Strategic Leadership

1. 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 sub-unit • a managerial frame of reference

2. Effective Strategic Leadership Strategic Intent Strategic Mission Successful Strategic Actions Strategic Leadership and the Strategic Management Process shapes the formulation of and influence

3. Strategic Competitiveness Above-Average Returns Formulation of Strategies Implementation of Strategies Successful Strategic Actions Strategic Leadership and the Strategic Management Process yields

4. External Environment Factors Affecting Managerial Discretion • External Environment • Industry structure • Rate of market growth • Number and type of competitors • Nature and degree of political/legal constraints • Degree to which products can be differentiated

5. External Environment Characteristics of the Organization Factors Affecting Managerial Discretion • Characteristics of the Organization • Size • Age • Culture • Availability of resources • Patterns of interaction among employees

6. External Environment Characteristics of the Organization Characteristics of the Manager Managerial Discretion Factors Affecting Managerial Discretion • Characteristics of the Manager • Tolerance for ambiguity • Commitment to the firm and its desired strategic outcomes • Interpersonal skills • Aspiration level • Degree of self-confidence

7. Determining strategic direction Exploiting and maintaining core competencies Establishing balanced organizational controls Effective Strategic Leadership Emphasizing ethical practice Developing human capital Sustaining an effective organizational culture Exercise of Effective Strategic Leadership

8. Exploiting and Maintaining Core Competencies • Core competencies are resources and capabilities that serve as a source of competitive advantage for a firm over its rivals • Strategic leaders must verify that the firm’s competencies are emphasized in strategy implementation efforts

9. Exploiting and Maintaining Core Competencies • In many large firms, and certainly in related-diversified ones, core competencies are exploited effectively when they are developed and applied across different organizational units • Core competencies cannot be developed or exploited effectively without developing the capabilities of human capital

10. Developing Human Capital • Human capital refers to the knowledge and skills of the firm’s entire workforce • Employees are viewed as a capital resource that requires investment • No strategy can be effective unless the firm is able to develop and retain good people to carry it out • The effective development and management of the firm’s human capital may be the primary determinant of a firm’s ability to formulate and implement strategies successfully

11. Sustaining an Effective Organizational Culture • An organizational 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 firm’s culture is a central task of effective strategic leadership

12. Sustaining an Effective Organizational Culture • An appropriate organizational culture encourages the development of an entrepreneurial orientation among employees and an ability to change the culture as necessary • Reengineering can facilitate this process

13. Sustaining an Effective Organizational Culture Changing Culture and Business 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

14. Sustaining an Effective Organizational Culture Changing Culture and Business Reengineering • Constant learning is a vital part of every person’s job • Teamwork is essential to successful implementation • Problems are solved only when teams accept the responsibility for the solution

15. Emphasizing Ethical Practices • Ethical practices increase the effectiveness of strategy implementation processes • Ethical companies encourage and enable people at all organizational levels to exercise ethical judgment

16. Emphasizing Ethical Practices • To properly influence employee judgment and behavior, ethical practices must shape the firm’s decision-making process and be an integral part of an organization’s culture • Leaders set the tone for creating an environment of mutual respect, honesty and ethical practices among employees

17. Strategy as a process of managing change 3 LAWS OF ORGANIZATIONAL SYSTEMS 1. Systems at rest tend to stay at rest. 2. Systems that stay at rest tend to decay (or at least become trouble). 3. Systems in trouble tend to get worse. The only way to combat 1-3 is to grow!

18. TYPICAL SEQUENCE AMONG INGREDIENTS OF SUCCESSFUL CHANGE Organization ENVIRONMENT Internal Problems Customers Competition Legislation Regulation Labor Force 1. NEEDS 3. Proposals 4. Adoptions 5. Implementation 2. IDEAS 6. Resources Suppliers Professional Associations Consultants Research Literature Internal Discoveries and Inventions

19. SPECIFIC FORCES AGAINST STRATEGIC CHANGE • Internal Forces • Sunk costs in land, building, plant and equipment. • Political issues and needs that cause people to resist change. • History of the firm will be repeated.(“But we’ve always done it this way!!”). • Poor information processing. • External Forces • Market forces that restrict movement, entry or exit. These can be either legal (anti-trust) or economic (economies of scale). • Legitimacy issues involving traditions, morespublic perceptions. • Complex or contradictory environmental information on which to base strategic decisions.

20. Determining Strategic Direction • Strategic direction means the development of a long-term vision of a firm’s strategic intent • A charismatic leader can help achieve strategic intent • It is important not to lose sight of the strengths of the organization when making changes required by a new strategic direction • Executives must structure the firm effectively to help achieve the vision

21. FUNCTIONS OF A CORPORATE MISSION STATEMENT • Ensure unanimity of purpose. • Motivating the use of the organization’s resources • As a basis for allocating organizational resources • Setting a general tone or climate • As a focal point for the organization’s identity • Aids in translating goals and objectives into a working • strategy • Specifies organizational purposes so they can be controlled.

22. Strategies Goals Mission Tactics The Great Links Objectives

23. The Mission of Southwest Airlines The Mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.

24. To Our Employees We are committed to provide our Employees a stable work environment with equal opportunity for learning and personal growth. Creativity and innovation are encouraged for improving the effectiveness of Southwest Airlines. Above all, Employees will be provided the same concern, respect, and caring attitude within the organization that they are expected to share externally with every Southwest Customer. January 1988