STRATEGIC LEADERSHIP

I. STRATEGIC LEADERSHIP AND STYLE

Strategic Leadership is the ability to anticipate, envision, maintain flexibility, and empower others
to create strategic change as necessary. STRATEGIC CHANGE brought about as a result of selecting and
implementing a firm's strategies. Multifunctional in nature, strategic Leadership involved through
managing through others, managing an entire organization rather than a functional subunit, and
coping with change that continues to increase in the global economy. Because of the global economy's
complexity, strategic leadership must learn how to effectively influence human behavior, often in
uncertain environments.
 Being able to demonstrate the skills of attracting and managing human capital in establishing and
nurturing an appropriate context for that capital to flourish is important, especially given that the crux
of strategic leadership is the ability to manage the firm's operations effectively and sustain high
performance over time.
The primary responsibility for effective strategic leadership rests at the top, in particular with the
CEO.
Other commonly recognized strategic leaders includes;
-members of the board of directors
-the top management team
-and divisional general tanagers.
Regardless of their title and organizational function, strategic leaders have substantial decision-
making responsibilities the cannot be delegated.
Strategic leadership is a complex but critical form of leadership Strategies cannot be formulated and
implemented for the purpose of achieving above average returns without effective strategic leaders.
As a strategic leader, a firm’s CEO is involved with a large number and variety of tasks, all of
which, in some form or fashion, relate to effective use of the strategic management process.
The style of leadership used by those in top management positions is important. Likely, the leader's
style will be based, at least partially, on his or her personal ideology and experience.14 For example,
based on his personal ideology, Tim Cook, CEO of Apple, initiated more philanthropic activities for the
firm, and he spoke out on important social issues, such as treating all people equally regardless of
ethnicity, gender, or sexual orientation.
Leaders are shaped and defined by character, Leaders inspire and enable others to do excellent
work and realize their potential. As a result, they build successful, enduring organizations.
Additionally, transformational leaders have emotional intelligence. Emotionally intelligent leaders
understand themselves well, have strong motivation, are empathetic with others, and have effective
interpersonal skills." As a result of these characteristics, transformational leaders are especially
effective in promoting and nurturing innovation in firm.
II.THE ROLE OF TOP-LEVEL MANAGERS
To exercise the duties of their role, top-level managers make many decisions, such as the
strategic actions and responses.
When making decisions related to using the strategic management process, managers (certainly
top-level ones) often use their discretion (or latitude for action).20 Managerial discretion differs
significantly across industries. The primary factors that determine the amount of decision-making
discretion held by a manager (especially a top-level manager) are
1. external environmental sources such as the industry structure, the rate of market growth in the
firm's primary industry, and the degree to which products can be differentiated
2. characteristics of the organization, including its size, age, resources, and culture
3.characteristics of the manager, including commitment to the firm and its strategic outcomes,
tolerance for ambiguity, skills in working with different people, and aspiration levels.
Top-level managers' roles in verifying that their firm effectively uses the strategic management
process are complex and challenging. Because of this, top management teams, rather than a single
top-level manager, typically make these types of decisions.
TOP MANAGEMENT TEAMS
The Top Management Teams is composed of the individuals who are responsible for making certain
the firm uses the strategic management process, especially for the purpose of selecting and
implementing strategies.
TOP MANAGEMENT TEAMS, FIRM PERFORMANCE, AND STRATEGIC CHANGE.
- The job of top-level managers is complex and requires a broad knowledge of the firm internal
organization as well as the three key parts of its external environment- the general, industry and
competitor environment. Therefore, firms try to form a top management team with the knowledge
and expertise needed to operate the internal organization and who can deal with the firm's
stakeholders as well as its competitors. Firm's also need to structure the top management team in a
way to best utilize the member's expertise (e.g. create structural interdependence to make the best
decision) To have this characteristics normally requires a heterogeneous top management team. A
HETEROGENEOUS TOP MANAGEMENT TEAM- is composed of individuals with different functional
backgrounds, experience, and education.
THE CEO AND TEAM MANAGEMENT POWER
The chief executive officer (CEO) is the highest-ranking person in a company. While every company
differs, CEOs are often responsible for expanding the company, driving profitability, and in the case of
public companies, improving share prices. CEOs manage the overall operations of a company.
They set the overall direction of a company and make strategic decisions about the long-term success
of the business.
II. MANAGERIAL SUCCESSION
-is defined as the plan or process by which new internal leaders are identified and developed to replace
existing leaders who will be transitioning out of their current responsibilities because of retirement,
disability, termination, or death. Our Approach.
2 TYPES OF MANAGERIAL LABOR MARKETS
1.INTERNAL MANAGERIAL LABOR MARKET- consists of a firm’s opportunities for managerial position
and the qualified employees within the company.
2.EXTERNAL MANAGERIAL LABOR MARKET- Is the collection of managerial career opportunities and
the qualified people who are external the organization in which the opportunities exist?
In summary, CEOs selected from inside the firm tend to benefit from their:
1. clear understanding of the firm's personnel and their capabilities
2. appreciation of the company's culture and its associated core values
3. deep knowledge of the firm's core competencies as well as abilities to develop new ones as
appropriate
4. "feel" for what will and will not "work" in the firm
In spite of the understandable and legitimate reasons to select CEOs from inside the firm, board of
directors sometimes prefer to choose a new CEO from the external managerial labor market.
Conditions suggesting a potentially appropriate preference to hire from outside include
1. the firm's need to enhance its innovate
2. the firm's need to reverse its recent poor performance
3. the fact that the industry in which the firm competes is experiencing rapid growth
4. the need for strategic change
STRATEGIC FOCUS: Trial by Fire: CEO Succession at General Motors
The trial by fire and CEO succession at general motors refers to the challenging period faced by
the CEO, Mary Barra, shortly after her appointment in 2014. Just two months after her tenure, general
motors was hit by a major crisis known as the “switch gate” fire. This crisis was triggered by an ignition
switch issue that resulted in recalls and investigations, as well as fatalities linked to the faulty switches.
Mary Barra faced criticism for the delayed response and perceived in addressing the problem.
However, she preserved and implemented significant changes to improve safety practices and the
corporate culture at general motors. Barra continued to lead the company and became the first
woman in general motor’s history hold the CEO position.
III. KEY STRATEGIC LEADERSHIP ACTION
Key strategic leadership actions refer to the specific actions and behaviors that leaders employ to
drive strategic initiatives and guide their organizations to success. Certain actions characterized
effective strategic leadership; we present the most important ones in figure 12.4. Many of the actions
interact with each other. For example, managing the firm’s resources effectively includes developing
human capital, and contributes to establishing a strategic directions, fostering an effective culture,
exploiting core competencies, using effective and balanced organizational control systems, and
establishing ethical practices. The most effective strategic leaders create viable options in making
decisions regarding each of the key strategic leadership actions.
DETERMINING STRATEGIC DIRECTION
Determining Strategic Direction involves specifying the vision and the strategy or strategies to
achieve this vision over time. The strategic direction is framed within the context of the conditions (i.e.,
opportunities and threats ) that strategic leaders expect their firm to face in roughly the next three to
five years.
Long-term strategic direction has two parts:
• A core ideology – motivates employees through the company’s heritage while the envisioned future
encourages them to stretch beyond their expectations of accomplishment and requires significant
change and progress to be realized.
• An envisioned future – serves as a guide to many aspects of a firm’s strategy implementation
process, including motivation, leadership, employee empowerment, and organizational design.
EFFECTIVELY MANAGING THE FIRM’S RESOURCE PORTFOLIO
Effectively managing the firm’s portfolio of resources is another critical strategic leadership action. The
firm’s resources are categorized as financial capital, human capital, social capital, and organizational
capital.
EXPLOITING AND MAINTAINING CORE COMPETENCIES
• Core competencies are capabilities that serve as a source of competitive advantage for a firm over its
rivals.
• Core competencies relate to skills within organizational functions, such as manufacturing, finance,
marketing, and research and development.
• Core competencies are developed over time as firms learn from the results of the competitive actions
and responses taken during the course of competing with rivals.
DEVELOPING HUMAN CAPITAL AND SOCIAL CAPITAL
Human capital refers to the knowledge and skills of a firm’s entire workforce. From the perspective of
human capital, employees are viewed as a capital resource requiring continuous investment.
Social capital involves relationship inside and outside the firm that help in efforts to accomplish tasks
and create value for stakeholders. Social capital is a critical asset given that employees must cooperate
with one another and others, including suppliers and costumers, in order to complete their work.
External social capital is increasingly critical to firm success in that few if any companies possess all of
the resources needed to successfully compete against their rivals.

SUSTAINING AN EFFECTIVE ORGANIZATIONAL CULTURE

Organizational culture – complex set of ideologies, symbols, and core values that are shared
throughout the firm and that influence how the firm conduct business.
- It can be a source of competitive advantage. Shaping the organizational culture is another
key strategic leadership action.
ENTREPRENEURIAL MIND-SET
• Pursuing entrepreneurial opportunities is a key action for strategic leaders to take to encourage and
promote innovation. Entrepreneurial opportunities are a vital source of growth and innovation.
• Invest in opportunities as real option. Invest in an opportunity in order to provide the potential
option of taking advantage of the opportunity at some point in the future.
• Firms use strategic entrepreneurship to pursue entrepreneurial opportunities as a means of earning
above-returns. Desired success would be likely to achieved by using strategic entrepreneurship when
employees have an entrepreneurial mind-set.
• Five Dimensions of Entrepreneurial Orientation that characterize a firm’s entrepreneurial mind-set.
1. Autonomy – allows employees to take actions that are free of organizational constraints and
encourages them to do so.
 2. Innovativeness – reflects a firm’s tendency to engage in and support new ideas, novelty,
experimentation, and creative process that may result in new products, services, or
technological processes.
3. Risk taking – reflects a willingness by employees and their firm to accept measured levels of
risks when pursuing entrepreneurial opportunities.
4. Proactiveness – describes a firm’s ability to be a market leader rather than a follower.
5. Competitive Aggressiveness – a firm’s propensity to take actions that allow it to consistently
and substantially outperform its rivals.
CHANGING THE ORGANIZATIONAL CULTURE AND RESTRUCTURING
• Incremental changes – changes to the firm’s culture that is typically used to implement strategies.
• Radical changes – changes to organizational culture support selecting strategies that differ from
those firm has implemented historically.
• Shaping and reinforcing a new culture requires:
- Effective communication and problem solving
- Selecting the right people – those who have the values desired for the organization.
- Engaging in effective performance appraisals – establishing goals that support the new core
values and measuring individuals’ progress toward reaching them.
- Using appropriate reward systems – rewarding the desired behaviors that reflect the new
core values.
• Cultural changes succeed only when the firm’s CEO, other key top management team members, and
middle-level managers actively support them.
• Middle-level managers need to be highly disciplines to energize the culture and foster alignment with
the firm’s vision and mission. They must be sensitive to the effects of other changes on organizational
culture.
EMPHASIZING ETHICAL PRACTICES
• Ethical companies encourage and enable people at all levels to act ethically when taking actions to
implement strategies.
•Ethical practices and the judgement on which they are based create “social capital” in the
organization, increasing the “goodwill available to individual and groups” in the organization. When
unethical practices evolve in an organization, once deemed acceptable by many managers and
employees, individual are more likely to engage in unethical practices to meet their goals when current
efforts to meet them are insufficient.
• Ethical practices must shape the firm’s decision-making process and be an integral part of
organizational culture. Value-based culture is the most effective means of ensuring that employees
comply with the firm’s ethical standards.
• Establishing and enforcing a meaningful code of ethics is an important action to take to encourage
ethical decision making as a foundation for using the strategic management process.
•Strategic leaders can take several actions to develop and support the firm's ethical organizational
culture. Examples of these actions:
1. Establishing and communicating specific goals to describe the firm’s ethical standards.
2. Continuously revising and updating the code of conduct, based on inputs from people
throughout the firm and from other stakeholders.
3. Disseminating the code of conduct to all stakeholders to inform them of the firm's ethical
standards and practices.
4. Developing and implementing methods and procedures to use in achieving the firm's ethical
standards.
5. Creating and using explicit reward systems that recognize acts of courage.
6. Creating a work environment in which all people are treated with dignity.
• When strategic leaders and others throughout the firm fail to take actions such as these – perhaps
because an ethical culture has not been created – problems are likely to occur.
ESTABLISHING BALANCED ORGANIZATIONAL CONTROLS
Organizational controls have long been viewed as an important part of the strategic management
process particularly the parts related to implementation.
• Controls, defined as the “formal, information-based ... procedures used by managers to maintain or
alter patterns in organizational activities”, help strategic leaders build credibility, demonstrate the
value of strategies to the firm's stakeholders, and promote and support strategic change. Most
critically, controls provide the parameters for implementing strategies as well as the corrective actions
to be taken when implementation-related adjustments are required.
• Strategic leaders are responsible for helping the firm develop and properly use these two types of
organizational controls – financial and strategic controls.
Financial control – focuses on short-term financial outcomes. Emphasizing this control often produces
more short-term and risk-averse decisions because financial outcomes may be caused by events
beyond leaders and managers’ direct control.
Strategic control – focuses on the content of strategic actions rather than the outcomes. This control
encourages lower-level managers to make decisions that incorporate moderate and acceptable levels
of risk because leaders and managers throughout the firm share the responsibility for the outcomes of
those decisions and actions resulting from them.
The challenge for strategic leaders is to balance the use of strategic and financial controls for the
purpose of supporting efforts to improve the firm’s performance.
THE BALANCE SCORECARD
Balanced scorecard – a tool firms use to determine if they are achieving an appropriate balance when
using strategic and financial controls as a means of positively influencing performance. This tool is most
appropriate to use when evaluating business-level strategies.
Four perspectives are integrated to form the balanced scorecard:

 Financial (concerned with growth, profitability, and risk from the shareholders' perspective)
 Customer (concerned with the amount of value customers perceive was created by the firm's
products)
 Internal business processes (with a focus on the priorities for various business processes that
create customer and shareholder satisfaction)
 Learning and growth (concerned with the firm's effort to create a climate that supports change,
innovation, and growth)
Using the balanced scorecard finds the firm seeking to understand:
1. how it responds to shareholders (financial perspective)
2. how customers view it (customer perspective)
3. what processes to emphasize to successfully use its competitive advantage (internal
perspective)
4. what it can do to improve its performance in order to grow (learning and growth perspective)
Generally speaking, firms tend to emphasize strategic controls when assessing their performance
relative to the learning and growth perspective, whereas the tendency is to emphasize financial
controls when assessing performance in terms of the financial perspective.
Firms use different criteria to measure their standing relative to the balanced scorecard's four
perspective.

Perspective Criteria
 Financial  Cash Flow
 Return on Equity
 Return on Assets
 Customer  Assessment of ability to anticipate customers’ needs
 Effectiveness of customer service practices
 Percentage of repeat business
 Quality of communications with customers
 Internal  Asset utilization improvements
Business  Improvements in employee morale
Processes  Changes in turnover rates
 Learning and  Improvements in innovation ability
Growth  Number of new products compared to competitor
 Increase in employee’s skills
Strategic leaders play an important role in determining a proper balance between strategic and
financial controls. A proper balance between controls is important, in that “wealth creation for
organizations where strategic leadership is exercised is possible because these leaders make
appropriate investments for future viability (through strategic control), while maintaining an
appropriate level of financial stability in the present (through financial control
Successfully using strategic control frequently is integrated with appropriate autonomy for the various
subunits so that they can gain a competitive advantage in their respective markets."

 Strategic control can be used to promote the sharing of both tangible and intangible resources
among interdependent businesses within a firm's portfolio.
 The autonomy provided allows the flexibility necessary to take advantage of specific market
place opportunities.
As a result, strategic leadership promotes simultaneous use of strategic control and autonomy.
Strategic leaders are critical to a firm's ability to successfully use all parts of the strategic management
process, including strategic entrepreneurship.