Strategic Leadership

Strategic Leadership Week 11

Strategic Leadership Involves • The ability to anticipate, envision, maintain flexibility and empower others in order to create strategic change • Multi-functional work that entails working through others • Consideration of the entire enterprise rather than just a subunit • A managerial frame of reference

Strategic Intent Strategic Mission and influences Successful Strategic Actions Formulation of Strategies Implementation of Strategies Effective Strategic Leadership shapes the development of:

Managerial Mindset • The set of: • Assumptions • Premises • Accepted wisdom that frames a manager’s understanding of: • The firm • The industries in which it competes • Its core competencies

Managerial Mindset • A firms’ long term competitiveness depends on mangers’ willingness to continually challenge their managerial mindsets • Managers must have the ability to make courageous but pragmatic decisions

Managers – An Organisational Resource External Environment • Industry structure • Rate of market growth • No. & type of competitors • Political\legal constraints • Degree of product differentiation Organisation’s Characteristics • Size • Age • Culture • Resources • Employee interaction Managerial discretion Manager’s Characteristic • Tolerance for ambiguity • Commitment to firm’s strategic outcomes • Interpersonal skills • Aspirations • Self-confidence

Poppy King: Success as a Leader? • Poppy King was voted Young Australian of the Year in 1995 • A leading light in cosmetics (lipstick), she tried to expand into the USA and break into the lingerie industry • King borrowed capital and hired expensive staff, but the business failed: is this a failure of leadership or a near-success that, with luck, might have turned out well? • Compare Jeff Bezos at Amazon: he is a renowned success despite the company’s less-than-ideal returns … why the difference?

Top Management Teams • Top management teams comprise the key managers responsible for formulating and implementing the organisation’s strategies • A heterogeneous top management team with varied expertise and knowledge can draw on multiple perspectives when evaluating alternative strategies and building consensus • A top management team must be able to function effectively as a team so as to implement strategies but a heterogeneous team makes this more difficult

Strategic Leadership • CEOs can gain so much power that they are virtually independent of being overseen by the board of directors • The potential for lack of monitoring is greatest when the CEO is also chairman of the board of directors • Long tenure CEOs can wield substantial power • The most effective forms of governance share power and influence among the CEO and board of directors

Managerial Labour Markets • The internal labour market comprises the career-path alternatives available to a firm’s managers • Selecting internal candidates for management positions helps build on valuable firm-specific knowledge • The external labour market includes career opportunities for managers outside their firm • Selecting an outsider often brings fresh insights & may energise the firm with innovative ideas

Ambiguous: Possible change in Top Management Team & Strategy Stable Strategy Stable Strategy with Innovation Strategic Change Effects of CEO Succession and Top Management Team Composition on Strategy Internal CEO Succession External CEO Succession Homogeneous Top Management Team Composition Heterogeneous

Determining Strategic Direction Exploiting & Maintaining Core Competencies Developing Human Capital Sustaining an Effective Organizational Culture Emphasizing Ethical Practices Establishing Balanced Organisational Controls Effective Strategic Leadership

Determining Strategic Direction • Developing a long-term vision of the firm’s strategic intent • Looks at least 5 to 10 years ahead • Two parts: • A core ideology • An envisioned future • Charisma ?

Exploiting Core Competencies • Leaders must ensure that the firm’s core competencies are emphasised in strategic implementation efforts • In diversified related firms, core competencies are exploited effectively when they are developed and applied across different organisational units

Developing Human Capital • No strategy can be effective unless the firm is able to develop and retain good people to carry it out • People are perhaps the only source of sustainable competitive advantage • Must promote staff development • International experience • Inpatriation • Training & development programs

Sustaining Organisational Culture • Organisational culture is the set of: • Ideologies • Symbols and • Core values That are • shared throughout the firm • Influence the way the firm does business • Leaders play a critical role in shaping and reinforcing the firm’s culture

Entrepreneurial Orientation • AutonomyAllows employees to take actions free from organisational constraints • InnovationA firm’s tendency to engage in and support new ideas • Risk takingA willingness to accept risks in pursuit of marketplace opportunities • ProactivenessA firms ability to be a market leader • Competitive AggressivenessA firms propensity to take actions that allow it to outperform its competitors

Entrepreneurial Orientation • IBM handbook • ‘Remember if you don’t exceed your authority at least once a week you’re probably not doing your job’ • ‘Brainstorm with someone 10 years older an d someone 10 years younger’

Changing Culture and Re-engineering Re-engineering benefits are maximised when employees believe that: • Every job in the firm is essential & important • All employees must create value through their work • Constant learning is a vital part of every job • Teamwork is essential to implementation success • Problems are solved only when teams accept responsibility for the solution

Changing Culture and Re-engineering To succeed, it requires: • Effective communication • Effective problem solving • Selection of the right people • Effective performance appraisals • Appropriate reward systems • Executive support • Support of middle level managers • Outside catalysts ?

BHP Sustaining an Organisation’s Culture • For generations, BHP (now BHP/Billiton) has had an aggressive ‘blokey’ culture, which was suitable for old-style mining but not for environmentally friendly activity and for dealings with Indigenous peoples • The process of culture-change started in the late 1990s and continues • The process has had little obvious success, as the existing culture is entrenched

Emphasising Ethical Practices • Leaders set the tone for creating an environment of mutual respect, honesty and ethical practices among employees • They must avoid managerial opportunism • Ethical organisations attract loyal stakeholders

Emphasising Ethical Practices • Establish code of conduct • Revise and update code of conduct • Disseminate code to all stakeholders • Implement & monitor ethical practices • Establish explicit reward systems for ethical conduct • Create a work environment where all people are treated with dignity

Establishing Organisational Controls • Controls set the parameters for strategic implementation and for taking corrective action • Strategic leaders balance strategic & financial controls • Strategic controls focus on content not outcome of actions • Diversified firms have trouble balancing the 2 controls

Establishing Organisational Controls • Strategic controls: • Help leaders build & maintain credibility • Demonstrate the value of strategies to stakeholders • Promote & support strategic change • Restructuring can refocus the firm on its core business and allow top managers to concentrate on strategy • Effective strategic controls are often integrated with autonomy for business units

Telstra Developing Human Capital and Downsizing • Is downsizing a loss of knowledge that outweighs the savings? • Telstra CEO Ziggy Switowski emphasised savings: ‘Let me urge you onto greater efforts … The head count progress is temporarily slowing … we have no room for forgiveness or negotiation re. this …’ • Is this good leadership?

Vicarious Liability

Vicarious Liability • DefinitionThe law holds a person liable for the wrongs of another even though the person has personally done no wrong • Examples • Employer\Employee

Rationale • EconomicThe employer is usually insured • SafetyProvides an incentive for employers to choose staff carefully and provide training • PolicyEmployers profit from their enterprise and therefore should be responsible for any loss it causes

Indemnities • A contract can contain a clause requiring the employee to indemnify the employer • Some jurisdictions have abolished this right (e.g. s27C Wrongs Act (SA)) • Employee is usually covered by employer’s insurance and insurer cannot recover against him (s66 Insurance Contracts Act)

Requirements • Commission of a tort • Not contract or other legal liabilities • By an employee • A Principal is not liable for acts of an Independent Contractor • Acting in the course of his employment • What was the employee employed to do. Employer will be liable for acts in that area or incidental to it or if the employer otherwise authorised the wrongful act.

Independent Contractors • Control test • Does the employer have the right to exercise control over what the employee does and how he does it? • Employer need only have power to control the employee’s work to the extent to which there is scope for such control

Independent Contractors • Control test (cont.) • Factors • Can the employer tell the employee what to do, how to do it, when to do it etc.? • Does the employer have the power of dismissal • Does the employer provide equipment • Does the employer pay holiday pay, sick leave, workers compensation?

Independent Contractors • Control test (cont.) • Integration testHow closely has the employee been integrated into the employer’s business

Independent Contractors • Multi-factor testA worker is likely to be an independent contractor and not an employee if he: • Owns and maintains his own equipment • Is paid by results • Takes the chance of profit\loss • Has the right to delegate work • Has the right to work for others • Is not entitle to sick pay, workers compensation, sick leave or superannuation • Does not have PAYE tax installments deducted

Acting in the Course of Employment • Wide meaning • Employer is liable even when the employee does something that is not part of his job • Employer is liable even when the employee commits an intentional or illegal act

Sexual Harassment & Discrimination • Employers are vicariously liable for sexual harassment and discrimination under both state and federal legislation. • The internet provides new opportunities for these crimes and employees should be aware.

Due Diligence. • Due diligence can be a defence • Reasonable steps were taken to avoid the illegal activity of an employee

Sexual Harrassment • The firm and management are legally liable for acts of unlawful harassment and discrimination committed by employees and agents in the course of work, unless it can be proved that all reasonable steps have been taken to prevent the unlawful conduct • Reasonable steps include both remedial and proactive steps • Individuals who have sexually or racially harassed another are held individually liable for their actions

All Reasonable Steps • Employer must demonstrate proactive steps taken, including: • existence of aclear, accessible and comprehensive policy that is applied to all staff • delivery of appropriate training to ensure all employees understand their rights and obligations regarding harassment, discrimination and respect for others • establishment of an effective and accessible complaints procedure, where all complaints are treated seriously, sensitively and confidentially • clear articulation by managers and administrators of what is expected of staff, and then to lead by example

Overview of Anti-Discrimination Law • Commonwealth • Racial Discrimination Act 1975 • Sex Discrimination Act 1984 • Disability Discrimination Act 1992 • Human Rights & Equal Opportunity Commission Act 1986 • State • Equal Opportunity Act

Commonwealth Legislation • Racial Discrimination Act 1975 • race discrimination • racial harassment • racial vilification • Sex Discrimination Act 1984 • sex discrimination • sexual harassment • Pregnancy • marital status • family responsibilities

Commonwealth Legislation • Disability Discrimination Act 1992 disability whether physical, mental, learning, disease or illness • Human Rights & Equal Opportunity Commission Act 1986 • national extraction • trade union activity • medical record • criminal record

State Legislation Equal Opportunity Act 1984 • sex • marital status • pregnancy • race • religious conviction • political conviction • impairment • age • family status • family responsibility • gender history • sexual orientation

Strategic Leadership