1. LEADERSHIP & DIRECTION SETTING
Strategic Management
LEADERSHIP & DIRECTION SETTING
Dr. Payne
(3)

2. Leadership
Leadership is the process of transforming organizations from what they are to what the leader would have them become.
This implies:
Dissatisfaction with the status quo
A vision of what should be done (the “content”)
A process for bringing about change (the “process”)

3. Leadership is Different than Management!
Leaders determine the direction, mission, values…the future! Leaders do the right things!
Managers follow direction, and do things right.
Leaders ensure management does things right through organizational design, cultural development, and developing a “learning” organization.

4. Leadership vs Management
Leadership & management are distinct, yet complementary systems of action
Effective leadership
produces useful change
Effective management controls complexity
effective leadership + effective management = effective organizations 3

5. Three Interdependent Activities of Leadership
Determining a Direction
Designing the Organization
Nurturing a Culture Dedicated to Excellence and Ethical Behavior
Integrate knowledge into a “vision” of what the organization could or should become.
“Leaders are change agents whose success is measured by how effectively they implement a strategic vision and mission.”

6. Strategic Direction Setting: Vision
Future Focused. Provides the “big picture” and clearly describes what your organization will be like in several years.
Directional. Serves as guide to organizational plans and strategies.
Specific. Clear and focused enough to shape decision-making.
Relevant and Purpose-Driven. Reflects the company’s response to the challenges of the day.
Values-Based. Implies the set of values that are required to support the organization.
Challenging. Inspires members of the organization to do great things and achieve a higher level of standards.
Unique and Memorable. Highlights what makes the organization different and why it matters.
Inspiring. Appealing and engages people to commit to a cause.

7. Examples: Strategic Visions
IKEA: To create a better every-day life for many people.
Disneyland: To be the happiest place on earth.
San Diego Zoo: To become a world leader at connecting people to wildlife and conservation.
Boy Scouts of America: To prepare every eligible youth in America to become a responsible, participating citizen and leader who is guided by the Scout Oath and Law.

8. Strategic Direction Setting: Mission
Mission statements
Purpose of the company
Basis of competition and competitive advantages
More specific than vision
Focused on the means by which the firm will compete
Establishes the scope of the business.

9. Definitions: Broad - Narrow Scope
Broad Definition
Beverages
Children’s products
Furniture
Global mail delivery
Travel & tourism
Narrow Definition
Soft drinks
Toys
Wrought iron lawn furniture
Overnight package delivery
Ship cruises in the Caribbean

10. Examples: Mission
FedEx: To produce superior financial returns for our shareholders as we serve our customers with the highest quality transportation, logistics, and e-commerce.
Amazon: To be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices.
Paypal: To build the Web’s most convenient, secure, cost-effective payment solution.

12. Strategic Direction Setting: Objectives
Strategic objectives
Operationalize the mission statement
Provide guidance on how the organization can fulfill or move toward the mission/vision.
More specific
Cover a more well-defined time frame
Company vision
Mission statements
Strategic objectives
NOTE: Strategic “goals” are often used synonymously with objectives, but are generally less specific.

13. Establishing Objectives
Follows Vision & Mission to more specifically establish direction and goals for the organization:
Represent commitment to achieve specific performance targets by a certain time.
Must be stated in quantifiable terms and contain a deadline for achievement.
Spell-out how much of what kind of performance by when.

14. Every company needs both strategic and financial objectives!
Types of Objectives Required
Financial Objectives
Strategic Objectives
Outcomes focused on improving a firm’s financial performance.
Outcomes focused on improving a firm’s competitiveness and its long-term business position.
Every company needs both strategic and financial objectives!

15. Examples: Financial Objectives
Increase sales growth 6 to 8 percent and accelerate core net earnings per share growth to 13 to 15 percent in each of the next five years (Procter & Gamble)
Generate Internet-related revenue of $1.5 billion. (Automation)
Increase the contribution of Banking Group earnings from investments, brokerage and insurance from 16 percent to 25 percent (Wells Fargo)
Cut corporate overhead costs by $30 million per year (Fortune brands)

16. Examples: Strategic (Non-financial) Objectives
Capitalize on e-commerce (Federal Express)
We want a majority of our customers,when surveyed, to say they consider Wells Fargo the best financial institution in the community (Wells Fargo)
We want to operate 6,000 stores by 2010—up from 3000 in the year 2000 (Walgreen’s)
Develop a smart card strategy that will help us play a key role in shaping online payments (American Express)
Reduce greenhouse gases by 10 percent (from a 1990 base) by 2010 (BP Amoco)

17. Strategic or Financial Objectives -Which Takes Precedence?
Pressures for better short-term financial performance become pronounced when
Firm is struggling financially
Resource commitments for new strategic initiatives may hurt bottom-line for several years
Proposed strategic moves are risky
A firm that consistently passes up opportunities to strengthen its long-term competitive position
Risks diluting its competitiveness
Risks losing momentum in its markets
Can hurt its ability to fend off rivals’ challenges

18. Short-Range and Long-Range Objectives
Short-Range objectives:
Targets to be achieved soon (~ 1 year)
Serve as stair steps for reaching long-range performance
Long-Range objectives
Targets to be achieved within 3 to 5 years
Prompt actions now that will permit reaching targeted long-range performance later

19. Objectives Are Needed at All Levels
Process is top-down, not bottom-up!
1. First, establish organization-wide objectives
2. Next, set business and product line objectives
3. Then, establish functional and departmental objectives
4. Individual objectives come last
Objective-setting needs to be more of a top-down than a bottom-up process in order to guide lower-level managers and organizational units toward outcomes that support the achievement of overall business and company objectives.

20. The Balanced Scorecard
Vision
& Strategy
CUSTOMER
“To achieve our vision, how should we appear to our customers?”
Objectives
Measures
Targets
Initiatives
FINANCIAL
“To succeed financially, how should we appear to our shareholders?”
INTERNAL BUSINESS PROCESSES
“To satisfy our shareholders and customers, what business processes must we excel at?”
INNOVATION AND LEARNING
“To achieve our vision, how will we sustain our ability to change and improve?”
Lagging
Hard
Leading
Soft

21. Applying the Balanced Scorecard