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

Chapter 44 Strategic Leadership Leadership and Strategic Direction 11 Learning Objectives Objectives To To understand: understand: • the the traditional traditional perspective perspective of of leadership leadership • the the primary primary leadership leadership responsibilities responsibilities of of the the CEO CEO • elements elements of of effective effective leadership, leadership, including including top top management management teams teams • effective corporate governance effective corporate governance characteristics characteristics • sources of influence on an organization's strategic sources of influence on an organization's strategic direction direction • the of mission mission and vision statements statements the elements elements of and vision • the and strategy strategy the importance importance of of linking linking values values and • the the components components of of social social responsibility responsibility and and sustainable sustainable development development 22 Strategic Strategic Management Management Process Process External and Internal Analysis Strategic Direction Strategy Formulation (corporate and business level) Strategy Implementation and Control Strategic Restructuring 33 Traditional View of Leadership • The The leader leader sets sets direction, direction, makes makes the the important important decisions, decisions, and and rallies rallies the the followers followers (usually (usually employees) employees) in in the the process process of of implementation implementation • Particularly Particularly common common in in the the West, West, where where leaders leaders are are equated equated with with heroes heroes • May May not not be be optimal optimal in in many many settings settings today today ›› ›› Turbulent Turbulent global global competitive competitive environments environments Multibusiness Multibusiness organizations organizations • Perhaps Perhaps today today the the most most important important role role of of the the CEO CEO is is to to harness harness the the energy, energy, talents, talents, and and creativity creativity of of organizational organizational members members 44 Four Primary Leadership Responsibilities of the CEO • Design Design organizational organizational purpose, purpose, vision vision and and core core values values • Oversee Oversee the the creation creation of of policies, policies, strategies strategies and and structure structure • Create Create an an environment environment for for organizational organizational learning learning • Serve Serve as as aa steward steward for for the the organization organization 55 Effective Effective Strategic Strategic Leaders • Must Must master master lower-level lower-level skills skills before before moving moving to to higher-level higher-level skills skills › Capable Capable individual individual › Team Team player player › Organizer Organizer › Effective Effective leader leader › Transformational Transformational leader leader 66 Emotional Emotional Intelligence Intelligence •Self Self Awareness: Awareness: Ability Ability to to understand understand own own moods moods and and emotions emotions as as well well as as their their impact impact on on others others •Self Self Regulation: Regulation: Ability Ability to to regulate regulate impulses, impulses, to to think think before before acting acting •Motivation: Motivation: Drive Drive to to achieve, achieve, optimism, optimism, passion passion •Empathy: Empathy: Ability Ability to to understand understand the the emotional emotional make-up make-up of of other other people people •Social Social Skill: Skill: Ability Ability to to manage manage relationships relationships for for particular particular purposes purposes 77 Situational Situational Leadership Leadership • Suggests Suggests that that leadership leadership style style should should fit fit the the situation situation ›› Production/operations Production/operations background background for for cost cost cutting cutting ›› Marketing Marketing or or R&D R&D background background for for differentiation differentiation of of products products ›› Young, Young, well-educated well-educated leaders leaders for for changes changes ›› Sales Sales and and marketing marketing background, background, risk risk takers takers for for growth growth ›› Outsider Outsider for for radical radical changes changes • Effective Effective leadership leadership requires requires aa combination combination of of basic basic traits traits and and situational situational traits traits 88 Top Top Management Management Teams Teams • Consist Consist of of high-ranking high-ranking leaders leaders including including CEO, CEO, COO, COO, CFO, CFO, possibly possibly vice vice presidents presidents • Heterogeneous Heterogeneous top top management management teams: teams: › managers managers with with aa wide wide variety variety of of backgrounds backgrounds › high high quality quality decisions decisions › innovation innovation and and strategic strategic change change › implementation may be more difficult 99 Position of Board of Directors Board Board of of Directors Directors Shareholders Shareholders Chief Executive Officer (CEO) VP-Human Res VP-Financial VP-Marketing VP-Legal Top Top ManageManageMent Ment Team Team 10 10 Corporate Governance Corporate Corporate governance governance is is concerned concerned with with the the balance balance between: between: •Economic Economic and and social social goals goals •Individual Individual goals goals of of managers managers and and firm firm goals goals The The board board of of directors directors typically: typically: •Protects Protects interests interests of of shareholders shareholders and and other other stakeholders stakeholders •Hires, Hires, fires, fires, supervises supervises and and compensates compensates top top management management •Provides Provides advice advice to to top top management management •Approves Approves major major strategic strategic decisions decisions •Provides Provides important important links links to to other other firms firms through through board board interlocks interlocks and and associations associations with with other other companies companies 11 11 Agency Theory •• Agents Agents managers managers with fiduciary duty to act act in in the the best best interests interests of of with aa fiduciary duty to owners owners •• Agency Agency problem problem managers managers maximize maximize their their own own self-interests self-interests at at the the expense expense of of shareholders shareholders •• High High salaries salaries of of CEOs CEOs •• Emphasis Emphasis on on short-term short-term performance performance at at expense expense of of future future investments investments •• Empire Empire building building for for status status •• CEO CEO duality duality 12 12 Strategic Direction Strategic Strategic direction direction is is defined defined by by aa firm’s firm’s vision vision of of where where itit is is heading, heading, the the businesses businesses in in which which itit is is involved involved and and how how itit serves serves its its stakeholders stakeholders Influences Influences on on strategic strategic direction direction •• Internal Internal stakeholders stakeholders –– CEO CEO and and top top management management team, team, managers, managers, employees employees •• External External stakeholders stakeholders –– especially especially customers, customers, suppliers, suppliers, competitors competitors and and communities communities •• Broad Broad environment environment –– sociocultural, sociocultural, technological, technological, economic, economic, and and political/legal political/legal forces forces •• History History and and inertia inertia –– past past successes successes and and failures, failures, founder’s founder’s vision vision and and values values 13 13 Mission and Vision Mission Mission –– what what the the organization organization is is Vision Vision –– what what the the organization organization wants wants to to become become Frequently Frequently aa vision vision is is incorporated incorporated into into the the mission mission statement, statement, as as illustrated illustrated in in this this example: example: ““Our Our mission mission is to be the world’s world’s premier premier consumer consumer products products company company focused focused on on convenient convenient foods foods and and beverages beverages We We seek seek to to produce produce financial financial rewards rewards to to investors investors as as we we provide provide opportunities opportunities for for growth growth and and enrichment enrichment to to our our employees, employees, our our business business partners partners and and the the communities communities in in which which we operate And And in in everything everything we we do, do, we we strive strive for for honesty, honesty, fairness fairness and and integrity integrity ” ” (Pepsico) (Pepsico) Note Note also also that that this this mission mission statement statement incorporates incorporates important important values values (honesty (honesty ,, fairness fairness and and integrity) integrity) 14 14 Business Definition • What What is is our our product product or or service? service? • Who Who are are our our customers? customers? (markets (markets and and distribution distribution channels) channels) • What What do we we do for for them them or or provide provide for for them? them? (functions (functions served served by by our our products products or or services) services) • How How do we we produce produce the the service service or or do it? it? (What (What are are our our resource resource conversion conversion processes, processes, technologies) technologies) 15 15 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 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 16 16 SOCIAL RESPONSIBILITY • Economic responsibilities • Legal responsibilities • Moral obligations (consistent with societal values) • Discretionary responsibilities (philanthropy) 17 17 SUSTAINABLE DEVELOPMENT • 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 18 18 ... for for status status •• CEO CEO duality duality 12 12 Strategic Direction Strategic Strategic direction direction is is defined defined by by aa firm’s firm’s vision vision of of where where itit... values and • the the components components of of social social responsibility responsibility and and sustainable sustainable development development 22 Strategic Strategic Management Management... External and Internal Analysis Strategic Direction Strategy Formulation (corporate and business level) Strategy Implementation and Control Strategic Restructuring 33 Traditional View of Leadership