Topic 6

Strategic Leadership

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Learning Objectives
1 Define strategic leadership and describe the importance of top-level managers
2 Define top management teams and explain their effects on firm performance
3 Describe the managerial succession process using internal and external
managerial labour markets
4 Discuss the value of strategic leadership in determining the firm’s strategic
direction
5 describe the importance of strategic leaders in managing the firm’s resources,
with emphasis on exploiting and maintaining core competencies, human capital
and social capital
6 define organisational culture and explain what must be done to sustain an
effective culture
7 explain what strategic leaders can do to establish and emphasise ethical
practices
8 discuss the importance and use of organisational controls.

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Strategic leadership and the strategic management
process

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Strategic leadership and
style
Definition
 strategic leadership is the ability to anticipate,
envision, maintain flexibility and empower others to
create strategic change as necessary
 the crux of strategic leadership is the ability to
effectively influence human behaviour in uncertain
environments
 strategic leadership is multi-functional, complex
and requires an understanding of how to influence
human behaviour.
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Strategic leadership and style
(cont.)
 Strategic leaders should have the attributes
of a transformational leadership.
 Transformational leaders:
 develop and communicate a vision
 formulate a strategy to achieve the vision
 make the followers continuously strive for higher
levels of achievement
 have high emotional intelligence.

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The role of top level
managers
 Managers often use their discretion (or latitude
for action) when making strategic decisions.
 Top executives must be action oriented and
consider the entire enterprise rather than just
a sub-unit.
 The primary factors affecting the amount of
decision-making discretion include:
 external environmental sources
 characteristics of the organisation 6

 characteristics of the manager.

Factors affecting managerial
discretion

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Top management teams
 Thetop management team is composed of the
key managers who are responsible for
formulating and implementing the
organisation’s strategies.
a heterogeneous top management team is
composed of individuals with different functional
backgrounds, experience and education
 the more heterogeneous a top management team
is, the more capacity it has to provide effective
strategic leadership in formulating strategy.
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The CEO and top management
team power
 Higher performance is achieved when the board of
directors is more directly involved in shaping
strategic direction.
 A powerful CEO may:
 appoint sympathetic outside board members
 have inside board members who report to the CEO
 have significant control over the board’s actions.
 They may also hold the position of chairman of the
board. This is more common in the USA than it is
in Australia where – in listed companies – it is rare.
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Managerial succession
 Organisations select managers and strategic
leaders from two types of managerial labour
markets:
 internal managerial labour market
 external managerial labour market.

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Determining strategic
direction
 Determining strategic direction involves
specifying the image and character the firm
seeks to develop over time.
 Ideal long-term vision has two parts:
 core ideology
 envisioned future.

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Effectively managing
the firm’s resource portfolio

Strategic leaders should have the ability to

manage the firm’s portfolio of resources by
organising them into capabilities and structuring
the firm to use the capabilities to achieve
competitive advantage.

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Exploiting and maintaining core competencies

 Leaders must ensure that the firm capitalises

on its functional skills and develops core
competencies.
 Leadersmust oversee the effective
development and exploitation of core
competencies across the different functional
units.
 Core competencies can only be developed and
exploited by developing the capabilities of
human capital. 13
Developing human capital
 Human capital (HC) refers to the knowledge
and skills of a firm’s entire workforce. Building
human capital is vital to the effective execution
of strategic leadership.
 Firmsmust invest in their human capital to
formulate and implement strategies effectively.

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Sustaining an effective
organisational culture
 An organisational culture consists of a complex
set of ideologies, symbols and core values that
is shared throughout the firm and influences
the way it conducts business.
 Shaping the context within which the firm
formulates and implements its strategies
– that is, shaping the organisational culture –
is a central task of strategic leaders.

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Entrepreneurial mind-set
 Anorganisational culture often encourages (or
discourages) the pursuit of entrepreneurial
opportunities, especially in large firms.
 Havingan entrepreneurial orientation involves
encouraging personal characteristics such as:
 autonomy

 innovativeness

 risk taking
 proactiveness

 competitive aggressiveness. 16
Changing the organisational culture and
restructuring
 Changing a firm’s organisational culture is more
difficult than maintaining it. Effective strategic
leaders recognise when change in culture is
needed.
 Shaping and reinforcing culture requires:
 effective communication
 problem-solving skills
 selection of the right people
 effective performance appraisals
 appropriate reward systems. 17
Establishing balanced
organisational controls

 Controls are an important part of strategy

implementation processes. They are formal and
informal information-based procedures used by
managers to maintain or change patterns in
organisational activities.
 Successful strategic leaders balance strategic
control and financial control.
 Controls help strategic leaders to:
 build credibility and demonstrate the value of
strategies to the firm’s stakeholders
 promote and support strategic change.
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Establishing balanced
organisational controls (cont.)
 The balanced scorecard
 the balanced scorecard is a framework used to
verify that the firm has established both strategic
and financial controls to assess its performance.
 it prevents an over-emphasis on financial controls
at the expense of strategic controls.
 the four perspectives of the balanced scorecard:
financial
customer
internal business processes
learning and growth. 19
Strategic controls and financial controls in a
balanced scorecard framework
• Cash flow

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THE END

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