Chapter 2 Leading Strategically Through Effective Vision and Mission

1. Chapter 2Leading Strategically Through Effective Vision and Mission

4. Try to think of the worst leader you’ve ever had? Why were they so bad? • 2. Think of the best leader you ever worked for. Why were they so great? • CEO Exchange Xerox • http://www.youtube.com/watch?v=qZG7J98PX58&feature=related Print me a Stradivarius

5. OBJECTIVES Explain how strategic leadership is essential to strategy formulation and implementation 1 Understand the relationships among vision, mission, values and strategy 2 3 Understand the roles of vision and mission in deter-mining strategic purpose and strategic coherence 4 Identify a firm’s stakeholders and explain why such identification is critical to effective strategy formula-tion and implementation Explain how ethics and biases may affect strategic decision-making 5

6. STRATEGIC LEADERSHIP Leadership: Strategic leadership: The task of exerting influence on other people’s pursuit of goals in an organizational context Managing an overall enterprise and influencing key organizational out-comes, such as company wide performance, competitive superiority, innovation, strategic change, and survival

7. Interpersonal roles • Figure head • Leader • Liaison • Informational roles • Monitor • Disseminator • Spokesperson • Decision roles • Entrepreneur • Disturbance handler • Resource allocator • Negotiator EXECUTIVE ROLES Formal authority and status

8. LEVEL 5 LEADERS Capabilities Build greatness through combination of will and humility Level 5leaders Can lead a group to superior levels of performance Level 4 leaders Organize people & resources to accomplish predetermined objectives Level 3 leaders Work effectively with others as a member of a team to achieve group objectives Level 2 leaders Make individual contributions through talent and work ethic Level 1 leaders

9. TWO ATTRIBUTES OF LEVEL 5 LEADERS • Being someone • who is self-aware • who appreciates others’ skills • who prefers to share credit rather than hog it • who tends to shun public attention, • act with calm determination, and • exercise ambitions on the company’s behalf rather than one’s own • The ability to translate strategic intent into the resolve needed to pursue a strategy • and usually to make hard choices over a period of time Professional will Professional modesty/humility

10. WHAT DOES IT TAKE TO BE A CEO? An Ivy league MBA? Charisma? There is little consensuson whether personality or background matters more International management experience? Integrity

11. Personality differences A large amount of research has been done on personality or the psychological determinants of strategic leadership focusing specifically on: • Locus of control • Need for achievement • Tolerance for risk or ambiguity • Charisma and emotional intelligence Personality characteristics may be important; defining and isolating leadership abilities is difficult LEADERSHIP CHARACTERISTICS Background and demographic differences Differences in competence and action Background refers to factors such as: • Work experience • Education Demographic refers to factors such as: • Gender • Nationality • Race • Religion • Network ties The profile of leaders is changing (e.g., more diversity among top management teams) Companies are increasingly placing value on substantive work experience; looking beyond skin color, gender, and even the items on a resume. Evidence of being a strategic leader–someone who works not only to develop a plan, but also empower the organization to realize the vision behind it, are important indicators of leadership potential

12. DO YOU HAVE A LEADER PERSONALITY? Take the “Intolerance of Ambiguity” Survey For even ones: 7 becomes 1 6 becomes 2 5 becomes 3 4 stays 4 3 becomes 5 2 becomes 6 1 becomes 7

14. A simple statement or under-standing of what the firm willbe in the future. A statementof vision is forward looking and identifies the firm’s desiredlong-term status Vision A declaration of what a firm is and stands for – of its fundamental values and purpose Mission VISION AND MISSION Because it’s hard to execute a strategy if it can’t be described or understand, firms with clearly and widely understood vision and mission find it easier to make strategic decisions entailing difficult trade offs Weird Science - Learning To See

15. VISION, MISSION AND STRATEGY Strategy The central, integrated, externally-oriented concept of how the firm will achieve its objectives. Consists of 5 elements: arenas, vehicles, differentiators, staging, and economic logic Vision and Mission Strategic Goals and objectives • Fundamental purpose • Values • View of future • Specific targets • Measurable outcomes

16. VISION – USES OF AMBITION AND AMBIGUITY Sony’s vision in early 1950’s: “becoming the company that most changes the worldwide image of Japanese products as being of poor quality.” Vision statements • generally express long-term action horizons, • are ambitious and force the firm to stretch. • their ambiguity allows flexibility for changing strategy or implementation tactics CitiBank’s vision in 1915: “the most powerful, the most serviceable, the most far reaching world financial institution the world has ever seen.”

17. IBM will not be split up and its many parts will be even more closely coordinated. • IBM will reassert its identity as customers’ primary computing resource. • The company will be the dominant supplier of technology in the industry. • PowerPC, a new microprocessor design will be IBM’s centerpiece. Built into many future computers, it will run a wide range of standard industry software. It will steeply cut manufacturing costs. • Mainframes are no longer central to the strategy, but IBM will still make them, now with microprocessors. • IBM is its own worst enemy. Employees must waste fewer opportunities, minimize bureaucracy, and put the good of the company before their division’s. GERSTNER’S 1993 VISION

18. To crystallize and disseminate the firm’s strategy among employees • To provide a shared logic for the firm’s view of its internal and external environments and of its treatment of stakeholders • To galvanize concerted strategic action • To link strategy formulation to implementation by tying vision and mission to specific and measurable goals and objectives REASONS TO CRAFT CLEAR VISIONS AND MISSIONS

19. Arenas Strategic coherence is • The symmetrical co-alignment of the five elements of a firm’s strategy • The congruence of policies in functions (e.g., finance, production, marketing) with these elements • The overarching fit of various businesses under the corporate umbrella Economic logic Staging Vehicles Differentiators STRATEGY COHERENCE Congruence

20. PERFORMANCE METRICS Some financial and non-financial performance metrics Financial performance metrics Non-financial performance metrics • Return on sales • Return on assets • Return on equity • Sales per employee • Sales growth • Inventory turn • Accounts receivable turn • Debt ratio • Current ratio • Cost reduction • Customer retention • Customer satisfaction • Customer complaints • Employee turnover • Product returns • Product quality • Patents • New products released • Product development speed • Reputation • Web traffic

21. After identifying stakeholders ask • Have I identified any vulnerable points in either the strategy or its potential implementation? • Which groups are mobilized and active in promoting their interests? • Have I identified supporters and opponents of the strategy? • Which groups will benefit from successful execution of the strategy and which may be adversely affected? • Where are various groups located? Who belong to them, and who represents them? Steps in identifyingstakeholders • Determine influences on strategy formulation decisions • Determine the effects of strategic decisions on the stakeholder • Determine stake-holders power and influence over strategy execution decisions STAKEHOLDER ANALYSIS Stakeholders: Individuals or groups who have an interest in an organization’s ability to deliver intended results and maintain the viability of its products and services

22. BENEFITS OF USING STAKEHOLDER ANALYSIS • Can use the opinions of the most powerful stakeholders to shape your strategy and tactics at an early stage. • Gain support from powerful stakeholders to help win more resources. • Can ensure that stakeholders fully understand what you are doing and understand the benefits of your project. • Can anticipate what people’s reactions to your project may be and build actions into the plan that will win people’s support.

23. MAPPING STAKEHOLDER INFLUENCE AND IMPORTANCE Power of Stakeholder Effect onstakeholder Little/Nopower Moderatepower Significant power Unknown Unknown Little/Noeffect Moderateeffect Significant effect

24. New strategy –A new means to accomplish goals Implementation –Executing new strategy to realize goals ETHICS AND BIASES Have any potential biases clouded our decision-making process? Is the decisionethical? • Authority structures • Incentive systems • Role of corporate governance • Common illusions about ourselves (e.g., favorability optimism , control) • Escalating commitments • Self-serving fairness bias • Overconfidence bias • Ethnocentrism and stereotyping • Risk assessment

25. 1 Explain how strategic leadership is essential tostrategy formulation and implementation 2 Understand the relationships among vision, mission, values and strategy 3 Understand the roles of vision and mission in deter-mining strategic purpose and strategic coherence 4 Identify a firm’s stakeholders and explain why such identification is critical to effective strategy formulation and implementation 5 Explain how ethics and biases may affect strategic decision-making SUMMARY

26. Review Questions Why is strategic leadership important for effective strategy formulation and implementation? • Strategic leadership is concerned with the management of the overall enterprise through the various roles they fill (e.g. figurehead, leader liaison, monitor, disseminator, spokesperson, entrepreneur, disturbance handler, allocator of resources, and negotiator). How executives fill these roles has a large bearing on the effectiveness of the strategic management process

27. Review Questions How do the characteristics of strategic leadership differ between individuals and teams? Perhaps no one person can single-handedly manage a large complex organization. A team can have advantages over individuals because teams can divide responsibilities and because it can tap into a diverse portfolio of skills and capabilities. However, management teams can present their own unique problems…..

28. Review Questions What is a vision? A mission? A vision is a simple statement or understanding of what the firm will be in the future. A statement of vision is forward looking and anticipates the desired long-term status of the company. In contrast, a mission is a declaration of what a firm is and what it stands for—its fundamental values and purpose. Together, mission and vision statements describe the identity and work of a firm as well as the mental picture of where the firm is going.

29. Review Questions How does strategy differ from vision and mission? Vision and mission statements do not address how the company will achieve its objectives. Rather, they provide a directional and moral compass to guide decision-making and actions. Strategies are more concrete plans about how objectives will be achieved. Thus, vision and mission statements may seem a bit ambiguous, while a high quality strategy will provide more definitive direction.

30. Review Questions What is strategic coherence? Strategic coherence is the symmetrical co-alignment of • five elements of strategy • functional area policies • various businesses within the corporate umbrella The opposite of strategic coherence would be incoherence, or strategic fragmentation.

31. Review Questions Who are a firm's stakeholders? Why are they important? Stakeholders are individuals or groups who have a vested interest in the formulation and implementation of a firm’s strategy, and otherwise have some influence on firm performance. Externally these groups will include representative governmental bodies, community-based organizations, social and political action groups, trade unions and guilds, journalists, and academics. Internally these groups will include business units, employees, and managers. Since vision and mission are necessarily long-term in orientation, the identification of important stakeholder groups helps to understand which constituencies stand the most to gain or lose from their realization. Stakeholders can both complement and clash with the firm in its efforts to execute its strategy.

32. Review Questions What tools can you use to identify the impact of various stakeholders on the firm and the impact of the firm on various stakeholders? A stakeholder map, of course!! These stakeholders can then be analyzed to determine the importance and influence of each party.

33. Review Questions Why should there be required ethics courses for business students, but not physics majors? Is it fair to assume that business students are unethical? No, business students are not necessarily unethical. Ethics are so important because you will have a huge impact on your community and on society (unlike physics majors), and therefore cannot escape questions of ethics and social responsibility.