedures  Reduces turnover of existing personnel many of whom possess valuable firm-specific knowledge  Favored when the firm is performing well  Benefits of External Managerial Labor Market  Long tenure with the same firm is thought to reduce innovation  Outsiders bring diverse knowledge bases and social networks, which offer the potential for synergy and new competitive advantage 12
Exercise of Effective Strategic Leadership: Key Strategic Leadership Actions 13
Key Strategic Leadership Actions  Determining Strategic Direction  Involves specifying the vision and the strategy to achieve this vision over time  Vision is a picture of what the firm wants to be and in broad terms what it wants to ultimately achieve  Strategic direction is framed within the context of the opportunities and threats over next 3-5 years  Includes a core ideology and an envisioned future  Should serve to motivate, “push”, and guide the organization 14
Key Strategic Leadership Actions  Effectively Managing the Firm’s Resource Portfolio  Includes financial, organizational (competencies and capabilities) and human capital  Firms resources must be managed in a way that is consistent and supportive of strategy  They also must be allocated as efficiently and effectively as possible so that each area or part of the firm has what it needs for strategy implementation  Changing strategy will likely call for the reallocation of resources and the movement of people and other resources from one area to another  Financial resources are managed through the budgeting and resource allocation process 15
Key Strategic Leadership Actions  Effectively Managing the Firm’s Resource Portfolio  Core competencies and competitive capabilities should be developed in a strategy supportive fashion  Firms should build their strategy around things they are good at doing and/or become good at doing things that are supportive of strategy  A firm’s human capital, which refers to the knowledge and skills of a firm’s entire workforce, should also fit its strategy.  This can be accomplished by:  Hiring people who fit the organization and its strategy  An effective training and development program  Investments should be made to acquire and develop the firm’s human capital 16
Key Strategic Leadership Actions  Sustaining an Effective Organizational Culture  Organizational culture: consists of a complex set of ideologies, symbols, and core values shared throughout the firm and influence the way business is conducted  Shapes the context within which the firm formulates and implements it's strategies.  Also helps to regulate and control employees’ behavior  There are many things that make up a company’s culture and many places that is comes from  Once developed, a company’s culture tends to last because:  Organizations hire people who fit the firm and its culture  Employees learn by observing the behavior of others and through socialization and systematic indoctrination of cultural values  Storytelling of company legends and ceremonies that honor employees who display cultural ideals 17  Visibly rewarding those who follow cultural norms
Key Strategic Leadership Actions  Sustaining an Effective Organizational Culture  Cultures can vary in strength depending on the degree to which they are imbedded in company practices and norms.  Firms must match culture to strategy, as a culture that promotes attitudes and behaviors that are well-suited to strategy will help in the achievement of strategic competitiveness and above average returns.  Related firms should develop cooperative cultures  Unrelated firms should develop competitive cultures  Cost leaders should value economy, frugality and efficiency  Differentiators should value innovation, quality, and excellence  Changing culture can be difficult but can be accomplished if the appropriate strategic leadership is in place 18
Key Strategic Leadership Actions  Emphasizing Ethical Practices  Ethical practices can be used control employee judgment and behavior  They should shape the firms decisions making process and are an integral part of organizational culture  Strategic leaders should:  Establish and communicate ethics related goals  Continuously revise, update, and disseminate the firm’s code of conduct  Develop and implement ethical policies and procedures  Use rewards to recognize ethical behavior  Create an appropriate work environment  Ethical practices can be used to control ethical behavior to make 19 sure people are behaving in the "right" way
Key Strategic Leadership Actions  Establishing Balanced Organizational Controls  Strategic leaders are responsible for the development and effective use of strategic and financial controls  Controls provide the parameters for implementing strategies as well as the corrective actions to be taken when implementation related adjustments are required  The challenge is to achieve an appropriate balance of financial and strategic controls  The Balanced Scorecard  Framework that allows strategic leaders to verify that they have established both financial and strategic controls to assess firm performance  Underlying premise is that firms jeopardize their future performance possibilities when financial controls are emphasized at the expense of strategic controls  An appropriate balance of strategic and financial controls allows firms to achieve higher level of performance. 20  Uses multiple perspectives