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Topic 17
Strategic Leadership
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The Nature of Strategic Leadership
Strategic leadership is the process of providing the direction and inspiration necessary to create or sustain an organization
Strategic leadership is the process of providing the direction and inspiration necessary to create or sustain an organization
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Figure 13-1 Components of Strategic Leadership
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Guidelines for Formulating Strategy
Determine long-term objectives and priorities Assess current strengths and weaknesses Identify core competencies Evaluate the need for a major change in strategy Identify promising strategies Evaluate the likely outcomes of a strategy Involve other executives in selecting a strategy
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Systems Thinking
The ability to process information and understand its consequences for the organization in its interaction with the environment
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Strategic Planning
Strategic planning encompasses those activities that lead to the statement of goals and objectives and the choice of strategy
Strategic planning often takes the form of a SWOT analysis, a method of considering strengths, weaknesses, opportunities, and threats in a particular situation
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SWOT Analysis
Represents an effort to examine the interaction between the particular characteristics of an organization or organizational unit and the external environment
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Examples of SWOT Elements
Strengths: Favorable location, talented workers, state-of-the-art equipment
Weaknesses: Unfavorable location, outdated equipment, limited capital
Opportunities: Culturally diverse customer base, changes in technology, deregulation
Threats: Ecommerce, declining market, new competitors
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Business Strategy Levels
Corporate-level strategy asks, “What business are we in?”
Business-level strategy asks, “How do we compete?”
Functional-level strategy asks, “How do we support the business-level strategy?”
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Sample Strategies
Differentiation Cost leadership Focus High quality Imitation Strategic alliances Growth through acquisition
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Sample Strategies (cont’d)
High speed and first-mover strategy Product and global diversification Sticking to core competencies Brand leadership Creating demand by solving problems Conducting business on the Internet Peoplepalooza (competitive advantage
through hiring talented people)
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Differences Between Lower Level Differences Between Lower Level and Upper Echelon Leadersand Upper Echelon Leaders
Who the leader is
Scope of
responsibility
Focus
Effectiveness criteria
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Strategic ForcesStrategic Forces
ORGANIZATIONS
LeadershipLeadershipEnvironment
Strategy Culture
StructureTechnology
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Dual Role of Dual Role of Upper Echelon LeadersUpper Echelon Leaders
StrategyFormulation
StrategyImplementation
Performance
LeadershipCharacteristics
ModeratingFactors
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External Moderators of Executive Discretion
Environmental
uncertainty
Type of industry
Market growth
Legal constraints
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Internal Moderators of Executive Discretion
Stability
Size and structure
Organizational culture
Stage of organizational growth
Presence, power, and makeup of TMT
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Themes in Upper Echelon StyleThemes in Upper Echelon Style
Challenge Seeking
Risk taking
Openness to
change
Willingness to
innovate
Future orientation
Need for Control
Delegation
Centralization
Uniformity of
practices
Focus on
process
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Strategic Leadership DimensionsStrategic Leadership Dimensions
NEED FOR CONTROL
High control Low control
High challenge-seeking
Low challenge-seeking
CHALLENGE-SEEKING
HIGH-CONTROLINNOVATOR (HCI)
Challenge-seeker whomaintains tight control
over organization
STATUS QUOGUARDIAN (SQG)
Challenge-averse whomaintains tight control
over organization
PARTICIPATIVEINNOVATOR (PI)
Challenge-seeker whodelegates control of organization
PROCESSMANAGER (PM)
Challenge-averse whodelegates control of organization
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Processes Leaders Use to Processes Leaders Use to Impact Their OrganizationImpact Their Organization
LEADER
Environment
Strategy
Culture
Structure
Leadership
Technology
• Direct decisions• Allocation of
resources• Reward system• Selection of other
leaders• Promotions• Role-modeling
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Direct DecisionsDirect Decisions
Vision
Mission
Strategy
Structure
Organizational culture
Selection of other
leaders
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Allocation of ResourcesAllocation of Resourcesand Reward Systemand Reward System
Decisions regarding funding and budgetsAllocation of resources to support goalsFormal rewards such as salary and bonusesInformal rewards such as recognitionPromotion of other leaders and managers
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Setting the Norms and Setting the Norms and Role ModelingRole Modeling
Setting decision
criteria and rules by
which others make
decisionsActive or subtle role modeling of behaviors and styles
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Responsibility of Responsibility of Upper Echelon LeadersUpper Echelon Leaders
Organizational performance
Accountability to various
internal and external
constituents
Ethical behavior and role-
modeling
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Factors That Affect Factors That Affect Executive SalariesExecutive Salaries
Firm size Industry competition CEO power and discretion Internationalization High stress and instability
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Constraints on Leaders
Internal Constraints Coalitions in the organization Strong organizational culture
External Constraints Organizations primary products and services Powerful external stakeholders Perception of the organization’s performance
Constraints and Leader Traits as Joint Determinants
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Strategic Leadership
Political Power and Strategic Leadership Executive Tenure and Strategic Leadership Executive Teams
Potential advantages of strategic teams Executive teams and organizational effectiveness
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How Leaders Influence Organizational Performance
Efficiency and Process Reliability Innovation and Adaptation Human Resources and Relations Leader Influence on Performance
Determinants
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Efficiency and Process Reliability
Performance management and goal setting programs (e.g.,MBO, zero defects)
Process and quality improvement programs (quality circles,TQM, Six Sigma)
Cost reduction programs (downsizing, outsourcing, just-in-time inventory)
Structural forms (functional specialization, formalization, standardization)
Appraisal, recognition, and reward systems focused on efficiency and process reliability
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Human Resources and Relations
Quality of worklife programs (flextime, job sharing, child care, fitness center)
Employee benefit programs (health care, vacations, retirement, sabbaticals)
Socialization and team building (orientation programs, ceremonies and rituals, social events and celebrations)
Employee development programs (training, mentoring, 360 feedback, education subsidies)
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Human Resources and Relations
Human resource planning (succession planning, assessment centers, recruiting programs)
Empowerment programs (self-managed teams, employee ownership, industrial democracy)
Recognition and reward programs focused on loyalty, service, or skill acquisition
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Innovation and Adaptation Competitor and market analysis programs (market
surveys, focus groups, consumer panels, comparative product testing, benchmarking competitor products and processes)
Innovation programs (intrapreneurship, quality circles, innovation goals)
Knowledge acquisition (consultants, joint ventures, import best practices from outside)
Organizational learning (knowledge management systems, postmortums, joint ventures)
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Innovation and Adaptation Temporary structural forms for implementing change
(steering committee, task forces) Growth and diversification programs (mergers and
acquisitions, franchises, joint ventures) Structural forms (research departments, small product
divisions, product managers crossfunctional product development teams, facilities designed to encourage innovation)
Appraisal, recognition, and reward systems focused on innovation and customer satisfaction
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Questions for External Monitoring
What do clients and customers need and want? What is the reaction of clients and customers to the
organization’s current products and services? Who are the primary competitors? What strategies are they pursuing (e.g., pricing,
advertising and promotions, new products, customer service, etc.)?
How do competitors’ products and services compare to those of the manager’s organization?
What events affect the acquisition of materials, energy, information, and other inputs used by the organization to conduct its operations?
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Questions for External Monitoring
How will the organization be affected by new legislation and by government agencies that regulate its activities (e.g., labor laws, environmental regulations, safety standards, tax policies, etc.)?
How will new technologies affect the organization’s products, services, and operations?
How will the organization be affected by changes in the economy (employment level, interest rates, growth rates)?
How will the organization be affected by changing population demographics (e.g., aging, diversity)?
How will the organization be affected by international events (e.g., trade agreements, import restrictions, currency changes, wars and revolutions)?
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Guidelines for External Monitoring
Identify relevant information to gather Use multiple sources of relevant information Learn what clients and customers need and
want Learn about the products and activities of
competitors Relate environmental information to strategic
plans
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Knowledge Management andthe Learning Organization
Knowledge management is the systematic sharing of information to achieve such goals as innovation, nonduplication of effort, and competitive advantage
A learning organization is one that is skilled at creating, acquiring, and transferring knowledge, and at modifying behavior to reflect new knowledge and insights
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Where Corporate Knowledge Lives
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Initiatives to Enhance Organizational Learning
Create a strategic intent to learn Create a shared vision Empower employees to make decisions and
seek continuous improvement Develop systems thinking Encourage personal mastery of the job
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Initiatives to Enhance Organizational Learning (cont’d)
Encourage team learning Encourage action learning Learn from failure Encourage continuous experimentation Develop political skills to make connections
with and influence others Encourage creative thinking
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Summary
Strategic leadership deals with the major purposes of an organization or organizational unit
Five important components of strategic leadership include high-level cognitive ability, multiple inputs to strategy formulation, anticipating and creating a future, revolutionary thinking, and creation of a vision
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Summary (cont’d)
Strategic planning often takes the form of a SWOT analysis
Strategic leaders use many different types of business strategies
Leaders must help their organizations adapt to the environment by taking initiatives to create a learning organization
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In charge of turning Xerox around
Focus on giving stakeholders hope and confidence
Role model desired behaviors
Leading by example
Leading Change:Leading Change:Anne MulcahyAnne Mulcahy
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Soft-spoken and understated Careful listener Focus on customer Repeat simple messages Change culture through
communication and symbols Openness and focus on people
Leadership In Action:Leadership In Action:A.G. LafleyA.G. Lafley
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o CEO involvement in nomination of board members helps assure that members with the right skills and expertise are selected
o Those nominated by CEO may have a conflict of interest and a positive bias towards the CEO
o Creation of a balance of members nominated by different stakeholders is essential
The Leadership ChallengeThe Leadership Challenge