©1999 South-Western College Publishing Chapter 12 Strategic Leadership Michael A. Hitt R. Duane Ireland Robert E. Hoskisson ©1999 South-Western College Publishing 1

The Strategic Management Process Strategy Formulation Chapter 2 The Strategic Management Process External Competitiveness Strategic Inputs Environment Strategic Intent Strategic Mission Chapter 3 Internal Environment Strategy Formulation Strategy Implementation Chapter 4 Chapter 5 Chapter 6 Chapter 10 Chapter 11 Business-Level Competitive Corporate-Level Corporate Structure Strategy Dynamics Strategy Governance & Control Strategic Actions Chapter 7 Chapter 8 Chapter 9 Chapter 12 Chapter 13 Acquisitions & International Cooperative Strategic Entrepreneurship & Innovation Restructuring Strategy Strategies Leadership Strategic Outcomes Strategic Competitiveness Above Average Feedback Returns 2

Strategic Leadership Strategic Leadership involves: The ability to anticipate, envision, maintain flexibility and empower others to create strategic change Multi-functional work that involves working through others Consideration of the entire enterprise rather than just a subunit Requires a Managerial frame of reference 7

Effective Strategic Leadership shapes the development of Strategic Intent Strategic Mission and influence Successful Strategic Actions Formulation of Strategies Implementation of Strategies 11

Managerial Discretion External Environment Factors which affect... Industry Structure Rate of market growth # and type of competitors Political/Legal constraints Managerial Discretion Organizational Characteristics Product differentiation Size and age Culture Resource availability Employee interaction Characteristics of the Manager Tolerance for ambiguity Commitment to the firm Interpersonal skills Aspiration level Self-confidence 15

Top Management Teams Top management teams are comprised of the key managers who are responsible for formulating and implementing the organization’s strategies A heterogeneous top management team with varied expertise and knowledge can draw on multiple perspectives when evaluating alternative strategies and building consensus A top management team must also be able to function effectively as a team in order to implement strategies. A heterogeneous team makes this more difficult. 18

Strategic Leadership Chief Executive Officers can gain so much power that they are virtually independent of oversight by the Board of Directors This is especially true when the CEO is also Chairman of the Board of Directors CEOs of long tenure can also wield substantial power The most effective forms of governance share power and influence among the CEO and Board of Directors 19

Managerial Labor Markets The internal labor market is comprised of the career path alternatives available to a firm’s managers Selecting internal candidates for management positions helps to build on valuable firm-specific knowledge The external labor market includes the collection of career opportunities for managers outside their firm Selecting an outsider often brings fresh insights and may energize the firm with innovative new ideas 21

Stable Strategy with Innovation Strategic Change Effects of CEO Succession and Top Management Team Composition on Strategy Managerial Labor Market: CEO Succession Internal CEO Succession External CEO Succession Ambiguous: Possible change in Top Management Team and Strategy Stable Strategy Homogeneous Top Management Team Composition Stable Strategy with Innovation Strategic Change Heterogeneous 27

Effective Strategic Leadership Exercise of Effective Leadership Determining Strategic Direction Effective Strategic Leadership Developing a long-term vision of the firm’s Strategic Intent 28

Effective Strategic Leadership Exercise of Effective Leadership Determining Strategic Direction Effective Strategic Leadership Exploiting & Maintaining Core Competencies Leaders must ensure that the firm’s core competencies are emphasized in strategic implementation efforts 29

Effective Strategic Leadership Exercise of Effective Leadership Determining Strategic Direction Effective Strategic Leadership Exploiting & Maintaining Core Competencies Developing Human Capital No strategy can be effective unless the firm is able to develop and retain good people to carry it out 30

Effective Strategic Leadership Exercise of Effective Leadership Determining Strategic Direction Effective Strategic Leadership Exploiting & Maintaining Core Competencies Developing Human Capital Sustaining an Effective Organizational Culture Leaders play a critical role in shaping and reinforcing the firm’s culture 31

Changing Culture and Reengineering The benefits of Business Reengineering are maximized when employees believe that: Every job in the company is essential and important All employees must create value through their work Constant learning is a vital part of every person’s job Teamwork is essential to implementation success Problems are solved only when teams accept the responsibility for the solution 36

Effective Strategic Leadership Exercise of Effective Leadership Determining Strategic Direction Effective Strategic Leadership Exploiting & Maintaining Core Competencies Developing Human Capital Sustaining an Effective Organizational Culture Leaders set the tone for creating an environment of mutual respect, honesty and ethical practices among employees Emphasizing Ethical Practices 37

Effective Strategic Leadership Exercise of Effective Leadership Determining Strategic Direction Effective Strategic Leadership Exploiting & Maintaining Core Competencies Developing Human Capital Sustaining an Effective Organizational Culture Controls set the parameters for strategic implementation and for taking corrective action Emphasizing Ethical Practices Establishing Balanced Organizational Controls 38