Slide strategic management 6e by harrison chapter 4 strategic leadership and strategic direction

Learning ObjectivesTo understand: • the traditional perspective of leadership • the primary leadership responsibilities of the CEO • elements of effective leadership, including top manag

Chapter 4

Strategic Leadership and

Strategic Direction

Chapter 4

Strategic Leadership and

Strategic Direction

1

Learning Objectives

To understand:

• the traditional perspective of leadership

• the primary leadership responsibilities of the CEO

• elements of effective leadership, including top management teams

• effective corporate governance characteristics

• sources of influence on an organization's strategic direction

• the elements of mission and vision statements

• the importance of linking values and strategy

• the components of social responsibility and sustainable

development

To understand:

• the traditional perspective of leadership

• the primary leadership responsibilities of the CEO

• elements of effective leadership, including top management teams

• effective corporate governance characteristics

• sources of influence on an organization's strategic direction

• the elements of mission and vision statements

• the importance of linking values and strategy

• the components of social responsibility and sustainable

development

Strategic

Direction

Strategy Formulation (corporate and business level)

Strategy Implementation

and Control

Strategic Restructuring

External and Internal

Analysis

Strategic Management Process

Traditional View of Leadership

• The leader sets direction, makes the important

decisions, and rallies the followers (usually

employees) in the process of implementation

• Particularly common in the West, where leaders

are equated with heroes

• May not be optimal in many settings today

› Turbulent global competitive environments

› Multibusiness organizations

• Perhaps today the most important role of the

CEO is to harness the energy, talents, and

creativity of organizational members

• The leader sets direction, makes the important

decisions, and rallies the followers (usually

employees) in the process of implementation

• Particularly common in the West, where leaders

are equated with heroes

• May not be optimal in many settings today

› Turbulent global competitive environments

› Multibusiness organizations

• Perhaps today the most important role of the

CEO is to harness the energy, talents, and

creativity of organizational members

Four Primary Leadership

Responsibilities of the CEO

Four Primary Leadership

Responsibilities of the CEO

• Design organizational purpose, vision and core

values

• Oversee the creation of policies, strategies and

structure

• Create an environment for organizational

learning

• Serve as a steward for the organization

• Design organizational purpose, vision and core

values

• Oversee the creation of policies, strategies and

structure

• Create an environment for organizational

learning

• Serve as a steward for the organization

Effective Strategic Leaders

• Must master lower-level skills before

moving to higher-level skills

› Capable individual

› Team player

› Organizer

› Effective leader

› Transformational leader

• Must master lower-level skills before

moving to higher-level skills

› Capable individual

› Team player

› Organizer

› Effective leader

› Transformational leader

Emotional Intelligence

•Self Awareness: Ability to understand own moods

and emotions as well as their impact on others

•Self Regulation: Ability to regulate impulses, to

think before acting

•Motivation: Drive to achieve, optimism, passion

•Empathy: Ability to understand the emotional

make-up of other people

•Social Skill: Ability to manage relationships for

particular purposes

•Self Awareness: Ability to understand own moods

and emotions as well as their impact on others

•Self Regulation: Ability to regulate impulses, to

think before acting

•Motivation: Drive to achieve, optimism, passion

•Empathy: Ability to understand the emotional

make-up of other people

•Social Skill: Ability to manage relationships for

particular purposes

Situational Leadership

• Suggests that leadership style should fit the

situation

› Production/operations background for cost cutting

› Marketing or R&D background for differentiation of products

› Young, well-educated leaders for changes

› Sales and marketing background, risk takers for growth

› Outsider for radical changes

• Effective leadership requires a combination of

basic traits and situational traits

• Suggests that leadership style should fit the

situation

› Production/operations background for cost cutting

› Marketing or R&D background for differentiation of products

› Young, well-educated leaders for changes

› Sales and marketing background, risk takers for growth

› Outsider for radical changes

• Effective leadership requires a combination of

basic traits and situational traits

Top Management Teams

• Consist of high-ranking leaders including

CEO, COO, CFO, possibly vice presidents

• Heterogeneous top management teams:

› high quality decisions

› implementation may be more difficult

CEO, COO, CFO, possibly vice presidents

› managers with a wide variety of backgrounds

› high quality decisions

› innovation and strategic change

› implementation may be more difficult

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Position of Board of Directors

Shareholders

Board of Directors

Board of Directors

Chief Executive

Manage-Ment Team

Top Manage-Ment

Team

VP-Legal VP-Financial VP-Marketing

VP-Human Res.

Corporate Governance

Corporate governance is concerned with the balance

between:

•Economic and social goals

•Individual goals of managers and firm goals

The board of directors typically:

•Protects interests of shareholders and other stakeholders

•Hires, fires, supervises and compensates top

management

•Provides advice to top management

•Approves major strategic decisions

•Provides important links to other firms through board

interlocks and associations with other companies

Corporate governance is concerned with the balance

between:

•Economic and social goals

•Individual goals of managers and firm goals

The board of directors typically:

•Protects interests of shareholders and other stakeholders

•Hires, fires, supervises and compensates top

management

•Provides advice to top management

•Approves major strategic decisions

•Provides important links to other firms through board

interlocks and associations with other companies

Agency Theory

owners

expense of shareholders

owners

expense of shareholders

Strategic Direction

Strategic direction is defined by a firm’s vision of where it is

heading, the businesses in which it is involved and how it serves its stakeholders

Influences on strategic direction

employees

communities

political/legal forces

Strategic direction is defined by a firm’s vision of where it is

heading, the businesses in which it is involved and how it serves its stakeholders

Influences on strategic direction

employees

communities

political/legal forces

Mission and Vision

Mission – what the organization is

Vision – what the organization wants to become

Frequently a vision is incorporated into the mission statement, as illustrated in this example:

“

“Our mission is to be the world’s premier consumer products company focused on convenient foods and beverages We seek to produce

financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the

communities in which we operate And in everything we do, we strive for honesty, fairness and integrity .” (Pepsico)

Note also that this mission statement incorporates important values (honesty , fairness and integrity)

Mission – what the organization is

Vision – what the organization wants to become

Frequently a vision is incorporated into the mission statement, as illustrated in this example:

“

“Our mission is to be the world’s premier consumer products company focused on convenient foods and beverages We seek to produce

financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the

communities in which we operate And in everything we do, we strive

Note also that this mission statement incorporates important values (honesty , fairness and integrity)

Business Definition

• What is our product or service?

• Who are our customers? (markets and

distribution channels)

• What do we do for them or provide for them?

(functions served by our products or services)

• How do we produce the service or do it? (What are

our resource conversion processes, technologies)

• What is our product or service?

• Who are our customers? (markets and

distribution channels)

• What do we do for them or provide for them?

(functions served by our products or services)

• How do we produce the service or do it? (What are

our resource conversion processes, technologies)

Ethical Behavior in Organizations

Ethical Behavior in Organizations

Ethical dilemmas - occur when the values of different stakeholders

are in conflict over a particular issue

Poor ethical behavior – people often do not personalize ethical

issues – they see the organization as responsible for the problem

Increasing ethical behavior

• Corporate values statement – broad values that guide behavior

• Codes of ethics – similar to values statements Sometimes

include more detail regarding specific behavior

• CEOs should clearly communicate values to managers and other stakeholders

• Rewards systems should reinforce values

• Major decisions should be based on values

• Firms may create an ethics compliance program and systems

Ethical dilemmas - occur when the values of different stakeholders

are in conflict over a particular issue

issues – they see the organization as responsible for the problem

Increasing ethical behavior

• Corporate values statement – broad values that guide behavior

• Codes of ethics – similar to values statements Sometimes

include more detail regarding specific behavior

• CEOs should clearly communicate values to managers and other stakeholders

• Rewards systems should reinforce values

• Major decisions should be based on values

• Firms may create an ethics compliance program and systems

• Economic responsibilities

• Legal responsibilities

• Moral obligations (consistent

with societal values)

• Discretionary responsibilities

(philanthropy)

• Economic responsibilities

• Legal responsibilities

• Moral obligations (consistent

with societal values)

• Discretionary responsibilities

(philanthropy)

SOCIAL RESPONSIBILITY

• Business growth that does not permanently

deplete the natural environment or damage

society

• Most organizations define in terms of:

› Technological advances

› Environmental protection

› What they are doing for communities and societies in

which they operate

• Business growth that does not permanently

deplete the natural environment or damage

society

• Most organizations define in terms of:

› Technological advances

› Environmental protection

› What they are doing for communities and societies in

which they operate

SUSTAINABLE DEVELOPMENT