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Chapter 12: Strategic Leadership (SL)


Chapter 12: Strategic Leadership (SL) Overview: Strategic leadership & top-level managers importance Top management teams and effects on firm performance – PowerPoint PPT presentation

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Title: Chapter 12: Strategic Leadership (SL)

Chapter 12 Strategic Leadership (SL)
  • Overview
  • Strategic leadership top-level managers
  • Top management teams and effects on firm
  • Managerial succession process
  • Value of strategic leadership in determining
    firms strategic direction
  • Importance of strategic leaders in managing
    firms resources
  • Organizational culture and actions to sustain it
  • Ethical practices establishment and emphasis
  • Importance and use of organizational controls

The Strategic Management Process
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 subunit
  • Coping with change
  • 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

Strategic Leadership and the Strategic Management
  • Effective strategic leadership is the foundation
    for successfully using the strategic management
  • Strategic leaders
  • Shape the formation of vision and mission
  • Facilitate strategy formulation and strategy
  • Are needed for the achievement of strategic
    competitiveness and above-average returns.

The Role of Top-Level 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
  • 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 use their discretion when making
    strategic decisions and this discretion
    influences firm performance
  • Several factors determine the amount of managers
    decision-making discretion including
  • External environmental sources
  • Organizational characteristics
  • Characteristics of the manager

Factors Affecting Managerial Discretion
The Role of Top-Level 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
  • TMT composed of key individuals who are
    responsible for selecting and implementing firms
  • 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

The Role of Top-Level 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
  • 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
  • Having a top management team that functions
    cohesively and having members with expertise in
    the firms core functions and businesses is also

The Role of Top-Level Managers
  • The CEO TMT Power
  • TMT characteristics can give the CEOs 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
  • TMT characteristics must fit strategy and
    strategy implementation

Managerial Succession
  • The choice of executives is a critical decision
    with important implications for the firms
  • Organizations select managers and strategic
    leaders from two types of managerial labor
  • 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

Effects of CEO Succession and Top Management Team
Composition on Strategy
Managerial Succession
  • Benefits of Internal Managerial Labor Market
  • Leads to continuity and continued commitment to
    firms 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

Exercise of Effective Strategic Leadership Key
Strategic Leadership Actions
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
  • Strategic direction is framed within the context
    of the opportunities and threats over next 3-5
  • Includes a core ideology and an envisioned future
  • Should serve to motivate, push, and guide the

Key Strategic Leadership Actions
  • Effectively Managing the Firms Resource
  • 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
  • Changing strategy will likely call for the
    reallocation of resources and the movement of
    people and other resources from one area to
  • Financial resources are managed through the
    budgeting and resource allocation process

Key Strategic Leadership Actions
  • Effectively Managing the Firms Resource
  • Core competencies and competitive capabilities
    should be developed in a strategy supportive
  • 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 firms human capital, which refers to the
    knowledge and skills of a firms entire
    workforce, should also fit its strategy.
  • This can be accomplished by
  • Hiring people who fit the organization and its
  • An effective training and development program
  • Investments should be made to acquire and develop
    the firms human capital

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
  • There are many things that make up a companys
    culture and many places that is comes from
  • Once developed, a companys culture tends to last
  • 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
  • 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 develop cooperative cultures
  • Unrelated firms develop competitive cultures
  • Cost leaders value economy, frugality and
  • Differentiators value innovation, quality, and
  • Changing culture can be difficult but can be
    accomplished if the appropriate strategic
    leadership is in place

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
    firms code of conduct
  • Develop and implement ethical policies and
  • Use rewards to recognize ethical behavior
  • Create an appropriate work environment
  • Ethical practices can be used to control ethical
    behavior to make 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
  • Uses multiple perspectives

Strategic Controls and Financial Controls in a
Balanced Scorecard Framework
Key Strategic Leadership Actions
  • Developing Policies and Procedures
  • Policies and procedures - are written or
    unwritten standards or styles of behavior that
    govern how people act and lead people to behave
    in predictable ways
  • Can facilitate good strategy implementation
  • Can increase efficiency because they standardize
    work behavior and specify the best way to
    accomplish a task
  • Provide top down guidance about how certain
    things need to be done
  • They help ensure consistency in how strategy
    critical activities are performed
  • Different types of firms make use of different
    types and numbers of policies and procedures
  • Firms need to create a strong supportive fit
    between policies and procedures and strategy

Key Strategic Leadership Actions
  • Developing Reward Systems
  • It can be argued that rewards are the single most
    powerful tool for winning the commitment of
    employees to effective strategy implementation
  • Rewards are an important tool used to achieve
    behavioral control.
  • Firms should create a results oriented system in
    which those achieving objectives are generously
    rewarded and those not achieving objectives are
    not rewarded
  • Rewards and incentives should also be tied to
  • Cost leaders should reward people for being
    efficient and for identifying ways to reduce
  • Differentiators should reward people for being
  • The bottom line is that firms need to reward and
    motivate people in ways that are supportive of
    strategy and strategy implementation

Key Strategic Leadership Actions
  • McKinsey 7-S Strategy Implementation Framework
  • Basic Premise there are seven internal aspects
    of an organization that need to be aligned if the
    organization is to be successful.
  • These seven elements are interdependent and can
    be categorized as either "hard" or "soft"
  • They are interdependent to the extent that making
    changes to one affects all of the others.
  • For an organization to perform well each of these
    elements must fit with and be consistent with one
  • These elements include
  • Strategy, Structure, Systems, Shared Values,
    Style, Staff , and Skills
  • (source http//

Key Strategic Leadership Actions