Copyright © 2012 Pearson Canada Inc. 0 Chapter 2 The Process of Strategic Leadership

Copyright © 2012 Pearson Canada Inc. Top Management Strategic Leadership Managing an overall enterprise and influencing key organizational outcomes. The top management team, typically led by the chief executive officer (CEO or president), is responsible for managing the strategy of the business. Failure to use this authority can lead to lack of direction and internal conflict. 1

Copyright © 2012 Pearson Canada Inc. Fit Condition in which all decisions made by management may support each other but at a minimum do not contradict each other. An implicit assumption of top management is that when various decisions “fit together,” the organization will perform better. The idea of fit has also been called alignment and coherence. Without fit, decisions contradict each other, causing confusion, ineffectiveness, and inefficiency. 2

Copyright © 2012 Pearson Canada Inc. Fit 3 Misfits A business always has a strategy because strategy is defined in terms of the decisions that management has made about the arena, differentiators, economic logic, staging, and vehicles. However, the strategy might not be a good one because it does not fit with the environment or because decisions about the resources and organization of the business do not fit with the strategy. Misfits that are strategically important will cause poor performance of the business now or in future.

Copyright © 2012 Pearson Canada Inc. Processes for Leading Three leadership approaches that top management can use to develop and administer strategy: 1. The Planned Process 2. The Visioned Process 3. The Discovered Process 4

Copyright © 2012 Pearson Canada Inc. Processes for Leading THE PLANNED PROCESS With the planned process, top management assumes that it can determine through keen analysis what will happen in the future and then design a strategy that will produce the best performance. It leads management in drawing up a plan of action that puts the strategy in place by moving the business from where it is in terms of resources and organization to where it needs to be. 5

Copyright © 2012 Pearson Canada Inc. Processes for Leading Value of the Planned Process The planned process implies relatively high certainty about what needs to be done so it works well in static and stable situations such as those found in mature industries. It can also be called the designed approach because management has crafted a strategic approach to the situation facing the business. Keen analysis is able to identify where problems lie and what actions need to be taken. 6

Copyright © 2012 Pearson Canada Inc. Processes for Leading Weaknesses of the Planned Process The planned/ designed process assumes that the information needed is available for analysis and can be used to produce a rational decision. But the necessary tools, concepts, and information are not always available to do complete analysis. And it gets worse when one recognizes that uncertainty, complexity, and ambiguity are common when dealing with strategic situations. 7

Copyright © 2012 Pearson Canada Inc. Processes for Leading THE VISIONED PROCESS A vision of where strategy will be taking the company is provided by top management. In practice, the vision statement ranges from a word, to a statement three pages long, or even a picture. Better statements are usually simple and brief, thus easily understood and remembered. 8

Copyright © 2012 Pearson Canada Inc. Processes for Leading Value of the Visioned Process The visioned process provides a strategic intent that calls for managers to set ambitious goals and then to develop the resources and capabilities needed to achieve those goals. The tension between where the business wants to be and where it is both energizes people and encourages their creativity. 9

Copyright © 2012 Pearson Canada Inc. Processes for Leading Weaknesses of the Visioned Process A weakness to this approach is that the vision is an abstraction that may not be concrete enough to be useful by itself. Translating it into behaviours for workers at all levels of the organization is hard work. Furthermore, even an abstract vision is not always possible when the future is unknowable. But a concrete vision can be a problem when management gets caught in the “tunnel vision trap.” 10

Copyright © 2012 Pearson Canada Inc. Processes for Leading THE DISCOVERED PROCESS People throughout the company have generated strategic ideas from which top management has selected some to further. The discovered process assumes that the environment is too complex and/ or rapidly changing for consensus about the strategy to be reached. When this is the case, strategy needs to emerge through an iterative and evolutionary process that is continually redefining the strategy. 11

Copyright © 2012 Pearson Canada Inc. Processes for Leading The Value of the Discovered Process The discovered process produces a business strategy that evolves over time as the business adapts to changes in society, technology, and politics. The business that adapts quickly is able to “beat” other businesses to opportunities as they appear. 12

Copyright © 2012 Pearson Canada Inc. Processes for Leading Weaknesses of the Discovered Process Innovation can be stymied in at least four different ways: First, a strong hierarchy working with an elaborate and bureaucratic (top-down) control system gives managers greater ability to block ideas and innovations that do not fit with their own views. Second, a strong organizational culture that prefers stability can limit innovation by challenging new ideas and demeaning them based on previous experience. 13

Copyright © 2012 Pearson Canada Inc. Processes for Leading Third, individuals in the organization may not have the necessary mindset for innovation. Fourth, championing an idea requires individuals with certain talents. They have to overcome cultural inertia and political barriers by inspiring others to support their new ideas. 14

Copyright © 2012 Pearson Canada Inc. The Human Influence on Strategic Leadership Processes The three major aspects of human behaviour affecting the processes are: 1. Cognitive biases 2. Power and politics 3. Values and ethics 15