Chapter 12 Strategic Leadership by Executives Group members

Chapter 12 Strategic Leadership by Executives Group members: Aw Hoay Fatin Shafina Binti Mahadi Nurulain Binti Zakaria Tan Mei Yee

Abstract This chapter study about the importance of strategic leadership by executives and is supported by three types of research which are studies of CEO succession, case studies of strategic leaders and survey field studies on CEO behavior and firm performance. Executives need understand the constraint and take appropriate action to influence performance determinants such as efficiency and process reliability, human relations and resources and adaptation to the environment in order to reach organizational effectiveness. Besides single leadership by executive, shared leadership by an executive team are also likely to be effective. In addition, monitor the environment and formulate a good competitive strategy is important for the executive to achieve organizational effectiveness.

Efficiency and Process Reliability Adaptation to the Environment Human Resources and Relations Organizational Performance

Adaptation to the Environment Responding in appropriate ways Important when volatile and uncertain More likely to be successful with a relevant competitive strategy Can be enhanced

Efficiency and Process Reliability Efficiency = Minimize costs and avoid wasted effort and resources Important when offer lower price or financial crisis Process Reliability = Avoiding delays, errors, quality defects or accidents Important component for efficiency Improve by using extra resources to produce quality and standard product or services Improve when saving > cost

Human Resources and Relations Human capital = Quality of organization’s human resources Related to efficiency and adaptation Eg: Talented, dedicated employees often instrumental for the achievement of both efficiency and adaption

Leadership Behaviors WAYS TO INFLUENCE THE PERFORMANCE DETERMINANTS Decisions about Competitive Strategy Programs, Systems, and Structure

Leadership Behaviors Three general types Task oriented behaviors Change oriented behaviors Relations oriented behaviors Effectiveness is depends on particular situation Eg: Change oriented behaviors relevant in rapidly changing environment and used more by top executives

Programs, Systems, and Structure Implementing or modifying formal programs, management systems and aspect of formal structure An indirect leadership and is complementary with direct leadership More likely to accept or success if explain by, how will benefit, encourage to participate Can enhance or limit the leadership behavior Serve as substitutes for some types of direct behaviors

Decisions about Competitive Strategy Decisions about competitive strategy are important source of influence Primary focus on adaption but is difficult improves unless consistence changes are made in efficiency and human capital Required some modification of management program and may involve negotiation

Need for Flexible, Adaptive Leadership Focus on multiple performance determinants One cannot be improved without consistent changes in other Need to find a balance between priorities

Coordinating Leadership Across Levels and Subunits Decisions cant implemented successfully without support from all level leader Conflict and resistance will cause drop in performance Difficult to achieve cooperation and coordination across levels and subunits Can coordinate or minimize by have a relevant core ideology or increase involvement of different leader in strategic decisions making

Constraints on Executives CONSTRAINTS INTERNAL EXTERNAL

Constraints on Executives Internal Coalitions in the organizations �Bernard (2007) Agency theory & behavioral model Organization culture �Resistance to change

Constraints on Executives External Products & services, market External stakeholders Perceive of organization performance

Constraints on Executives Constraints and executive traits as Joint Determinants Interaction Situation and different traits of leader

Constraints on Executives • Constraints and executive traits as Joint Determinants External Constraints Internal Constraints Leader’s Behavior Leader’s Personality & Skills

Constraints on Executives Situation and different traits of leader ▪CEO=figurehead ▪more freedom ▪consevative, risk -adverse, compliant ▪ambitous, dynamic, innovative EAST CONSTRAINTS SEVERE CONSTR

Conditions Affecting the Need for Strategic Leadership Periods of Reorientation Periods of Convergence Influence of Top Management

Conditions Affecting the Need for Strategic Leadership Role of top management Convergence Periods Reorientation Periods TIME

Conditions Affecting the Need for Strategic Leadership Periods of Reorientation Intense activity due to major changes in organization Whole organization will be affected Concurrent changes in interrelated aspects of strategy, structure, processes and people are required Resistances are unavoidable Guidance and coordination is necessary

Conditions Affecting the Need for Strategic Leadership Periods of Convergence Relatively longer periods compared to reorientation Small incremental changes occur for better adaption to environment Pros & cons

Conditions Affecting the Need for Strategic Leadership Influence of Top Management Tushman & Romanelli (1985) Forces for Top management stability Mechanism for mediating change Less Potential impact Convergence Periods Reorientation Periods Larger Potential impact

Conditions Affecting the Need for Strategic Leadership Influence of Top Management When strategy is already not relevant, executive often try to improve the existing strategy rather than introduce a new one. Major changes are hard to implement since support are difficult to get. Majority of reorientation are initiated by new leadership

Political Power and Strategic Leadership Power of coalitions also influence change Hickson et al. (1971) stated more power goes to subunits with distinct expertise who can solve critical problems Salancik & Pfeffer (1977) highlighted that political tactics is used to increase or protect their power even after their expertise is no longer critical

Executive Tenure and Strategic Leadership Hambrick & Fukutomi life cycle model Greatly Influenced By Implicit Mandate Experiment with different approaches Narrow minded and inflexible

RESEARCH ON EFFECT OF CEO LEADERSHIP Succession study Case study Survey field study

STUDIES OF CEO SUCCESSION “succession studies” attempt to determine how a change in top leadership affects indicators of organizational performances. Problem: Erroneously interpreted result. �There is three failure: �To correct org size �To correct dollar-denominated �To allow enough time for new leaders to influences quantitative performances outcomes. Researcher do not take account the effects of CEO skill.

HOW TO SOLVE THE PROBLEM? Need to consider internal and external constraints on a successor CEO. Company financial condition. Changing economic. Timing of succession and timing of the performances outcomes also important. Succession on the important of CEO have no conclusion because of the many methodological problem.

CASE STUDY OF STRATEGIC LEADERSHIP Study the influences of the CEO on the performances. Sources info : Interview, questionnaires, company record, annual report, financial database. Biographies, autobiographies, magazine article Case studies of chief executive: Examine type of decision and action that account for success or failure.

INTENSIVE CASE METHOD Involved analysis of the decision and action. Involved the chief executive of a large company in times of uncertainty. Provide alternative way to explore the effect of CEO succession.

COMPARATIVE CASE To see similar pattern of strategic decision and behavior. To compare more or less successful CEOs in similar companies. Examine CEOs who initially successful but latter experiences failure

LIMITATION OF CASE STUDY Difficult to get accurate information Information given is biased Close with CEO. Fear of their reputation. Non-disclosed agreement Even when accurate info can be obtained, it maybe difficult to asses the influences of single CEO. Suggestion: Researchers make a systematic effort to gather the relevant information.

SURVEY FIELD STUDY CEO behavior and firm performances. Examines the relationship between CEO charismatic leadership and organizational performances. Data: v Questionnaire v Archival data. Subordinate were ask to rate the charismatic leadership of their boss.

EFFECTIVENESS is depend on: Correlated with corporate financial performances Environmental uncertainty Theories of transformational and charismatic leadership are focused primarily on the way leaders influences relations. PROBLEM: Do not explain a chief executive’s impact on other organizational-level determinant. Strategic leadership- “managing” rather than “leading”

STRATEGIC LEADERSHIP BY EXECUTIVE TEAMS. Potential advantages of executive teams: Better strategic decisions when members have relevant skills and knowledge that the CEO lacks. Members have relevant skills and knowledge that CEO lack. Decision made. (interest of the member/quality) Important task become easy (share burden) Communication and cooperative among executives from diff subunit is improved (meeting)

Depends on: Situation Important in Complex Rapidly changing environment that places many external demand on CEO. Teams member (diverse) Attitude, personality and skill of the CEO.

It is more difficult to develop mutual trust and cooperation when team members represent subunits with different objectives or members are competing to become the successor to current CEO.

Executive teams and organization effectiveness Emphasis on decision making Important element to ensure the effective of the decision-organization member Find out-by using simultaneous evaluation and related other strategic decision + consider about technical planning = effective of decision making

Two Key Responsibilities For Top Executive Responsible that usually important compare to lower-level leader Offer guideline to ensure that the responsibilities undertaken are effectively Monitoring the environmen t Developing competitive strategy

Monitoring the Environment External environment & identify threats and opportunities for org. provide information that need for strategic planning.

Guidelines Identify relevant information to gather Use multiple source of relevant information Learn what client and supplier need & want Learn about the product and activities of competitors Relate environmental information to strategic plan

Developing Competitive Strategy Compete effectively in the marketplace and remain profitable. Competitive strategy-different, lowcost, well-knowledge

Guidelines Determine long term objectives and priorities Assess current strengths and weaknesses Identify core competencies Evaluate the need for major change in strategy Identify promising strategies Evaluate the likely key outcomes of strategy Involves others executive in selecting strategy

The End

Reference Gary Yukl. (2010). Leadership in Organizations Seventh Edition. Selangor: Prentice Hall.