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The second in organizational is culture and organizational performance.

This cultural value

can enhance the performance of an organization if they are consistent with the types of

processes needed to accomplish the mission and adapt to internal and external challenges

(Gordon & DiTomaso, 1992; Kotter & Heskett, 1992). For example, shared values such as

flexibility, creativity, and entrepreneurial initiative can facilitate innovation and

organizational learning (Baer & Frese, 2003).

The third in organizational is leader influence on culture. Leaders can influence the culture of

an organization in a variety of ways, and the effects are stronger when the different

approaches are consistent with each other. One form of leader influence on the organizational

culture is the use of ideological appeals and repeated articulation of an inspiring vision for the

organization or subunit. Leaders communicate their values when they make statements about

values and objectives that are important and formulate long‐term strategies and plans for

attaining them. Another approach for influencing culture involves the use of cultural forms

such as symbols, slogans, rituals, and ceremonies (Trice & Beyer, 1993). A third way for

leaders to influence culture is creation or modification of formal programs, systems,

organization structure, and facilities.

Besides that, the fourth in organizational culture is difficulty of culture change. In general, it

is much more difficult for leaders to change culture in a mature organization than to create it

in a new organization. One reason is that many of the underlying beliefs and assumptions

shared by people in an organization are implicit and unconscious. Cultural assumptions are

also difficult to change when they justify the past and are a matter of pride. Moreover,

cultural values influence the selection of leaders and the role expectations for them. In a
mature, relatively prosperous organization, culture influences leaders more than leaders

influence culture.

Research on Effects of Strategic Leadership

The effects of CEO leadership on company performance have been examined in research

with different methods. Results will be reviewed for succession studies, intensive case

studies, and survey studies of CEO behavior. The first one in studies of CEO Succession that

research on the consequences of changing the chief executive of an organization is relevant

for understanding importance of strategic leadership. The research method in most succession

studies is an archival field study on CEOs for a sample of business corporations, but a few

succession studies have used coaches of professional sports teams. All data is from archival

records, and characteristics of the successors (e.g., internal vs. external) are related to changes

in objective measures of organizational performance in the years before and after succession

occurs (e.g., Grinyer, Mayes, & McKiernan, 1990). Reviews of the succession research

provide evidence that changes in the chief executive have important effects on the long‐term

performance of an organization (Giambatista et al., 2005; Kesner & Sebora, 1994).

The second we discuss in descriptive studies of CEO decisions and actions. Several types of

descriptive studies have been used to investigate the influence of CEOs on their

organizations. Many different sources of information can be used, including interviews,

questionnaires, company records, annual reports, and financial databases. Some researchers

also use information from secondary sources such as biographies, autobiographies, and

magazine articles about organizations and their leaders. Descriptive studies of chief

executives usually examine the types of decisions and actions that account for the success or

failure of an organization over a period of several years. One limitation of most descriptive

studies is the difficulty in getting accurate information about the behavior of chief executives
and their influence on organizational performance. Information provided by a current or

former CEO may be biased by a desire to present a favorable image. Few members of the

organization have an opportunity to directly observe most of a chief executive’s actions. The

people who are close to the CEO may be unwilling to discuss controversial decisions or

events in which they were involved, out of loyalty, fear for their own reputation, or because

of non‐disclosure agreements. Even when accurate information can be obtained, it may be

difficult to assess the influence of a single CEO. Many of a chief executive’s strategic

decisions and actions only indirectly affect the financial performance of a large company, and

the effects may not be clear until several years later.

The third in research on effects of strategic leadership is survey study on CEO leadership.

Charismatic or transformational leadership was correlated with a measure of organizational

effectiveness in some studies but not others. None of the studies included adequate measures

of performance determinants that explain how a CEO influences financial performance for a

large company. This attribution bias occurs when the CEO of a company known to have

strong financial performance is rated more charismatic or transformational than CEOs

forcompanies with weaker performance, despite no actual difference in their behavior. In one

study that attempted to control for this bias by including a measure of past performance, a

significant effect for CEO charismatic leadership was not found (Angle et al., 2006).

Evaluation of Research on Strategic Leadership

The research on leadership by chief executives of organizations shows that they can influence

organizational processes and outcomes, but this influence varies greatly depending on the

situation and the traits and skills of the leaders. The succession studies, descriptive studies,

and survey studies all have limitations, and more comprehensive research is needed to

accurately determine how chief executives can influence the financial performance of their
firms. The research should examine a much broader range of actions and decisions by chief

executives, including how they influence strategy, structure, programs, systems, and culture.

The research should include measures of other relevant mediating processes and performance

determinants in addition to member motivation, commitment, and cooperation. Finally, it is

essential to gather information about the influence of other top executives and leaders at

middle and lower levels in the organization.

Executive Teams

All organizations have a top management group that includes the CEO and other top

executives, but organizations differ greatly in the way this group operates. The traditional

approach is to have a clear hierarchy of authority with a CEO (usually the chairman of the

board, but sometimes the president of the organization), a chief operating officer (usually the

president of the organization), and several subordinate executives (e.g., vice presidents) who

head various subunits of the organization. This structure is still prominent, but an

increasingly popular alternative is to share power within the top management team (Ancona

& Nadler, 1989). Executives in the team collectively assume the responsibilities of the chief

operating officer in managing the internal operations of the organization, and they assist the

CEO in formulating strategy.

Potential Advantages

Executive teams offer a number of potential advantages for an organization (Ancona &

Nadler, 1989; Bradford & Cohen, 1984; Eisenstat & Cohen, 1990; Hambrick, 1987; Nadler,

1998). The members often have relevant skills and knowledge that the CEO lacks and can
compensate for weaknesses in the skills of the CEO. Important tasks are less likely to be

neglected if several people are available to share the burden of leadership. A recent study

found that when the CEO allowed other members of a top executive team to influence a

strategic decision, the decision quality was better, the decision was perceived as more fair,

team members were more committed to implement the decision, their trust in the leader

increased, and they identified more with the team (Korsgaard, Schweiger, & Sapienze, 1995).

Facilitating Conditions

The potential advantages of having an executive team depend in part on the situation, and

they are especially important in a complex, rapidly changing environment that places many

external demands on the CEO (Ancona & Nadler, 1989; Edmondson et al., 2003). Growing

turbulence in the environment due to rapid technological changes and increased global

competition has made the responsibility for developing successful strategy more difficult for

many organizations. Teams are also more important when the organization has diverse but

highly interdependent business units that require close coordination across units. In an

organization with several diverse business units, a single leader is unlikely to have the broad

expertise necessary to direct and coordinate the activities of these units. The quality of the

strategic decisions made by a team is likely to be better if members have a diverse

backgrounds and perspectives and their knowledge and skills are relevant for understanding
how the organization can adapt in a dynamic, uncertain environment (Bantel & Jackson,

1989; Cannella, Park, & Lee, 2008; Murray, 1989).

Leadership of Executive Teams

Effective leadership is more likely if the CEO has relevant values, traits, and skills. For

example, a comparative case study of 17 CEOs (e.g., Peterson, Smith, Martorana, & Owens,
2003) found that CEO personality was related to the top management team characteristics

(optimism, cohesiveness, flexibility, and moderate risk taking), which were related in turn to

a measure of financial performance. Executive teams are more likely to be successful when

the CEO selects team members with relevant skills and experience, clearly defines objectives

consistent with shared values, gives the team considerable discretion but clearly specifies the

limits of team authority in relation to CEO authority, helps the team establish norms that will

facilitate group processes, facilitates learning of skills in working together effectively, and

encourages openness and mutual trust among team members. The CEO should avoid actions

that encourage competition or distrust, such as overtly making comparative evaluations

among team members and meeting with individual executives to deal with issues that should

be addressed by the entire team. It is also essential for the CEO to help the team avoid

process problems that can prevent them from making good decisions. If the CEO dominates

decisions, the potential benefits of diverse members with relevant knowledge may not be

realized. The quality of a strategic decision is likely to be better if individuals with the most

expertise for that type of decision have ample influence over it. It is also important to make

decisions in a timely way. The CEO should seek consensus among the executives who would

be the most affected by a decision, rather than prolonging discussion in an effort to achieve

consensus among everyone.

Example of a Study on Executive Teams

Eisenhardt (1989) conducted a study of eight minicomputer firms to investigate how the

speed and quality of strategic decisions were affected by the decision processes in these

firms. Interviews were conducted with members of the executive team in each company to

learn about the process used for important decisions, including when and how they were
made. Questionnaires, company documents, and industry reports were used to obtain

additional information about decision processes and company performance. The study found

that strategic decisions were both faster and better when the executive team conducted a

simultaneous evaluation of several alternatives rather than using the common “satisficing”

procedure of examining alternatives sequentially until a satisfactory one is found.

Emerging Conceptions of Organizational Leadership

Some different ways of conceptualizing leadership have emerged in recent years, and they are

eliciting interest among scholars who believe that the currently popular theories are too

limited. Examples include shared and distributed leadership, relational leadership and social

networks, and emergent processes in complexity theory. These approaches are still evolving,

and as yet there is little conclusive research on them. Each approach will be described briefly.

Shared and Distributed Leadership

The theory and research on leadership has long recognized that effective leaders empower

others to participate in the process of interpreting events, solving problems, and making

decisions (Argyris, 1964; Likert, 1967). In most of these approaches, the focus is on the

process by which focal leaders encourage and enable others to share responsibility for

leadership functions.

Relational Leadership

Most theory and research on leadership views it as an influence process and focuses on the

actions of people designated as leaders. Relationships are acknowledged to be important in


much of the leadership literature, but in “traditional” approaches the focus is on how an

individual leader can develop and maintain cooperative relationships. An alternative view of

leadership is to describe it as part of the evolving social order that results from interactions,

exchanges, and influence processes among many people in an organization.

Complexity Theory of Leadership

To accurately describe effective leadership in organizations requires theories that are more

complex than most of the earlier ones. Distributed leadership, relational dynamics, and

emergent processes are not adequately described in the hierarchical leadership theories that

focus on the influence of a chief executive or the top management team. Complexity theory

involves interacting units that are dynamic (changing) and adaptive, and the complex pattern

of behaviors and structures that emerge are usually unique and difficult to predict from a

description of the involved units (Marion & Uhl‐Bien, 2001).

Two Key Responsibilities for Top Executives

Two key functions for top executives in business organizations are to monitor the external

environment and formulate a competitive strategy. External monitoring is needed to detect

threats and opportunities for the organization, and competitive strategy guides the

organization’s response to threats and opportunities.


External Monitoring

External monitoring (also called “environmental scanning”) provides the information needed

for strategic planning and crisis management. Grinyer et al. (1990) studied 28 British

companies that experienced a sharp improvement in performance and a matched sample of

firms with only average performance; the top management of the high‐performing companies

did more external monitoring (e.g., environmental scanning, consultation with key customers)

and were quicker to recognize and exploit opportunities. The amount of change and

turbulence in the environment will determine how much external monitoring is necessary.