Chapter 10 STRATEGIC LEADERSHIP: LEADING AND GOVERNING Copyright ©2011 Taylor & Francis Group, an informa business

Objectives… Strategic Leadership The Basics of Leadership Casting a Vision Communicating & Motivating Catalyzing Innovation & Change Driving for Results Adding Value

Objectives… Corporate Governance: Public & Private Ownership Agency Problems Governing the Board The Value of Good Governance

Strategic Leadership What did Hugh McColl contribute to the formation and growth of BoA? What is the connection between leadership and strategic management?

The Basics of Leadership Leadership is generally defined as influencing others towards the achievement of a common goal. By implication, leaders are the individuals who exercise that influence, setting goals and directing others towards their attainment.

Casting a Vision Coca-Cola follows a simple mission, “to refresh the world.” What does this mean in terms of strategy and action? How can it serve to motivate and guide?

Casting a Vision Anyone can articulate a vision: Simply writing down a statement about the purpose of the firm is no guarantee of success. For leadership to have its desired effect, this vision must activate and energize the efforts of the organization and its various stakeholders. It must tap into the basic needs of the customers and into unseen opportunities in the environment.

Communicating and Motivating Even the best vision is worth little until it is connected to the organization. Leader-Member Exchange (LMX) is the study of how leaders engage and motivate the support of their followers. Most of the tangible effects of leadership are transmitted through the actions of the immediate followers.

Catalyzing Innovation and Change Innovation and change are essential to strategic success. Without innovation, every firm will eventually stagnate and drift out of the mainstream of the market. Without change, every capability will eventually grow calcified and obsolete, becoming irrelevant to customers and competitors and losing all competitive advantage. Thus, innovation and change are keys to long term success and key imperatives of any successful strategy.

Catalyzing Innovation and Change What are some examples of innovation and change in leading organizations? Who would have led these changes and who would have resisted them? What sort of reactions would investors have to strategies promoting innovation and change? Why might an investor be cautious and concerned?

Driving for Results Leadership drives for success, both now and into the future. A strong competitive advantage and strong organizational performance are the aggregated outcomes of many individual instances of good decision making, where value is created for individual customers and where lessons about the purpose, commitment, and values of the firm are taught and learned.

Driving for Results Linking all of those discrete episodes together and connecting them to the overall mission and strategy of the firm is the job of leadership. Phillip Selznick (1957) described this as the process of institutionalization.

Adding Value Leadership and strategy both are marked by the value they add, over and above what is obvious and available to everyone else. That value can and should be quantified and evaluated.

Adding Value Compare the Tobin’s q value of various automobile companies, like GM, Toyota, Ford, Volkswagen, Hyundai, and Nissan. What can this tell us about the quality of these firms’ strategy and leadership?

Corporate Governance Governance refers collectively to the processes, structures, and systems by which firms are governed.

Public and Private Ownership What is the distinction between publicly held and privately held firms? How is the corporate governance impacted by this distinction?

Agency Problems The issue of greatest concern in the governance of publically held firms is the separation of ownership and control. The managers control the firms but frequently bear few risks of ownership. As a result, their orientations can be quite different, which creates the potential for moral hazard.

Governing the Board The board has the ability to influence the firm, hence the seats on the board are often coveted. Maintaining the independence of the board can be a challenge. This is especially true when the CEO is also the board chair, a condition known as duality. What are the arguments for and against CEO duality?

The Value of Good Governance Governance should be seen as a means to an end, rather than as an end to itself. Corporate governance is a highly specialized area, with its own vocabulary and issues; yet it is of key importance to strategic management. Good governance is a necessary, but not sufficient, condition for sustained competitive advantage and for strong performance.

Governance, Value and Strategic Management Good governance creates conditions in which competitive advantage can grow, but by itself it cannot overcome: A highly competitive environment A poorly designed product A poorly marketed service A resource base that is outdated and easily imitated