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cap_12_hitt.pptx
PART 3: STRATEGIC ACTIONS:
STRATEGY IMPLEMENTATION
CHAPTER 12 STRATEGIC LEADERSHIP
Authored by:
Marta Szabo White, PhD.
Georgia State University
THE STRATEGIC MANAGEMENT PROCESS
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
KNOWLEDGE OBJECTIVES
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
● Define strategic leadership and describe top-level managers’ importance.
● Explain what top management teams are and how they affect firm performance.
● Describe the managerial succession process using internal and external managerial labor markets.
● Discuss the value of strategic leadership in determining the firm’s strategic direction.
KNOWLEDGE OBJECTIVES
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
● Describe the importance of strategic leaders in managing the firm’s resources.
● Define organizational culture and explain what must be done to sustain an effective culture.
● Explain what strategic leaders can do to establish and emphasize ethical practices.
● Discuss the importance and use of organizational controls.
INTRODUCTION
● Effective strategic leadership is the foundation for successfully using the strategic management process.
● Strategic leaders guide the firm in ways that result in forming a vision and mission.
● This guidance often finds leaders thinking of ways to create goals that stretch everyone in the organization to improve performance.
● Moreover, strategic leaders facilitate the development of appropriate strategic actions and determine how to implement them.
● Leaders can make a major difference in how a firm performs.
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
THE ROLE OF TOP-LEVEL MANAGERS
● Managers use their discretion when making strategic decisions
● Primary factors that determine the amount of a manager’s decision-making discretion
External environmental sources
Organization’s characteristics
Manager’s characteristics
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
FACTORS AFFECTING MANAGERIAL DISCRETION
FIGURE 12.2
Factors Affecting Managerial Discretion
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FACTORS AFFECTING MANAGERIAL DISCRETION
External
Environment
Industry structure
Rate of market growth
Number and type of competitors
Nature and degree of political/legal constraints
Degree to which products can be differentiated
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
FACTORS AFFECTING MANAGERIAL DISCRETION
External
Environment
Characteristics of
the Organization
Size
Age
Culture
Availability of resources
Patterns of interaction among employees
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
FACTORS AFFECTING MANAGERIAL DISCRETION
External
Environment
Characteristics of
the Organization
Characteristics of
the Manager
Tolerance for ambiguity
Commitment to the firm and its desired strategic outcomes
Interpersonal skills
Aspiration level
Degree of self-confidence
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
FACTORS AFFECTING MANAGERIAL DISCRETION
External
Environment
Characteristics of
the Organization
Characteristics of
the Manager
Managerial
Discretion
The degree of latitude for action when making strategic decisions, especially those concerned with effective implementation of strategies
How managers exercise discretion when determining appropriate strategic actions is critical to the firm’s success
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
TOP MANAGEMENT TEAMS
Top Management Teams
Help avoid potential problem of CEO making decisions alone: managerial hubris
Hubris: excessive pride leading to a feeling of invincibility
Hubris can magnify the effects of decision-making biases
Composed of key individuals who are responsible for selecting and implementing firm’s strategies; usually includes officers of the corporation (VP and above) and BOD
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
TOP MANAGEMENT TEAM, FIRM PERFORMANCE, AND STRATEGIC CHANGE
Heterogeneous team: individuals with varied functional backgrounds, experiences, and education
Team members: bring a variety of strengths, capabilities, and knowledge and provide effective strategic leadership when faced with complex environments and multiple stakeholder relationships to manage
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
TOP MANAGEMENT TEAM, FIRM PERFORMANCE, AND STRATEGIC CHANGE
A HETEROGENEOUS TEAM
Introduces a variety of perspectives
Has a greater propensity for strong competitive action
“Outside of the box thinking," leads to more creative decision making, innovation, and strategic change
Offers various areas of expertise to identify environmental opportunities, threats, or the need for change
Promotes debate, which leads to better strategic decisions, and higher firm performance
May take longer to reach consensus
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
MANAGERIAL SUCCESSION
DEFINITION: preselect and shape the skills of tomorrow’s leaders
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
This decision impacts company performance and the ability to embrace change in today's competitive landscape
Succession, top management team composition, and strategy are intimately related
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
EFFECTS OF CEO SUCCESSION AND TOP MANAGEMENT TEAM COMPOSITION ON STRATEGY
FIGURE 12.3
Effects of CEO Succession and Top Management Team Composition on Strategy
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
MANAGERIAL SUCCESSION
Benefits of Internal Managerial Labor Market
Continuity
Continued commitment
Familiarity
Reduced turnover
Retention of “private knowledge”
Favored when the firm is performing well
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
MANAGERIAL SUCCESSION
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 advantages
Fresh paradigms
Note: Opportunity cost for firms: Women as strategic leaders have been somewhat overlooked
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
EXERCISE OF EFFECTIVE STRATEGIC LEADERSHIP
FIGURE 12.4
Exercise of Effective Strategic Leadership
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KEY STRATEGIC LEADERSHIP ACTIONS
Determining Strategic Direction
● The strategic direction is framed within the context of the conditions (i.e., opportunities and threats) strategic leaders expect their firm to face in the next 3-5 years
● Ideal long-term strategic direction has two parts:
■ Core ideology
■ Envisioned future
● Serves as a guide to a firm’s strategy implementation process, including motivation, leadership, employee empowerment, and organizational design
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
KEY STRATEGIC LEADERSHIP ACTIONS
Effectively Managing the Firm’s Resource Portfolio
Most important task - effectively managing the firm’s portfolio of resources
Resources defined as financial, human, social, and organizational capital
Effective strategic leaders manage their firm’s resource portfolio by:
Organizing the resources into capabilities
Structuring the firm to facilitate using those capabilities
Managing each type of resource as well as the integration of resources, e.g., using financial capital to enhance human capital capabilities (training and development)
Choosing strategies through which the capabilities are successfully leveraged to create value for customers
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
KEY STRATEGIC LEADERSHIP ACTIONS
Exploiting and Maintaining Core Competencies
Core competencies
Resources and capabilities that serve as a source of competitive advantage for a firm over its rivals
Relate to an organization’s functional skills, such as manufacturing, finance, marketing, and research and development
Leadership must verify that the firm’s competencies are emphasized when implementing strategy
Firms must continuously develop/change their core competencies to prevail over competitors
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
KEY STRATEGIC LEADERSHIP ACTIONS
Developing Human Capital and Social Capital
Human capital: knowledge and skills of a firm’s entire workforce, requiring investment in training and development
Social capital: relationships inside and outside the firm that help it accomplish tasks and create value for customers and shareholders
Cooperative strategies, e.g., strategic alliances, may leverage complementary resources to develop social capital
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
KEY STRATEGIC LEADERSHIP ACTIONS
Developing Human Capital and Social Capital
Firms with strong social capital can access multiple capabilities, providing them with important flexibility to take advantage of opportunities and respond to challenges
Social capital created through alliances is pivotal to:
Large multinational firms when entering new foreign markets
Entrepreneurial firms for resource access, venture capital, or other types of resources
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
KEY STRATEGIC LEADERSHIP ACTIONS
Sustaining an Effective Organizational Culture
Organizational culture: the complex set of ideologies, symbols, and core values shared throughout the firm
Influences the way business is conducted
Helps regulate and control employees’ behavior
Strong organizational culture may be a competitive advantage
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
KEY STRATEGIC LEADERSHIP ACTIONS
Sustaining an Effective Organizational Culture
ENTREPRENEURIAL MIND-SET
● Source of growth and innovation
● May be encouraged and promoted by strategic leaders
● An organizational culture can encourage (or discourage) strategic leaders from pursuing (or not pursuing) entrepreneurial opportunities
Fostering an Entrepreneurial Mind-Set: Five Dimensions
Autonomy
Innovativeness
Risk taking
Proactiveness
Competitive aggressiveness
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
KEY STRATEGIC LEADERSHIP ACTIONS
Sustaining an Effective Organizational Culture
CHANGING THE ORGANIZATIONAL CULTURE AND RESTRUCTURING
More difficult to change culture than maintain it
Sometimes change must occur
Effective strategic leaders recognize when change in culture is needed
Requires effective communicating and problem solving
Selecting the right people
Engaging in effective performance appraisals
Measuring individual performance toward goals that fit with new values
Using appropriate reward systems
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
KEY STRATEGIC LEADERSHIP ACTIONS
Emphasizing Ethical Practices
Effectiveness of strategy implementation processes increases when based on ethical practices
Ethical practices create social capital and goodwill for the firm
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
KEY STRATEGIC LEADERSHIP ACTIONS
Establishing Balanced Organizational Controls
● Financial Controls
Focus on short-term financial outcomes
Produce risk-averse managerial decisions because financial outcomes may be caused by events beyond managers’ direct control
● Strategic Controls
Focus on the content of strategic actions rather than their outcomes
Encourage decisions that incorporate moderate and acceptable levels of risk
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
KEY STRATEGIC LEADERSHIP ACTIONS
Establishing Balanced Organizational Controls
THE BALANCED SCORECARD
Framework to evaluate if firms have achieved the appropriate balance among the strategic and financial controls to attain the desired level of firm performance
Most appropriate for evaluating business-level strategies; it can also be used with the other strategies firms implement (e.g., corporate-level, international, and cooperative)
Prevents overemphasis of financial controls at the expense of strategic controls
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
