strategic leadership

Title

Strategic Leadership – Does it make a difference?

Sub-Title

The nature and function of Strategic Leadership – a review of some key issues and themes.

Abstract

This essay begins with a review of the nature of strategy and the strategic process in order to

differentiate between strategy formulation and strategy implementation, and goes on to use the

these frameworks to argue that strategic leadership defined as:

“the ability to anticipate, envision, maintain flexibility, think strategically, and

work with others to initiate changes that will create a viable future for the

organisation.” (Ireland, Hitt & Hoskinsson, 1999, p.43)

is integral to the effective implementation of strategy. The following theories are reviewed

namely; strategic leadership theory (Ireland, Hitt & Hoskinsson, 1999; Finkelstein &

Hambrick, 1996), visionary leadership (Yukl G, 1998; Boal & Byson, 1985; Nutt & Backoff,

1997; Hunt, 1996), charismatic leadership (Conger & Kanungo, 1999) and transformational

leadership (Bass & Avolio, 1990; Burns 1978, 1998) in order to support the above assertion and

dispute Lieberson & O’connor’s (1972) study which argues that top managers have little

impact in reality on organisational performance.

Whilst it is argued that the theories reviewed are neither mutually exclusive nor exhaustive

frameworks, they are clearly indicative of the types of leadership behaviours and approaches

which can ‘lead’ to fundamental and permanent changes in organisational culture (Schein E,

1992), resulting in empowered followers who learn (Pedler et al., 1996) through feedback at all

levels to develop an environment within which the organisation is able to achieve and sustain

competitive advantage.

Key Words

Strategy, Strategic Objectives, Corporate Strategy, Business Strategy, Strategic Leadership,

Strategic Management, Subordinates, Followers, Competitive Advantage, Leadership,

Management, Influence, Shared Vision, Shared Goal, Strategic Direction, Core Competencies,

Collective Learning, Human Capital, Intellectual Capital, Organisational Culture, Sustaining

Culture, Changing Culture, Ethical Leadership, Ethical Culture, Organisational Controls, Upper

Echelon Theory, Bounded Rationality, Executive Choice, Executive Orientation, Strategic

Situation, Strategic Context, Filtering, Constructed Reality, Strategic Choice, Executive

Behaviours, Organisational Performance, Visionary Leadership, Charismatic Leadership,

Attribution Theory of Charismatic Leadership, Transformational Leadership, Transactional

Leadership, Full Range Leadership Model, Charisma, Idealised Influence, Inspirational

Motivation, Intellectual Stimulation, Individual Consideration, Contingent Reward, Management

by Exception, Laissez-Faire, Empowerment, Cultural Change.

According to Andrews (1987) strategy mat be defined as a:

“pattern of decisions in a company that determines and reveals its objectives, purposes, or goals, produces the principal policies and plans for achieving those goals, and defines the range of business the company is to pursue, the kind of economic and human organisation it is or intends to be, and the nature of the economic and non-economic contribution it intends to make to its shareholders, employees, customers, and communities.”(Andrews, 1987, p.86)

Hax (1990), whilst not differentiating between corporate and business strategy, argues that ‘strategy’ is the fundamental frameworks through which an organisation is able to:

“Assert its vital continuity while at the same time purposefully managing its adaptation to the changing environment to gain competitive advantage” (Hax, 1990, p.32).

Hax (1990) goes on to argue that strategy can be viewed in terms of the following six critical dimensions which underpin the above definition.

1. Strategy as a coherent, unifying and integrative pattern of decisions.2. Strategy as a means of establishing an organisation’s purpose in terms of its long-term

objectives by defining the major programs, the actions needed to achieve such objectives and providing a framework for deploying the necessary resources.

3. Strategy as a definition of an organisation’s competitive domain – strategy formation requires strategists to take decisions in relation to areas of growth, new product/service development, diversification and investment, thus, defining the core nature of the business activities and the organisation’s position in the market place.

4. Strategy as a response to external opportunities and threats, and to internal strengths and weakness as a means of achieving competitive advantage – thus, the outcome of strategic planning is a rational approach to maintaining and developing the organisation’s competitive advantage within clearly defined market segment(s). The underlying philosophy recognises that; the ultimate objective is for the organisation to achieve a long-term competitive advantage over its key competitors, that such a competitive advantage will result from a rational analysis of internal and external forces for change and that a viable match between an organisation’s internal resources and the external environment can be achieved.

5. Strategy as a logical system for differentiating managerial tasks at corporate, business and functional levels. This dimension is a recognition that the managerial responsibilities at corporate, business and functional levels are different and the potential exists for them to become internally inconsistent and strategically dysfunctional. Organisational strategy needs to address the needs’ of the organisation as a whole (corporate strategy), the business level needs integral to enhancing the competitive position of each individual business unit, and the need to develop the specialist organisational functions eg finance, human resources in order to support the achievement of strategy at other levels. The key issue here is that, regardless of organisational structure a key dimension of strategy is the integration of these needs into a unified framework.

Strategic Leadership - Does it make a difference? Page 1

6. Strategy as a definition of the economic and non-economic contribution the firm intends to make to its stakeholders. In this sense the term stakeholder can be applied to anyone who directly or indirectly receives the benefits or sustains the costs that result from an organisations’ actions. Strategy needs to take into account the short term and long term needs of its stakeholders, which may sometimes appear ill-conditioned or even ideologically in opposition eg the need for short term profits verses a desire to pursue environmentally friendly manufacturing processes.

In attempting to define and discuss the nature of strategic leadership as an integral role of the strategist it is necessary to differentiate between strategy formulation (deciding what to do) and strategy implementation (achieving identified outcomes). Viewed in this way Strategy Formulation is essentially an extension of rational approaches to problem solving and decision making including the activities of: identification of opportunity and risk, determining the current state of the organisation’s material, technical, financial and managerial resources and the extent to which these will constrain or facilitate the achievement of competitive advantage, (environmental survival), and consideration of what alternatives are preferred by senior managers ie what are their preferred ideologies and what values and beliefs are these predicated on? In this sense these activities assume that strategists, (and hence strategic leaders), are analytically objective in estimating the ability of their organisation to obtain and sustain competitive advantage. However, it is important to recognise that the range of options considered will be framed and constrained by the values, beliefs and individual needs and preferences of the strategists themselves. (Hambrick & Mason, 1984)

According to Andrews (1987) Strategy Implementation involves a series of activities which are essentially administrative in nature namely; determining and developing suitable organisational structures and accountability relationships, establishing measures of organisational control, and providing the strategic leadership necessary to convert strategy into reality. The sub-activities of strategy formulation and implementation are represented in the form of diagram at the top of page 3.

Once developed the key role of senior managers is to ‘manage the strategy process’, Chakravarthy & Lorange (1991) to reduce goal incongruence and informational asymmetry. This is viewed as consisting of four distinct dimensions which help shed light on the role of senior managers and the functional outcomes of the strategic leadership process.

Dimension 1 - Strategic Planning System: Here the role of the senior manager is concerned with communicating corporate vision, setting objectives, (delineating strategic intent), which ensure that the vision is attainable in reality and perceived by subordinates to be so, and to ensure the involvement of functional managers in the further development and implementation of strategy. The latter may involve a degree of negotiation and rational persuasion in order to transform subordinate compliance into commitment to new roles and new ways of working.

Dimension 2 – Monitoring Control and Learning: The key roles here involve developing performance measures, the monitoring and controlling of output and ensuring that feedback from quality control systems engenders learning at all levels in the organisation. Ensuring that the efforts of the workforce are co-ordinated and focused on the strategic objectives, developing an


organisational culture which supports the strategy by ensuring that changes in the underlying assumptions of the workforce (Schein E, 1992) are in line with set objectives, and facilitate organisational learning.

Dimension 3 - Incentives Systems: Key roles of senior managers need to include ensuring that strategically and culturally orientated behaviour and performance are adequately rewarded, developing congruence between organisational sub-units and encouraging the exchange of full and valid business information. (According to Pedler et al (1996) the latter being one prerequisite of a learning company).

Dimension 4 – Staffing Systems: Key roles involve the matching of managerial experience, values, beliefs and personality with strategic and cultural imperatives through the development, recruitment, and socialisation of key employees, whilst, redesigning work and business processes to ensure that the achievement of strategic objectives is intellectually and vocationally challenging and thus contributes to employee satisfaction.

Fig 1 – Strategy Formulation and ImplementationFORMULATION

(Deciding what to do)IMPLEMENTATION(Achieving Results)

1. Identification of opportunity and risk

1. Organisation structure and relationships: Division of labour, Co-ordination of divided responsibility, information systems

2. Determine the company’s material, technical, financial and managerial resources

CORPORATE STRATEGY

Patterns of purposes and policies defining the company

an its business

2. Organisation processes and behaviourStandards and measurement, Motivation and incentive systems, control systems, recruitment and development of managers

3. Personal values and aspirations of senior management

3. Top leadershipStrategic,

Organisational,Personal4. Acknowledgement of

non economic responsibility to society

[Source: Andrews, 1987, p.91]

Yukl (1998) and Northhouse (2001) argue that whilst leadership can be defined from many perspectives there are several components which can be defined as central to phenomenon.


Namely, that leadership is a process, leadership involves influencing followers, leadership usually occurs within a group context, and leadership involves the attainment of team and organisational goals.

“Based on these components the following definition of leadership … [can be developed] … leadership is a processes whereby an individual influences a group of individuals to achieve a common goal” (Northouse, 2001, p.3)

The remaining sections of this essay build on this definition in order to discuss the nature and form of strategic leadership in relation to the dimensions of the strategic management process described above.

Ireland, Hitt & Hoskinsson (1999) define strategic leadership as:

“The ability to anticipate, envision, maintain flexibility, think strategically, and work with others to initiate changes that will create a viable future for the organisation.” (Ireland, Hitt & Hoskinsson, 1999, p.43)

They go on to argue that effective strategic leadership, which results in the successful implementation of strategies, is underpinned by the following key actions:

Determining the Strategic Direction: this involves formulating and articulating a long term vision of strategic intent which involves a view of the organisation at least 5-10 years in the future. A successful vision is viewed as one, which motivates employees to stretch beyond their expectations of accomplishment towards a desirable but achievable future state, which in turn will inform organisational structure and culture. Yukl (1998) in attempting to define the quality and characteristics of an effective vision cites the work of (Bennis & Nanus, 1985; Kotter, 1996; Kouzes & Posner, 1995; Tichy & Devanna, 1986) in arguing that a vision should be a simple and idealistic picture of a desirable future state and not a complex project plan with detailed action steps, and should appeal to the values, hopes, and ideals of organisation members whose support is required. Additionally the vision should be challenging but achievable. Yukl (1998) enunciates the following guidelines for leaders who need to develop a meaningful vision.

Guidelines for Formulating a vision

Involve key stakeholders Identify strategic objectives with wide appeal Identify relevant elements in the old ideology Link the vision to the core competences of the

organisation Evaluate the credibility of the vision Continually assess and refine the vision

(Yukl G, 1998, p.446)


In terms of the strategic management process Prahalad & Hamel (1990) equate the term ‘core competencies’ to collective learning which resides within an organisation which is derived from communication, wide spread dissemination of information and a deep commitment to working across organisational boundaries.

Rowe (2001) offers a pragmatic definition of strategic leadership as the process which:

“Influences others to voluntarily make day-to-day decisions that enhance the long-term viability of the organisation, while at the same time maintaining its short term financial stability.” (Rowe, 2001, p.82)

The outcomes of the strategic leadership process as defined by Rowe (2001) namely long-term survival (competitive advantage) and short-term financial stability whilst commensurate with earlier cited definitions of strategic process, do not directly elude to the role vision. Rowe differentiates between visionary leadership and strategic leadership in arguing that the latter whilst future oriented is concerned with risk taking and not necessarily constrained by the environment. (See table 1 on page 6)

Exploiting and maintaining the core competences: as explained above the core competences of an organisation refer primarily to functional skills and knowledge such manufacturing, finance, marketing, human resource management, research and development. Strategic leaders need to be able to analysis the fit between the organisations core competencies and the likelihood that these can be marshalled in order to respond competitively to the pressures of the external environment. This is an integral stage in strategy formulation (Hax, 1990)

Developing Human (Intellectual) Capital: According to Ireland, Hitt & Hoskinsson (1999) developing human capital involves developing the knowledge and skills of the organisation’s entire workforce in order to align core competencies with strategic objectives. The development of human capital is integral to an organisation’s ability to develop and sustain a culture commensurate with its corporate, business and functional strategies.

Sustaining an effective Organisational Culture: Schein E (1992) defines organisational culture as;

“A pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems.” (Schein E, 1992 p.12)

Because organisational culture influences how an organisation operates and conducts its business, it tends to have a regulatory effect on the behaviour of organisational members, hence, a corporate culture aligned to the demands of the external environment can be source of competitive advantage. Schein E (1992) argues that leaders can influence organisational culture in the following ways: the way in which they gain and sustain the attention of followers, through their reactions to crises, through the allocation of rewards, by setting criteria for selection,


through the design of organisational and team structures, the design of the working environment and ways of working, by narrating and passing on organisational folklore in the form of legends and stories, and through the use of public statements. (For more information see table 2 on page 7).

Table 1Strategic Leaders

Synergetic combination of managerial and visionary leadership Emphasis on ethical behaviour and value-based decisions Oversee operating (day-to-day) and strategic (long-term) responsibilities Formulate and implement strategies for immediate impact and preservation of long-term goals to enhance

organisational survival, growth and long-term viability Have strong positive expectations of the performance they expect from their superiors, peers, subordinates

and themselves Use strategic and financial controls, with emphasis on strategic controls Use, and interchange, tacit and explicit knowledge on individual and organisational levels Use linear and non-linear thinking patterns Believe in strategic choice, that is, their choices make a difference in their organisations and environment.

Visionary Leaders

Are proactive, shape ideas, change the way people think about what is desirable, possible and necessary

Work to develop choices, fresh approaches to long standing problems

Are concerned with ideas, relate to people in intuitive and empathetic ways

Feel separate from their environment; work in, but do not belong to, organisations; sense of who they are does not depend on work

Influence attitudes and opinions of others within the organisation

Concerned with ensuring the future of the organisation, especially through the development and management of people

More embedded in complexity, ambiguity and information overload, engage in multifunctional, integrative tasks

Know less that their functional area experts More willing to invest in innovation, human

capital, and creating and maintaining an effective culture to ensure long-term viability

Focus on tacit knowledge and develop strategies as communal forms of tacit knowledge that promotes enactment of vision

Utilises non-linear thinking Believe in strategic choice, that is, their choices

make a difference in their organisation and environment

Managerial Leaders

Are reactive; adopt passive attitudes towards goals; goals arise out of necessities, not desires and dreams; goals based on past experiences

View work as an enabling process involving some combination of ideas and people interacting to establish strategies

Relate to people according to their roles in the decision-making process

See themselves as conservators and regulators of existing order; sense of who they are depends on their role in the organisation

Influence actions and decisions of those with whom they work

Involved in situations and contexts characterised by day-to-day activities

Concerned with, and more comfortable in, functional areas of responsibility

Expert in their functional area Likely to make value-based decisions Engage in, and support short-term, least cost-

behaviour to enhance financial performance figures

Focus on managing the exchange and combination of explicit knowledge and ensuring compliance to standard operating procedures.

Utilise linear thinking Believe in determinism, that is, the choices they

make are determine by their internal and external environments.

[Source: Rowe, 2001, p.82]


Table 2 Primary and Secondary Leadership Mechanisms for and Changing and Sustaining Organisational Culture (Schein, 1992)

The way in which they gain and sustain the attention of followers: Leaders communicate their priorities, values and concerns by their choice of things to ask about, measure,

comment on, praise and criticise Much communication occurs when the leader is planning activities and monitoring operations. [Occasional] Emotional outbursts by leaders have an especially strong effect in communicating values and

concerns.Through their reactions to crises Because of the emotionality surrounding crises, a leader's response to them can send a strong message

about values and assumptions. A leader who faithfully supports espoused values when the pressure is on for expedient action

communicates clearly that the values are importantBy role modelling strategically desirable behaviours Leaders communicate values and expectations by their own actions, especially actions showing loyalty,

self-sacrifice, and service beyond the call of duty. A leader who institutes a policy or procedure but fails to act in accordance with it is communicating the

message that it is not really important or necessary.Through the allocation of rewards The criteria used as the basis for allocating rewards signal what is valued by the organisation. Formal recognition in ceremonies and informal praise communicate a leader's concerns and priorities. Failure to recognise contributions and achievements sends a message that they are not important.By setting criteria for selection Leaders can reinforce or change the culture through the criteria [lawful] that they set for selection to and

promotion within work.Through the design of systems and procedures Formal budgets, planning processes, reports, performance reviews, and management development reviews

can be used to emphasise some activities and criteria whilst helping to reduce role ambiguity. This in turn may impact on organisational and team culture - a preference for formality reflects strong

values about control and order.Through the design of organisational/team structure(s) The design of structure is often influenced by assumptions about internal relationships or implicit theories

of management than by the actual requirements for effective adaptation A centralised structure reflects the belief that only the leader can determine what is best, whereas a

decentralised structure or the use of self-managed teams reflects a belief in individual initiative and shared responsibility

Through the design/redesign of facilities (Working Environment) Although seldom done as an intentional strategy, leaders can design facilities to reflect basic values eg an

open office layout [or use of multidisciplinary teams] is consistent with a value for open communications and collaborate problem solving.

By narrating/passing on stories, legends and myths to successive generations Stories about improvement events and people in the organisation help transmit values and assumptions.

[Stories and myths are more a reflection of the culture than a determinate of it]. The potential use of this mechanism by leaders to influence culture is very limited in any organisation/team

or society where open communication makes it possible to detect a 'false' story.Through the use of formal statements Public statements of values by the leader and written value statements, charters and philosophies can be

useful as a supplement to other mechanisms. Such statements often ignore the informal, grass roots sub-cultures.

Emphasising Ethical Practices: in order to influence the behaviour of followers strategic leaders need to ensure that they are strong role models for the type of ethical behaviour which will sustain a market position commensurate with the long-term survival of the organisation.


Thus, espoused ethical behaviour becomes a practical filter through which decisions are taken and justified by organisational members as well as customers. Strategic leaders who strive to do the right thing, and whose behaviour exhibits honesty and integrity are likely to inspire these qualities in others. Thus, facilitating the development of a culture in which ethical practices become behavioural norms and over time form underlying assumptions about the way business is done. Ireland, Hitt & Hoskinsson (1999), identify the following actions that strategic leaders can take to develop and ethical organisational culture:

Table 3Leadership Guidelines for Developing an Ethical Organisational Culture

1. Establishing and communicating specific goals to describe the organisations ethical standards

2. Continuously revising and updating the code of conduct, based on inputs from followers throughout the organisation and external stakeholders

3. Disseminating the organisation’s code of conduct to all members of the organisation and external stakeholders (eg customers, suppliers, contractors) in order to inform of the organisation’s ethical frameworks for practice

4. Developing and implementing methods and procedures to use in achieving the organisation’s ethical standards (internal and external auditing procedures)

5. Creating and using explicit reward systems which recognise ‘acts of courage’ (eg rewarding (and protecting) those who use appropriate channels and procedures to report malpractice)

6. Creating a work environment, which promotes respect and dignity for all stakeholders.

(Adapted from: Ireland, Hitt & Hoskinsson, 1999, p.404-405)

Establishing balanced organisational controls: Simons (1994) defines organisational controls as:

“Formal information based procedures used by managers to maintain or alter patterns in organisational activities” (Simons, 1994, p.170)

Which according to Simons (1994) will enable strategic leaders to build credibility, demonstrate the value of espoused strategy to the organisations’ stakeholders, and promote and support strategic change. In this manner controls provide the parameters within which strategies are implemented, performance measures derived, and corrective action taken. A key issue here for strategic leaders is to achieve a balance between exercising strategic control themselves and delegating this to organisational sub-units, allowing lower level managers the autonomy to take advantage of specific and opportunistic business opportunities.

“Effective organisational controls provide an underlying logic for strategic leadership, focus attention on critical strategic issues, support a competitive culture, and provide a forum that builds commitment to strategic intent.” (Ireland, Hitt & Hoskinsson, 1999, p.406)


Upper echelon theory (Hambrick & Mason, 1984), which built on the work of Child (1972) amongst others, argues that the specific knowledge, skills, experiences, values, ideologies and preferences of a small number of top managers within organisations influence the assessment of the environment and thus, constrain the strategy choices organisations make. Upper echelon theory provides the archetype for what by the 1980’s was considered to be main stream Strategic Leadership Theory. Which at a basic level argues that:

“top managers’ values, cognitions, and personalities affects their field of vision, their selective perception of information, and their interpretation of information. These intervening information-processing steps transmit the effects of psychological constructs by affecting the options that top managers evaluate and select. Therefore strategic leadership theory is very much a decision making theory.” (Cannella A, Monroe M, 1997, p.215)

Finkelstein & Hambrick (1996) in developing their model of strategic leadership argue that decision making logic of top managers is framed by a ‘bounded rationality’ which hinges on the premise that leaders are confronted with more stimuli from both within and outside the organisation that they can assimilate, and that such stimuli are often ambiguous, contradictory and overly complex. Hence, strategic leaders will construct their own view of reality, leading to decision making through a staged process of; limiting the field of vision, selective perception and interpretation. This filtering process is determined by a strategic leaders ‘executive orientation’ which is dependent on psychological factors such as personal values, their cognitive model of reality, and other personal factors such as the need for power or achievement; and determinants of observable experiences such as age, tenure, educational background, functional background etc. (See fig 2)

Limiting the field of vision is the first stage in the filtering process; strategic leaders will filter external stimuli in order that they are exposed to only a small subset – this is sometimes known as environmental scanning – a prerequisite of organisational learning (Senge 1990, Pedler et al., 1996). Some leaders may pay more attention to various functional areas of the organisation or to various market segments than others. The field of vision is closely related to the extent of the manager’s/leader’s internal and external networks (Minzberg, 1973; Kotter, 1982)

Selective perception occurs because the strategic leader can only selectively perceives a limited number of stimuli in her/his field of vision.

“Starbuck and Miliken (1988) refer to this as the process of noticing and argue that noticing is a complex function of what is familiar and unfamiliar to the decision-maker. On the one hand, people become relatively insensitive to familiar stimuli. [….] the same filtering process may occur when the executive sits through a long meeting of presentations by a subordinate … [….] not all of the information within the executive’s field of vision will register equally: some will be vivid and meaningful, and engaging; some will slide into the executive’s sub-conscious; and some will escape the executive’s attention altogether.” (Finkelstein & Hambrick, 1996, p.44)


Interpretation is the third stage in the filtering process and is the point at which the strategic leader attaches meaning to selected perceptions within his/her limited field of vision. This stage is sometimes known as sense-making and is the point at which the strategic leader constructs reality or defines the ‘enacted environment’ (Weick, 1969; Dixon, 1997), prior to making strategic decisions which define the relationship of the organisation with its environment and thus affect performance/competitive advantage.

Executive Orientation: can be defined in terms of two classes of personal characteristics; psychological properties, such as values and cognitive models, and other elements of personality. These properties provide the basis on which executives filter and interprets stimuli in order to make choices.

In the last two decades of the 20th century research in strategic leadership focussed on new theories of charismatic, transformational and visionary leadership. Boal & Hooijberg, (2001) in discussing contemporary frameworks for strategic leadership, argue that these theories emphasise the interpersonal processes between leader and followers. They argue that all organisations possess an identity that describes what it is and what is distinctive and distinguishing, and that it is through the vision of the leader that past, present and future come together. Such visions have both a cognitive and an affective component. The cognitive component focuses on outcomes and means of achieving them and the affective component makes a direct appeal to the personal values and beliefs systems of the their followers. Yukl’s (1998) guidelines on creating vision can be loosely equated to Boal & Byson’s (1988) components of vision:

Guidelines for Formulating a vision

Involve key stakeholders [Cognitive domain] Identify strategic objectives with wide appeal

[Affective domain] Identify relevant elements in the old ideology

[Affective domain] Link the vision to the core competences of the

organisation [Affective domain] Evaluate the credibility of the vision [Cognitive

domain] Continually assess and refine the vision [Cognitive

and Effective domain]

(Yukl G, 1998, p.446)


Fig 2 - Strategic Leadership and Executive Choice[Source: Hambrick and Mason (1984) in Finkelstein & Hambrick, 1996, p.42]

Executive Orientation

Filtering Process

Strategic Situation

(All potential environmental and organisational stimuli)

Psychological Factors

ValuesCognitive ModelOther personality Factors

Observable experiencesAge or TenureFormal educationFunction BackgroundOther Factors

Limited Field of Vision

Selective Perception

Interpretation Constructed Reality

Strategic Choices and

Executive Behaviours

Organisational Performance


Nutt & Backoff (1997) articulate the following criteria, which underpin visionary leadership; possibility, desirability, actionablity and articulation. They suggest that visions should:

Have innovative features that are unique, vibrant and inspirational, and that offer new order, and be future oriented enough to reveal opportunities with potentially important consequences (Possibility)

Should draw upon the organisation’s value and culture, and connect the possibilities to these values (Desirability)

Clearly outline achievable activities that followers can undertake to move toward the desirable future (Actionability)

Meet the reality test ie followers believe that they are achievable – here the leader needs to use powerful images, stories, and organisational folklore to crystallise in the minds’ of followers what is possible (Articulation)

According to Hunt (1996) within the of visionary leadership framework, strategic leaders believe that they are able to influence organisational performance by empowering followers to realise cultural determinants of their vision.

“The vision and culture-creating process is carried out by means of five leader behaviours or skills derived from Bennis & Nanus (1985). Thus, the approach emphasises leader personal characterises [a central tenant of strategic leadership theory of (Finkelstein & Hambrick, 1996)], organisational settings within which the visionary leader acts, and specific actions that they take to build vision and culture. [….] The visionary leadership behaviour consists of focussing the attention on the vision; communicating the vision personally; demonstrating trustworthiness; displaying respect; and taking risk.” (Hunt J, 1996, p.195, p.196)

Conger J A & Kanungo R B (1987, 1999) argue that charismatic leadership is an attribution based on followers' perceptions of their leader's behaviour. Leadership is the result of the interaction between members of a group, as each member works with others in the group to attain the objectives of the group, each begins to realise his or her status in the group as either a leader or follower. This realisation is based on observations of the influence processes within the group, the individual who is able to exert maximum influence over other members of the group is perceived to be filling the leadership role. This leadership role is then validated when the group members recognises and identifies with the leader on the basis of their interactions with that person. In other words, leadership qualities are attributed to an individual's influence.

"Thus, charisma [and thus charismatic leadership] must be viewed as an attribution made by followers. This is consistent with the assumption stated earlier that leadership is a rational and attributional phenomenon. The leadership role behaviours displayed by a person make that individual (in the eyes of the followers) not only a task leader or a social leader and a participative or directive leader but also a charismatic or non-charismatic leader. The leader's observable behaviours can be interpreted by his or her own followers. These dispositional attributes are inferred from the leader's observable behaviour in the same way as other styles of leadership that have been identified previously (Blake & Mounton, 1964, Fielder, 1967, Hersey & Blanchard, 1977). In this sense, charisma can be


considered an additional inferred dimension of leadership behaviour or an additional leadership role." (Conger & Kanungo, 1999, p.48)

It is reasonable to ask - what are the leadership behaviours responsible for such attributions, given the above process definition of leadership? According to (Conger & Kanungo, 1999) the leadership behaviours involved in the process of moving organisational members from an existing status-quo towards the achievement of long-term goals may be represented in terms of a three stage model, leading to outcomes at an Organisational, Group and Individual (Follower) Level which reinforce followers' attributions of charismatic leadership.

In the first stage the leader needs to critically evaluate the existing situation or status quo. Deficiencies in the status quo or poorly exploited opportunities in the environment lead to the formulation of future goals. The leader will need to assess the inclinations, the abilities, the needs and the level of satisfaction with the present state experienced by followers.

The second stage is concerned with the formulation and articulation of goals, in this stage the leader will need to develop and communicate a powerful, engaging and realistic vision in order to define an idealised but achievable future state. The third stage is concerned with the leader demonstrating to his/her followers how the future goals inherent in the vision can be achieved. Within this staged model of the influence process (Conger & Kanungo, 1999) distinguish at each stage between the behaviours associated with charismatic and non-charismatic leaders, (see table 4)

"This model, however, nicely simplifies and approximates this dynamic process [leadership] and allows us to more effectively construct the differences between charismatic and non-charismatic leadership. The reader should simply keep in mind that, in reality, a leader is constantly moving back and fourth between the stages or engaging in them simultaneously." (Conger & Kanungo, 1999, p.49)

In the third stage of the leadership process, charismatic leaders build in followers a sense of trust in their abilities and clearly demonstrate the tactics and behaviours required to achieve the organisation's goals. The charismatic leader does this through personal example and risk taking, as well as through unconventional expertise. It is critical that followers develop a trust in the leader's vision. In general, leaders are perceived as trustworthy when they advocate their position in a disinterested manner and demonstrate a concern for follower's needs rather than their own self-interest. They must transform their concerns for their followers' needs into a total dedication and commitment to a common cause they share, and they must express this in a disinterest and selfless manner.

Charismatic leaders will need to engage in exemplary acts that are perceived by followers as involving great personal risk, cost and energy. Personal risk that leads to the attribution of charisma may involve the possible loss of formal or informal status, power, authority and credibility, or even the possible loss of personal finances, being fired or demoted.

"The more leaders are able to demonstrate that they are indefatigable workers prepared to take on high personal risks or incur high personal costs to achieve their shared vision, the more they reflect charisma in the sense of being worthy of complete trust." (Conger & Kanungo, 1999, p.56)


Fig 3 - A Staged Model of Charismatic Leadership

LEADER BEHAVIOUR OUTCOMESStage 1: Evaluation of Status Quo (Present State)

Stage 2: Formulation and Articulation of Organisational Goals

Stage 3: Means to Achieve

Organisational or Group Level Outcomes: High internal cohesion Low internal conflict High value congruence High consensus

Individual (Follower) Outcomes In relation to the leader

Reverence for the leader Trust in the leader Satisfaction with the leader

In relation to the task Work group cohesion High task performance High level of empowerment

Assessment of environmental resources/constraints and follower needs

Effective articulation

Realisation of deficiencies in status quo

Formulation of environmental opportunities into a strategic vision

Effective articulation of inspirational vision that is highly discrepant from the status quo yet within latitude of acceptance

By personal example; risk taking; and counter-cultural empowering, and impression management practices, leader conveys goals, demonstrates means to achieve, builds follower trust, and motivates followers.

[Source: Conger J A & Kanungo R B, 1999, p.40]


Table 4 Distinguishing Attributes of Charismatic and Non-Charismatic Leaders [Source: Conger J A & Kanungo R B, 1999, p.51]

Non-Charismatic Leaders Charismatic LeadersStage 1: Evaluation of Status Quo (Present State)Environmental sensitivity

Relation to status quo

Low need for environmental sensitivity to maintain status quoEssentially agrees with status quo and strives to maintain it

High need for environmental sensitivity to change the status quoEssentially opposes status quo and strives to change it

Stage 2: Formulation and Articulation of Organisational GoalsFuture Goals

Likeableness

Articulation

Goals not discrepant from status quo

Shared perspective makes him/her likeable

Weak articulation of goals and motivation to lead

Idealised vision that is highly discrepant from status quoShared perspective and idealised vision make him or her likeable and worthy of identification and imitation.Strong and/or inspirational articulation of future vision and motivation to lead.

Stage 3: Means to achieveBehaviour novelty

Trustworthiness

Expertise

Conventional, conforming to existing norms.Disinterested advocacy in persuasion attempts.Expert in using available means to achieve goals within the framework of the existing order.

Unconventional or counter-normativePassionate advocacy, incurring great personal risk and cost.Expert in using unconventional means to transcend the existing order

Influence StrategyPower base usage Positional power and personal power

(based on reward and/or expert power, and liking for a friend who is a similar other).

Personal power (based on expert power; respect and admiration for a unique hero).

In an attempt to develop an ‘all embracing’ theory strategic of leadership, recent research has focussed on the transformational ability of senior managers. The concept of transformational leadership is described in a seminal work by the political sociologist James MacGregor Burns (1978) entitled Leadership. In his work, Burns attempts to link the roles of leadership and followership. He describes transformational leaders as those people who tap the motives of followers.

"Transformational leadership refers to the process whereby an individual engages with others and creates a connection that raises the level of motivation and morality in both the leader and the follower. This type of leader is attentive to the


needs and motives of the followers and tries to help followers reach their fullest potential.” (Northhouse P, 1997, p.131)

This is a different type of leadership from transactional leadership argues refers to the majority of leadership models which focus on an exchange which occurs between leaders and followers eg senior executives who offer promotion to employees who surpass set objectives are exhibiting transactional leadership.

According to (Bass & Avolio, 1990; Bass, 1998) the key issue here is not that constructive transactional approaches should be avoided (as at times these provide essential frameworks for action), but need to be balanced with transformational approaches. This is illustrated in their full range leadership model:

Fig 4 - Full Range Leadership Model (Bass & Avolio, 1990)

Transformational Leadership

Factor 1Charisma

Idealised Influence

Factor 2InspirationalMotivation

Factor 3IntellectualStimulation

Factor 4IndividualisedConsideration

Transactional Leadership

Factor 5Contingent Reward

Constructive Transactions

Factor 6Management by

Exception Active and Passive Corrective

Transactions

Non Leadership

Factor 7Laissez-faire

Non-transactional

[Source: Bass, 1998, p.6]

Charismatic leadership (CL) or idealised influence (II) describes leaders who act as strong role models for followers. Followers identify with these leaders and want very much to emulate them. These leaders usually have very high standards of moral and ethical conduct can be counted on to do the right thing. They are deeply respected by followers, who usually place a great deal of trust in them. They provide followers with a vision and a sense of mission. This


dimension provides a conceptual link between the charismatic leadership theory of Conger & Kanungo (1999), and Bass & Avolio’ (1990) multi-dimensional model.

Inspiration or inspirational motivation (IM) is descriptive of leaders who communicate high expectations to followers, inspiring them through motivation to become committed to and a part of the shared vision in the organisation. In practice, leaders use symbols and emotional appeals to focus the group members’ efforts to achieve more that they would in their own self-interest. This type of leadership enhances team spirit.

Intellectual Stimulation (IS) includes leadership that stimulates followers to be creative and innovative, and to challenge their own beliefs and values as well as those of the leader and the organisation. This type of leadership supports followers as they try new approaches to issues. It promotes followers thinking things out on their own and engaging in careful problem solving.

Individualised Consideration (IC) is representative of leaders who provide a supportive climate in which they listen carefully to the individual needs of followers. Leaders act as coaches and advisors while trying to assist individuals in becoming fully actualised. These leaders may use delegation as a means to help followers grow through personal challenges.

Contingent Reward (CR): is the first of two transactional leadership factors. It refers to an exchange process between leaders and followers in which effort by the followers is exchanged for specific rewards. With this kind of leadership, the leader tries to obtain agreement from followers on what needs to be done and what the payoffs will be for the people doing it.

Management by-Exception (MBE): refers to leadership which involves corrective criticism, negative feedback and negative reinforcement. Management-by-Exception (MBE) takes two forms: active and passive. A leader using the active form of MBE, (MBE-A), watches followers carefully for mistakes or rule violations and the takes corrective action. A leader using the passive form of MBE, (MBE-P) intervenes only after standards have not been met or problems have arisen. Both active and passive MBE use more negative reinforcement patterns than the positive reinforcement pattern associated with the use of contingent rewards.

Laissez-Faire Leadership: refers to an abdicated approach to leadership. Such a leader abdicates responsibility, delays decisions, gives no feedback, and makes little effort to help followers satisfy their needs. There is not exchange with followers or any attempt to help them grow.

Research based on the full range leadership model of Bass & Avolio (1990), (see Fig 5), suggests that strategic leaders who are most likely to engender permanent change within their organisations commensurate with strategic objectives need to balance the frequent application of transformational dimensions with appropriate, but less frequent use of constructive transactional behaviours.

Given the integral nature of the leadership process to the models of strategy and strategy implementation reviewed in this essay (Andrews, 1987; Hax 1990), the research evidence which suggests that strategic leadership really does make a difference in reality (Tichy & Devanna, 1986; Tichy & Sherman, 1993; Virany & Tushman, 1986; Murray, 1989), coupled with


Hambrick and Mason’s, (1984) re-examination of Lieberson & O’connor’s (1972) study which cast doubt on their original assertion that that top executives have little impact on the organisation’s performance; then strategic leadership would appear to be a sizeable determinant of organisational performance and thus an important influence on strategy formulation and implementation. Which in turn facilitate an organisation in asserting its vital continuity while at the same time purposefully managing its adaptation to the changing environment to gain competitive advantage. (Hax, 1990).

The complex, interrelated and dynamic, processes and structures which define the global market at the beginning of the 21st century, necessitate a greater understanding of the process of strategic leadership, and it is therefore not surprising that equally complex frameworks are required in order to gain a full understanding of the organisational effects of the phenomena. The frameworks reviewed for this essay, namely; strategic leadership theory (Ireland, Hitt & Hoskinsson, 1999; Finkelstein & Hambrick, 1996), visionary leadership (Yukl G, 1998; Boal & Byson, 1985; Nutt & Backoff, 1997; Hunt, 1996), charismatic leadership (Conger & Kanungo, 1999) and transformational leadership (Bass & Avolio, 1990; Burns 1978, 1998) are neither mutually exclusive nor exhaustive frameworks. However, they are clearly indicative of the types of leadership behaviours and approaches which can ‘lead’ to fundamental and permanent changes in organisational culture (Schein E, 1992), resulting in empowered followers who learn (Pedler et al., 1996) through feedback at all levels to develop an environment within which the organisation is able to achieve and sustain competitive advantage.


Fig 5 - Full Range Leadership Model (Bass & Avolio, 1990)

The leader with an optimal transformational profile infrequently displays laissez faire (LF) leadership and leadership predicated on management by exception passive (MBE-P) and adopts leadership predicated on management by exception active (MBE-A) or

contingent reward (CR) and frequently uses styles of leadership associated with the (4Is of Transformational leadership) ie: Idealised Influence (II) or (Charismatic Leadership

(CL)), Inspirational Motivation (IM), Intellectual Stimulation (IS) and Idealised Consideration (IC). [Source: Adapted from Bass, 1998, p.8]


LF

MBE -P

MBE -A

CR

4Is

Effective

Ineffective

ActivePassive

Frequency

References:

Andrews K, 1987, The concept of corporate strategy, Chp2, Irwin, Homewood, in de Wit B & Meyer R, 1998, Strategy – Process, Content and Context, London: International Thomson Business Press

Bass B M & Avolio B J, 1990, The implications of transactional and transformational leadership for individual, team and organisational development, Research in organisational change and development, 4, p.231-272

Bass B M, 1985, Leadership and performance beyond expectations, New York: Free Press

Bass B M, 1990, From transactional to transformational leadership: Learning to share the vision, Organisational Dynamics, 18, p.19-31

Bass B, 1998, Transformational Leadership, London: Lawrence Erlbaum Associates

Bennis W G & Nanus B, 1985, Leaders: The strategies for taking charge, New York: Harper 7 Row

Blake and Mouton, 1964, the Managerial Grid, Houston, TX: Gulf Publishing

Blanchard K H, 1985, SL II: A situational approach to managing people, Escondido, CA: Blanchard Training and Development, Inc

Boal K B & Bryson J M, 1988, Charismatic leadership: A phenomenological and structural approach in Boal K B & Hooijberg R, 2001, Strategic Leadership research: Moving On, Leadership Quarterly, 11(4), p.515-549

Boal K B & Hooijberg R, 2001, Strategic Leadership research: Moving On, Leadership Quarterly, 11(4), p.515-549

Burns J M, 1978, Leadership, New York: Harper Row

Cannella A A & Monroe M J, 1997, Contrasting perspectives on strategic leaders: Towards amore realistic view of top managers, Journal of Management, 23, p.213-238

Chakravarthy & Lorange, 1991, A framework for a multi-business Firm, Prentice Hall, Englewood Cliffs, New Jersey in de Wit B & Meyer R, 1998, Strategy – Process, Content and Context, London: International Thomson Business Press

Child J, 1972, Organisational structure, environment, and performance: The role of strategic choice, Sociology, 6, p.1-22 in Finkelstein S & Hambrick D C, 1996, Strategic Leadership: Top Executives and their Effects on Organisations, San Francisco, CA: West Publishing Company


Conger & Kanungo, 1987, Towards a Behavioural Theory of Charismatic Leadership in Organisational Settings, Academy of Management Review, 1987, Vol 12 No 4, p.637-647

Conger J& Kanungo R, 1999, Charismatic Leadership in Organisations, London: Sage Publications

Dixon D, 1997, The organisational learning cycle, Aldershot: Gower Publishers

Fiedler F E, 1967, A theory of leadership effectiveness, New York: MacGraw-Hill in Northhouse Peter G, 1997, Leadership - Theory and Practice, London: Sage Publications

Finkelstein S & Hambrick D C, 1996, Strategic Leadership: Top Executives and their Effects on Organisations, San Francisco, CA: West Publishing Company

Hambrick D C & Mason P, 1984, Upper Echelons: the organisation as a reflection of its top managers, Academy of management review, Vol(9), p.193-206

Hax A, 1990, Redefining the concept of Strategy, Planning Review, May/June 1990 in de Wit B & Meyer R, 1998, Strategy – Process, Content and Context, London: International Thomson Business Press

Hersey P & Blanchard K H, 1977, Management of Organisational Behaviour: Utilising Human Resources, Englewood Cliffs, NJ: Prentice Hall in Northhouse Peter G, 1997, Leadership - Theory and Practice, London: Sage Publications

Hitt M & Hoskinsson R, Wan W & Yiu D, 1999 Theory and research in strategic management: Swings of a pendulum, journal of management, 25(3), p.417-456

Hitt M, Ireland D, & Hoskinsson R, 1999, Achieving and maintaining strategic competitiveness in the 21st century: The role of strategic leadership

Hitt M, Ireland D, & Hoskinsson R, 1999, Strategic Management Competitiveness and Globalisation, San Francisco, CA: International Thomson Business Press

Hunt J, 1996 Leadership A New Synthesis, London: Sage Publications

Kakabadse A & Kakabadse N, 1999, The essence of Leadership, London: International Thomson Business Press

Kotter J P, 1982, The General Managers, New York: Free Press

Kotter J P, 1996, Leading change, Boston, MA: Harvard Business School Press

Kouzes J M & Posner B Z, 1995, The leadership challenge: How to keep getting extraordinary things done in organisations, San Francisco, CA: Jossey Bass


Lieberson S & O’Connor J F, 1972, Leadership and Organisational Performance: a study of large corporations, American Sociological Review, 37, p.117-p.130 in Finkelstein S & Hambrick D C, 1996, Strategic Leadership: Top Executives and their Effects on Organisations, San Francisco, CA: West Publishing Company

Minzberg H, 1973, The nature of managerial work, New York: Harper Row

Murray A I, 1989, Top management group heterogeneity and firm performance, Strategic Management Journal Vol 10, P.125-p.141

Northhouse P G, 2001 (2nd Ed), Leadership - Theory and Practice, London: Sage Publications

Northhouse Peter G, 1997, Leadership - Theory and Practice, London: Sage Publications

Nutt P C & Backoff R W, 1997, Crafting Vision, Journal of Management Inquiry, 6, p.308-p.328

Pedler M, Burgoyne J and Boydell T, 1996 (2nd Ed), the learning Company, London: McGraw-Hill

Prahalad C K & Hamel G, Core Competencies of the organisation, Boston, MA: Harvard Business School Press in de Wit B & Meyer R, 1998, Strategy – Process, Content and Context, London: International Thomson Business Press

Rowe W G, 2001, Creating wealth in organisations: The role of strategic leadership, Academy of Management executive, 15(1), p.81-94

Schein R, 1992, Organisational Culture & Leadership, San Francisco: Jossey Bass Publishers

Senge P M, 1990, the fifth discipline, London: Century Press

Simons R, 1994, how new top managers use control systems as levers of strategic renewal, Strategic Management Journal, 15: p.170-171

Simons R, 1995, Control in the age of empowerment, Harvard business Review, 73(2), p.80

Starbuck & Miliken, 1988, Executives’ Perceptual Filters: What they notice and how they make sense in the executive effect: Concepts and methods for studying top managers, ed D Hambrick, 35-65, Greenwich, CONN: JAI Press in Finkelstein S & Hambrick D C, 1996, Strategic Leadership: Top Executives and their Effects on Organisations, San Francisco, CA: West Publishing Company

Tichy N & Sherman S, 1993, Control your destiny or someone else will, New York: Currency Doubleday

Tichy N M & Devanna M A, 1986, The transformational leader, New York: John Wiley & Sons


Virany B & Tushman M, 1986, Top management teams and corporate success in an emerging industry, Journal of Business Venturing, 1, p.261-p.274 in Finkelstein S & Hambrick D C, 1996, Strategic Leadership: Top Executives and their Effects on Organisations, San Francisco, CA: West Publishing Company

Volberda H W & Elfring T, 2001, Rethinking Strategy, London: Sage Publications

Weick K E, 1969, The Social Psychology of Organising, Reading: Addison-Wesley in Finkelstein S & Hambrick D C, 1996, Strategic Leadership: Top Executives and their Effects on Organisations, San Francisco, CA: West Publishing Company

Yukl G, 1998, Leadership in organisations, Englewood Cliffs, NJ: Prentice Hall


strategic leadership

Documents

title strategic leadership

business strategy

nature of strategy

ethical leadership

corporate strategy

strategy implementation

transactional leadership

strategy formulation